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 RECORD THIRD QUARTER RESULTS
Memphis, TN, May 3, 2004 - Accredo Health, Incorporated (NASDAQ: ACDO) today
reported record results for its third quarter ended March 31, 2004. Net
earnings were $21.1 million or $0.43 per diluted share, for the quarter ended
March 31, 2004. The company had incurred a net loss of $18.7 million, or $0.39
per diluted share, for the same period in fiscal 2003. The loss was due to the
bad debt expense of $66.1 million recorded in the March 2003 quarter compared
to $9.3 million recorded in the March 2004 quarter. Revenues for the quarter
increased 14% to $409.3 million compared to $358.1 million for the same period
in fiscal 2003. In addition, gross profit margins were 20.5% and earnings
before minority interest, interest, taxes, depreciation and amortization
(EBITDA) as a percentage of total revenues were 9.8% for the quarter ended
March 31, 2004. An explanation and reconciliation of net income under generally
accepted accounting principles (GAAP) to EBITDA is discussed in the question
and answer section of this press release.
David D. Stevens, Accredo's chief executive officer commented, "We are pleased
with the record results achieved in the March quarter. We are also excited
about our recently announced new and expanded relationships. Bertek
Pharmaceuticals, Inc. selected us as one of three specialty pharmacy providers
of APOKYN(TM) used in the treatment of Parkinson's disease for patients who
suffer from debilitating periods of total or partial immobility or "off"
episodes associated with the disease. In addition, we have expanded our
relationship with Medco Health Solutions, Inc. (NYSE: MHS) through a ten-year
strategic alliance becoming the preferred retail and home delivery pharmacy
provider to Medco Health Solutions, Inc. ("Medco") members for the specialty
products we currently dispense. While we continued to benefit from prior payor
agreements with Medco in the March quarter, we did not experience any transfer
of new patients pursuant to the new strategic alliance. However, we do expect
the transfer of patients to begin by the end of our fourth quarter.
These events continue to validate our niche specialty pharmacy model."
Joel R. Kimbrough, Accredo's chief financial officer, added, "We are pleased
with the continued overall revenue growth. In addition, based upon our results
through the March quarter, we also expect to achieve 37% to 39% growth in our
Synagis(R) revenues for the treatment of RSV in infants in fiscal 2004. As a
reminder, we began distributing certain products on a consignment basis and
sold our infertility business during fiscal 2003 eliminating revenues from
these products in future periods. In the March 2003 quarter, our revenues from
these products amounted to approximately $23.0 million. Excluding the $23.0
million, total revenues increased 22% from the March 2003 to the March 2004
quarter."
Mr. Kimbrough continued, "Based upon our results to date, the continuing
unknown reimbursement environment related to MediCal and excluding any
potential benefit from our new relationship with Medco, we expect our results
for our fiscal year ending June 30, 2004 to be at the lower end of our previous
revenue estimate range of $1.50 billion to $1.55 billion and our previous
earnings per share estimate range of $1.58 to $1.63. In the June 2004 quarter,
we will incur incremental costs in preparation for the implementation of the
Medco alliance. In addition, we are increasing our estimates for our fiscal
year ending June 30, 2005 previously announced. Due to the expanded
relationship with Medco, we estimate that for our fiscal year ending June 30,
2005, we will achieve revenues in the $1.85 billion to $1.90 billion range and
earnings per share of $1.88 to $1.93. These estimates do assume reductions in
the MediCal and Medicare reimbursement rates based upon information we have at
this time. These estimates assume no new indications for current product lines,
potential new product lines or future acquisitions and could be impacted upon
final resolution by MediCal of the reimbursement rate changes now being
considered."
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) WHAT IS THE RECONCILIATION OF NET INCOME UNDER GAAP TO EBITDA?
A1) When we refer to EBITDA, we mean net income before minority interest,
interest, income tax expense, and depreciation and amortization. We have
included the EBITDA information because we consider it to be a good indication
of our ability to generate cash flow in order to liquidate our liabilities and
reinvest in our Company. EBITDA is not a measurement of financial performance
under GAAP and should not be considered a substitute for net income as a
measure of performance or for cash flow as a measure of liquidity. A
reconciliation of net income under GAAP to EBITDA for the quarter ended March
31, 2004 is as follows (in thousands):
2004
-------
Net income $21,127
Minority interest in consolidated subsidiary 688
Interest expense, net 1,964
Income tax expense 13,254
Depreciation and amortization 3,277
-------
EBITDA $40,310
=======
EBITDA as a percentage of total revenues
9.8%
=======
Q2) WHY DID THE COMPANY INCUR A LOSS OF $18.7 MILLION IN THE MARCH 2003
QUARTER?
A2) During the March 2003 quarter, we analyzed historical collection rates
and other data used in estimating the allowance for doubtful accounts. Our
calculations indicated that the accounts receivable reserve needed to be
increased. As a result of the new information obtained through the analysis, we
recorded a charge to bad debt expense and increased the allowance for doubtful
accounts resulting in a net loss of $18.7 million for the quarter ended March
31, 2003.
Q3) WHAT CHANGES HAVE BEEN MADE TO THE INCOME STATEMENT FOR THE MARCH 2003
QUARTER?
A3) As discussed in the June 2003 quarter, management determined that the
recognition of revenue is upon the delivery of product to the patient (which
typically occurs one day after shipment), and the Company has no
further obligation related to such product. Previously, the Company considered
the delivery to occur when the product was shipped. As a result, the impact on
the March 2003 financial results was a decrease in revenues from $366.6 million
(as previously reported) to $358.1 million and an increase in net loss from
$17.8 million, or $0.37 per diluted share, (as previously reported) to a net
loss of $18.7 million, or $0.39 per diluted share.
In addition, amortization of debt financing costs amounting to
$370,000 has been reclassified from amortization expense to interest expense in
the March 2003 quarter. The reclassification of the amortization expense to
interest expense did not impact net income.
Q4) WHY DID GROSS PROFIT MARGINS DECREASE TO 20.5% IN THE MARCH 2004
QUARTER COMPARED TO 20.8% ACHIEVED IN THE SAME QUARTER LAST YEAR?
A4) For the March 2004 quarter, gross profit margins decreased to 20.5%
compared to 20.8% in the same quarter last year. The decrease is primarily a
result of product mix changes. We derived a larger percentage of our revenues
from lower margin products (primarily Synagis(R)) in the March 2004 quarter
when compared to the same quarter last year. We expect our overall gross margin
percentage to be in the 20.5% to 21.5% range in the fourth quarter of fiscal
2004.
Q5) WHAT IS THE STATUS OF PROPOSED CHANGES IN MEDICARE AND MEDICAL
REIMBURSEMENT RATES?
A5) The recently passed Medicare rate reduction that was effective January
1, 2004, excluded blood clotting factor from the rate change of AWP less 5% to
AWP less 15%. The summary of these proposed changes is vague as to the impact,
if any, on blood clotting factor reimbursement in fiscal 2005 and 2006. We now
understand that it is CMS's intention that the ASP plus 6% reimbursement
formula will affect blood clotting factor reimbursement during those periods.
On December 23, 2003, the United States District Court for the Eastern
District of California issued an injunction enjoining the State of California
from implementing a scheduled 5% reimbursement rate reduction paid to providers
of the state's MediCal program, which was scheduled to take effect on January
1, 2004. The length of the injunction and the ultimate outcome of this
litigation are uncertain at this time. In addition, MediCal's proposed change
to ASP plus 20% as a reimbursement formula for blood clotting factor was to be
effective January 1, 2004. Presently, there has been no clarification by the
State of California as to the definition of ASP or other information to
establish product reimbursement levels or planned implementation dates. The
Company's earnings guidance includes an estimate of the effect from these
proposed changes beginning January 1, 2004.
Q6) WHY DOES THE REVENUE AND EARNINGS GUIDANCE INDICATE A SEQUENTIAL
DECLINE FROM THE THIRD QUARTER TO THE FOURTH QUARTER?
A6) For fiscal year 2004, Synagis(R) will achieve revenues in the range of
$104 to $106 million, a 37% to 39% 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.
As previously announced, the Company's conference call to discuss the third
quarter results is scheduled for Monday, May 3, 2004, 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 3, 2004. 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. The replay of the call will be available until May 21, 2004 at 5:00 p.m.
CDT. To access the replay call, dial 402-220-2491 and enter the code 23001592.
The Internet playback option will be archived on the Company's website. 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 acquisitions,
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 Annual Report on Form 10-K for its year ended June
30, 2003.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------- -------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Net patient revenue $ 1,103,197 $ 1,015,676 $ 398,919 $ 349,372
Other revenue 28,604 27,259 9,667 8,336
Equity in net income of joint ventures 2,272 1,345 722 405
------------ ------------ ------------ ------------
Total revenues 1,134,073 1,044,280 409,308 358,113
Cost of sales 894,338 830,202 325,517 283,531
------------ ------------ ------------ ------------
Gross profit 239,735 214,078 83,791 74,582
General & administrative expenses 103,166 97,174 34,178 33,761
Bad debts 23,731 80,345 9,303 66,103
Depreciation and amortization 9,333 7,548 3,277 2,715
------------ ------------ ------------ ------------
Income (loss) from operations 103,505 29,011 37,033 (27,997)
Interest expense, net (6,365) (7,194) (1,964) (2,384)
Minority interest in consolidated subsidiary (1,741) (1,473) (688) (470)
------------ ------------ ------------ ------------
Net income (loss) before income taxes 95,399 20,344 34,381 (30,851)
Provision for income tax expense (benefit) 36,855 8,048 13,254 (12,128)
------------ ------------ ------------ ------------
Net income (loss) $ 58,544 $ 12,296 $ 21,127 $ (18,723)
============ ============ ============ ============
Earnings (loss) per share:
Basic $ 1.22 $ 0.26 $ 0.44 $ (0.39)
Diluted $ 1.20 $ 0.25 $ 0.43 $ (0.39)
Weighted average shares outstanding:
Basic 48,050,099 47,419,325 48,307,891 47,698,820
Diluted 48,869,037 48,488,663 49,277,358 48,541,507
CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
MARCH 31, JUNE 30,
2004 2003
---------- ----------
Cash & cash equivalents $ 44,635 $ 48,006
Accounts receivable, net 354,420 307,982
Inventories 139,536 89,985
Other current assets 46,530 55,909
Fixed assets, net 34,759 31,681
Intangible and other assets 409,608 381,220
---------- ----------
Total assets $1,029,488 $ 914,783
========== ==========
Current liabilities $ 259,493 $ 206,008
Long-term debt 166,605 178,438
Other liabilities 24,182 17,629
Stockholders' equity 579,208 512,708
---------- ----------
Total liabilities and stockholders' equity $1,029,488 $ 914,783
========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(AMOUNTS IN THOUSANDS)
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net cash provided by operating activities $ 49,206 $ 47,954 $ 23,584 $ 16,078
Net cash (used in) investing activities (46,122) (33,937) (4,722) (22,279)
Net cash provided by (used in) financing activities (6,455) (24,868) (90) 1,920
---------- ---------- ---------- ----------
Increase (decrease) in cash and cash equivalents $ (3,371) $ (10,851) $ 18,772 $ (4,281)
========== ========== ========== ==========