Priority Healthcare Announces Record Quarterly Sales Results

Priority Healthcare Announces Record Quarterly Sales Results



LAKE MARY, Fla., Oct. 28  /PRNewswire-FirstCall/ -- Priority Healthcare
Corporation (NASDAQ:PHCC) reported results for the third quarter and nine
months ended October 2, 2004.

For the third quarter, sales increased 21% to $440 million, compared to the
third quarter of 2003.  Operating earnings increased 8% to $20.8 million, net
earnings grew 4% to $12.6 million and diluted earnings per share increased 4%
to $.29.

For the nine month period, sales increased 20% to $1.28 billion, compared to
the same period last year.  Excluding the second quarter restructuring charge,
operating earnings increased 6% to $61.3 million, net earnings grew 3% to $37.9
million and diluted earnings per share increased 2% to $.86. Including the
second quarter charge, operating earnings increased 4% to $60.0 million, net
earnings increased 1% to $37.0 million and diluted earnings per share stayed
the same at $.84.

"We are pleased that we met our revised sales forecast and earnings guidance
for the third quarter.  The strong sales performance was led by ophthalmology,
oncology, neurology and our recent acquisitions of Integrity Healthcare
Services and HealthBridge.  Our integration of these acquisitions is on track
and they are meeting our expectations," stated Steve Cosler, President and
Chief Executive Officer.  "Our performance was achieved despite the challenging
hurricane season in Florida, which impacted our approximately 550 employees in
the state, as well as the public health challenges surrounding the lack of
Fluvirin(R) for the 2004 flu season."

"This quarter we also announced our new pharmacy partnership with Aetna. This
agreement, which is the largest specialty pharmacy contract in the industry,
further validates our leadership position.  The development of the new
operation is underway in Orlando and will be partially funded with $1.2 million
in tax incentives provided by the State of Florida and Orange County.  This
initiative will accelerate our clinical management development that will
benefit all of our current and future customers, moving us closer to disease
management capabilities in all of our key disease states."

In commenting on certain financial aspects of the quarter, Steve Saft, Chief
Financial Officer, stated, "Our 21% sales increase for the quarter was driven
by 16% organic growth.  Our gross profit increased 130 basis points to 11.8%
sequentially, from the second quarter.  SG&A expense increased 130 basis points
sequentially, from the second quarter, driven by our recent acquisitions and
investments we have made in current projects and future opportunities."

Mr. Saft continued, "Our balance sheet remains strong with $79 million in cash
and marketable securities, offset by $45 million drawn on our line of credit. 
Cash flow from operations was $6 million for the third quarter.  Our trade
DSO's were 43 days, an increase of 4 days from the second quarter, primarily
driven by our Integrity acquisition.  Our inventory turns were 14, an increase
of two turns from the third quarter of last year.  Return on committed capital
and invested capital for the quarter were strong at 44% and 27%, respectively,
which we believe is among the highest in the industry."

Mr. Cosler concluded, "Strategically, our results for the quarter were
significant, with the integration of our two acquisitions and the completion of
our new Aetna agreement.  We remain committed to capitalizing on the momentum
of the specialty industry by continued investment in new projects, completion
of our Compass system implementation, adding new product and service offerings
and making selective acquisitions to build out our hub and spoke operating
platform. We will continue to take a very disciplined approach across all
aspects of our business to assure we maximize our returns."

As previously announced, a web cast of the company's conference call to review
the financial results is available on Priority Healthcare's website,
http://www.priorityhealthcare.com/ , live at 9:00 AM Eastern today.  A replay
of this conference call will be available on the company's website
approximately two hours after the event for a two week period.

About Priority Healthcare Corporation

Priority Healthcare Corporation is a national specialty pharmacy and
distributor that provides biopharmaceuticals, complex therapies, and related
disease treatment services.  Priority Healthcare provides comprehensive
programs for patients, payors, physicians, and pharmaceutical manufacturers for
a growing number of disease states including cancer, hepatitis C, respiratory
and pulmonary conditions, infertility, rheumatoid arthritis, hemophilia,
multiple sclerosis, Parkinson's disease, and macular degeneration. Additional
information regarding Priority Healthcare is available online at
http://www.priorityhealthcare.com/ .

Certain statements included in this press release, which are not historical
facts, are forward-looking statements.  Such forward-looking statements are
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995.  These forward-looking statements represent our
expectations or beliefs and involve certain risks and uncertainties, including
those described in our public filings with the United States Securities and
Exchange Commission; also including, but not limited to, changes in interest
rates, competitive pressures, changes in customer mix, changes in third party
reimbursement rates, financial stability of major customers, changes in
government regulations or the interpretation of these regulations, changes in
supplier relationships, growth opportunities, cost savings, revenue
enhancements, synergies and other benefits anticipated from acquisition
transactions, difficulties relative to integrating acquired businesses, the
accounting and tax treatment of acquisitions, and asserted and unasserted
claims, which could cause actual results to differ from those in the
forward-looking statements.  The forward-looking statements by their nature
involve substantial risks and uncertainties, certain of which are beyond our
control, and actual results may differ materially depending on a variety of
important factors.  You are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date herein.

                     PRIORITY HEALTHCARE CORPORATION
                   CONSOLIDATED STATEMENTS OF EARNINGS
                    (000's omitted, except share data)
                               (unaudited)

                      Nine-month    Nine-month   Three-month   Three-month
                    period ended  period ended  period ended  period ended
                       October 2, September 27,    October 2, September 27,
                            2004          2003          2004          2003

  Net sales           $1,279,854    $1,064,891     $ 440,159     $ 362,855
  Cost of
   products sold       1,139,147       947,450       388,332       323,483
  Gross profit           140,707       117,441        51,827        39,372

  Selling, general
   and administrative
   expense                74,841        56,506        29,269        18,981
  Restructuring charge     1,317            --            --            --

  Depreciation and
   amortization            4,577         3,137         1,778         1,127
  Earnings from
   operations             59,972        57,798        20,780        19,264

  Interest income            508         1,058           139           246
  Interest expense          (635)           --          (439)           --

  Minority interest         (255)           --           (92)           --

  Earnings before
   income taxes           59,590        58,856        20,388        19,510

  Provision for
   income taxes           22,546        22,071         7,747         7,316

  Net earnings           $37,044       $36,785       $12,641       $12,194

  Earnings per share:
    Basic                   $.85          $.85          $.29          $.28
    Diluted                 $.84          $.84          $.29          $.28
  Weighted average
   shares outstanding:
    Basic             43,380,899    43,452,856    43,531,489    43,259,781
    Diluted           44,008,150    44,024,550    44,160,814    43,773,728


             RECONCILIATION OF NET EARNINGS TO NET EARNINGS,
                      EXCLUDING RESTRUCTURING CHARGE

                      Nine-month    Nine-month   Three-month   Three-month
                    period ended  period ended  period ended  period ended
                       October 2, September 27,    October 2, September 27,
                            2004          2003          2004          2003

  Net earnings           $37,044       $36,785       $12,641       $12,194

  Restructuring charge,
   net of applicable
   income taxes              817            --            --            --

  Net earnings,
   excluding
   restructuring
   charge                $37,861       $36,785       $12,641       $12,194

  Earnings per share,
   excluding
   restructuring charge:
    Basic                   $.87          $.85          $.29          $.28
    Diluted                 $.86          $.84          $.29          $.28


                     PRIORITY HEALTHCARE CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                             (000's omitted)

                                                (unaudited)
                                                 October 2,     January 3,
                                                      2004           2004

  Cash and cash equivalents                        $70,641        $47,719
  Marketable securities                              8,624         15,317
  Receivables, net                                 236,795        172,206
  Finished goods inventory                         107,898        117,218
  Other current assets                              36,552         20,642
  Fixed assets, net                                 37,691         29,780
  Other assets                                     162,430        111,127

  Total assets                                   $ 660,631      $ 514,009

  Current liabilities                            $ 199,425      $ 164,663
  Line of credit                                    45,274             --

  Long-term debt                                        --             --

  Other liabilities                                  6,490          6,437
  Minority interest                                 23,255             --

  Shareholders' equity                             386,187        342,909

  Total liabilities and shareholders' equity     $ 660,631      $ 514,009


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DATASOURCE: Priority Healthcare Corporation



CONTACT:  Stephen Saft, Chief Financial Officer of Priority Healthcare

Corporation, [phone]



Web site:  http://www.priorityhealthcare.com/ 

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