Priority Healthcare b (NASDAQ:PHCC)
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Priority Healthcare Announces Second Quarter Results - Record
Quarterly Sales
LAKE MARY, Fla, July 29 /PRNewswire-FirstCall/ -- Priority Healthcare
Corporation (NASDAQ:PHCC) reported results for the second quarter ended July 2,
2005.
For the second quarter, sales increased 29% to $567 million, compared to the
second quarter of 2004. Excluding transaction costs, net earnings were $11.8
million and diluted earnings per share were $.27. Including transaction costs,
net earnings were $11.4 million and diluted earnings per share were $.26.
Transaction costs associated with the Company's pending acquisition by Express
Scripts, Inc. (NASDAQ:ESRX) and another transaction that was not consummated
were $575,000, or $.01, per diluted share.
"This is an exciting time in the history of Priority Healthcare. Our recently
announced transaction with Express Scripts will strengthen and broaden the
specialty offering for both companies to maximize the tremendous opportunities
on the horizon in our industry," stated Steve Cosler, President and Chief
Executive Officer.
Mr. Cosler continued, "We are pleased with our record sales for the second
quarter and the progress we have made with many of our new initiatives. Our
strong sales performance was led by ophthalmology, nephrology, ambulatory
surgery, primary care and the start-up of the Aetna Specialty Pharmacy."
"Our new initiatives should be strong future contributors to our performance.
We are very pleased with the response we have received to our new relationship
with Serono in infertility and believe it will be a key impetus to new
marketshare growth in that disease state. The Aetna Specialty Pharmacy is
progressing with the exception of products that are either in short supply or
not available due to exclusivity agreements with other providers. Our
integration of Spectracare into our Integrity Healthcare specialty infusion
platform is going well and should be completed in the third quarter. Finally,
our new logistics service center in Columbus, OH is performing very well for
our initial customer and we look forward to pursuing other opportunities to
leverage our infrastructure."
In commenting on certain financial aspects of the quarter, Steve Saft, Chief
Financial Officer, stated, "Our 29% sales increase for the quarter was driven
by 23% organic sales growth. Our gross profit increased 10 basis points to
11.1%, sequentially, from the first quarter. SG&A expense, which excludes
transaction costs, decreased by 20 basis points to 7.2%, sequentially, from the
first quarter, primarily driven by the ramp up of the Aetna Specialty Pharmacy."
Mr. Saft continued, "Our balance sheet remains strong with $26 million in cash
and marketable securities, offset by $70 million drawn on our line of credit.
During the quarter we invested $22 million in the acquisition of Spectracare
and $7 million to fund additional working capital for the Aetna Specialty
Pharmacy. Cash flow from operations was a use of cash of $18 million for the
second quarter. This was driven by additional working capital used in the
start up of the Aetna Specialty Pharmacy, a temporary growth in inventory of
$13 million and the increase in accounts receivable driven by strong growth in
specialty distribution and specialty infusion, which was accelerated by the
acquisition of Spectracare during the second quarter. Our trade DSO's were 45
days, a decrease of one day from the first quarter. Our inventory turns were
15, in line with the first quarter. Return on committed capital and invested
capital for the quarter were strong at 30% and 18%, respectively, which we
believe is among the highest in the industry."
Mr. Cosler concluded, "We continue to have success with limited distribution
products. We are pleased to have been selected by Bayer as one of the limited
network specialty pharmacies that will distribute Viadur(R). Viadur is
indicated in the palliative treatment of advanced prostate cancer. We have now
added seven limited distribution products this year and are on track to achieve
our goal of 10 for 2005. Along with our new initiatives, these new products are
a strong foundation for our future growth."
About Priority Healthcare Corporation
Priority Healthcare is the premier healthcare services company providing
innovative, high quality and cost-effective solutions that enhance quality of
life. As a national specialty pharmacy and distributor, Priority Healthcare
provides biopharmaceuticals, complex therapies, related disease treatment
programs and a portfolio of other service offerings for patients, payors,
physicians and pharmaceutical manufacturers. The growing number of specialty
areas serviced by Priority Healthcare include: oncology, gastroenterology,
reproductive endocrinology, neurology, hematology, pulmonology, ophthalmology,
rheumatology, endocrinology, infectious disease and nephrology, as well as
ambulatory surgery centers. Additional information regarding Priority
Healthcare is available online at http://www.priorityhealthcare.com/ .
Where to Find Additional Information
Priority plans to file with the Securities and Exchange Commission (the "SEC")
and mail to its shareholders a Proxy Statement in connection with the proposed
transaction with Express Scripts. Investors are urged to carefully read the
Proxy Statement and any other relevant documents filed with the SEC when they
become available, because they will contain important information about
Priority and the proposed merger. The Proxy Statement will be mailed to the
shareholders of Priority prior to the shareholder meeting. In addition,
investors and security holders will be able to obtain free copies of the Proxy
Statement, when it becomes available, and other documents filed by Priority
with the SEC, at the Web site maintained by the SEC at http://www.sec.gov/ .
These documents may also be accessed and downloaded for free from Priority's
Web site at http://www.priorityhealthcare.com/ , or copies may be obtained,
without charge, by directing a request to Chief Financial Officer, Priority
Healthcare Corporation, 250 Technology Park, Lake Mary, Florida 32746, (407)
804-6700.
Participants in the Solicitation
Priority and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from the shareholders of Priority
in connection with the proposed transaction. Information regarding Priority's
directors and executive officers is contained in Priority's proxy statement
relating to its 2005 annual meeting of shareholders, which was filed with the
SEC on April 8, 2005. Additional information regarding the interests of
participants in the solicitation will be set forth in the Proxy Statement filed
with the SEC in connection with the proposed transaction.
Safe Harbor Statement
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)
Three- Three-
Six-month Six-month month month
period period period period
ended ended ended ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net sales $1,053,342 $839,695 $566,601 $438,452
Cost of products sold 937,127 750,815 503,733 392,585
Gross profit 116,215 88,880 62,868 45,867
Selling, general and
administrative expense 76,844 45,572 40,648 23,414
Restructuring charge -- 1,317 -- 1,317
Transaction costs 575 -- 575 --
Depreciation and amortization 5,476 2,799 2,861 1,430
Earnings from operations 33,320 39,192 18,784 19,706
Interest income 168 369 46 163
Interest expense (1,336) (196) (699) (164)
Minority interest 1,793 (163) 293 (85)
Earnings before income taxes 33,945 39,202 18,424 19,620
Provision for income taxes 12,900 14,799 7,002 7,456
Net earnings $21,045 $24,403 $11,422 $12,164
Earnings per share:
Basic $.48 $.56 $.26 $.28
Diluted $.47 $.56 $.26 $.28
Weighted average shares
outstanding:
Basic 43,812,618 43,305,603 43,844,902 43,288,606
Diluted 44,409,470 43,926,991 44,375,597 43,797,690
RECONCILIATION OF NET EARNINGS TO NET EARNINGS, EXCLUDING TRANSACTION COSTS
AND RESTRUCTURING CHARGE
Three- Three-
Six-month Six-month month month
period period period period
ended ended ended ended
July 2, July 3, July 2, July 3,
2005 2004 2005 2004
Net earnings $21,045 $24,403 $11,422 $12,164
Transaction costs, net of
applicable income taxes 357 -- 357 --
Restructuring charge, net of
applicable income taxes -- 817 -- 817
Net earnings, excluding items $21,402 $25,220 $11,779 $12,981
Earnings per share, excluding
items:
Basic $.49 $.58 $.27 $.30
Diluted $.48 $.57 $.27 $.30
The costs and charges included in the above non-GAAP measures that are
discussed in the press release were outside the normal course of company
operations. The non-GAAP measures are used by management in assessing
the Company's on-going performance because the costs and charges were not
a component of recurring operations. Management also believes investors
will have a better understanding of the ongoing business if the results
of operations are presented without the costs and charges. Thus, we have
included a separate presentation of the results.
PRIORITY HEALTHCARE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted)
(unaudited)
July 2, January 1,
2005 2005
Cash and cash equivalents $20,470 $45,465
Marketable securities 5,454 17,289
Receivables, net 325,655 244,730
Finished goods inventory 131,122 112,616
Other current assets 39,112 36,457
Fixed assets, net 62,337 48,209
Other assets 179,946 164,627
Total assets $764,096 $669,393
Current liabilities $237,635 $200,875
Line of credit 70,400 40,290
Long-term debt -- --
Other liabilities 9,714 9,714
Minority interest 25,818 23,212
Shareholders' equity 420,529 395,302
Total liabilities and shareholders' equity $764,096 $669,393
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DATASOURCE: Priority Healthcare Corporation
CONTACT: Stephen Saft, Chief Financial Officer, Priority Healthcare
Corporation, +1-407-804-6700
Web site: http://www.priorityhealthcare.com/