<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 000-23249
PRIORITY HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1927379
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
285 WEST CENTRAL PARKWAY, SUITE 1704
ALTAMONTE SPRINGS, FLORIDA 32714
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 869-7001
NO CHANGE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of April 16, 1999, the number of shares outstanding of each of the issuer's
classes of common stock were as follows:
Class A Common Stock - 4,920,982
Class B Common Stock - 7,657,991
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
MARCH 31,
1999 1998
----------------------------
<S> <C> <C>
Net sales........................................................... $ 83,159 $ 58,129
Cost of products sold............................................... 72,853 51,313
---------- -----------
Gross profit........................................................ 10,306 6,816
Selling, general and administrative expense......................... 4,251 3,167
Depreciation and amortization....................................... 313 311
---------- -----------
Earnings from operations............................................ 5,742 3,338
Interest income, net of expense..................................... 258 109
---------- -----------
Earnings before income taxes........................................ 6,000 3,447
Provision for income taxes.......................................... 2,382 1,370
---------- -----------
Net earnings........................................................ $ 3,618 $ 2,077
========== ===========
Historical earnings per share:
Basic............................................................ $ .29 $ .17
Diluted.......................................................... $ .28 $ .17
Historical weighted average shares outstanding:
Basic............................................................ 12,554,292 12,515,208
Diluted.......................................................... 12,822,396 12,545,051
Pro forma earnings per share:
Basic............................................................ $ .19 $ .11
Diluted.......................................................... $ .19 $ .11
Pro forma weighted average shares outstanding:
Basic............................................................ 18,831,438 18,772,812
Diluted.......................................................... 19,233,594 18,817,576
</TABLE>
(See accompanying notes to consolidated financial statements.)
2
<PAGE> 3
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------------------------
ASSETS:
Current assets:
<S> <C> <C>
Cash and cash equivalents............................................... $ 5,706 $ 2
Accounts receivable, less allowance for doubtful accounts of
$811 and $778, respectively............................................ 61,151 56,825
Receivable from BWI...................................................... 13,166 16,517
Finished goods inventory................................................. 24,532 24,387
Deferred income taxes.................................................... 1,214 1,145
Other current assets..................................................... 724 284
--------- ---------
106,493 99,160
--------- ---------
Fixed assets, at cost...................................................... 3,344 3,279
Less: accumulated depreciation........................................... 1,602 1,459
--------- ---------
1,742 1,820
--------- ---------
Intangibles, net 6,370 6,539
--------- ---------
Total assets................................................. $ 114,605 $ 107,519
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable........................................................ $ 35,981 $ 33,857
Other current liabilities............................................... 3,282 3,428
--------- ---------
39,263 37,285
--------- ---------
Deferred income taxes...................................................... 216 193
--------- ---------
Shareholders' equity:
Preferred stock, no par value, 5,000,000 shares authorized, none
issued and outstanding................................................ -- --
Common stock
Class A, $0.01 par value, 15,000,000 shares authorized,
5,465,497 and 10,214,286 issued and outstanding, respectively...... 55 102
Class B, $0.01 par value, 40,000,000 shares authorized,
7,103,626 and 2,301,476 issued and outstanding, respectively....... 71 23
Additional paid in capital....................................... 54,388 52,922
Retained earnings................................................ 20,612 16,994
--------- ---------
Total shareholders' equity................................... 75,126 70,041
--------- ---------
Commitments and contingencies.............................................. -- --
--------- ---------
Total liabilities and shareholders' equity................... $ 114,605 $ 107,519
========= =========
</TABLE>
(See accompanying notes to consolidated financial statements.)
3
<PAGE> 4
PRIORITY HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE-MONTH PERIOD ENDED
MARCH 31,
1999 1998
---------------------------
<S> <C> <C>
Cash flow from operating activities:
Net income................................................................... $ 3,618 $ 2,077
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization................................................ 313 311
Deferred income taxes........................................................ (46) --
Change in assets and liabilities:
Accounts receivable.......................................................... (4,326) 1,761
Finished goods inventory..................................................... (145) 2,526
Trade accounts payable....................................................... 2,124 (4,460)
Other current assets and liabilities......................................... (587) (387)
------- -------
Net cash provided by operating
activities........................................................... 951 1,828
------- -------
Cash flow from investing activities:
Purchase of fixed assets..................................................... (65) (195)
------- -------
Net cash used by investing activities................................... (65) (195)
------- -------
Cash flow from financing activities:
Net change in amounts due to /from BWI....................................... 3,351 (4,444)
Proceeds from stock option exercises and related tax benefit................. 1,467 --
Payments on long-term obligations............................................ -- (19)
------- -------
Net cash provided (used) by financing
activities........................................................... 4,818 (4,463)
------- -------
Net increase (decrease) in cash................................................... 5,704 (2,830)
Cash and cash equivalents at beginning of period.................................. 2 7,910
------- -------
Cash and cash equivalents at end of period........................................ $ 5,706 $ 5,080
======= =======
Supplemental cash flow information:
Interest paid................................................................ $ -- $ 116
Income taxes paid............................................................ $ 1,500 $ 1,370
</TABLE>
(See accompanying notes to consolidated financial statements.)
4
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PRIORITY HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying consolidated financial statements have been prepared by
the Company without audit. Certain information and footnote disclosures,
including significant accounting policies, normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes that the
financial statements for the three-month periods ended March 31, 1999 and
1998 include all necessary adjustments for fair presentation. Results for
any interim period may not be indicative of the results of the entire year.
2. On April 7, 1999, the Company announced that the Board of Directors
authorized a 3-for-2 stock split of the Company's Common Stock to be
effected as a stock dividend to all shareholders of record at the close of
business on April 20, 1999, the Record Date. Shareholders on the Record
Date received a stock dividend of one share for each two shares held. The
stock dividend was paid on May 4, 1999. Holders of the Class A Common Stock
received Class A shares in the split and holders of Class B Common Stock
received Class B shares. Cash was paid in lieu of fractional shares. The
pro forma amounts presented herein give effect to the stock split as if it
had occurred at the beginning of all periods presented.
3. The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings Per Share," for all periods
presented. Basic earnings per share is computed by dividing net income by
the weighted average of Class A and Class B shares outstanding for the
period. Diluted earnings per share computations assume outstanding stock
options with a dilutive effect on earnings were exercised. These common
stock equivalents are added to the weighted average number of shares
outstanding in the diluted calculation. Net earnings are the same for both
basic and diluted. A reconciliation of the basic and diluted weighted
average shares outstanding is as follows for the three months ended March
31:
<TABLE>
<CAPTION>
(In Thousands) 1999 1998
---- ----
<S> <C> <C>
Historical:
Weighted average number of Class A and Class B Common shares outstanding
used as the denominator in the basic earnings per share calculation 12,554 12,515
Additional shares assuming exercise of dilutive
stock options 268 30
------ ------
Weighted average number of Class A and Class B Common and equivalent shares
used as the denominator in the diluted earnings per share calculation 12,822 12,545
====== ======
Pro forma for effect of stock split:
Weighted average number of Class A and Class B Common shares outstanding
used as the denominator in the basic earnings per share calculation 18,831 18,773
Additional shares assuming exercise of dilutive
stock options 403 45
------ ------
Weighted average number of Class A and Class B Common and equivalent shares
used as the denominator in the diluted earnings per share calculation 19,234 18,818
====== ======
</TABLE>
5
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4. On April 12, 1999, the Company completed an acquisition of the majority of
the operating assets of Pharmacy Plus, Ltd., a specialty mail order
pharmacy in Philadelphia, Pennsylvania, that primarily provides injectable
biopharmaceuticals by overnight delivery. The acquisition will be accounted
for using the purchase method of accounting and the results of operations
will be included in the consolidated financial statements subsequent to the
date of acquisition. The total purchase price for the Pharmacy Plus assets
was approximately $3.5 million, which includes approximately $450,000 for
inventory and fixed assets and results in approximately $3.1 million of
goodwill. No indebtedness was assumed. The results of operations of
Pharmacy Plus would not have been material to the results of the Company
for the first quarter of 1999 or 1998.
5. IV-1, Inc. ("IV-1") and IV-One Services, Inc. ("IV-One Services") have been
named as defendants in a second amended counterclaim filed by Amgen, Inc.
("Amgen") on May 14, 1996, in the Circuit Court of the Eighteenth Judicial
District of Seminole County, Florida. Amgen has asserted that these
entities tortiously interfered with a license agreement (the "License
Agreement") between Amgen and Ortho Pharmaceutical Corporation ("Ortho").
Pursuant to this agreement, Amgen licensed Ortho to sell EPO for use in the
treatment of non-dialysis patients, while Amgen reserved the exclusive
right to sell EPO for use in the treatment of dialysis patients. Amgen has
asserted that, prior to the purchase of IV-1 and IV-One Services by the
Company, these entities induced Ortho to sell EPO to them for resale in the
dialysis market in contravention of the License Agreement. Amgen has also
alleged that IV-1 and IV-One Services were involved in a civil conspiracy
to circumvent the terms of the License Agreement to allow the resale of EPO
to the dialysis market. Furthermore, Amgen has asserted unfair competition
claims against IV-1, including that IV-1 manufactured and distributed
unapproved prefilled syringes of EPO and another product manufactured by
Amgen in container systems unapproved by Amgen. Amgen did not specify a
time frame for the acts complained of in the civil conspiracy and unfair
competition allegations. In each count, Amgen has demanded an unspecified
amount of compensatory damages, including costs and interest.
The Company believes that the sellers of IV-1, IV-One Services and Charise
Charles, Ltd., Inc. ("Charise Charles") are contractually obligated to
provide legal defense and to indemnify the Company for losses and
liabilities with respect to this litigation, to the extent that the alleged
acts occurred prior to the purchase of such entities by the Company. To
date, the sellers have provided the legal defense for IV-1 and IV-One
Services in the litigation. Indemnification from the sellers of IV-1 and
IV-One Services is limited to no more than $1.5 million and indemnification
from the sellers of Charise Charles is limited to no more than $2.0
million. The Company does not expect the Amgen litigation to be material to
the Company's results of operations, financial condition or cash flows;
however, no assurance can be given that this litigation will not have a
material adverse effect on the Company's business, financial condition and
results of operations. As of March 31, 1999, approximately $161,000 of
charges have been incurred on behalf of the sellers for claims for
indemnification. In addition, Amgen is the Company's largest supplier.
Consequently, this litigation presents the risk of adversely affecting the
Company's business relationship with Amgen, which could have a material
adverse effect on the Company.
The Company is also subject to ordinary and routine litigation incidental
to its business, none of which is material to the Company's results of
operations, financial condition, or cash flows.
On November 14, 1995, an investigator for the Food and Drug Administration
(the "FDA"), accompanied by an inspector from the State of Florida Board of
Pharmacy, inspected the Company's pharmacy in Altamonte Springs, Florida.
At the end of the inspection, the FDA investigator issued an FDA Form-483,
which is the form used by FDA investigators to identify any observed or
suspected noncompliance with the laws administered by the agency. The FDA
Form-483 identified the facility as a pharmacy/repackager and listed three
observations related to certain requirements that the FDA typically imposes
on manufacturers of sterile products. The Company advised the FDA in
December 1995 that the Company believes it is not, within the statutory or
regulatory meaning of these terms, a repackager or a manufacturer. A second
inspection of the same facility occurred on June 26, 1997, in which the FDA
investigator was again accompanied by Florida pharmacy authorities. The FDA
investigator issued a substantially identical FDA Form-483 at the end of
that
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inspection. The Florida State Board of Pharmacy did not issue any
deficiencies regarding the operations of the Altamonte Springs pharmacy in
either of these inspections.
On March 16, 1992, the FDA issued a Compliance Policy Guide (CPG 460.200),
which explains the criteria the FDA uses to distinguish between pharmacy
operations that are properly regulated under state law and drug
manufacturing regulated by the FDA. The Company's response to the FDA in
December 1995 cited this CPG and explained the Company's contention that,
according to the FDA's own criteria, the facility is a pharmacy properly
regulated under state and local laws.
On November 21, 1997, the President signed into law the FDA Modernization
Act of 1997, which, among a number of other items, adds a new section on
pharmacy compounding to the Federal Food, Drug and Cosmetic Act. In this
provision, Congress clarified a gray area by explicitly identifying the
circumstances in which pharmacies may compound drugs without the need for
filing a New Drug Application, observing the FDA's Good Manufacturing
Practice regulations or complying with certain other specific Federal Food,
Drug and Cosmetic Act requirements. Congress provided that the term
"compounding" does not include mixing or reconstituting that is done in
accordance with directions contained in approved labeling provided by the
manufacturer of the product. The Company believes that, as a result of this
amendment, so long as it follows the manufacturer's approved labeling in
each case, and prepares drugs only for identified individual patients using
licensed practitioners, the Company's activities should be regulated by the
Florida State Board of Pharmacy and not be subjected by the FDA to a full
New Drug Application requirement demonstrating the basic safety and
effectiveness of the drugs.
If the Company is correct and its operations are limited to those engaged
in by pharmacies, there should be no material adverse effect from the FDA
Form-483s because the Company believes it is currently in compliance in all
material respects with applicable state and local laws. If the Company is
deemed to be a sterile product manufacturer or a sterile product
repackager, it would be subject to additional regulatory requirements. If
for some reason the FDA or other legal authorities decide that the Company
must file for approval of a New Drug Application, such an event could have
a material adverse effect on the Company.
There can be no assurance that future legislation, future rulemaking, or
active enforcement by the FDA of a determination that the Company is a drug
manufacturer will not have a material adverse effect on the business of the
Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Forward Looking Statements.
Certain statements included in this quarterly report, 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, 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, asserted
and unasserted claims, and our ability and the ability of the entities with
which we transact business to modify or redesign computer systems to work
properly in the year 2000, 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.
Results of Operations.
Net sales increased to $83.2 million in the first three months of 1999 from
$58.1 million in the first three months of 1998, an increase of 43%. The
growth primarily reflected the addition of new customers, new
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product introductions (including the new Rebetron treatment for
Hepatitis-C), additional sales to existing customers and inflationary price
increases.
Gross profit increased to $10.3 million in the first three months of 1999
from $6.8 million in the first three months of 1998, an increase of 51%.
Gross profit as a percentage of net sales increased in the first three
months of 1999 to 12.4% from 11.7% in the first three months of 1998. The
increase in gross profit reflected increased sales by both Priority
Healthcare Pharmacy and Priority Healthcare Distribution. The increase in
gross profit as a percentage of net sales was primarily attributed to the
change in sales mix, as Priority Healthcare Pharmacy experienced increased
sales, which generate higher gross margins than Priority Healthcare
Distribution sales. Competition continues to exert pressure on margins,
particularly those of Priority Healthcare Distribution.
Selling, general and administrative ("SGA") expense increased to $4.3
million in the first three months of 1999 from $3.2 million in the first
three months of 1998, an increase of 34%. SGA expense as a percentage of
net sales decreased in the first three months of 1999 to 5.1% from 5.4% in
the first three months of 1998. The increase in SGA expense reflected the
growth in our business. The decrease in SGA expense as a percentage of net
sales resulted from the spreading of fixed costs over a larger sales base.
Management continually monitors SGA expense and remains focused on
controlling these increases through improved technology and efficient asset
management.
Depreciation and amortization ("D&A") increased to $313,000 in the first
three months of 1999 from $311,000 in the first three months of 1998, an
increase of 0.6%. The increase in D&A was primarily the result of
additional depreciation on new equipment, particularly management
information systems, offset, in part, by a decrease in amortization of
intangible assets that became fully amortized.
Interest income, net of expense, increased to $258,000 in the first three
months of 1999, from $109,000 in the first three months of 1998. In the
first three months of 1999, interest income of $45,000 was primarily
related to amounts earned by investing excess cash balances in overnight
repurchase agreements with a major financial institution and interest
income of $213,000 was related to loaning funds to Bindley Western
Industries, Inc. ("BWI"). In the first three months of 1998, interest
income of $111,000 was primarily related to amounts earned by investing
funds received from the October 1997 initial public offering of our Class B
Common Stock in overnight repurchase agreements with a major financial
institution and interest income of $112,000 was primarily related to
loaning funds to BWI. This interest income was partially offset by interest
expense of $109,000 in the first three months of 1998 for interest due on
the subordinated note issued to BWI on March 31, 1997. The subordinated
note issued to BWI was paid on September 30, 1998. The interest income on
the loans to BWI was calculated by applying BWI's average incremental
borrowing rate to the average outstanding loans. The average outstanding
loans to BWI were $13.5 million in the first three months of 1999 and $7.0
million in the first three months of 1998. BWI's average incremental
borrowing rate was 5.3% in the first three months of 1999 and 6.4% in the
first three months of 1998.
Through December 31, 1998, we participated in the consolidated federal and
state income tax returns filed by BWI. BWI charged federal and state income
tax expense to us as if we filed our own separate federal and state income
tax returns. The provision for income taxes in the first three months of
1999 and 1998 represented 39.7% of earnings before taxes.
Liquidity - Capital Resources.
Net cash provided by operating activities. Our operations generated
$951,000 in cash during the first three months of 1999. Accounts receivable
increased $4.3 million during the first three months of 1999, primarily to
support the increase in sales and the extension of credit terms to meet
competitive conditions. Inventory increased $145,000 during the first three
months of 1999 to support the increase in sales. Trade accounts payable
increased $2.1 million to partially reduce the cash required for the
accounts receivable increase. This increase was attributable to the timing
of payments, the inventory increase and the credit terms negotiated with
vendors. Depreciation and amortization totaled $313,000 during the first
three months of 1999.
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Net cash used by investing activities. Capital expenditures during the
first three months of 1999 totaled $65,000. We expect that capital
expenditures during the last nine months of 1999 will be approximately $1.0
million and during 2000 will be approximately $1.0 million. We anticipate
that these expenditures will relate primarily to the purchase of computer
hardware and software, telecommunications equipment, and furniture and
equipment for a new corporate facility. We expect to complete the move to
our new corporate facility in November of 1999.
Net cash provided by financing activities. We have advanced excess cash to
BWI on an interest-bearing basis under the terms of a $25.0 million
Revolving Credit Promissory Note which is effective through December 31,
1999, at which time all outstanding amounts are due in full. During the
first three months of 1999, our receivable from BWI decreased by $3.4
million. During the first three months of 1999, we also received proceeds
of $1.5 million, including the income tax benefit, from stock option
exercises.
Our principal capital requirements have been to fund working capital needs
to support internal growth, for acquisitions and for capital expenditures.
Our principal working capital needs are for inventory and accounts
receivable. Management controls inventory levels in order to minimize
carrying costs and maximize purchasing opportunities. We sell inventory to
our customers on various payment terms. This requires significant working
capital to finance inventory purchases and entails accounts receivable
exposure in the event any of our major customers encounter financial
difficulties. Although we monitor closely the creditworthiness of our major
customers, we cannot assure you that we will not incur some collection loss
on major customer accounts receivable in the future.
We believe that cash from operations, repayment by BWI of advances made to
it and availability under our line of credit will be sufficient to meet our
working capital needs for at least two years.
Year 2000 Compliance.
The year 2000 will pose a unique set of challenges to those industries that
rely on information technology. As a result of the methods employed by
early programmers, many software applications and operational programs may
be unable to distinguish the year 2000 from the year 1900. If not
effectively addressed, this problem could result in the production of
inaccurate data, or, in the worst cases, the inability of the systems to
continue to function altogether. We and other companies in the same
business are vulnerable to this problem because of our dependence on
distribution and communications systems.
Since December 31, 1996, we have replaced all of our hardware and software
systems for reasons other than year 2000 compliance; we have spent
approximately $425,000 for these systems. The hardware systems have been
successfully tested for year 2000 compliance. In May 1998, we initiated the
process of preparing our software applications to make them year 2000
compliant. Two of the three main software packages that we use were tested
for year 2000 compliance during 1998 and the third software package was
upgraded during January 1999. We believe these software systems are now
year 2000 compliant. The total costs relating to the upgrade of our
software programs was approximately $75,000. Funds for these payments were
generated from operations. In addition, we have tested the recently
acquired software and hardware systems of Pharmacy Plus and estimate that
it will cost approximately $10,000 to make those systems year 2000
compliant.
We believe that the payments required to bring our systems into compliance
have not and will not have a material adverse effect on us. However, the
year 2000 problem is widespread and complex and can potentially affect any
computer process. As a result, we cannot assure you that the year 2000
compliance can be achieved without additional unanticipated expenditures
and uncertainties that might affect future financial results.
Also, to operate our business, we rely on governmental agencies, utility
companies, telecommunications companies, shipping companies, suppliers and
other third party service providers over which we have little control. Our
ability to conduct our business is dependent upon the ability of these
third parties to avoid year 2000 related disruptions. We are in the process
of contacting our third party service providers about their year
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2000 readiness, but we have not yet received any assurances from any of
these third parties about their year 2000 compliance. The failure of our
key third party service providers, customers, suppliers or third party
payors to adequately address their year 2000 issues could result in a
material adverse effect on our business, financial condition or results of
operations.
We have not to date developed any contingency plans, because these plans
will depend on the responses from our third party service providers.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our primary exposure to market risk consists of changes in interest rates
on our loans to BWI. Our interest income on these loans is determined based
on BWI's average incremental borrowing rate (a variable rate) with its
third-party lender. A decrease in interest rates would adversely affect our
operating results and cash flow available to fund operations and expansion.
Based on the average loan balance for the first three months of 1999, a
decrease of 10% in BWI's average incremental borrowing rate would result in
an approximately $85,000 annual decrease in interest income. Conversely, a
10% increase in BWI's average incremental borrowing rate would result in an
approximately $85,000 annual increase in interest income.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information set forth in Note 5 to the Notes to Consolidated
Financial Statements (unaudited) set forth elsewhere in this Report is
incorporated herein by reference.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) Sales of Unregistered Securities
None.
(d) Use of Proceeds
The Company's Registration Statement on Form S-1 (File No. 333-34463)
was declared effective on October 23, 1997. There has been no change in the
Use of Proceeds since that reported in the Company's Form 10-K for the year
ended December 31, 1998.
ITEM 5. OTHER INFORMATION.
On April 7, 1999, the Company announced that the Board of Directors
authorized a 3-for-2 stock split of the Company's Common Stock to be
effected as a stock dividend to all shareholders of record at the close of
business on April 20, 1999, the Record Date. Shareholders on the Record
Date received a stock dividend of one share for each two shares held. The
stock dividend was paid on May 4, 1999. Holders of the Class A Common Stock
received Class A shares in the split and holders of Class B Common Stock
received Class B shares. Cash was paid in lieu of fractional shares.
On April 12, 1999, the Company completed an acquisition of the
majority of the operating assets of Pharmacy Plus, Ltd., a specialty mail
order pharmacy in Philadelphia, Pennsylvania, that primarily provides
injectable biopharmaceuticals by overnight delivery. The acquisition will
be accounted for using the purchase method of accounting and the results of
operations will be included in the consolidated financial statements
subsequent to the date of acquisition. The total purchase price for the
Pharmacy Plus assets was approximately $3.5 million, which includes
approximately $450,000 for inventory and fixed assets and results in
approximately $3.1 million of goodwill. No indebtedness was assumed. The
results of operations of Pharmacy Plus would not have been material to the
results of the Company for the first quarter of 1999 or 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
On January 4, 1999, the Company filed a Current Report on Form
8-K dated December 31, 1998, reporting the spin-off of the Company's
Class A Common Stock by Bindley Western Industries, Inc. to its
shareholders.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
May 5, 1999 PRIORITY HEALTHCARE CORPORATION
BY: /s/ DONALD J. PERFETTO
--------------------------------------------
Donald J. Perfetto
Executive Vice President and Chief Financial
Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> $5,706
<SECURITIES> 0
<RECEIVABLES> 61,151
<ALLOWANCES> 811
<INVENTORY> 24,532
<CURRENT-ASSETS> 106,493
<PP&E> 3,344
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0
0
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<CGS> 72,853
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<EPS-PRIMARY> $.29
<EPS-DILUTED> $.28
</TABLE>
