<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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 000-25769
ACCREDO HEALTH, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1642871
-------------------------------- ------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1640 CENTURY CENTER PKWY, SUITE 101, MEMPHIS, TN 38134
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(901) 385-3688
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS OCTOBER 27, 2000
<S> <C>
COMMON STOCK, $0.01 PAR VALUE................ 16,962,032
NON-VOTING COMMON STOCK, $0.01 PAR VALUE..... 0
----------
TOTAL COMMON STOCK........................... 16,962,032
==========
</TABLE>
<PAGE> 2
ACCREDO HEALTH, INCORPORATED
INDEX
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations (unaudited)
For the three months ended September 30, 1999 and 2000
Condensed Consolidated Balance Sheets
June 30, 2000 and September 30, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
For the three months ended September 30, 1999 and 2000
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Part II - OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Note: Items 1, 2, 3 and 4 of Part II are omitted because they are not
applicable.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three
Months Ended
September 30,
----------------------
2000 1999
-------- -------
<S> <C> <C>
Net patient service revenue $ 95,597 $ 72,684
Other revenue 3,769 3,569
Equity in net income of joint ventures 211 618
-------- --------
Total revenues 99,577 76,871
Cost of services 85,008 65,992
-------- --------
Gross profit 14,569 10,879
General & administrative 6,636 5,246
Bad debts 1,552 1,363
Depreciation and amortization 1,013 645
-------- --------
Income from operations 5,368 3,625
Interest (income) expense, net (374) 352
Minority interest in consolidated subsidiary 149 --
-------- --------
Income before income taxes 5,593 3,273
Provision for income taxes 2,229 1,305
-------- --------
Net income $ 3,364 $ 1,968
======== ========
Cash dividends declared on common stock $ -- $ --
======== ========
Earnings per share:
Basic $ 0.22 $ 0.14
Diluted $ 0.21 $ 0.13
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(000'S OMITTED, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, June 30,
2000 2000
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 58,478 $ 10,204
Patient accounts receivable, less allowance for
doubtful accounts of $9,512 at September 30, 2000
and $8,395 at June 30, 2000 66,507 68,417
Due from affiliates 2,234 1,634
Other accounts receivable 11,843 7,420
Inventories 32,311 32,342
Prepaids and other current assets 722 770
Deferred income taxes 3,685 3,133
-------- --------
Total current assets 175,780 123,920
Property and equipment, net 7,172 6,992
Other assets:
Joint venture investments 2,068 2,056
Goodwill and other intangible assets, net 71,724 72,261
-------- --------
Total assets $256,744 $205,229
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 77,055 $ 79,677
Accrued expenses 4,321 7,115
Income taxes payable 1,517 1,289
Line of credit -- 200
-------- --------
Total current liabilities 82,893 88,281
Long-term notes payable -- 37,000
Deferred income taxes 1,533 1,355
Minority interest in consolidated joint venture 1,198 1,049
Stockholders' equity:
Undesignated Preferred Stock, 5,000,000 shares
authorized, no shares issued -- --
Non-voting Common Stock, $.01 par value;
2,500,000 shares authorized; no shares issued -- --
Common Stock, $.01 par value; 30,000,000 shares authorized;
16,957,032 and 14,106,968 shares issued and outstanding at
September 30, 2000 and June 30, 2000, respectively 169 141
Additional paid-in capital 157,022 66,838
Retained earnings 13,929 10,565
-------- --------
Total stockholders' equity 171,120 77,544
-------- --------
Total liabilities and stockholders' equity $256,744 $205,229
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
ACCREDO HEALTH, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000'S OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
2000 1999
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,364 $ 1,968
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,013 645
Provision for losses on accounts receivable 1,552 1,363
Deferred income tax benefit (392) (413)
Compensation resulting from stock transactions 46 46
Tax benefit of disqualifying disposition of stock options 1,138 249
Minority interest in income of consolidated joint venture 149 --
Changes in operating assets and liabilities:
Patient receivables and other (4,065) 416
Due from affiliates (601) (155)
Inventories 31 (2,070)
Prepaids and other current assets 43 (12)
Accounts payable and accrued expenses (5,416) (2,472)
Income taxes payable 229 1,350
-------- -------
Net cash provided by (used in) operating activities (2,909) 915
INVESTING ACTIVITIES:
Purchases of property and equipment (548) (455)
Business acquisitions and joint venture investments (103) --
Change in joint venture investments, net (11) (618)
-------- -------
Net cash used in investing activities (662) (1,073)
FINANCING ACTIVITIES:
Decrease in long-term notes payable (37,200) --
Issuance of common stock 89,589 252
Payment of costs related to public offerings (544) (467)
-------- -------
Net cash provided (used) by financing activities 51,845 (215)
-------- -------
Increase (decrease) in cash and cash equivalents 48,274 (373)
Cash and cash equivalents at beginning of period 10,204 5,542
-------- -------
Cash and cash equivalents at end of period $ 58,478 $ 5,169
======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary to present fairly the
condensed consolidated financial position, results of operations and cash flows
of Accredo Health, Incorporated ( the "Company" or "Accredo" ) have been
included. Operating results for the three-month period ended September 30, 2000,
are not necessarily indicative of the results that may be expected for the
fiscal year ended June 30, 2001.
Certain amounts in the period ended September 30, 1999 have been reclassified to
conform to the September 30, 2000 presentation.
The balance sheet at June 30, 2000 has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended June 30, 2000.
2. INVESTMENT IN JOINT VENTURE
On August 15, 2000, the Company entered into a joint venture agreement with
Children's Hospital in Washington, DC, to market, sell, provide and distribute
hemophilia clotting factor and related services and supplies. The term of the
joint venture is for a period of five years unless terminated at an earlier date
pursuant to the terms of the agreement. Both companies will contribute $50,000
in capital to the joint venture and will share equally in the assets,
liabilities, profits and losses.
In conjunction with the formation of this joint venture, the Company also
entered into a management, service and sales agreement with the joint venture,
whereby the Company will provide specialty pharmacy and management services to
the joint venture in exchange for a monthly management fee and the reimbursement
of certain expenses. The Company previously had a direct management agreement
relationship with an affiliate of Children's Hospital.
3. DEBT REPAYMENT AND TERMINATION OF INTEREST RATE SWAP AGREEMENT
During the quarter, the Company paid off the outstanding principal balance of
its revolving line of credit and terminated its interest rate swap agreement.
The termination of the swap agreement generated a one time pre-tax gain of
$350,000. The $60.0 million revolving credit facility will remain available
through December 1, 2001 and currently requires a payment of five basis points
of the unused portion of the credit facility each quarter.
4. STOCKHOLDERS' EQUITY
During the quarter, the Company completed a stock offering of 2,760,000 shares
of its common stock and recorded net proceeds of approximately $88.3 million.
Also during the quarter, employees exercised stock options to acquire 90,064
shares of common stock for exercise prices ranging between $2.00 and $19.50 per
share.
<PAGE> 7
5. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share (in thousands, except share data):
<TABLE>
<CAPTION>
Three Months Ended
September 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Numerator for basic and diluted income per
share to common stockholders:
Net income $ 3,364 $ 1,968
=========== ===========
Denominator:
Denominator for basic income per
share to common stockholders -
weighted-average shares 15,345,153 13,650,341
Effect of dilutive stock options 862,448 1,035,382
----------- -----------
Denominator for diluted income per
share to common stockholders -
adjusted weighted-average shares 16,207,601 14,685,723
=========== ===========
Earnings per common share:
Basic $ 0.22 $ 0.14
Diluted $ 0.21 $ 0.13
</TABLE>
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD LOOKING STATEMENTS
Some of the information in this quarterly report contains forward-looking
statements that involve substantial risks and uncertainties. You can identify
these statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "intend," "estimate" and "continue" or similar words.
You should read statements that contain these words carefully for the following
reasons:
- the statements discuss our future expectations;
- the statements contain projections of our future earnings or
of our financial condition; and
- the statements state other "forward-looking" information.
There may be events in the future that we are not accurately able to predict or
over which we have no control. The risk factors discussed below, as well as any
cautionary language in this quarterly report, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Examples of
these risks, uncertainties and events include the availability of new drugs, our
relationships with the manufacturers whose drugs we handle, competitive or
regulatory factors affecting the drugs we handle or their manufacturers, the
demand for our services, our ability to expand through joint ventures and
acquisitions, our ability to maintain existing pricing arrangements with
suppliers, the impact of government regulation, our need for additional capital,
the seasonality of our operations and our ability to implement our strategies
and objectives.
Investors in our common stock should be aware that the occurrence of any of the
events described in the risk factors discussed elsewhere in this quarterly
report and other events that we have not predicted or assessed could have a
material adverse effect on our earnings, financial condition and business. In
such case, the trading price of our common stock could decline and you may lose
all or part of your investment.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
REVENUES
Total revenues increased 30% from $76.9 million to $99.6 million from the three
months ended September 30, 1999 to the three months ended September 30, 2000.
The growth was primarily the result of the addition of new patients, additional
sales to existing patients and the introduction of intravenous immunoglobulin
("IVIG") drugs, which we began distributing in December 1999.
Equity in net income of joint ventures decreased $.4 million from the three
months ended September 30, 1999 to the three months ended September 30, 2000 due
to the acquisition of an additional 30% interest in the joint venture Children's
Hemophilia Services effective April 1, 2000. The results of operations of the
joint venture have been consolidated with the Company's results of operations
since the date of acquisition and therefore, are no longer recorded using the
equity method of accounting.
Total revenues included approximately $8.4 million of revenues from companies
acquired since September 30, 1999.
COST OF SERVICES
Cost of services increased from $66.0 million to $85.0 million, or 29%, from the
three months ended September 30, 1999 to the three months ended September 30,
2000. This increase is commensurate with the increase in revenues discussed
above. As a percentage of revenues, cost of services decreased from 85.8% to
85.4% from the three months ended September 30, 1999 to the three months ended
September 30, 2000. This decrease is primarily the result of changes in the
revenue mix by therapy type and more specifically increased sales of intravenous
immunoglobulin drugs which have a lower acquisition cost as a percentage of
revenues than many of the other drugs we distribute.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased from $5.2 million to $6.6 million,
or 27%, from the three months ended September 30, 1999 to the three months ended
September 30, 2000. This increase was primarily the result of increased salaries
and benefits associated with the expansion of our reimbursement, sales,
marketing, administrative and support staffs due to existing product line
<PAGE> 9
revenue growth, new product line launches and the acquisitions made since
September 30,1999. General and administrative expenses represented 6.8% and 6.6%
of revenues for the three months ended September 30, 1999 and 2000,
respectively.
BAD DEBTS
Bad debts increased from $1,363,000 to $1,552,000, or 14%, from the three months
ended September 30, 1999 to the three months ended September 30, 2000 primarily
due to the increase in revenues. Bad debt expense was 1.8% and 1.6% of revenues
for the three months ended September 30, 1999 and 2000, respectively.
DEPRECIATION AND AMORTIZATION
Depreciation expense increased from $195,000 to $368,000 from the three months
ended September 30, 1999 to the three months ended September 30, 2000 as a
result of purchases of property and equipment associated with our revenue growth
and expansion of our leasehold facility improvements. Amortization expense
associated with goodwill and other intangible assets increased from $450,000 to
$645,000 from the three months ended September 30, 1999 to the three months
ended September 30, 2000 due to acquisitions made in fiscal year 2000.
Amortization expense attributable to the acquisitions made during fiscal year
2000 amounted to approximately $225,000 in the three months ended September 30,
2000.
INTEREST INCOME/EXPENSE, NET
Interest expense, net, amounted to $352,000 for the three months ended September
30, 1999 compared to interest income, net, of $374,000 for the three months
ended September 30, 2000. This change, amounting to $726,000, is due to the
repayment of the Company's debt with the proceeds of the stock offering of
2,760,000 shares of common stock completed during the quarter, the investment of
the excess cash from the offering and the sale of an interest rate swap for
$350,000. We generated interest income of approximately $55,000 and $438,000 in
the three months ended September 30, 1999 and 2000, respectively.
INCOME TAX EXPENSE
The effective tax rate was 39.9% in both of the three-month periods ended
September 30, 1999 and 2000. The difference between the recognized tax rate and
the statutory tax rate was primarily attributed to approximately $205,000 and
$197,000 of nondeductible amortization expense in the three months ended
September 30, 1999 and 2000, respectively, and state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000, our working capital was $92.9 million, cash and cash
equivalents were $58.5 million, and the current ratio was 2.1 to 1.0.
Cash used in operations was $2.9 million for the three months ended September
30, 2000. During the three months ended September 30, 2000, accounts receivable
increased $2.5 million and accounts payable decreased $5.4 million. The changes
are primarily due to our revenue growth and the timing of the collection of
receivables, inventory purchases and payments of accounts payable.
Net cash used by investing activities was $.7 million for the three months ended
September 30, 2000. Cash used in investing activities consisted primarily of $.5
million for purchases of property and equipment.
Net cash provided by financing activities was $51.8 million for the three months
ended September 30, 2000. Net cash provided by financing activities consisted
primarily of $88.3 million of net proceeds from the common stock offering
completed in the quarter, $.7 million from the proceeds of stock option
exercises, and $37.2 million of net repayments on the revolving line of credit.
Historically, we have funded our operations and continued internal growth
through cash provided by operations. We anticipate that our capital expenditures
for the year ending June 30, 2001 will consist primarily of additional computer
hardware and a fully integrated pharmacy and reimbursement software system to
meet the needs of our growth. We expect the cost of our capital expenditures in
fiscal year 2001 to be approximately $5.5 million, exclusive of any acquisitions
of businesses, and expect to fund these expenditures through cash on hand, cash
provided by operating activities and/or borrowings under our revolving credit
agreement.
We have a $60.0 million revolving credit facility under the terms of our
existing credit agreement. The credit agreement contains a $20.0 million
sub-limit for working capital loans and letters of credit and is subject to a
borrowing base limit that is based on our cash provided by operations. All
outstanding principal and interest on loans made under the credit agreement is
due and payable on December 1, 2001. Interest on loans under the credit
agreement accrues at a variable rate index based on the prime rate or the London
Inter Bank Offered Rate for one, two, three or six months (as selected by us),
plus a margin depending on the amount of our debt to
<PAGE> 10
cash flow ratio as defined by the credit agreement and measured at the end of
each quarter for prospective periods. During the three months ended September
30, 2000, we paid margin rates of 1.50%. As of September 30, 2000, there were no
borrowings outstanding under the line of credit.
Our obligations under the credit agreement are secured by a lien on
substantially all of our assets, including a pledge of all of the common stock
or partnership interest of each of our subsidiaries in which we own an 80% or
more interest.
The credit agreement contains operating and financial covenants, including
requirements to maintain a certain debt to equity ratio and minimum leverage and
debt service coverage ratios. In addition, the credit agreement includes
customary affirmative and negative covenants, including covenants relating to
transactions with affiliates, use of proceeds, restrictions on subsidiaries,
limitations on indebtedness, limitations on liens, limitations on capital
expenditures, limitations on mergers, acquisitions and sales of assets,
limitations on investments, prohibitions on payment of dividends and stock
repurchases, and limitations on debt payments (including payment of subordinated
indebtedness) and other distributions. The credit agreement also contains
customary events of default, including certain events relating to changes in
control of our company.
We are also a guarantor of a bank loan made to Children's Hemophilia Services, a
California general partnership in which we own an 80% interest. The original
line of credit amounted to $1,500,000. The payment schedule requires that all
outstanding principal amounts in excess of $1,000,000 be paid on January 1,
2000, all outstanding principal amounts in excess of $500,000 be paid on July 1,
2000 and all remaining principal shall be paid in full on November 24, 2000. As
of September 30, 2000, there were no borrowings outstanding under the line of
credit.
We have used interest rate swap agreements to manage our interest rate exposure
under the credit agreement. We had effectively converted, for the period through
October 31, 2001, $25.0 million of floating-rate borrowings to fixed rate
borrowings. We had secured a 5.5% fixed interest rate (exclusive of the margin
rate) using this interest rate swap agreement. On August 21, 2000, in
conjunction with the repayment of the outstanding principal balance of our
revolving line of credit, we surrendered our swap agreement and received
$350,000 in consideration for the early termination of the agreement.
While we anticipate that our cash from operations, along with the short term use
of the revolving credit facility and the net proceeds received from our recent
stock offering will be sufficient to meet our internal operating requirements
and growth plans for at least the next 12 months, we expect that additional
funds may be required in the future to successfully continue our growth beyond
such period. We may be required to raise additional funds through sales of
equity or debt securities or seek additional financing from financial
institutions. There can be no assurance, however, that financing will be
available on terms that are favorable to us or, if obtained, will be sufficient
for our needs.
<PAGE> 11
RISK FACTORS
You should carefully consider the risks and uncertainties we describe below
before investing in Accredo. The risks and uncertainties described below are NOT
the only risks and uncertainties that could develop. Other risks and
uncertainties that we have not predicted or evaluated could also affect our
company.
If any of the following risks occur, our earnings, financial condition or
business could be materially harmed, and the trading price of our common stock
could decline, resulting in the loss of all or part of your investment.
WE ARE HIGHLY DEPENDENT ON OUR RELATIONSHIPS WITH A LIMITED NUMBER OF
BIOPHARMACEUTICAL SUPPLIERS AND THE LOSS OF ANY OF THESE RELATIONSHIPS COULD
SIGNIFICANTLY IMPACT OUR ABILITY TO SUSTAIN OR GROW OUR REVENUES.
We derive a substantial majority of our revenue and profitability from
our relationships with Biogen, Genzyme and Genentech. The table below shows the
concentration of our revenue derived from these relationships as a percentage of
revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS FISCAL YEAR ENDED
ENDED ----------------------------------
SEPTEMBER 30, JUNE 30, JUNE 30, JUNE 30,
2000 2000 1999 1998
------------- -------- -------- --------
<S> <C> <C> <C> <C>
Biogen, Genzyme,
and Genentech 72% 71% 72% 75%
</TABLE>
The revenue from our relationship with Biogen constitutes more than
50% of the revenue derived from these three relationships. Our agreements with
these suppliers are short-term and cancelable by either party without cause on
60 to 90 days prior notice. These agreements also generally limit our ability to
handle competing drugs during and, in some cases, after the term of the
agreement, but allow the supplier to distribute through channels other than us.
Further, these agreements provide that pricing and other terms of these
relationships be periodically adjusted for changed market conditions or required
service levels. Any termination or adverse adjustment to any one of these
relationships could have a material adverse effect on a significant portion of
our business, financial condition and results of operations.
OUR ABILITY TO GROW COULD BE LIMITED IF WE DO NOT EXPAND OUR EXISTING BASE OF
DRUGS OR IF WE LOSE PATIENTS.
We focus almost exclusively on a limited number of complex and
expensive drugs that serve small patient populations. The drugs that we
currently sell are prescribed for Multiple Sclerosis, Gaucher Disease,
Hemophilia and Autoimmune Disorders, Growth Hormone-Related Disorders, Crohn's
Disease, and Respiratory Syncytial Virus.
Due to the small patient populations that use the drugs we handle, our
future growth is highly dependent on expanding our base of drugs. Further, a
loss of patient base or reduction in demand for any reason of the drugs we
currently handle could have a material adverse effect on a significant portion
of our business, financial condition and results of operation.
OUR BUSINESS WOULD BE HARMED IF DEMAND FOR OUR PRODUCTS AND SERVICES IS
REDUCED.
Reduced demand for our products and services could be caused by a
number of circumstances, including:
- patient shifts to treatment regimens other than those we
offer;
- new treatments or methods of delivery of existing drugs that
do not require our specialty products and services;
- a recall of a drug;
- adverse reactions caused by a drug;
- the expiration or challenge of a drug patent;
- competing treatment from a new drug or a new use of an
existing drug;
- the loss of a managed care or other payor relationship
covering a number of high revenue patients;
- the cure of a disease we service; or
- the death of a high-revenue patient.
THERE IS SUBSTANTIAL COMPETITION IN OUR INDUSTRY, AND WE MAY NOT BE
ABLE TO COMPETE SUCCESSFULLY.
The specialty pharmacy industry is highly competitive and is continuing
to become more competitive. All of the drugs, supplies and services that we
provide are also available from our competitors. Our current and potential
competitors include:
- other specialty pharmacy distributors;
<PAGE> 12
- specialty pharmacy divisions of wholesale drug distributors;
- pharmacy benefit management companies;
- hospital-based pharmacies;
- retail pharmacies;
- home infusion therapy companies;
- comprehensive hemophilia treatment centers; and
- other alternative site health care providers.
Many of our competitors have substantially greater resources and more
established operations and infrastructure than we have. We are particularly at
risk from any of our suppliers deciding to pursue its own distribution and
services and not outsource these needs to companies like us. A significant
factor in effective competition will be an ability to maintain and expand
relationships with managed care companies, pharmacy benefit managers and other
payors who can effectively determine the pharmacy source for their enrollees.
RECENT INVESTIGATIONS INTO REPORTING OF AVERAGE WHOLESALE PRICES COULD
REDUCE OUR PRICING AND MARGINS.
Recent revisions to how the average wholesale price (or AWP) is
determined will result in reduced prices and profit margins for some drugs that
we handle. Many government payors, including Medicare and Medicaid, pay us
directly or indirectly at the drug's AWP or at a percentage off AWP. We have
also contracted with a number of private payors to sell drugs at AWP or at a
percentage off AWP. AWP for most drugs is compiled and published by a private
company, First DataBank, Inc. Various federal and state government agencies have
been investigating whether the reported AWP of many drugs, including some that
we sell, is an appropriate or accurate measure of the market price of the drugs.
As recently reported in the Wall Street Journal, there are also several
whistleblower lawsuits pending against various drug manufacturers. These
government investigations and lawsuits involve allegations that manufacturers
reported artificially inflated AWP prices of various drugs to First DataBank.
Bayer AG, one of the Company's suppliers of clotting factor, announced on
September 18, 2000, that it had tentatively agreed to pay $14 million in a
settlement with the government regarding these charges. In February 2000, First
DataBank published a Market Price Survey of 437 drugs. The First DataBank Survey
significantly reduces reimbursement to us for a number of the clotting factor
and IVIG products that we sell.
A number of state Medicaid agencies now pay us for clotting factor at
the prices shown on the Market Price Survey or at a percentage discount off
those prices. Other states have not changed their pricing structure or have
changed back to their pre-Market Price Survey reimbursement rates. The Health
Care Financing Administration (or HCFA) had also announced that effective
October 1, 2000 Medicare intermediaries should calculate the amount that they
pay for certain drugs by using the lower prices on the First DataBank Market
Price Survey. However, the proposal to include clotting factor in the lower
Medicare pricing has been withdrawn. Instead, HCFA will seek legislation that
would establish payments to cover the administrative costs of suppliers of
clotting factor as a supplement to lower AWP pricing for factor.
We estimate that reimbursement by Medicare and state Medicaid agencies
currently make up approximately 2% and 5%, respectively, of our gross patient
service revenues from drugs we handle that are covered by the Market Price
Survey. We have seen an overall reduction in pricing and margins for clotting
factor that we sell. However, we cannot predict the eventual results of the
government investigations and the changes made by First DataBank. If the reduced
average wholesale prices published by First DataBank for the drugs that we sell
are ultimately adopted as the standard by which we are paid by government payors
or private payors, this could have a material adverse effect on our business,
financial condition and results of operation, including reducing the pricing and
margins on certain of our products.
IF ANY OF OUR RELATIONSHIPS WITH MEDICAL CENTERS ARE DISRUPTED OR
CANCELLED, OUR BUSINESS COULD BE HARMED.
We have significant relationships with six medical centers that provide
services primarily related to hemophilia, growth hormone-related disorders and
respiratory syncytial virus. For the fiscal years ended June 30, 1999 and 2000
and the quarter ended September 30, 2000, we received approximately 23%, 12% and
4%, respectively, of our earnings before income taxes and extraordinary item
from equity in the net income of unconsolidated joint ventures associated with
these relationships.
As of April 1, 2000, our ownership was increased to 80% in one of our
joint ventures with Children's Home Care, Inc. and the financial results of this
joint venture are now included in our consolidated financial results. This
consolidated joint venture represented approximately 11% of our earnings before
income taxes and extraordinary item for the quarter ended September 30, 2000.
<PAGE> 13
Our agreements with medical centers have terms of between one and five
years, and may be cancelled by either party without cause upon notice of between
one and twelve months. Adverse changes in our relationships with those medical
centers could be caused, for example, by:
- changes caused by consolidation within the hospital industry;
- changes caused by regulatory uncertainties inherent in the
structure of the relationships; or
- restrictive changes to regulatory requirements.
Any termination or adverse change of these relationships could have a
material adverse effect on our business, financial condition and results of
operations.
IF ADDITIONAL PROVIDERS OBTAIN ACCESS TO FAVORABLY PRICED DRUGS WE
HANDLE, OUR BUSINESS COULD BE HARMED.
We are not eligible to participate directly in the federal pricing
program of the Public Health Service, commonly known as PHS, which allows
hospitals and hemophilia treatment centers to obtain discounts on clotting
factor. The federal Health Resources and Services Administration recently issued
a notice that we expect will broaden the number of facilities purchasing PHS
priced clotting factor. Increased competition from hospitals and hemophilia
treatment centers may reduce our profit margins.
OUR ACQUISITION AND JOINT VENTURE STRATEGY MAY NOT BE SUCCESSFUL, WHICH COULD
CAUSE OUR BUSINESS AND FUTURE GROWTH PROSPECTS TO SUFFER.
As part of our growth strategy, we continue to evaluate joint venture
and acquisition opportunities, but we cannot predict or provide assurance that
we will complete any future acquisitions or joint ventures. Acquisitions and
joint ventures involve many risks, including:
- difficulty in identifying suitable candidates and negotiating
and consummating acquisitions on attractive terms;
- difficulty in assimilating the new operations;
- increased transaction costs;
- diversion of our management's attention from existing
operations;
- dilutive issuances of equity securities that may negatively
impact the market price of our stock;
- increased debt; and
- increased amortization expense related to goodwill and other
intangible assets that would decrease our earnings.
We could also be exposed to unknown or contingent liabilities resulting
from the pre-acquisition operations of the entities we acquire, such as
liability for failure to comply with health care or reimbursement laws.
FLUCTUATIONS IN OUR QUARTERLY FINANCIAL RESULTS MAY CAUSE OUR STOCK PRICE TO
DECLINE.
Our results of operations may fluctuate on a quarterly basis, which
could adversely affect the market price of our common stock. Our results may
fluctuate as a result of:
- lower prices paid by Medicare or Medicaid for the drugs that
we sell, including lower prices resulting from recent
revisions in the method of establishing AWP;
- below-expected sales or delayed launch of a new drug;
- price and term adjustments with our drug suppliers;
- increases in our operating expenses in anticipation of the
launch of a new drug;
- product shortages;
- inaccuracies in our estimates of the costs of ongoing
programs;
- the timing and integration of our acquisitions;
- changes in governmental regulations;
- the annual renewal of deductibles and co-payment requirements
that affect patient ordering patterns;
- our provision of drugs to treat seasonal illnesses, such as
respiratory syncytial virus;
- physician prescribing patterns; and
- general economic conditions.
<PAGE> 14
OUR BUSINESS WOULD BE HARMED IF THE BIOPHARMACEUTICAL INDUSTRY CEASES RESEARCH,
DEVELOPMENT AND PRODUCTION OF THE TYPES OF DRUGS THAT ARE COMPATIBLE WITH THE
SERVICES WE PROVIDE.
Our business is highly dependent on continued research, development,
manufacturing and marketing expenditures of biopharmaceutical companies, and the
ability of those companies to develop, supply and generate demand for drugs that
are compatible with the services we provide. Our business would be materially
and adversely affected if those companies stopped outsourcing the services we
provide or failed to support existing drugs or develop new drugs. Our business
could also be harmed if the biopharmaceutical industry undergoes any of the
following developments:
- supply shortages;
- adverse drug reactions;
- drug recalls;
- increased competition among biopharmaceutical companies;
- an inability of drug companies to finance product development
because of capital shortages;
- a decline in product research, development or marketing;
- a reduction in the retail price of drugs from governmental or
private market initiatives;
- changes in the FDA approval process; or
- governmental or private initiatives that would alter how drug
manufacturers, health care providers or pharmacies promote or
sell products and services.
OUR BUSINESS COULD BE HARMED IF THE SUPPLY OF ANY OF THE PRODUCTS THAT WE
DISTRIBUTE BECOMES SCARCE.
The biopharmaceutical industry is susceptible to product shortages.
Some of the products that we distribute, such as IVIG and blood-related
products, are collected and processed from human donors. Accordingly, the supply
of these products is highly dependant on human donors and their availability
have been constrained from time to time. If these products, or any of the other
drugs that we distribute, are in short supply for long periods of time, our
business could be harmed.
IF SOME OF THE DRUGS THAT WE PROVIDE LOSE THEIR "ORPHAN STATUS," WE COULD FACE
MORE COMPETITION.
Our business could also be adversely affected by the expiration or
challenge to the "orphan drug" status that has been granted by the Food and Drug
Administration, FDA, to some of the drugs that we handle. When the FDA grants
"orphan drug" status, it will not approve a second drug for the same treatment
for a period of seven years unless the new drug is chemically different or
clinically superior. The "orphan drug" status applicable to drugs that we handle
expires as follows:
- Cerezyme(R) expires May 2001;
- AVONEX(R) expires May 2003; and
- REMICADE(TM) expires September 2005.
The loss of orphan drug status could result in competitive drugs
entering the market, which could harm our business.
OUR ABILITY TO CONTINUE TO PROVIDE AVONEX(R) COULD BE AFFECTED BY A PENDING
CHALLENGE THAT BIOGEN is INFRINGING ON A PATENT.
Our ability to continue to service AVONEX(R) could also be affected by
a pending challenge by Berlex Laboratories, Inc. that Biogen is infringing on a
Berlex patent in the production of AVONEX(R). Berlex is seeking, among other
things, a permanent injunction restraining Biogen from manufacturing AVONEX(R).
If the permanent injunction is granted or if Biogen is unable to continue to
supply AVONEX(R) on terms favorable to us, our business could be harmed. In
August 2000 the Federal District Court for the District of Massachusetts granted
summary judgment in Biogen's favor ruling that AVONEX(R) does not infringe on a
Berlex patent, and in September 2000 the Court entered a final judgement in
favor of Biogen dismissing the District Court Case. Berlex has appealed this
decision to the U.S. Federal District Court of Appeals.
OUR BUSINESS COULD BE HARMED BY CHANGES IN MEDICARE OR MEDICAID.
Changes in the Medicare, Medicaid or similar government programs or the
amounts paid by those programs for our services may adversely affect our
earnings. For example, these programs could revise their pricing based on new
methods of calculating the AWP for drugs we handle. We estimate that
approximately 18% of our gross patient service revenues for the fiscal years
ended June 30, 1999 and 2000 and the quarter ended September 30, 2000 consisted
of reimbursements from federal and state programs, excluding sales to private
physicians whose ultimate payor is typically Medicare. Any reductions in amounts
reimbursable by government programs for our services or changes in regulations
governing such reimbursements could materially and adversely effect our
business, financial condition and results of operations.
<PAGE> 15
OUR BUSINESS WILL SUFFER IF WE LOSE RELATIONSHIPS WITH PAYORS.
We are highly dependent on reimbursement from non-governmental payors.
For the fiscal years ended June 30, 1999 and 2000 and the quarter ended
September 30, 2000 we derived approximately 82% of our gross patient service
revenue from non-governmental payors (including self-pay), which included 6%, 5%
and 5%, respectively for those periods, from sales to private physician
practices whose ultimate payor is typically Medicare.
Many payors seek to limit the number of providers that supply drugs to
their enrollees. For example, we were recently selected by Aetna U.S.
Healthcare, Inc.(R) as one of three providers of injectible medications. From
time to time, payors with whom we have relationships require that we and our
competitors bid to keep their business, and there can be no assurance that we
will be retained or that our margins will not be adversely affected when that
happens. The loss of a payor relationship, for example, our relationship with
Aetna (which is terminable on 90 days notice), could result in the loss of a
significant number of patients and have a material adverse effect on our
business, financial condition and results of operations.
WE RELY HEAVILY ON A SINGLE SHIPPING PROVIDER, AND OUR BUSINESS WOULD BE HARMED
IF OUR RATES ARE INCREASED OR OUR PROVIDER IS UNAVAILABLE.
Almost all of our revenues result from the sale of drugs we deliver to
our patients and principally all of our products are shipped by a single
carrier, FedEx. We depend heavily on these outsourced shipping services for
efficient, cost effective delivery of our product. The risks associated with
this dependence include:
- any significant increase in shipping rates;
- strikes or other service interruptions by our primary carrier,
FedEx, or by another carrier that could affect FedEx; or
- spoilage of high cost drugs during shipment, since our drugs
often require special handling, such as refrigeration.
OUR BUSINESS COULD BE HARMED IF PAYORS DECREASE OR DELAY THEIR PAYMENTS TO US.
Our profitability depends on payment from governmental and
non-governmental payors, and we could be materially and adversely affected by
cost containment trends in the health care industry or by financial difficulties
suffered by non-governmental payors. Cost containment measures affect pricing,
purchasing and usage patterns in health care. Payors also influence decisions
regarding the use of a particular drug treatment and focus on product cost in
light of how the product may impact the overall cost of treatment. Further, some
payors, including large managed care organizations and some private physician
practices, have recently experienced financial trouble. The timing of payments
and our ability to collect from payors also affects our revenue and
profitability. If we are unable to collect from payors or if payors fail to pay
us in a timely manner, it could have a material adverse effect on our business
and financial condition.
IF WE ARE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS WILL BE HARMED.
Our rapid growth over the past four years has placed a strain on our
resources, and if we cannot effectively manage our growth, our business,
financial condition and results of operations could be materially and adversely
affected. We have experienced a large increase in the number of our employees,
the size of our programs and the scope of our operations. Our ability to manage
this growth and be successful in the future will depend partly on our ability to
retain skilled employees, enhance our management team and improve our management
information and financial control systems.
WE COULD BE ADVERSELY AFFECTED BY AN IMPAIRMENT OF THE SIGNIFICANT AMOUNT OF
GOODWILL ON OUR FINANCIAL STATEMENTS.
Our formation and our acquisitions of Southern Health Systems, Inc. and
Hemophilia Health Services, Inc., and most recently Sunrise Health Management,
Inc. and the specialty pharmacy businesses of Home Medical of America, Inc.
resulted in the recording of a significant amount of goodwill on our financial
statements. The goodwill was recorded because the book value of the tangible and
intangible assets owned by those companies at the time they were acquired was
less than the purchase price. We have determined that the goodwill recorded as a
result of those acquisitions will benefit us for a period of no less than 40
years and, as a result, we amortize this goodwill evenly over a 40-year period.
There can be no assurance that we will realize the full value of this goodwill.
We evaluate on an on-going basis whether events and circumstances indicate that
all or some of the carrying value of goodwill is no longer recoverable, in which
case we would write off the unrecoverable goodwill in a charge to our earnings.
If the amortization period for a material portion of goodwill is overly
long, it causes an overstatement of earnings in periods immediately following
the transaction in which the goodwill was recorded. In later periods, it causes
earnings to be understated because of an amortization charge for an asset that
no longer provides a corresponding benefit. Earnings in later periods could also
be significantly affected if the remaining balance of goodwill is impaired and
written off as a charge against earnings. We are not presently aware of any
persuasive evidence that any material portion of our goodwill will be impaired
and written off against
<PAGE> 16
earnings. As of September 30, 2000, we had goodwill, net of accumulated
amortization, of approximately $68.7 million, or 27% of total assets and 40% of
stockholders' equity.
Since our growth strategy may involve the acquisition of other
companies, we may record additional goodwill in the future. The amortization and
possible write-off of this goodwill could negatively impact our future earnings.
Also, in future acquisitions we will be required to allocate a portion of the
purchase price to the value of non-competition agreements, patient base and
contracts that are acquired. The value of any amounts allocated to these items
could be amortized over a period much shorter than 40 years. As a result, our
earnings and market price of our common stock could be negatively impacted.
WE RELY ON A FEW KEY EMPLOYEES WHOSE ABSENCE OR LOSS COULD ADVERSELY AFFECT OUR
BUSINESS.
We depend on a few key executives, and the loss of their services could
cause a material adverse effect to our company. We do not maintain "key person"
life insurance policies on any of those executives. As a result, we are not
insured against the losses resulting from the death of our key executives.
Further, we must be able to attract and retain other qualified, essential
employees for our technical operating and professional staff, such as
pharmacists. If we are unable to attract and retain these essential employees,
our business could be harmed.
WE MAY NEED ADDITIONAL CAPITAL TO FINANCE OUR GROWTH AND CAPITAL REQUIREMENTS,
WHICH COULD PREVENT US FROM FULLY PURSUING OUR GROWTH STRATEGY.
In order to implement our growth strategy, we will need substantial
capital resources and will incur, from time to time, additional short- and
long-term indebtedness, the terms of which will depend on market and other
conditions. We cannot be certain that existing or additional financing will be
available to us on acceptable terms, if at all. As a result, we could be unable
to fully pursue our growth strategy. Further, additional financing may involve
the issuance of equity securities that would reduce the percentage ownership of
our then current stockholders.
OUR INDUSTRY IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND NONCOMPLIANCE BY
US OR OUR SUPPLIERS COULD HARM OUR BUSINESS.
The marketing, sale and purchase of drugs and medical supplies is
extensively regulated by federal and state governments, and if we fail or are
accused of failing to comply with laws and regulations, we could suffer a
material adverse effect on our business, financial condition and results of
operations. Our business could also be materially and adversely effected if the
suppliers or clients we work with are accused of violating laws or regulations.
The applicable regulatory framework is complex, and the laws are very broad in
scope. Many of these laws remain open to interpretation, and have not been
addressed by substantive court decisions.
The health care laws and regulations that especially apply to our
activities include:
- The federal "Anti-Kickback Law" prohibits the offer or
solicitation of compensation in return for the referral of
patients covered by almost all governmental programs, or the
arrangement or recommendation of the purchase of any item,
facility or service covered by those programs. The Health
Insurance Portability and Accountability Act of 1996, or
HIPAA, created new violations for fraudulent activity
applicable to both public and private health care benefit
programs and prohibits inducements to Medicare or Medicaid
eligible patients. The potential sanctions for violations of
these laws range from significant fines, to exclusion from
participation in the Medicare and Medicaid programs, to
criminal sanctions. Although some "safe harbor" regulations
attempt to clarify when an arrangement will not violate the
Anti-Kickback Law, our business arrangements and the services
we provide may not fit within these safe harbors. Failure to
satisfy a safe harbor requires analysis of whether the parties
intended to violate the Anti-Kickback Law. The finding of a
violation could have a material adverse effect on our
business.
- The Department of Health and Human Services recently proposed
regulations implementing the Administrative Simplification
provision of HIPAA concerning the maintenance and transmission
and security of electronic health information, particularly
individually identifiable information. The new regulations,
when enacted, will require the development and implementation
of security and transaction standards for all electronic
health information and impose significant use and disclosure
obligations on entities that send or receive individually
identifiable electronic health information. Failure to comply
with these regulations, or wrongful disclosure of confidential
patient information could result in the imposition of
administrative or criminal sanctions, including exclusion from
the Medicare and state Medicaid programs. In addition, if we
choose to distribute drugs through new distribution channels
such as the Internet, we will have to comply with government
regulations that apply to those distribution channels, which
could have a material adverse effect on our business.
- The Ethics in Patient Referrals Act of 1989, as amended,
commonly referred to as the "Stark Law," prohibits physician
referrals to entities with which the physician or their
immediate family members have a "financial relationship." A
violation
<PAGE> 17
of the Stark Law is punishable by civil sanctions, including
significant fines and exclusion from participation in Medicare
and Medicaid.
- State laws prohibit the practice of medicine, pharmacy and
nursing without a license. To the extent that we assist
patients and providers with prescribed treatment programs, a
state could consider our activities to constitute the practice
of medicine. If we are found to have violated those laws, we
could face civil and criminal penalties and be required to
reduce, restructure, or even cease our business in that state.
- Pharmacies and pharmacists must obtain state licenses to
operate and dispense drugs. Pharmacies must also obtain
licenses in some states to operate and provide goods and
services to residents of those states. If we are unable to
maintain our licenses or if states place burdensome
restrictions or limitations on non-resident pharmacies, this
could limit or affect our ability to operate in some states
which could adversely impact our business and results of
operations.
- Federal and state investigations and enforcement actions
continue to focus on the health care industry, scrutinizing a
wide range of items such as joint venture arrangements,
referral and billing practices, product discount arrangements,
home health care services, dissemination of confidential
patient information, clinical drug research trials and gifts
for patients.
- The False Claims Act encourages private individuals to file
suits on behalf of the government against health care
providers such as us. Such suits could result in significant
financial sanctions or exclusion from participation in the
Medicare and Medicaid programs.
THE MARKET PRICE OF OUR COMMON STOCK MAY EXPERIENCE SUBSTANTIAL FLUCTUATIONS FOR
REASONS OVER WHICH WE HAVE LITTLE CONTROL.
Our common stock is traded on the Nasdaq National Market. Since our
common stock has only been publicly traded for a short time, an active trading
market for the stock may not develop or be maintained. Also, the market price of
our common stock could fluctuate substantially based on a variety of factors,
including the following:
- future announcements concerning us, our competitors, the drug
manufacturers with whom we have relationships or the health
care market;
- changes in government regulations;
- overall volatility of the stock market;
- changes in earnings estimates by analysts; and
- changes in operating results from quarter to quarter.
Furthermore, stock prices for many companies fluctuate widely for
reasons that may be unrelated to their operating results. These fluctuations,
coupled with changes in our results of operations and general economic,
political and market conditions, may adversely affect the market price of our
common stock.
SOME PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT
COULD DISCOURAGE A CHANGE IN CONTROL, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL
TO OUR STOCKHOLDERS.
Our certificate of incorporation, our bylaws and Delaware law contain
provisions that could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders.
<PAGE> 18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to the impact of financial market risk is currently not
significant. Our primary financial market risk exposure consists of interest
rate risk related to interest income from our short term investments in money
market and high quality short term debt securities with maturities of six months
or less that we intend to hold to maturity. We have invested and expect to
continue to invest a substantial portion of our excess cash in such securities.
Generally, if the overall average return on such securities had decreased 10%
from the average return during the quarter ended September 30, 2000, then our
interest income would have decreased, and pre-tax income would have decreased
approximately $79,000. This amount was determined by considering the impact of a
hypothetical change in interest rates on our interest income. Actual changes in
rates may differ from the hypothetical assumptions used in computing this
exposure.
In prior periods, we have used derivative financial instruments to manage our
exposure to rising interest rates on our variable-rate debt, primarily by
entering into variable-to-fixed interest rate swaps. During the quarter, we used
a portion of the proceeds from our recent stock offering to pay off the
outstanding principal balance of our revolving line of credit and terminated our
interest rate swap agreement. Accordingly, we currently do not have an exposure
to financial market risk associated with our revolving line of credit or any
derivative financial instruments.
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
During the quarter, we completed an offering of 2,760,000 shares of our common
stock. We received net proceeds from the offering of approximately $88.3
million. The proceeds of the stock offering have been used to repay the
outstanding principal balance of our revolving line of credit and will also be
used for working capital and other general corporate purposes, including
possible acquisitions.
On October 3, 2000 we entered into a distribution agreement with MedImmune,
Incorporated to distribute Synagis(R) during the 2000-2001 respiratory syncytial
virus season. The distribution agreement can be terminated by either party upon
30 days notice.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 27.1 Financial Data Schedule (for SEC use only) (filed
herewith)
(b) Reports on Form 8-K
On August 16, 2000, we filed a Current Report on Form 8-K to
incorporate information regarding our June 30, 2000 financial results into our
Registration Statement on Form S-3 that was completed and made final on August
17, 2000.
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.
November 14, 2000 Accredo Health, Incorporated
BY: /s/ David D. Stevens
----------------------------------------
David D. Stevens
Chairman of the Board and
Chief Executive Officer
/s/ Joel R. Kimbrough
----------------------------------------
Joel R. Kimbrough
Senior Vice President, Chief
Financial Officer and Treasurer
