UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the period ended March 29, 1996
Commission File Number 0-19952
CHRONIMED Inc.
(Exact name of registrant as specified in its charter)
Minnesota 41-1515691
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
13911 Ridgedale Drive
Minnetonka, MN 55305
(Address of principal executive offices)
(Zip code)
Registrant's telephone number, including area code (612) 541-0239
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, and (2) has been subject to such filing requirements
for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.01 par value - 12,415,593 shares outstanding as of April 26,
1996
INDEX
CHRONIMED INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 29, 1996 and June 30, 1995.
Consolidated Statements of Operations - Three months ended
March 29, 1996 and March 31, 1995; Nine months ended March 29,
1996 and March 31, 1995.
Consolidated Statements of Cash Flows - Nine months ended
March 29, 1996 and March 31, 1995.
Notes to Consolidated Financial Statements - March 29, 1996.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted since all items are inapplicable or
answers negative.
Item 6. Exhibits
11.1 Computation of Earnings Per Share.
27 Financial Data Schedule
99 Cautionary Statements
SIGNATURES
Part I. Financial Information
Item I. Financial Statements
CHRONIMED INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 29, JUNE 30,
1996 1995
----------- -----------
ASSETS (UNAUDITED) (NOTE A)
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................ $ 5,600,000 $ 2,203,055
Available-for-sale securities .................... 14,067,372 11,595,690
Accounts and notes receivable (net of allowance
of $1,000,000 and $725,000 at March 29, 1996
and June 30, 1995, respectively) ................ 17,791,239 13,803,540
Income taxes receivable .......................... 973,181 1,397,653
Inventory ........................................ 7,359,916 4,490,149
Other current assets ............................. 34,487 298,380
Deferred taxes ................................... 860,300 860,300
----------- -----------
Total current assets ......................... 46,686,495 34,648,767
Note receivable .................................... 1,335,445 927,641
Available-for-sale securities ...................... 13,347,096 11,605,667
Property and equipment:
Property and equipment ........................... 7,531,436 5,102,253
Allowance for depreciation ....................... (2,670,358) (1,629,432)
----------- -----------
4,861,078 3,472,821
Other assets, net .................................... 1,252,081 438,977
----------- -----------
Total assets ......................................... $67,482,195 $51,093,873
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ............ 13,016,533 $ 3,524,345
Liability due to acquisition ..................... 404,000 --
----------- -----------
Total current liabilities ................ 13,420,533 $ 3,524,345
Liability due to acquisition ....................... 150,000 --
Shareholders' equity:
Preferred Stock, $.01 par value;
5,000,000 shares authorized; none
outstanding .................................... -- --
Common Stock, $.01 par value --
authorized 20,000,000 shares; issued and
outstanding March 29, 1996 -- 12,435,593 shares;
June 30,1995 -- 11,903,751 shares .............. 124,356 119,038
Additional paid-in capital ....................... 47,867,599 45,357,161
Retained earnings ................................ 5,865,150 2,016,254
----------- -----------
53,857,105 47,492,453
Unrealized gain on available-for-sale securities . 54,557 77,075
----------- -----------
Total shareholders' equity .................... 53,911,662 47,569,528
----------- -----------
Total liabilities and shareholders'
equity ........................................... $67,482,195 $51,093,873
=========== ===========
</TABLE>
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 29, MARCH 31, MARCH 29, MARCH 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Managed Care $ 4,168,150 $ 2,267,300 $ 9,950,236 $ 6,107,289
Proprietary 8,736,068 3,203,927 23,116,576 12,967,032
Patient Choice/Professional
Referral 9,655,760 7,861,583 32,827,846 27,723,899
------------ ------------ ------------ ------------
TOTAL REVENUES 22,559,978 13,332,810 65,894,658 46,798,220
Cost of Sales 15,986,920 10,249,321 47,222,209 35,438,839
------------ ------------ ------------ ------------
GROSS PROFIT 6,573,058 3,083,489 18,672,449 11,359,381
Operating Expenses:
Selling 1,585,861 1,366,424 4,802,484 3,896,932
General and Administrative 2,872,956 2,300,957 8,559,541 5,900,443
Research and Development 132,349 73,300 324,368 172,016
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 4,591,166 3,740,681 13,686,393 9,969,391
Operating Income (Loss) 1,981,892 (657,192) 4,986,056 1,389,990
Interest Income 312,565 263,573 852,839 738,238
Income Tax (Expense)
Benefit (792,000) 248,000 (1,990,000) (552,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 1,502,457 $ (145,619) $ 3,848,895 $ 1,576,228
============ ============ ============ ============
INCOME (LOSS) PER SHARE $ 0.11 $ (0.01) $ 0.29 $ 0.13
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 13,427,854 12,717,988 13,248,093 12,547,723
============ ============ ============ ============
</TABLE>
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 29, MARCH 31,
1996 1995
------------ ------------
<S> <C> <C>
Operating Activities:
Net income .......................................... $ 3,848,895 $ 1,576,228
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization ................ 1,194,413 521,730
Changes in operating assets and liabilities:
Accounts and notes receivable ............. (3,610,316) (653,574)
Inventory ................................. (2,496,174) (708,263)
Other current assets ...................... 281,974 (561,109)
Accounts payable and other liabilities .... 8,837,974 (2,277,777)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES ...................... 8,056,766 (2,102,765)
Investing Activities:
Acquisitions, net of cash purchased ................. (84,461) --
Purchases of property and equipment ................. (2,305,787) (2,399,178)
Purchases of available-for-sale securities .......... (14,739,000) (7,122,238)
Sales and maturities of available-for-sale securities 10,503,372 11,157,557
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES ......................... (6,625,876) 1,636,141
Financing Activities:
Net proceeds from sale of Common Stock .............. 1,966,055 1,552,417
Principal payments on notes payable and
capital lease obligations ....................... -- (5,075,773)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES ................................... 1,966,055 (3,523,356)
Increase (decrease) in cash and cash equivalents ...... 3,396,945 (3,989,980)
Cash and cash equivalents at beginning of period ...... 2,203,055 6,260,237
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ... $ 5,600,000 $ 2,270,257
============ ============
</TABLE>
CHRONIMED INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed 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 Rule 10-01 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 for a fair presentation have been
included. Operating results for the nine-month period ended March 29, 1996 are
not necessarily indicative of the results that may be expected for the year
ending June 28, 1996. For further information, refer to the financial statements
and footnotes thereto for the year ended June 30, 1995.
The balance sheet at June 30, 1995, 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.
The Company adopted a 4-4-5 accounting cycle in fiscal 1993 with the fiscal year
ending on the Friday closest to June 30 and the fiscal quarters ending on the
Friday closest to the last day of the respective month.
NOTE B--INVENTORIES
Inventories consist primarily of goods held for resale and are valued at the
lower of cost or market under the first-in, first-out (FIFO) method.
NOTE C--INVESTMENTS
The Company's investment policy is to invest idle and excess funds in high
grade, fixed income securities generally for no more than two years. These
securities are classified as Available-for-Sale as of March 29, 1996 and June
30, 1995. The Company considers the net unrealized gain on these investments of
$54,557 and $77,075 at those respective dates to be temporary, and as such has
recorded it through shareholders' equity.
Part I. Financial Information
Item 2. Management's Discussion
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a health care company specializing in the needs of
patients with chronic conditions. The Company develops, markets and distributes
prescription drugs, medical products and educational materials by mail to
specific populations of patients with chronic conditions. By focusing on
specific chronic conditions, the Company believes it is able to provide valuable
services to: the patients affected by chronic conditions; the insurance
companies, health maintenance organizations, preferred provider organizations,
government agencies and other third-party payors ("Payors") that pay a large
portion of the related health care costs; the developers and manufacturers that
produce the prescription drugs and other products needed to manage chronic
conditions; and the institutions, foundations and health care providers working
with these patients. Generally, the Company is paid for sales of prescription
drugs and medical products by the Payors who provide reimbursement coverage for
the patients served by the Company.
Historically, the Company has obtained patients primarily through
referrals from health care providers and direct patient contacts. As employers
have attempted to control their escalating health care costs, Payors have
increasingly adopted various specialized managed care techniques in order to
limit the costs of health care. The specialty managed care industry has
developed principally in response to the demand from employers and Payors for
more effective control of cost increases in certain sectors, such as patients
with chronic conditions. In recent years, there has been a growing trend of
employees in the United States being subject to managed care programs. The
Company seeks to adapt managed care techniques or to develop new techniques to
manage the particular delivery systems, cost structures, and utilization
characteristics of patients with chronic conditions. As a result of the
increasing role of managed care, coupled with the Company's experience in
managing specific patient groups, patient referrals are increasingly coming from
the Company's Payor programs.
The Company has increased its emphasis on the development and licensing
of proprietary products suitable for distribution through its system. Through
its marketing agreement with Orphan Medical, Inc., the Company has the right to
market seven potential proprietary drugs and expects to receive initial revenue
on one or more of these products in early fiscal 1997, pending FDA approval. The
Company does not expect revenue on these products to exceed $2 million in fiscal
1997. The Company is also developing an innovative blood glucose monitor that
uses a continuous membrane system, as well as information management products
for specific disease states. Pursuant to exclusive distribution agreements, the
Company currently markets diabetes-related products, including the Supreme blood
glucose monitor and reagent strip, generic reagent strips, infusion sets and a
lancing device. Additionally, the Company distributes two proprietary clinical
nutrition products, PeptiCal, and NutrAssist, a protein supplement, both of
which are intended for HIV/AIDS and oncology patients.
REVENUES
The Company's revenues are derived from three principal sources: (1)
customers who are part of a managed care network ("Managed Care"); (2) revenues
generated primarily from sales of proprietary products ("Proprietary Products");
and (3) referrals from healthcare providers or patients who choose to purchase
from the Company ("Patient Choice").
Total revenues increased 69%, from $13,333,000 to $22,560,000, for the
three months ended March 31, 1995 and March 29, 1996, respectively; and 41%,
from $46,798,000 to $65,895,000, for the nine months ended March 31, 1995 and
March 29, 1996, respectively. While increases in prices of prescription drugs
and medical products have contributed to these increases in revenues, price
increases generally have not been a significant reason for the revenue growth.
Revenue from Managed Care contracts grew 84%, from $2,267,000 to
$4,168,000 for the three months ended March 31, 1995 and March 29, 1996,
respectively; and 63%, from $6,107,000 to $9,950,000, for the nine months ended
March 31, 1995 and March 29, 1996, respectively. Strong growth in managed care
sales for distribution of self injectable drugs accounted for this increase.
Revenue from Proprietary Products grew 173%, from $3,204,000 to $8,736,000, for
the three months ended March 31, 1995 and March 29, 1996, respectively; and 78%,
from $12,967,000 to $23,117,000, in the respective nine month periods. Strong
sales growth in both the Quick Check and Supreme strips were primarily
responsible for these increases. In the year earlier period, Proprietary
Products revenues were adversely affected by $1.8 million due to a production
hold by the Company's supplier of the Quick Check strip. Patient Choice revenue
increased 23%, from $7,862,000 to $9,656,000, for the three months ended March
31, 1995 and March 29, 1996, respectively; and 18%, from $27,724,000 to
$32,828,000, in the respective nine month periods. Specialty Pharmacy, the
largest business unit in Patient Choice, increased its revenue 23% and 27% in
the respective three and nine month periods. This growth reflects the efforts of
an experienced sales force as well as programs for patient retention and
upgraded customer service implemented during the past nine months.
Revenue growth is expected to remain strong through the remainder of fiscal
1996, with Managed Care and Proprietary Product sales experiencing the greatest
increases. The Company predicates its high growth managed care revenue
projections on a business model which relates the number of converted patients
for the Company's self injectables program to the number of members of health
insurance plans under formal agreements with the Company. Because the Company
has had limited time with the programs to develop statistically sound patient
conversion rates, its projections may be subject to inaccuracy. As to
proprietary products' projections, recent production rates of reagent strips, if
continued, will provide for high growth rates through fiscal 1996 compared to
fiscal 1995 when the reagent strip production hold was in effect. The company
believes its production rates are sustainable but may be subject to unforeseen
shortfalls.
COST OF SALES AND GROSS PROFIT
The increase in cost of sales in the fiscal 1996 periods compared to
the fiscal 1995 periods reflects the Company's revenue growth. The gross margin
percentage improved from 23.1% to 29.1% for the three months ended March 31,
1995 and March 29, 1996, respectively; and from 24.3% to 28.3% for the
respective nine month periods. This improvement is the result of the sales mix
of products and an increase in internal Supreme strip production, which is sold
at a favorable margin.
The average order size increased from $295 to $460 for the three months
ended March 31, 1995 and March 29, 1996, respectively; and from $317 to $423 for
the respective nine month periods. The increase in order size has resulted in
higher gross margin dollars per order. These increases were due to continued
growth in higher-priced prescription drugs and volume sales through distributors
of medical products.
SELLING EXPENSES
Selling expenses have increased since the fiscal 1995 period, primarily
as a result of increased promotional activities and hiring of additional sales
personnel. As a percent of revenues, selling expenses decreased from 10.2% to
7.0% in the three months ended March 31, 1995 and March 29, 1996, respectively;
and from 8.3% to 7.3% in the respective nine month periods.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased since the fiscal 1995
period, primarily as a result of increased fulfillment costs related to
increases in revenues. As a percent of revenues, these expenses decreased from
17.3% to 12.7% for the three months ended March 31, 1995 and March 29, 1996,
respectively. For the respective nine month periods, general and administrative
expenses increased from 12.6% to 13.0%. The dollar and percentage increases
reflect additional resources added in fiscal 1995 and early 1996 to build an
appropriate infrastructure in preparation for revenue growth. The Company
expects general and administrative expenses to decrease as a percentage of
revenue during the fourth quarter of fiscal 1996 compared to fiscal 1995, as
revenue growth requires infrastructure spending at a decreasing rate.
RESEARCH AND DEVELOPMENT EXPENSES
Research and Development expenses were $73,000 and $132,000 for the
three months ended March 31, 1995 and March 29, 1996, respectively; and $172,000
and $324,000 in the respective nine month periods. These expenses were for
proprietary product development commenced in fiscal 1995.
OPERATING INCOME
Operating income increased from a loss of $657,000 to an income of
$1,982,000 for the three months ended March 31, 1995 and March 29, 1996,
respectively; and increased 259%, from $1,390,000 to $4,986,000, in the
respective nine month periods. These increases reflect significant revenue
growth, higher gross margin percentages, and lower operating expense
percentages.
INTEREST INCOME
Interest income increased in the three and nine month periods due
primarily to an increase in total investments. Net interest income after a
provision for taxes accounted for approximately 45% and 21% of net income for
the nine months ended March 31, 1995 and March 29, 1996, respectively.
INCOME TAXES
The Company generated an income tax benefit in the three months ended
March 31, 1995 due to the $657,000 operating loss. For the three months ended
March 29, 1996, the Company's income tax rate was approximately 34.5%. For the
respective nine month periods, the income tax rate was approximately 25.9% and
34.1%. These rates differ from the statutory rate due to favorable tax treatment
on municipal bond and Treasury note interest income. The rate increase in the
nine month periods is due to a lower percentage of income from interest in the
fiscal 1996 period.
NET INCOME
The Company's net income increased from a loss of $146,000 to an income
of $1,502,000 for the three months ended March 31, 1995 and March 29, 1996,
respectively; and 144%, from $1,576,000 to $3,849,000, for the respective nine
month periods. The increases result from significant revenue growth, higher
gross margin percentages, lower operating expense percentages, and higher
interest income.
LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 1996, the Company had working capital of approximately
$33,266,000.
The Company's accounts receivable are generally with Payors for which
the collection periods vary depending on the practices of the individual Payor.
Because of the complexities involved in the reimbursement process, typically as
much as one third of the Company's receivables are generally outstanding for
more than 90 days on an ongoing basis. The average collection period for the
Company's accounts receivable increased up until the beginning of fiscal 1995 as
the Company became more involved in the reimbursement process through its
specialty pharmacy programs for patients with chronic conditions, including
organ transplant, HIV/AIDS and oncology. Additionally, the Company has obtained
an increasing number of patients with benefits from Medicaid and special state
programs which tend to pay claims more slowly. As a result of the relatively
long collection period for the Company's accounts receivable, the Company
expects working capital requirements to increase as revenues increase.
The days sales outstanding (DSO) of the Company's accounts receivable
were 69 at March 29, 1996, compared to 92 at March 31, 1995. The decrease
reflects improved collection efforts and the mix of business. Growth in revenue
from Payors which are billed electronically and increased sales to large
institutions have both contributed to the decrease in DSO as these groups pay
claims in a more timely manner.
The reserve for bad debts increased from $725,000 to $1,000,000 from
June 30, 1995 to March 29, 1996, supporting the Company's significant revenue
growth.
The Company has entered into an agreement to purchase computer software
for approximately $1,100,000, of which approximately $700,000 has been incurred
through March 29, 1996. This acquisition is expected to be completed next fiscal
year. Further, the Company plans to spend up to $1.5 million in the near future
to complete the development of two or more blood glucose monitors. One of these
developments is being performed by a project management firm and is being
financed by the Company through a note receivable, totalling $1.3 million on the
Company's balance sheet as of March 29, 1996. The Company believes that the
project will be completed successfully. However, as always with product design
and development efforts, there is a risk that the project will not be completed
successfully. Should this occur, it is likely that the Company will not collect
on its note receivable nor recover its investment through future product sales.
While none of these planned expenditures represents irrevocable commitments, the
Company expects them to occur.
The Company has a discretionary line of credit of $2,500,000. There was
no balance outstanding under this line of credit at March 29, 1996.
HEALTH REFORM/GOVERNMENT REGULATION
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. A variety of new
approaches has been proposed, including mandated basic health care benefits,
controls on health care spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, and the creation
of large purchasing groups and other fundamental changes to the health care
delivery system. In addition, some of the states in which the Company operates
have adopted or are considering various health care reform proposals. The
Company anticipates that both the public and private sectors will continue to
review and assess alternative health care delivery systems and payment methods
and that debate of these issues will likely continue in the future. Because of
uncertainty regarding the ultimate features of reform initiatives and their
enactment and implementation, the Company cannot predict which, if any, of such
reform proposals will be adopted, when they may be adopted, or what impact they
may have on the Company.
The Company's business is subject to substantial governmental
regulation, including laws governing the dispensing of prescription drugs and
laws prohibiting the payment of remuneration for patient referrals. Management
believes that the Company is in substantial compliance with all existing
statutes and regulations materially affecting the conduct of its business.
SEASONALITY
The Company has experienced a significant seasonal pattern in its
operating results. Historically, the Company has had higher revenues in its
second fiscal quarter than in its third fiscal quarter. The Company believes the
seasonality of its revenues and earnings results from the acceleration of
purchases of prescription drugs and medical products by individuals prior to the
beginning of a new calendar year (which is generally when Payors impose new
deductible calculations). As sales through Patient Choice become a less
significant part of the Company's total revenues, the Company believes its
operating results will become somewhat less seasonal. Revenues for the third
quarter ended March 29, 1996, were $22,560,000, down 9.1% against the
$24,809,000 in revenues for the second quarter ended December 29, 1995. For the
same two periods a year ago, revenue dropped 27.7%, indicating a fiscal 1996
softening of this second quarter to third quarter seasonality trend.
PART II
Items 1 through 5 required under Part II have been omitted since they are
inapplicable or the answers negative.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings Per Share.
99 Cautionary Statements for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company was not required to file any reports on Form 8-K
during the quarter ended March 29, 1996.
SIGNATURES
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.
CHRONIMED INC.
(REGISTRANT)
May 1, 1996 /s/ Maurice R. Taylor II
Date Maurice R. Taylor II
Chairman of the Board, President, and
Chief Executive Officer
May 1, 1996 /s/ Norman A. Cocke
Date Norman A. Cocke
Senior Vice President and Chief
Financial Officer
EXHIBIT 11.1
CHRONIMED INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Mar. 29, Mar. 31, Mar. 29, Mar. 31,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Primary
Average shares outstanding ................ 12,330 11,791 12,151 11,616
Net effect of dilutive stock options
and warrants -- based on the treasury
stock method using average market price 1,037 920 835 932
-------- -------- -------- --------
Total .............................. 13,367 12,711 12,986 12,548
======== ======== ======== ========
Net income (loss) ........................... $ 1,503 $ (146) $ 3,849 $ 1,576
======== ======== ======== ========
Net income (loss) per share ................. $ .11 $ ( .01) $ .30 $ .13
======== ======== ======== ========
Fully Diluted
Average shares outstanding ................ 12,330 11,791 12,151 11,616
Net effect of dilutive stock options
and warrants -- based on the treasury
stock method using the higher of average
or ending market price ................. 1,098 927 1,097 932
-------- -------- -------- --------
Total .............................. 13,428 12,718 13,248 12,548
======== ======== ======== ========
Net income (loss) ........................... $ 1,503 $ (146) $ 3,849 $ 1,576
======== ======== ======== ========
Net income (loss) per share ................. $ .11 $ ( .01) $ .29 $ .13
======== ======== ======== ========
</TABLE>
EXHIBIT 99
CAUTIONARY STATEMENTS FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
CHRONIMED Inc. (the "Company) desires to take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 and is filing
this Exhibit to its Quarterly Report on Form 10-Q in order to do so. When used
in this Quarterly Report on Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission in the Company's annual report, quarterly
reports, press releases and in oral statements made with the approval of an
authorized executive officer, the words or phrases "will likely result", "look
for", "may result", "will continue", "is anticipated", "expect", "project" or
similar expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. The Company cautions readers that the following
important factors, among others, could affect the Company's financial
performance and could cause the Company's actual results for future periods to
differ materially from any forward-looking statements made by, or on behalf of,
the Company:
The Company's ability to maintain its on-going arrangements with the
manufacturers of various products and their ability to satisfy the Company's
volume requirements and pricing and product criteria, particularly with the
Sandimmune(R) and Neoral(R) products manufactured by Sandoz, A.G. and the
Quick Check reagent strip manufactured by Diagnostic Solutions, Inc.
Changes in or unknown violations of various Federal, State, and Local
regulations governing: the dispensing of prescription drugs; the prohibiting
of payments for patient referrals; the labeling, packaging, advertising and
adulteration of prescription drugs; the dispensing of "controlled" substances
and prescription drugs; the "fraud and abuse" provisions of the Social
Security Act; and others not specifically mentioned.
The costs and other effects of legal and administrative cases and proceedings;
claims of customers, both current and former; settlements and investigations;
and changes in those items; developments or assertions by or against the
Company relating to distribution rights and licenses; adoption of new, or
changes in, accounting policies and practices and the application of such
policies and practices.
The amount, and rate of growth in, the Company's selling, general and
administrative expenses; and the impact of unusual items resulting from the
Company's ongoing evaluation of its business strategies, asset valuations and
organizational structures.
The effects of, and changes in, trade, monetary and fiscal policies, laws and
regulations, other activities of government agencies, as previously mentioned;
changes in social and economic conditions, such as trade restrictions or
prohibitions, inflation and monetary fluctuations, import and other charges or
taxes; the ability or inability of the Company to obtain, or hedge against,
foreign currency, foreign exchange rates and fluctuations in those rates;
unstable governments and legal systems, and intergovernmental disputes.
The Company's ability to obtain competitive financing to fund its growth.
Difficulties or delays in the development and marketing of the Company's
products, including, but not limited to, a failure to deliver new proprietary
products and technologies when anticipated (e.g., the continuous membrane
blood glucose monitor and the Vanguard patient information system).
Occurrences affecting the Company's ability to realize cost and volume
efficiencies, particularly in its Managed Care business.
Heightened competition, including specifically the intensification of price
competition; the entry of new competitors; and the introduction of new
products and services by new and existing competitors.
Termination of payor contracts or renegotiation at lower rates or less
favorable terms of payment.
Adverse actions of governmental payors, including reduction of Medicare and
Medicaid allowables for products or services provided, and discontinuance or
limitations on governmentally-funded programs.
Failure to obtain new customers, retain existing customers or reductions in
force by existing customers.
Adverse publicity and news coverage.
Inability to carry out marketing and sales plans.
Loss or retirement of key executives.
Changes in interest rates causing a reduction of interest income, or the
unforeseen need for the Company to liquidate its available-for-sale securities
prior to maturity, potentially resulting in permanent losses.
The Company does not undertake and specifically declines any obligations to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
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