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 28, 1997
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 - 11,739,476 shares outstanding
as of April 28, 1997
INDEX
CHRONIMED INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 28, 1997 and June 28, 1996
Consolidated Statements of Income - Three months ended March 28, 1997
and March 29, 1996; Nine months ended March 28, 1997 and March 29,
1996
Consolidated Statements of Cash Flows - Nine months ended March 28,
1997 and March 29,1996
Notes to Consolidated Financial Statements - March 28, 1997
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 not applicable
or answers are negative.
Item 6. Exhibits and Reports on Form 8-K
11.1 Computation of Earnings Per Share
27 Financial Data Schedule
SIGNATURES
Part 1. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
CHRONIMED INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
Mar 28, 1997 June 28,
------------ --------
1996
----
ASSETS (Unaudited) (Note A)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,333 $ 11,434
Available-for-sale securities 6,457 12,803
Accounts receivable, net 18,891 19,843
Income taxes receivable 42 49
Inventory 8,312 5,476
Other current assets 501 559
Deferred taxes 493 493
-------- --------
Total current assets 40,029 50,657
Note receivable (Note D) -- 1,375
Available-for-sale securities 1,790 9,069
Property and equipment:
Property and equipment 11,412 8,542
Allowance for depreciation (4,899) (3,097)
-------- --------
6,513 5,445
Intangible assets, net 9,746 1,362
-------- --------
Total assets $ 58,078 $ 67,908
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 9,226 $ 9,992
Short-term debt 350 404
-------- --------
Total current liabilities 9,576 10,396
Long-term debt -- 350
Shareholders' equity:
Preferred stock, $.01 par value--
authorized 5,000,000 shares; none outstanding -- --
Common stock, $.01 par value--
authorized 20,000,000 shares; issued and
outstanding March 28, 1997--11,739,476;
June 28, 1996--12,454,560 117 125
Additional paid-in capital 36,798 49,569
Retained earnings 11,655 7,475
-------- --------
48,570 57,169
Unrealized (loss) on available-for-sale securities (68) (7)
-------- --------
Total shareholders' equity 48,502 57,162
-------- --------
Total liabilities and shareholders' equity $ 58,078 $ 67,908
======== ========
</TABLE>
<TABLE>
<CAPTION>
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per share amounts)
Three months ended Nine months ended
------------------ -----------------
Mar 28, 1997 Mar 29, 1996 Mar 28, 1997 Mar 29, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Managed Care $ 5,967 $ 4,168 $ 16,457 $ 9,950
Proprietary 7,361 8,736 25,838 23,117
Patient Choice 13,770 9,656 44,641 32,828
-------- -------- -------- --------
Total Revenue 27,098 22,560 86,936 65,895
YR TO YR GROWTH 20.1% 31.9%
COSTS AND EXPENSES
Cost of sales (Note E) 18,186 15,987 61,587 47,223
Gross profit 8,912 6,573 25,349 18,672
% OF REVENUE 32.9% 29.1% 29.2% 28.3%
Selling and marketing 1,548 1,586 4,996 4,802
General and administrative 4,149 2,873 12,509 8,560
Research and development 86 132 371 324
Write-off of note receivable (Note D) 1,391 -- 1,391 --
Total operating expenses 7,174 4,591 19,267 13,686
% OF REVENUE 26.5% 20.4% 22.2% 20.8%
INCOME FROM OPERATIONS 1,738 1,982 6,082 4,986
% OF REVENUE 6.4% 8.8% 7.0% 7.6%
Interest income 136 312 594 853
INCOME BEFORE INCOME TAXES 1,874 2,294 6,676 5,839
Provision for income taxes (711) (792) (2,497) (1,990)
-------- -------- -------- --------
NET INCOME $ 1,163 $ 1,502 $ 4,179 $ 3,849
-------- -------- -------- --------
% OF REVENUE 4.3% 6.7% 4.8% 5.8%
NET INCOME PER SHARE $ 0.10 $ 0.11 $ 0.33 $ 0.29
-------- -------- -------- --------
WEIGHTED AVERAGE SHARES OUTSTANDING 12,127 13,428 12,611 13,248
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
CHRONIMED INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended
Mar 28, 1997 Mar 29, 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,179 $ 3,849
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,683 1,194
Changes in operating assets and liabilities:
Accounts and notes receivable 2,333 (3,610)
Inventory (2,836) (2,496)
Other assets 27 282
Accounts payable and accruals (765) 8,838
-------- --------
Net cash provided by operating activities 5,621 8,057
INVESTING ACTIVITIES:
Repurchase of Common Stock (14,452) --
Acquisitions, net of cash purchased (9,234) (84)
Purchases of property and equipment (2,869) (2,306)
Purchases of available-for-sale securities (4,041) (14,739)
Sales and maturities of available-for-sale securities 17,606 10,503
-------- --------
Net cash (used in) investing activities (12,990) (6,626)
FINANCING ACTIVITIES:
Net proceeds from sale of Common Stock 1,268 1,966
Net cash provided by financing activities 1,268 1,966
Increase (decrease) in cash and cash equivalents (6,101) 3,397
Cash and cash equivalents at beginning of period 11,434 2,203
-------- --------
Cash and cash equivalents at end of period $ 5,333 $ 5,600
======== ========
</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 28, 1997 are
not necessarily indicative of the results that may be expected for the year
ending June 27, 1997. For further information, refer to the financial statements
and footnotes thereto for the year ended June 28, 1996.
The balance sheet at June 28, 1996, 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 uses a four-week, four-week, five-week (4-4-5) quarterly accounting
cycle 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 average cost 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 28, 1997 and June
28, 1996. The Company considers the net unrealized loss on these investments of
$68,000 and $7,000 at those respective dates to be temporary, and as such has
recorded it through shareholders' equity.
NOTE D--NOTE RECEIVABLE
The Company wrote off, in the third quarter ending March 28, 1997, the
$1,391,000 note receivable from Health Craft International (HCI), recently
concluding that the note is not likely to be fully collectible given the
yet-to-be solved technical challenges facing the underlying project and the
financial status of HCI. Chronimed is working to find a technical partner in the
project but has concluded that the note receivable should be written off in
full.
NOTE E--COST OF SALES
As a result of a previously disclosed shipment hold on Quick Check reagent
strips being manufactured by Diagnostic Solutions Inc. (DSI), Chronimed recorded
a favorable adjustment to cost of sales of $1,240,000 in the third quarter ended
March 28, 1997. This reflects the overaccrual of inventory costs that would have
been paid had DSI been able to achieve full volume under its contract with
Chronimed. Chronimed's contract with DSI was structured so that the highest
volume units were the most expensive. The Company chose to record all units at
an estimated average cost for the entire expected volume. Thus, since the unit
volume was never fully achieved due to the shipment hold, the overaccrual of
inventory costs was recaptured as a favorable adjustment in the third quarter.
NOTE F--RELATED PARTY TRANSACTION
On April 9, 1997, subsequent to the completion of the third quarter, the Company
entered into a guarantee of indebtedness of Mr. Maurice R. Taylor, II,
Chronimed's Chairman and Chief Executive Officer. Such indebtedness permitted
Mr. Taylor to continue to hold large amounts of Company stock. There was
$355,000 of indebtedness under the guarantee on April 28, 1997.
Part I. Financial Information
Item 2. Management's Discussion
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Chronimed Inc. ("Chronimed" or the "Company") develops, markets and
distributes prescription drugs, medical products and educational materials by
mail and retail pharmacy 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. The patient populations
for which the Company believes its services are most effective include patients
who:
* Require a costly regimen of maintenance prescription drugs or
other medical products over the course of their lives;
* Are treated by health care specialists; and
* Require a significant amount of self-management and on-going
education.
The Company is currently serving four such populations: patients with diabetes,
patients who have had an organ transplant, patients with HIV/AIDS, and patients
who self-administer injectable medications. Starting July 1996, Chronimed has
increased its efforts in addressing the needs of HIV/AIDS patients through the
Company's acquisition of StatScript Management Services, Inc., and its specialty
HIV/AIDS pharmacies. The Company is investigating programs for a variety of
other chronic conditions.
Chronimed provides patients with a convenient, competitively-priced
source of prescription drugs, medical and clinical nutrition products and a
variety of educational materials designed to help patients achieve maximum
control over their chronic conditions. Often, the greater the effort a patient
makes to stabilize or control his or her chronic condition, the lower the
incidence of complications and the better the patient's quality of life.
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. Chronimed works with managed care organizations to
reduce costs and improve health outcomes. As a result of the increasing presence
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 developed relationships with certain treatment centers,
foundations and associations which specialize in the treatment or support of
patients with chronic conditions. These relationships provide the Company with
access to a large number of individuals with chronic conditions and to the
health care providers treating these conditions.
Chronimed believes that its system is well-suited for developers and
manufacturers of pharmaceutical and medical products designed for small or
hard-to-identify patient populations. Chronimed provides these companies with
assistance in the design and rapid introduction of their products, a cost
effective means for distributing these products to specific patient populations,
and a method for monitoring the use of these products as well as outcomes.
Chronimed develops and licenses proprietary products suitable for
distribution through its system. Pursuant to exclusive distribution and license
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. Through its agreement with Orphan Medical,
Inc., the Company has the right to sell a number of proprietary drugs.
Additionally, Chronimed has exchanged rights to sell other Orphan Medical drugs
for future royalties. At present, Chronimed is working to restructure its
relationship with Orphan Medical to possibly include the sale of its domestic
distribution rights back to Orphan Medical.
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 20%, from $22,560,000 to $27,098,000, for the
three months ended March 29, 1996 and March 28, 1997, respectively; and 32%,
from $65,895,000 to $86,936,000, for the nine months ended March 29, 1996 and
March 28, 1997, respectively. Price increases generally have not been a
significant reason for the revenue growth.
Revenue from Managed Care contracts grew 43%, from $4,168,000 to
$5,967,000 for the three months ended March 29, 1996 and March 28, 1997,
respectively; and 65%, from $9,950,000 to $16,457,000, for the nine months ended
March 29, 1996 and March 28, 1997, respectively. Growth in managed care sales of
self injectable medications accounted for this increase. Revenue from
Proprietary Products decreased 16%, from $8,736,000 to $7,361,000, for the three
months ended March 29, 1996 and March 28, 1997, respectively, due to a
production and shipment hold on the Quick Check product being manufactured by
Diagnostic Solutions, Inc. (DSI). Revenues from Proprietary Products increased
12%, from $23,117,000 to $25,838,000, in the respective nine month periods due
to strong sales growth in the Supreme strips, partially offset by the impact of
the Quick Check hold. Patient Choice revenue increased 43%, from $9,656,000 to
$13,770,000, for the three months ended March 29, 1996 and March 28, 1997,
respectively; and 36%, from $32,828,000 to $44,640,000, in the respective nine
month periods. For Specialty Pharmacy, the largest business unit in Patient
Choice, revenue decreased 9% in each of the respective three and nine month
periods due mainly to the decision by the Company to suspend serving patients
insured by the lowest margin payors. This decline was more than offset by
revenues from StatScript Pharmacy of $4,710,000 and $13,450,000 in the
respective three and nine month periods. StatScript was acquired in July 1996.
Revenue growth is expected to continue through the remainder of fiscal
1997, particularly due to growth from StatScript Pharmacy and the
self-injectables program. Because StatScript Pharmacy was acquired at the
beginning of fiscal 1997, fiscal 1997 revenues compare favorably to fiscal 1996.
StatScript Pharmacy's revenue through the first nine months of fiscal 1997 is up
49% against last year's same period when StatScript was an independent company.
This rate is expected to continue through fiscal 1997 year end. The Company
predicates its growth-oriented 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 not yet
developed statistically sound patient conversion rates, its projections may be
subject to inaccuracy.
The shortfall in Quick Check sales noted above has been discussed in
prior public announcements. The FDA has requested a hold on production and
shipment of the Quick Check strip pending resolution of certain regulatory
issues, including the possible need for a new 510(k) FDA clearance. Chronimed is
working to restructure the relationship with DSI, the Quick Check supplier, and
while the Company is presently in negotiations with them, there can be no
reasonable prediction of the ultimate outcome. The Company is assuming a
disruption in supply for at least several months. The monthly revenue impact is
approximately $1 million.
GROSS PROFIT
The gross profit percentage for the third quarter was 32.9% of revenue.
Excluding the $1.24 million one-time favorable Quick Check adjustment (see Note
E), the underlying gross profit percentage declined from 29.1% to 28.3% for the
three months ended March 29, 1996 and March 28, 1997, respectively. This decline
is due primarily to the increase in lower-margin Managed Care revenue and the
decrease in Specialty Pharmacy gross profits. For the respective nine month
periods, the underlying gross profit percentage declined from 28.3% to 27.7% due
primarily to the increase in lower-margin Managed Care revenue and the decrease
in Specialty Pharmacy gross profits.
SELLING AND MARKETING EXPENSES
Selling and marketing expenses were flat in the third quarter compared
to last year due to careful management of discretionary expenses and the
favorable impact of the loss of Quick Check volume on variable expenses. As a
percent of revenue, selling and marketing expenses decreased from 7.0% to 5.7%
in the three months ended March 29, 1996 and March 28, 1997, respectively; and
from 7.3% to 5.7% in the respective nine month periods. Chronimed received
$217,000 and $506,000 in selling and marketing rebates from a large manufacturer
in last year's third quarter and nine months ended March 29, 1996. The Company
believes it will earn a similar rebate approximating $700,000 in fiscal fourth
quarter ending June 27, 1997.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative (G&A) expenses for the third quarter totaled
$4,147,000 or 15.3% of revenue (excluding the $1,391,000 write-off of the HCI
note receivable), up 44% against the prior year of $2,873,000, or 12.8% of
revenue. This third quarter spending is in line with actual spending for the
first two quarters of this year and reflects the semi-fixed nature of G&A costs
when revenue varies quarter to quarter. Chronimed's G&A expenses include
customer service, billing, and pharmacy fulfillment as well as other traditional
G&A expenses such as Corporate and Divisional Management, Information Services,
Business Development, Finance, and Human Resources. For the respective nine
month periods, G&A expenses increased 46%, with expenses as a percent of revenue
increasing from 13.0% to 14.4%. Spending increases in both the quarter and nine
month periods reflect major infrastructure investments to prepare for growth,
including information systems, customer service and pharmacy delivery processes,
and financial processes. Goodwill costs associated with the StatScript
acquisition also contributed to the increase in G&A spending.
INCOME FROM OPERATIONS
Income from operations dropped from $1,982,000 to $1,738,000 for the
three months ended March 29, 1996 and March 28, 1997, respectively. The net
financial impact of the one-time adjustments recorded this quarter (the HCI note
receivable -- see Note D; and the Quick Check accounting -- see Note E) total
$150,000 unfavorable to income from operations. Excluding these adjustments, the
underlying income from operations as a percent of revenue decreased from 8.8% to
7.0%, with much of the decline coming from increased G&A spending. For the
respective nine month periods, income from operations increased from $4,986,000
to $6,082,000. Excluding the adjustments note above, the underlying income from
operations as a percent of revenue decreased from 7.6% to 7.2% due primarily to
increased G&A spending.
INTEREST INCOME
Interest income dropped from $312,000 in last year's third quarter to
$136,000 this quarter. This decline is due to reductions in investable funds
related to the StatScript acquisition and the repurchase of Chronimed stock.
Interest income for the fourth quarter will be somewhat higher than for the
third quarter given a continuing positive cash flow and the impact of higher
interest rates on an investment portfolio of relatively short duration. For the
nine month periods ended March, interest income dropped from $853,000 in fiscal
1996 to $594,000 in fiscal 1997 for the same reasons noted above.
LIQUIDITY AND CAPITAL RESOURCES
As of March 28, 1997, the Company had working capital of $30,453,000,
with no long-term debt, and $48,502,000 of shareholders' equity.
The Company believes that its current working capital, together with
existing sources of liquidity and cash generated by operations, will satisfy its
working capital requirements through at least fiscal 1997.
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 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 and HIV/AIDS. 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. The advent of electronic billing is a recent
positive trend that has begun to shorten cash collection periods and improve
cash flow. Nonetheless, the Company expects working capital requirements to
increase as revenues increase.
The days sales outstanding (DSO) of the Company's accounts receivable
improved to 63 at March 28, 1997, compared to 69 at March 29, 1996. 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 contributed to the decrease in DSO as these groups pay claims
in a more timely manner.
The reserve for bad debts increased from $860,000 to $960,000 from June
28, 1996, to March 28, 1997, supporting the Company's revenue growth, favorably
offset by the improving quality of receivables.
Inventory increased $2.8 million from June 28, 1996 to March 28, 1997
due to the acquisition of StatScript inventory and to general business growth.
The Company believes there is not a significant risk of inventory write-offs and
that the current inventory reserve is adequate.
On September 6, 1996, the Company approved a stock repurchase plan of
up to 1 million shares at times and prices to be determined by management.
Through March 28, 1997, the Company has repurchased all 1 million shares at a
cost of $14.4 million.
The Company has no material commitments for capital expenditures for
fiscal 1997. The Company has recently entered into a five-year facility lease
through March, 2002 totaling approximately $350,000 each year.
The Company recently increased its committed line of credit from $2.5
million to $15 million in an agreement executed on December 31, 1996. As of
March 28, 1997, there was no balance outstanding under the line of credit.
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). Chronimed expects the degree of seasonality to
moderate as revenues increase from managed care payors and customers not subject
to insurance payments.
OUTLOOK
Information contained in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations", other than historical
information, should be considered forward looking and reflects management's
current views of future events and financial performance that involve a number
of risks and uncertainties. The factors that could cause actual results to
differ include, but are not limited to, the following: competition and pricing
pressures; difficulties or delays in the development and marketing of the
Company's products; difficulties in realizing the expected revenues and profits
from the StatScript acquisition; termination of key Payor contracts, including
the Health Insurance Plan of New York, a contract that is currently being
re-bid; termination of key supplier contracts; alteration or restructuring of
Medicare contracts and related reimbursement rates; changes in or unknown
violations of various federal, state, and local regulations governing the
business; timing of decisions by the FDA relative to the Diagnostic Solutions
Inc. (DSI) Quick Check product and Chronimed's regulated products; and
management of growth. Please see Exhibit 99 filed with the Company's Form 10-K
on September 12, 1996, for additional circumstances that could cause actual
results to differ from forecasts.
PART II
Items 1 through 5 required under Part II have been omitted since they are not
applicable or the answers negative.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Computation of Earnings Per Share
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 28, 1997.
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 5, 1997 /s/ Maurice R. Taylor, II
- ------------------ -----------------------------------
Date Maurice R. Taylor, II
Chairman of the Board and
Chief Executive Officer
May 5, 1997 /s/ Norman A. Cocke
- ------------------ -----------------------------------
Date Norman A. Cocke
Senior Vice President, Chief Financial Officer
and Secretary
EXHIBIT 11.1
<TABLE>
<CAPTION>
CHRONIMED INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
MAR. 28, MAR. 29, MAR. 28, MAR. 29,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Average shares outstanding ................ 11,763 12,330 12,125 12,151
Net effect of dilutive stock options
and warrants -- based on the treasury
stock method using average market price 364 1,037 486 835
------- ------- ------- -------
Total .............................. 12,127 13,367 12,611 12,986
======= ======= ======= =======
Net income .................................. $ 1,163 $ 1,502 $ 4,179 $ 3,849
======= ======= ======= =======
Net income per share ........................ $ .10 $ .11 $ .33 $ .30
======= ======= ======= =======
Fully Diluted
Average shares outstanding ................ 11,763 12,330 12,125 12,151
Net effect of dilutive stock options
and warrants -- based on the treasury
stock method using the higher of average
or ending market price ................. 364 1,098 486 1,097
------- ------- ------- -------
Total .............................. 12,127 13,428 12,611 13,248
======= ======= ======= =======
Net income .................................. $ 1,163 $ 1,502 $ 4,179 $ 3,849
======= ======= ======= =======
Net income per share ........................ $ .10 $ .11 $ .33 $ .29
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> DEC-28-1996
<PERIOD-END> MAR-28-1997
<CASH> 5,333,000
<SECURITIES> 6,457,000
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0
0
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</TABLE>
