Chronimed Reports Fiscal 2000 Third Quarter Results

April 25, 2000 at 12:00 AM EDT

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NEWS RELEASE April 25, 2000
Contacts:	Paul S. Dunn, Investor Relations, or Maurice R. Taylor, II, Chairman and CEO, at Chronimed Inc. (612) 979-3600
CHRONIMED REPORTS FISCAL 2000 THIRD QUARTER RESULTS Operating Income for Combined Company Hits $0.10 per Share Before Non-Recurring Items
MINNEAPOLIS, April 25, 2000 -- Chronimed Inc. (Nasdaq: CHMD), today reported third quarter results, which will now conform to its previously announced intention to spinoff the Diagnostic Products business through a tax-free dividend to shareholders. The spinoff, which is contingent upon a favorable tax opinion and satisfaction of other conditions, is expected to be completed in the next few months. Given the intended spinoff, Chronimed will report the Pharmacy business as continuing operations in its financial statements and the Diagnostic Products business as discontinued operations. Combined operations – Third Quarter For the third quarter ended March 31, 2000, combined operating income from continuing and discontinued operations, excluding the non-recurring charge discussed below, was ten ($0.10) cents per share compared to four ($0.04) cents per share last year. The continuing Pharmacy business accounted for seven cents of the quarter's results, while discontinued Diagnostic Products business contributed three cents per share. These results compare against last year's loss of two cents and income of six cents from Pharmacy and Diagnostic Products, respectively. Net income per share, as reported for the combined entity, was a 16 cent loss for this year's third quarter. Pharmacy's loss of 21 cents was created by a non-cash charge of $5.5 million, or 28 cents per share, resulting from the Company's decision to exit Clinical Partner's contracts management line. This charge included the pre-tax write off of $4.7 million in goodwill and other restructuring charges of $800,000. Diagnostic Products generated net income of five cents per share in the quarter. Continuing operations – Third Quarter Chronimed's continuing Pharmacy business reported revenue of $57.6 million, up 31 percent from $44.0 million in last year's third quarter. Adjusted operating income was $1.4 million, or an equivalent seven cents per share, up from a loss of $385,000 or an equivalent two cents per share loss in last year's third quarter. The net loss from continuing operations for the quarter, including the $3.4 million after-tax impact of the Clinical Partner's charge, was $2.5 million or 21 cents per share, compared to a net loss of $218,000 or two cents per share last year. Discontinued operations – Third Quarter The discontinued operations represented by Diagnostic Products generated revenue of $8.1 million and contributed net income after tax of $635,000 or five cents per share. Included in these amounts is a gain on the sale of securities in the third quarter of two cents per share. Commenting on the combined entity's results, Chronimed's current chairman and chief executive officer Maurice R. Taylor, II, said, “I am very pleased with our underlying performance this quarter. Combined revenues, margins, and expenses were at, or favorable to, our expectations. Combined operating income, excluding our Clinical Partners decision, totaled ten cents per share, an increase of 150% from fiscal year 1999 operating results.” Henry F. Blissenbach, Pharm.D., Chronimed's future chairman and chief executive officer said of the continuing business, “Adjusted operating income from the Pharmacy business, which includes our mail-order and retail distribution segments, improved significantly from last year, moving from a pre-tax loss of almost $400,000 to a pre-tax profit of $1.4 million. The Pharmacy business has definitely turned the corner on profitability, which is shown by this, our third consecutive quarter of operating profits. The decision to exit the Clinical Partner's contracts management line was a difficult one. However, this writedown eliminates a substantial operating drag and allows us to focus on our core distribution business. With our new strategic focus and this earnings momentum, we believe we are positioned nicely for fourth quarter and fiscal 2001.” Year-to-date results For the nine-month period, revenue from continuing operations grew 39 percent to $166.8 million, up from $120.4 million last year. Adjusted for $931,000 of costs incurred this year to pursue strategic alternatives, and the Clinical Partners charge, operating income more than tripled from $1.2 million last year to $3.7 million this year, or from an equivalent six cents per share last year to 19 cents this year. Including the three non-operating items of strategic alternatives costs, the Clinical Partners charge, and last year's sale of the Publishing business, net income per diluted share from continuing operations decreased from 11 cents last year to a loss of 14 cents this year. Discontinued operations represented by Diagnostic Products generated revenue of $25.0 million and contributed net income after tax of $1.7 million or 14 cents per share this year. Chronimed Inc. is a leading integrated healthcare company specializing in diagnostic products and specialty pharmacy services for people with chronic health conditions. The Company develops, manufactures, markets, and/or distributes pharmaceuticals and medical diagnostic products. It provides specialized patient management services nationwide for people with long-term chronic conditions such as HIV/AIDS, diabetes, organ transplants, and diseases treated with injectable medications. Chronimed works directly with patients, providers, and payors to improve clinical and cost-of-care outcomes. The Company's web site address is www.chronimed.com. As a cautionary note to investors, certain matters discussed in this press release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such matters involve risks and uncertainties that may cause actual results to differ materially, including the following: changes in economic conditions; general competitive factors; pressures on gross profit margins; the Company's ability to execute its sales and marketing plans; changes in the status of managed care contracts; changes in ownership; changes in status of the intended spin-off of the Diagnostic Products business; material litigation; and the risks described from time to time in the Company's public reports filed with the SEC.

	Chronimed Inc.

	*(In thousands, except per share data)*

		Third Quarter Ended				Nine Months Ended

		Mar 31, 2000		Apr 2, 1999		Mar 31, 2000			Apr 2, 1999

Revenue		$57,596		$44,045		$166,820			$120,436
Yr to Yr Growth		31%				39%

Income (Loss) from Operations
-- as adjusted - base		$1,402	(1)	($385)		$3,745		(1)(2)	$1,219
-- as reported		($4,098)			($385)		($2,686)		$1,219


Net Income (Loss)
-- Continuing Operations - base		$855		($235)		$2,284			$744
-- Interest income (expense)		(26)		17		(76)			245
-- Strategic alternatives/PaineWebber expense		--		--		(568)			--
-- Write-off of Clinical Partners contracts line		(3,355)		--		(3,355)			--
-- Gain on sale of publishing business		--		--		--			307(3)
Total Continuing Operations		($2,526)			($218)		($1,715)		$1,296

-- Discontinued Operations - base		$346		$684		$1,429			$3,119
-- Gain on sale of securities		289	(4)	--		289		(4)	--
Total Discontinued Operations		$635		$684		$1,718			$3,119

Total Net Income as reported		($1,891)		$466		$3			$4,415


Diluted Earnings (Loss) per Share:
-- Continuing Operations - base		$0.07		($0.02)		$0.19			$0.06
-- Interest income (expense)		0.00		0.00		(0.01)			0.02
-- Strategic alternatives/PaineWebber expense		--		--		(0.05)			--
-- Write-off of Clinical Partners contracts line		(0.28)		--		(0.28)			--
-- Gain on sale of publishing business		--		--		--			0.03
Total Continuing Operations		($0.21)			($0.02)		($0.14)		$0.11

-- Discontinued Operations - base		$0.03		$0.06		$0.12			$0.25
-- Gain on sale of securities		0.02		--		0.02			--
Total Discontinued Operations		$0.05		$0.06		$0.14			$0.25

Total Net Income as reported		($0.16)		$0.04		$0.00			$0.36


Average Shares Outstanding--Diluted		12,133		12,109		12,106			12,263


(1) Excludes the charge of $5,500 before tax ($3,355 after tax) incurred this quarter to write-off goodwill and record restructuring charges for Clinical Partner's contracts management line.
(2) Excludes expenses of $931 before tax ($568 after tax) for the first nine months related to the Company's efforts in seeking strategic alternatives.
(3) Gain of $503 before tax ($307 after tax) for the prior year nine months related to the Company's sale of its publishing business.
(4) Gain of $474 before tax ($289 after tax) on the sale of available-for-sale securities this quarter.

Chronimed Inc.
Consolidated Statements of Income
(In thousands, except per share amounts)
(Unaudited)

	Quarter Ended					Nine Months Ended
	Mar 31, 2000		April 2, 1999			Mar 31,2000			April 2, 1999
Revenues
Mail Order - Specialty Pharmacy Services	$29,386		$26,303			$88,369			$76,826
Retail - Disease Management	28,210		17,742			78,451			43,610
Total Revenue	57,596		44,045			166,820			120,436
Yr to Yr Growth	31%					39%
Costs and Expenses
Cost of revenues	47,463		36,699			136,452			97,410
Gross profit	10,133		7,346			30,368			23,026
% of Revenue	17.6%		16.7%			18.2%			19.1%

Selling and marketing	1,127		1,091			3,380			3,607
General and administrative	7,604		6,640			24,174			18,200
Other expense - Clinical Partners write-off	5,500		--			5,500			--
Total operating expenses	14,231		7,731			33,054			21,807
% of Revenue	24.7%		17.6%			19.8%			18.1%

Income (Loss) from Operations	(4,098)				(385)			(2,686)			1,219
% of Revenue	-7.1%		-0.9%			-1.6%			1.0%

Interest (expense) income	(43)				28	(125)					402
Other income - Publishing sale	--		--			--			503

Income (Loss) before Income Taxes	(4,141)				(357)			(2,811)			2,124
Income taxes	1,615		139			1,096			(828)

Income (Loss) from Continuing Operations	(2,526)				(218)			(1,715)			1,296
% of Revenue	-4.4%		-0.5%			-1.0%			1.1%

Income from Discontinued Operations, net of tax		635		684			1,718			3,119

Net Income (Loss)	($1,891)				$466	$3			$4,415
% of Revenue	-3.3%		1.1%			0.0%			3.7%

Basic Earnings (Loss) per Share:
Income (Loss) from Continuing Operations	($0.21)				($0.02)			($0.14)			$0.11
Income from Discontinued Operations	0.05		0.06			0.14			0.25
Net Income (Loss) per share	($0.16)				$0.04	$0.00			$0.36

Diluted Earnings (Loss) per Share:
Income (Loss) from Continuing Operations	($0.21)				($0.02)			($0.14)			$0.11
Income from Discontinued Operations	0.05		0.06			0.14			0.25
Net Income (Loss) per share	($0.16)				$0.04	$0.00			$0.36

Average Shares Outstanding--Basic	12,133		12,109			12,106			12,108
Average Shares Outstanding--Diluted	12,133		12,109			12,106			12,263

Chronimed Inc.
Consolidated Balance Sheets
(In thousands)
	Mar 31, 2000	July 2, 1999
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$533	$3,312
Accounts receivable, net	43,650	32,533
Income taxes receivable	2,211	--
Inventory	6,735	5,395
Other current assets	720	1,358
Deferred taxes	929	929
Total current assets	54,778	43,527

Property and equipment:
Property and equipment	14,674	13,850
Allowance for depreciation	(7,781)		(5,993)
	6,893	7,857

Goodwill, net	9,315	15,373
Net assets of discontinued operations	11,743	11,624
Other assets, net	107	161
Total assets	$82,836	$78,542

Liabilities and shareholders' equity
Current liabilities:
Accounts payable	$9,151	$9,917
Accrued expenses	2,090	1,952
Income taxes payable	--	186
Short-term debt	4,200	--
Total current liabilities	15,441	12,055

Shareholders' equity:
Preferred Stock	--	--
Common Stock, issued and outstanding shares--
12,131 and 12,088 respectively	121	121
Additional paid-in capital	52,763	52,499
Retained earnings	13,712	13,709
	66,596	66,329
Accumulated other comprehensive income --
Unrealized gain on available-for-sale securities of discontinued operations	799	158
Total shareholders' equity	67,395	66,487

Total liabilities and shareholders' equity	$82,836	$78,542

Chronimed Inc.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)

	Nine Months Ended
	Dec 31, 1999	Jan 1, 1999
Operating activities:
Net income	$3	$4,415
Less income from discontinued operations	1,718	3,119

Income (loss) from continuing operations	(1,715)		1,296

Adjustments to reconcile income from continuing operations to net cash provided by (used in) operating activities:
Depreciation and amortization	3,229	2,831
Write-off of Clinical Partners contract management line	5,500	--
Changes in operating assets and liabilities, net of effect of Clinical Partners write-off:
Accounts receivable	(11,117)		(10,502)
Income taxes	(2,397)		1,011
Inventory	(1,340)		642
Accounts payable and accrued expenses	(1,297)		2,825
Other assets	656	(382)

Net cash (used) provided by operating activities	(8,481)		(2,279)

Investing activities:
Purchases of property and equipment	(1,002)		(2,825)
Sales and maturities of available-for-sale securities	--	6,537

Net cash (used in) provided by investing activities	(1,002)		3,712

Financing activities:
Repurchase of Common Stock	--	(1,842)
Net proceeds from issuance of Common Stock	264	1,255
Net proceeds from borrowings	4,200	--

Net cash provided by financing activities	4,464	(587)

Cash provided by discontinued operations	2,240	2,659

(Decrease) Increase in cash and cash equivalents	(2,779)		3,505

Cash and cash equivalents at beginning of period	3,312	1,027

Cash and cash equivalents at end of period	$533	$4,532

Price
Change

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News Release

Chronimed Reports Fiscal 2000 Third Quarter Results

Revenue

Income (Loss) from Operations

Average Shares Outstanding--Diluted

Revenues

Income (Loss) from Operations

Income (Loss) before Income Taxes

Income (Loss) from Continuing Operations

Assets

Liabilities and shareholders' equity