D&K Healthcare Resources Reports 3rd Quarter Income - Continued Strong Independent and Regional Sales Growth

Business Wire, April 28, 2005

ST. LOUIS -- D&K Healthcare Resources, Inc. (NASDAQ:DKHR):

--Company reports diluted earnings per share of $0.25 for the third quarter of fiscal 2005,

--Independent and regional pharmacies sales for the quarter grew 33%

--Company revises guidance for remainder of fiscal 2005

D&K Healthcare Resources, Inc. (NASDAQ:DKHR) reported today that diluted earnings per share (EPS) for the third quarter of fiscal 2005 were $0.25 compared to $0.38 in the prior year quarter. The reduction in EPS from last year reflects the transition from a "buy and hold" to a "fee for service" industry model which decrease the contribution by the national accounts trade class as it reduced the amount of inventory available to this trade class. Similar to the Company's first and second quarter results, product price increases were lower than previous years, contributing to the unfavorable quarterly results. Sales in the independent and regional pharmacies trade class increased 33% over last year, continuing the strong growth shown during the first half of fiscal 2005.

"We continue to face the industry issues that are creating a period of uncertainty for wholesale drug distributors," said J. Hord Armstrong, III, D&K Healthcare's Chairman and Chief Executive Officer. "Despite industry issues, D&K delivered strong third quarter sales growth in our core independent and regional pharmacy business. Our strategy of focusing on our distinct capabilities to service this customer segment continues to produce very positive top line growth, which we believe will produce favorable earnings as industry issues are resolved over the next several quarters."

Performance Highlights

--Net sales in the independent and regional pharmacies trade class increased 33% in the fiscal 2005 third quarter driven primarily by new business wins and improving sales trends in D&K's service territory.

--The inventory balance at March 31, 2005 was $431 million, down $71 million or 14.1% compared to the year ago balance, and down 6.5% compared to the June 30, 2004 balance. Inventory was also down 29.5% from December 31, 2004 levels. The decreases in inventory reflect a combination of the normal seasonal sell-down of inventory that occurs in the March quarter and the impact of the transition to the "fee for service" industry model that continue to reduce special purchasing opportunities.

--The long-term debt balance at March 31, 2005 was $267 million compared to $308 million at June 30, 2004 and $384 million a year ago. These decreases relate primarily to lower inventory levels. The balance also represents a reduction of $177 million from December 31, 2004 levels.

--A summary of net sales by class of trade for the third quarter and first nine months of fiscal 2005 follows.

Net Sales Summary
                            (In Thousands)
----------------------------------------------------------------------
                                      % Change              % Change
                                         vs.                 vs. First
                             Third      Third   First Nine     Nine
                            Quarter    Quarter   Months of   Months of
                            of Fiscal  Fiscal     Fiscal      Fiscal
                              2005      2004       2005        2004
-------------------------- ---------- --------- ----------- ----------
Independent and Regional
 Pharmacies(1)              $722,177      33.4  $2,059,739       63.7%
National Accounts            168,817     -35.4     333,260      -29.5
Other Healthcare
 Providers(2)                 29,406       1.9      88,993        6.4
PBI, Inc.                      2,371      12.9       6,977        4.2
Software Services/Other        1,079     104.0       3,395       44.8
                           ----------           -----------
Total                       $923,850      10.8  $2,492,364       36.7
-------------------------- ---------- --------- ----------- ----------

The Walsh acquisition was completed on December 5, 2003. As such, the
nine month percentage change calculation includes a six month period
benefited by additional Walsh sales, as follows:

(1) Nine month sales figures include Walsh sales of $424,456 for the
    six months ended December 31, 2004. The corresponding period of
    fiscal 2004 included $52,949 related to Walsh.

(2) Nine month sales figures include Walsh sales of $4,845 for the six
    months ended December 31, 2004. The corresponding period of fiscal
    2004 included $1,430 related to Walsh.

Company-wide Performance

D&K reported gross profit of $34.1 million, down 2.9% compared to $35.2 million in the year ago quarter. Gross profit as a percent of sales, or gross margin, was 3.70% compared to last year's second quarter gross margin of 4.22%. The gross profit and margin declines reflect lower product price increases in combination with current competitive market pressures. Operating expenses increased to $22.7 million from $21.4 million in the year ago quarter, driven by higher volume, but decreased as a percentage of sales from 2.57% to 2.46%. Income from operations as a percent of sales, or operating margin, declined to 1.23% from 1.65% in last year's third quarter reflecting the impact of lower gross profit margins.