D&K WHOLESALE DRUG MOVING TO CAPE FACILITY

*Products are distributed from Cairo as far north as southern Minnesota, east to Evansville, Ind., south to Hattiesburg, Miss., and west to eastern Oklahoma.

CAIRO, Ill. -- A move to a new Cape Girardeau facility offers a challenge this year to the Cairo Division of D&K Wholesale Drug Inc., said George Bray, division president.

"A person can't underestimate the impact of moving a business of this size," Bray said. "The planning that has to go into the move is tremendous."

Its Cairo warehouse has 20,000 items of pharmaceutical, health and beauty products valued at $26 million. Products are distributed from Cairo as far north as southern Minnesota, east to Evansville, Ind., south to Hattiesburg, Miss., and west to eastern Oklahoma.

Bray has been looking at possible Cape Girardeau warehouse locations. He said the size of the warehouse, originally projected at 85,000 square feet, will be influenced by D&K's acquisition of Krelitz Industries Inc., of Minneapolis, which was announced in January.

A Cape Girardeau warehouse may not be as large as originally thought, Bray said, since some of the upper Midwest business may be handled through Minneapolis. Bray expects the Krelitz deal to be closed this month.

Bray wants to be ready to start the construction process for a Cape Girardeau warehouse this spring. He expects the division to move to Cape Girardeau in spring 1996.

Bray said there are about 70 people working out of the Cairo warehouse. Ten sales people use it as a base and the division has about 30 truckdrivers spread out from Des Moines to Memphis.

In addition to Krelitz, D&K completed acquisitions of two other businesses over the past nine months. The first was assets of the drug distributors unit of Fleming Companies Inc., a Malone & Hyde Inc. subsidiary in Memphis. D&K, headquartered in St. Louis, bought the unit's pharmaceutical inventory and all its non-prescription inventory for Super D Drug Stores operated by M&H Drug Inc. The second, completed last fall, involved the Northern Drug Co. of Duluth, Minn., a wholesale drug distributor with annual sales of $55 million. Northern, operating as a D&K division, serves about 200 customers in Minnesota, Wisconsin and Michigan.

The three acquisitions will be brought into a cohesive group, Bray said. "We want to take advantage of what these individual companies have to offer while having a corporate focus," Bray said.

Several things took place over the last three years that will allow D&K to grow, Bray said. People were hired with the right background in wholesale drugs, he said, and expense control was given greater emphasis.

Bray said D&K's long-term plan is to help smaller companies recognize that they have to become part of a larger entity to continue growth. He said D&K offers small companies an opportunity to join a larger organization that understands the philosophy of a small, independent distributor.

"That's where we came from," Bray said. "We understand the problems of the smaller distributor."

The acquisitions have been good for D&K, Bray said.

"First, it proves that we have access to capital. It backs up the fact that we can do acquisitions in the proper manner and add value to the overall operations. Secondly, it allows us to grow. For our investors, it gives them a greater chance for stock appreciation."

Bray said D&K is considering a secondary offering of stock to reduce debt and provide additional funds for acquisitions. With 2.4 million shares outstanding, D&K probably will offer to sell another 800,000 to one million shares after July 1, Bray said.

With the secondary stock offering, the reduction in the company's debt should allow more earnings per share, Bray said.

"What we are trying to do with the acquisitions is add one and one and come up with three," Bray said. "We think the larger company will be bigger than the sum of its parts."

D&K, a full-service, regional, wholesale drug-distribution company, was founded in Cairo in 1965 as Delta Wholesale Drug Inc. The company later merged with the Kelly Wholesale Drug Co. and became D&K Wholesale Drug Inc.

D&K also has a warehouse in Lexington, Ky. The company serves independent and retail chain pharmacies, hospitals, managed-care facilities, alternative care centers and other customers in 17 states throughout the Midwest and Midsouth.