Several class actions have been filed against pharmaceuticals and healthcare supply wholesaler D&K Healthcare Resources, Inc. (Nasdaq:DKHR) and certain of its officers and directors by stockholders who purchased the company's common stock between April 23, 2001, and September 16, 2002. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.

Named as defendants in the actions are D&K Healthcare, J. Hord Armstrong, III, Martin D. Wilson, and Thomas S. Hilton. The action alleges that, throughout the applicable period, the defendants issued numerous statements to the market concerning the D&K's financial results, all of which failed to disclose and misrepresented the following adverse facts: (1) that the company's seemingly positive financial results were, in part, based on its incentive-laden deals with Bristol which could not be sustained in the long-term; (2) given the terms of the incentive-laden deals with Bristol, D&K was subject to the heightened risk that Bristol would stop providing it with favorable purchasing opportunities; and (3) based on the foregoing, the defendants lacked a reasonable basis for their positive statements about the company and their earnings projections throughout the class period.

On September 16, 2002, after the close of trading, D&K Healthcare announced that it was reducing its EPS guidance before one-time charges related to the implementation of SFAS 142 to approximately $0.13 -- $0.17, from $0.30 to $0.31. According to the company, during the first two months of the fiscal 2003 first quarter, its internal revenue and margin objectives for its national chain business were not achieved. The sales shortfall resulted from fewer than expected purchasing and sales opportunities available during the period. In response to the announcement, on September 17, 2002, the price of D&K Healthcare common stock dropped more than 60% to close at $9.51 per share on unusually high trading volume.