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AmeriSource Second Quarter Earnings Increase 26%

04/29/99

    Business Editors

    MALVERN, Pa.--(BUSINESS WIRE)--April 29, 1999--

Strong Operating Margin Expansion Drives Earnings

    AmeriSource Health Corp. (NYSE:AAS), one of the nation's leading wholesale pharmaceutical distributors, today reported its financial results for its second fiscal quarter ended March 31, 1999.
    Net income advanced 26% to $20.4 million compared to $16.2 million recorded for the same period last year. Diluted earnings per share for the quarter rose 24% to $.41 compared to $.33 for the same period a year ago, adjusted for the two-for-one stock split effective March 24, 1999.
    Diluted earnings per share exceeded the consensus estimate of $.40 per share, and for the seventeenth consecutive quarter, exceeded the Company's internal goal of 20% or greater.
    For the first six months of fiscal 1999, AmeriSource recorded net income of $38.2 million, an increase of 25% from the $30.7 million recorded one year ago. Diluted earnings per share for the first six months of $.78 represents an increase of 24% from the $.63 recorded in the first six months of last year.
    Strong operating margin expansion driven by increased operating efficiencies and an improved customer contract portfolio were major factors driving the earnings improvement.
    Revenue for the quarter and the first six months of fiscal 1999 was $2.2 billion and $4.3 billion, respectively. The modest decrease in revenue reflected last year's termination of service contracts with two major warehousing chain customers and one large mail order customer whose purchases resulted in operating margins below the Company's average.
    Adjusting for the loss of these three accounts, revenues advanced 13% in the second quarter.
    "This was another outstanding quarter" stated R. David Yost, President and CEO of AmeriSource. "In addition to turning in very solid financial results, the quarter was marked by several significant new customer contract wins in both the retail and institutional settings which will further support our growing revenue momentum".
    He also added, "AmeriSource has signed 46 new Premier hospital accounts since being chosen as a preferred provider three months ago. In addition, the Company began servicing the VA contract which went into effect on April 1, 1999. Revenue from Premier and the VA is expected to ramp up in the second half of this fiscal year."
    For the second quarter of fiscal 1999, the Company's gross margin, as a percentage of operating revenue, decreased 3 basis points to 5.13% as compared to 5.16% for the same period one year ago. Continued focus on cost reduction and productivity improvements reduced operating expenses as a percentage of operating revenues by 21 basis points to 3.18% versus 3.39% a year ago.
    This, in combination with stable gross margin performance in the quarter, allowed the Company's operating margin to strongly expand up by 19 basis points to 1.95% compared to 1.76% for the same quarter last year.
    As a result of continued disciplined capital usage, AmeriSource drove its interest expense down and its return on committed capital up in the quarter. Interest expense showed a significant decrease of 21% to $9.5 million as compared to $12.0 million for the same period last year. Expanding operating margins in combination with disciplined capital usage drove the Company's return on committed capital up to 26.1%, well in excess of its stated goal of 20% or greater.
    AmeriSource also announced today that it has signed a definitive merger agreement for the acquisition of C. D. Smith Healthcare Inc. Based in St. Joseph, Mo., C. D. Smith is the seventh largest regional wholesale distributor of pharmaceuticals in the country with operating revenues of approximately $800 million.
    Under the terms of the agreement, shareholders of C.D. Smith will receive a fixed exchange of 2.69 million shares of AmeriSource common stock for all of the outstanding common shares of C. D. Smith. AmeriSource will assume about $89.1 million in long-term debt for a total transaction value of about $169.0 million based on AmeriSource's closing stock price of $29.69 on April 28, 1999.
    The combination has been structured as a tax-free transaction and will be accounted for as a pooling of interests. The transaction is expected to be completed by the end of June, 1999.
    AmeriSource Health Corp. is a Fortune 200 company with revenue of $8.7 billion for fiscal year 1998. The Company is one of the nation's leading pharmaceutical distributors and serves the healthcare industry from a nationwide network of 22 strategically located distribution centers. News and additional information about AmeriSource are available at www.amerisource.com



                       AMERISOURCE HEALTH CORP.
                           FINANCIAL SUMMARY
                 (In thousands, except per share data)
                              (unaudited)

                     Three                  Three
                  Months Ended   % of    Months Ended   % of
                    March 31,  Operating   March 31,  Operating    %
                      1999      Revenue      1998      Revenue  Change
                  ------------ --------- ------------ --------- ------
Revenue:
 Operating revenue  $2,167,984   100.00%   $2,192,285    100.00%  -1%
 Bulk deliveries 
  to customer 
  warehouses             7,909                 26,069
                  ------------           ------------
Total revenue        2,175,893              2,218,354

Cost of goods sold:
 Operating cost of 
  goods sold         2,056,758    94.87%    2,079,272     94.84%  -1%
          
 Cost of goods
  sold - bulk 
  deliveries             7,909                 26,069
                  ------------           ------------
          
Total cost of 
 goods sold          2,064,667              2,105,341
                  ------------           ------------

Gross profit           111,226     5.13%      113,013      5.16%  -2%


Operating expenses:
 Selling and 
  administrative        65,110     3.00%       70,687      3.22%  -8%
 Depreciation            3,500     0.16%        3,358      0.15%   4%
 Amortization              254     0.01%          361      0.02% -30%
                  ------------           ------------

Operating income        42,362     1.95%       38,607      1.76%  10%


Interest expense         9,510     0.44%       12,030      0.55% -21%
                  ------------           ------------


Income before
 taxes                  32,852     1.52%       26,577      1.21%  24%


Taxes on income         12,484     0.58%       10,367      0.47%  20%
                  ------------           ------------

Net income             $20,368     0.94%      $16,210      0.74%  26%
                  ============           ============



Earnings per 
 share:(a)
 Basic                   $0.42                  $0.34
 Assuming 
  dilution                0.41                   0.33

Weighted average
 common shares
 outstanding: (a)
 Basic                  48,587                 47,789
 Assuming 
  dilution              49,420                 48,481



                       AMERISOURCE HEALTH CORP.
                           FINANCIAL SUMMARY
                 (In thousands, except per share data)
                              (unaudited)


                      Six                    Six
                  Months Ended   % of    Months Ended   % of
                    March 31,  Operating   March 31,  Operating   %
                     1999       Revenue      1998      Revenue  Change
                  ------------ --------- ------------ --------- ------
Revenue:
 Operating 
  revenue          $4,328,888    100.00%  $4,446,845   100.00%   -3%
 Bulk deliveries 
  to customer 
  warehouses           16,671                 51,067
                  ------------           ------------
Total revenue       4,345,559               4,497,912


Cost of goods 
 sold:
 Operating cost 
  of goods sold     4,115,969     95.08%   4,228,226    95.08%   -3%
 Cost of goods 
  sold - bulk 
  deliveries           16,671                 51,067
                  ------------           ------------
Total cost of 
 goods sold         4,132,640              4,279,293
                  ------------           ------------

Gross profit          212,919      4.92%     218,619     4.92%   -3%

Operating expenses:
 Selling and 
  administrative      126,123      2.91%     136,452     3.07%   -8%
 Depreciation           7,000      0.16%       6,513     0.15%    7%
 Amortization             510      0.01%         643     0.01%  -21%
                  ------------           ------------

Operating income       79,286      1.83%      75,011     1.69%    6%

Interest expense       17,651      0.41%      24,692     0.56%  -29%
                  ------------           ------------

Income before 
 taxes                 61,635      1.42%      50,319     1.13%   22%

Taxes on income        23,422      0.54%      19,626     0.44%   19%
                  ------------           ------------

Net income            $38,213      0.88%     $30,693     0.69%   25%


Earnings per share:
 Basic                 $0.79                   $0.64
 Assuming 
  dilution              0.78                    0.63

Weighted average 
 common shares
 outstanding:
 Basic                48,478                  47,751
 Assuming dilution    49,144                  48,464


                       AMERISOURCE HEALTH CORP.
                      CONSOLIDATED BALANCE SHEETS
                        (dollars in thousands)




    ASSETS                                     (unaudited)
                               March 31,        Sept. 30,    Increase
                                 1999             1998      (Decrease)
                               --------        ----------    --------
Current assets:
 Cash  and cash 
  equivalents                  $119,134         $48,461      $70,673
 Restricted cash                 36,340          37,044         (704)
 Accounts receivable, less 
  allowance for doubtful 
  accounts                      480,326         458,238       22,088
 Merchandise inventories        942,152         870,223       71,929
 Prepaid expenses and other       3,816           4,356        (540)
                               --------        ----------    --------
  Total current assets        1,581,768       1,418,322      163,446
                                
Property and equipment, net      59,752          60,789       (1,037)

Other assets, less 
 accumulated amortization        78,005          73,171        4,834 
                               --------        ----------    --------

  Total assets               $1,719,525      $1,552,282     $167,243


  LIABILITIES AND 
   STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable              $917,292        $873,181      $44,111
 Accrued  expenses 
  and other                      42,518          48,532       (6,014)
 Accrued  income taxes            7,927              78        7,849
 Deferred  income taxes         100,671          93,385        7,286
                               --------        ----------    --------
          
  Total current liabilities   1,068,408       1,015,176       53,232
                                
Long-term debt:
 Revolving credit facility      210,004         145,000       65,004
 Receivables securitization 
  financing                     299,965         299,948           17
 Other debt                       8,595           8,813         (218)

Other liabilities                 8,664           8,036          628 

Stockholders' equity:
 Common stock and capital 
  in excess of par value        255,305         244,938       10,367
 Retained earnings (deficit)   (125,196)       (163,409)      38,213
 Cost of common stock in 
  treasury                       (6,220)         (6,220)           0
                               --------        ----------    --------
  Total stockholders' equity    123,889          75,309       48,580
                               --------        ----------    --------

  Total liabilities and 
   stockholders' equity      $1,719,525      $1,552,282     $167,243
                             ==========      ==========     ========   


    Certain information contained in this press release includes forward-looking statements (as defined in Section 27A of the Securities Act and Section 21E of the Exchange Act) that reflect the Company's current views with respect to future events and financial performance.
    Certain factors such as competitive pressures, success of restructuring initiatives, continued industry consolidation, changes in customer mix, changes in pharmaceutical manufacturers' pricing and distribution policy, the loss of one or more key customer or supplier relationships and other matters contained in the Company's Form 10-K for fiscal year 1998 and other public documents could cause actual results to differ materially from those in the forward-looking statements.
    The Company assumes no obligation to update the matters discussed in this press release.


     CONTACT:  AmeriSource Health Corp.
               MaryBeth M. Alvin, director, Investor Relations
               610/296-4480
               malvin@amerisource.com     

Corporate Overview

AmerisourceBergen is one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. With services ranging from drug distribution and niche premium logistics to reimbursement and pharmaceutical consulting services, AmerisourceBergen delivers innovative programs and solutions across the pharmaceutical supply channel..

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