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AmerisourceBergen Reports December Quarter Results, with Diluted Earnings Per Share from Continuing Operations of $0.47; Record Operating Revenue of $13.5 Billion, up 11 Percent

01/25/06

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Jan. 25, 2006--AmerisourceBergen Corporation (NYSE:ABC) today reported results for its fiscal first quarter ended December 31, 2005. The following results are presented in accordance with U.S. generally accepted accounting principles (GAAP).

    Fiscal First Quarter Highlights

    --  Diluted earnings per share from continuing operations of
        $0.47, up 47 percent before the cumulative effect of the prior
        fiscal year accounting change.

    --  Record operating revenue of $13.5 billion, up 11 percent.

    --  Cash flow from operations of $230.5 million.

    --  Record low net interest expense of $6.5 million.

"Our outstanding performance in the December quarter exceeded our internal expectations and provides strong momentum for the remainder of fiscal 2006," said R. David Yost, AmerisourceBergen's Chief Executive Officer. "Operating revenue was a record $13.5 billion, and the excellent earnings per share results were driven by strong performance under our new fee-for-service agreements, the continued strength of our specialty pharmaceutical business and our significant financial leverage. With $1.5 billion in cash at the end of the first quarter, our balance sheet is the strongest in our history, and we maintain considerable financial flexibility."

Discussion of Results

AmerisourceBergen's operating revenue was $13.5 billion in the first quarter of fiscal 2006 compared to $12.2 billion for the same period last year, an 11 percent increase. Bulk deliveries in the quarter decreased 22 percent to $1.1 billion from $1.4 billion in last fiscal year's first quarter.

Consolidated operating income in the quarter increased 24 percent to $166.6 million, primarily due to increased gross margin in the Pharmaceutical Distribution segment. In addition, an $18.0 million gain from the settlements of drug manufacturer antitrust litigation cases, less $8.8 million of charges for facility consolidations, employee severance, and costs related to the outsourcing of information technology activities, had a net $9.2 million positive impact on consolidated operating income in the fiscal 2006 first quarter. Operating income in the first quarter of fiscal 2005 included an $18.8 million gain from antitrust litigation cases and charges for facility consolidations and employee severance of $5.1 million for a net positive impact of $13.7 million. Also impacting operating income this quarter was the Company's adoption of FAS 123R, which resulted in the Company's expensing stock options for the first time. As a result, equity compensation expense in the first quarter of fiscal 2006 was $2.6 million.

Net interest expense in the fiscal 2006 first quarter was a record low $6.5 million compared to $22.1 million in the prior year's first quarter, a 71 percent decrease driven by net debt reduction.

The effective tax rate for the first quarter of fiscal 2006 was 38.5 percent compared to 38.4 percent in the same period in fiscal 2005.

Diluted earnings per share were $0.46 in the first quarter of fiscal 2006, compared to $0.24 in the previous fiscal year's first quarter. Diluted earnings per share from continuing operations, before the cumulative effect of an accounting change, in the first quarter of fiscal years 2006 and 2005 were $0.47 and $0.32, respectively, a 47 percent increase. The net per share impact of the gain from the litigation settlements and the charges from facility consolidations, employee severance and information technology outsourcing was a positive $0.03 in first quarter fiscal 2006. In the first quarter of fiscal 2005, the net per share impact of the gain from litigation settlements and the charges from facility consolidations, employee severance, and the early retirement of debt, was also a positive $0.03.

Average diluted shares outstanding for the first quarter of fiscal 2006 were 210.3 million, down from 223.2 million shares in the prior fiscal year's first quarter. The number of shares outstanding and the per share results reflect AmerisourceBergen's two-for-one stock split on December 28, 2005.

"In the first quarter of fiscal 2006, outstanding operating performance in Pharmaceutical Distribution offset weak performance in PharMerica," said Kurt J. Hilzinger, AmerisourceBergen's President and Chief Operating Officer.

"Our Specialty Group again delivered strong growth with annualized operating revenue of more than $8 billion, as our market-leading oncology businesses continued to grow faster than the overall pharmaceutical market and strong performances in the Group's other distribution businesses also contributed to revenue and earnings growth in the quarter. During the quarter, we signed a definitive agreement to purchase Network for Medical Communications & Research, LLC (NMCR), a privately held provider of physician accredited continuing medical education and analytical research for the oncology market for approximately $90 million, including assumed debt. The addition of NMCR will strengthen our oncology platform.

"In the Drug Corporation, we significantly improved the gross margin through our efforts over the past several quarters, including completing and performing on fee-for-service agreements, improved generics contribution, and the customer-focused Transform initiatives. Benefits from Optimiz(R), our program to enhance the efficiency of our distribution center network, continued to improve our cost structure. Optimiz remains on schedule and on budget.

"The Packaging Group continued to perform well in the quarter, exceeding internal revenue and gross margin expectations. The Group added new product packaging contracts to its growing pipeline, and is delivering new compliance and generic packaging solutions to the marketplace."

"In our PharMerica segment, we continue to face a difficult environment. Increased revenue from new customers in the first quarter of fiscal 2006 could not offset the impact of larger than expected bad debt expense and the added cost of preparing for the implementation of Medicare Part D on January 1, 2006. With Medicare Part D implementation, this will continue to be a transition year for PharMerica," said Hilzinger.

Segment Review

AmerisourceBergen operates in two segments: Pharmaceutical Distribution (which includes the operations of AmerisourceBergen Drug Corporation, Specialty Group, and Packaging Group) and PharMerica (which includes the long-term care pharmacy and workers' compensation businesses). Intersegment sales of $221.6 million in the first quarter of fiscal 2006 from AmerisourceBergen Drug Corporation to PharMerica, which are included in the Pharmaceutical Distribution segment operating revenue, are eliminated for consolidated reporting purposes.

Pharmaceutical Distribution Segment

Operating revenue in the Pharmaceutical Distribution segment was $13.3 billion in the first quarter of fiscal 2006, an increase of 11 percent over the $12.0 billion of operating revenue in the same quarter of the previous fiscal year.

Strong growth in the Specialty Group and Drug Corporation, especially in a few large institutional alternate site customers, drove operating revenues above the Company's expectations in the quarter.

Pharmaceutical Distribution customer mix in the first quarter of fiscal 2006 was 59 percent institutional and 41 percent retail.

For the segment, gross profit as a percentage of operating revenue in the first quarter of fiscal 2006 was 2.97 percent, a 24 basis point improvement over 2.73 percent in the same period in the prior fiscal year. Total expenses as a percentage of operating revenue in the fiscal 2006 first quarter were 1.93 percent, the same as the first quarter of last fiscal year. Segment operating income for the first quarter of fiscal 2006 was $138.9 million, a 43 percent increase over the previous fiscal year's first quarter, and as a percentage of operating revenue, was 1.04 percent, a 24 basis point improvement from the first quarter of fiscal 2005.

PharMerica

PharMerica's operating revenue for the first quarter of fiscal 2006 was $409.3 million, compared with $385.6 million in the previous year's first quarter, up 6 percent. Operating income for the first quarter of fiscal 2006 was $18.5 million, down 21 percent from $23.5 million for the same quarter last fiscal year. Lower operating income was due primarily to increased bad debt expense and the cost of preparing for the implementation of the Medicare Modernization Act. Operating income as a percentage of revenue was 4.52 percent in the first quarter of fiscal 2006.

Looking Ahead

"As announced earlier this month, we expect the fiscal year 2006 revenue growth to be in the range of 7 percent to 9 percent, up from the previous range of 6 percent to 8 percent," said Yost. "We continue to expect diluted earnings per share from continuing operations in the range of $1.98 to $2.13 for fiscal year 2006. Diluted earnings per share from continuing operations expectations for the fiscal year include the impact of a $0.04 to $0.05 charge for equity compensation expense and the anticipation that expected litigation recovery gains will be offset by expenses from facility consolidations, employee severance, and costs related to the outsourcing of information technology activities. Cash flow from operations is anticipated to be in the range of $500 million to $600 million.

"For fiscal year 2006, we continue to expect operating margins for the Pharmaceutical Distribution segment to be in the range of 1.15 percent to 1.25 percent. For the PharMerica segment, we continue to expect the revenue growth rate in fiscal year 2006 to be in the mid single digits. However, due to the impact of Medicare Part D, we have lowered our operating margin expectations to the 4 percent to 5 percent range from the previous expectation of the middle of the 5 percent to 6 percent range."

AmerisourceBergen also continues to expect to repurchase a total of approximately $400 million to $450 million of its stock by the end of fiscal 2006.

Conference Call

The Company will host a conference call to discuss its results at 11:00 a.m. Eastern Standard Time on January 25, 2006. Participating in the conference call will be: R. David Yost, Chief Executive Officer; Kurt J. Hilzinger, President and Chief Operating Officer; and Michael D. DiCandilo, Executive Vice President and Chief Financial Officer.


To access the live conference call via telephone:

        Dial in: (612) 332-1025, no access code required.

To access the live webcast:

Go to the Quarterly Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.

A replay of the telephone call and webcast will be available from
2:30 p.m. January 25, 2006 until 11:59 p.m. February 1, 2006. The
Webcast replay will be available for 30 days.

To access the replay via telephone:

Dial in:    800-475-6701 from within the U.S., access code: 813006
            (320) 365-3844 from outside the U.S., access code: 813006

To access the archived webcast:

Go to the Quarterly Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.

About AmerisourceBergen

AmerisourceBergen (NYSE:ABC) is one of the world's largest pharmaceutical services companies serving the United States and Canada. Servicing both pharmaceutical manufacturers and healthcare providers in the pharmaceutical supply channel, the Company provides drug distribution and related services designed to reduce costs and improve patient outcomes. AmerisourceBergen's service solutions range from pharmacy automation and pharmaceutical packaging to pharmacy services for skilled nursing and assisted living facilities, reimbursement and pharmaceutical consulting services, and physician education. With more than $54 billion in annual revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs more than 13,000 people. AmerisourceBergen is ranked #23 on the Fortune 500 list. For more information, go to www.amerisourcebergen.com.

Forward-Looking Statements

This news release may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may vary materially from the expectations contained in the forward-looking statements. Forward-looking statements may include statements addressing AmerisourceBergen's future financial and operating results and the benefits, efficiencies and savings to be derived from the Company's integration plans to consolidate its distribution network.

The following factors, among others, could cause actual results to differ materially from those described in any forward-looking statements: competitive pressures; the loss of one or more key customer or supplier relationships; customer defaults or insolvencies; changes in customer mix; supplier defaults or insolvencies; changes in pharmaceutical manufacturers' pricing and distribution policies or practices; adverse resolution of any contract or other disputes with customers (including departments and agencies of the U.S. Government) or suppliers; regulatory changes; changes in U.S. government policies (including reimbursement changes arising from the Medicare Modernization Act); market interest rates; operational or control issues arising from AmerisourceBergen's outsourcing of information technology activities; success of the Pharmaceutical Distribution segment's ability to transition its business model to fee-for-service; success of integration, restructuring or systems initiatives; fluctuations in the U.S. dollar - Canadian dollar exchange rate; economic, business, competitive and/or regulatory developments in Canada; acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control; and other economic, business, competitive, legal, regulatory and/or operational factors affecting the business of AmerisourceBergen generally.

More detailed information about these and other risk factors is set forth in AmerisourceBergen's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for fiscal 2005.

AmerisourceBergen is under no obligation to (and expressly disclaims any such obligation to) update or alter any forward looking statements whether as a result of new information, future events or otherwise.


                    AMERISOURCEBERGEN CORPORATION
                          FINANCIAL SUMMARY
                (In thousands, except per share data)
                             (unaudited)


                     Three                  Three
                  Months Ended   % of    Months Ended   % of
                  December 31, Operating December 31, Operating   %
                     2005       Revenue     2004       Revenue  Change
                  ------------ --------- ------------ --------- ------

Revenue:
 Operating
  revenue         $13,535,854    100.00% $12,202,109    100.00%    11%
 Bulk deliveries
  to customer
  warehouses        1,117,293              1,434,727              -22%
                  ------------           ------------
Total revenue      14,653,147             13,636,836                7%

Cost of goods
 sold              14,124,769             13,182,244                7%
                  ------------           ------------

Gross profit          528,378      3.90%     454,592      3.73%    16%

Operating
 expenses:
 Distribution,
  selling and
  administrative      331,859      2.45%     294,825      2.42%    13%
 Depreciation and
  amortization         21,087      0.16%      20,549      0.17%     3%
 Facility
  consolidations,
  employee
  severance, and
  other                 8,827      0.07%       5,133      0.04%    72%
                  ------------           ------------

Operating income      166,605      1.23%     134,085      1.10%    24%

Other loss
 (income)                 783      0.01%      (1,058)    -0.01%   N/A

Interest expense,
 net                    6,512      0.05%      22,078      0.18%   -71%
Loss on early
 retirement of
 debt                       -                  1,015      0.01%   N/A
                  ------------           ------------

Income from
 continuing
 operations
 before income
 taxes and
 cumulative
 effect of change
 in accounting        159,310      1.18%     112,050      0.92%    42%

Income taxes           61,334      0.45%      43,027      0.35%    43%
                  ------------           ------------

Income from
 continuing
 operations
 before
 cumulative
 effect of change
 in accounting         97,976      0.72%      69,023      0.57%    42%

Loss from
 discontinued
 operations, net
 of tax                   709                  7,905
Cumulative effect
 of change in
 accounting, net
 of tax                     -                 10,172
                  ------------           ------------

Net income            $97,267      0.72%     $50,946      0.42%    91%
                  ============           ============


Earnings per
 share:
 Basic
  Continuing
   operations           $0.47                  $0.33               42%
  Discontinued
   operations               -                  (0.04)
  Cumulative
   effect of
   change in
   accounting               -                  (0.05)
                  ------------           ------------
    Net income          $0.47                  $0.24               96%
                  ============           ============
 Diluted
  Continuing
   operations           $0.47                  $0.32               47%
  Discontinued
   operations               -                  (0.04)
  Cumulative
   effect of
   change in
   accounting               -                  (0.05)
  Rounding              (0.01)                  0.01
                  ------------           ------------
    Net income          $0.46                  $0.24               92%
                  ============           ============

Weighted average
 common shares
 outstanding:
 Basic                208,250                211,122
 Diluted              210,349                223,214




                     AMERISOURCEBERGEN CORPORATION
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)
                             (unaudited)


                        ASSETS
                                           December 31,  September 30,
                                               2005          2005
                                           ------------- -------------
Current assets:
     Cash and cash equivalents               $1,506,088    $1,315,683
     Accounts receivable, net                 2,663,779     2,640,646
     Merchandise inventories                  4,972,288     4,003,690
     Prepaid expenses and other                  24,305        27,673
                                           ------------- -------------
             Total current assets             9,166,460     7,987,692

Long-term assets                              3,409,418     3,393,482
                                           ------------- -------------

             Total assets                   $12,575,878   $11,381,174
                                           ============= =============


       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Accounts payable                        $6,307,065    $5,292,253
     Current portion of long-term debt            1,243         1,232
     Other current liabilities                  797,799       758,611
                                           ------------- -------------
             Total  current  liabilities      7,106,107     6,052,096

Long-term debt, less current portion          1,051,433       951,479

Other liabilities                                98,625        97,242

Stockholders' equity                          4,319,713     4,280,357
                                           ------------- -------------

             Total liabilities and
              stockholders' equity          $12,575,878   $11,381,174
                                           ============= =============




                    AMERISOURCEBERGEN CORPORATION
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands)
                             (unaudited)

                                                Three        Three
                                             Months Ended Months Ended
                                             December 31, December 31,
                                                2005         2004
                                             ------------ ------------

Operating Activities:
    Net income                                   $97,267      $50,946
    Changes in operating assets and
     liabilities                                  81,077        9,929
    Adjustments to reconcile net income to
     net cash provided by operating
     activities                                   52,163       61,858
                                             ------------ ------------
Net cash provided by operating activities        230,507      122,733
                                             ------------ ------------

Investing Activities:
    Capital expenditures                         (27,913)     (79,182)
    Cost of acquired companies, net of cash
     acquired                                    (81,119)        (786)
    Proceeds from sale-leaseback transactions     28,143       20,732
    Proceeds from sale of discontinued
     operations                                        -        3,560
    Proceeds from sales of property and
     equipment                                     1,868           23
                                             ------------ ------------
Net cash used in investing activities            (79,021)     (55,653)
                                             ------------ ------------

Financing Activities:
    Net debt borrowings (repayments)              99,739     (180,000)
    Exercise of stock options                     33,607       30,084
    Cash dividends on common stock                (5,210)      (2,628)
    Purchases of common stock                    (88,922)    (253,191)
    Deferred financing costs and other              (295)      (3,149)
                                             ------------ ------------
Net cash provided by (used in) financing
 activities                                       38,919     (408,884)
                                             ------------ ------------

Increase (decrease) in cash and cash
 equivalents                                     190,405     (341,804)

Cash and cash equivalents at beginning of
 period                                        1,315,683      871,343
                                             ------------ ------------

Cash and cash equivalents at end of period    $1,506,088     $529,539
                                             ============ ============




                    AMERISOURCEBERGEN CORPORATION
                     SUMMARY SEGMENT INFORMATION
                        (dollars in thousands)
                             (unaudited)

                                     Three Months Ended December 31,
                                   -----------------------------------
Operating Revenue                     2005         2004      % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution        $13,348,153  $12,041,768        11%
PharMerica                             409,258      385,621         6%
Intersegment eliminations             (221,557)    (225,280)        2%
                                   ------------ ------------

    Operating revenue              $13,535,854  $12,202,109        11%
                                   ============ ============



                                     Three Months Ended December 31,
                                   -----------------------------------
Operating Income                      2005         2004      % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution           $138,876      $96,871        43%
PharMerica                              18,507       23,522       -21%
Facility consolidations, employee
 severance, and other                   (8,827)      (5,133)      -72%
Gain on antitrust litigation
 settlements                            18,049       18,825        -4%
                                   ------------ ------------

    Operating income                  $166,605     $134,085        24%
                                   ============ ============



Percentages of operating revenue:

Pharmaceutical Distribution
    Gross profit                          2.97%        2.73%
    Operating expenses                    1.93%        1.93%
    Operating income                      1.04%        0.80%

PharMerica
    Gross profit                         27.80%       27.69%
    Operating expenses                   23.27%       21.59%
    Operating income                      4.52%        6.10%

AmerisourceBergen Corporation
    Gross profit                          3.90%        3.73%
    Operating expenses                    2.67%        2.63%
    Operating income                      1.23%        1.10%




                     AMERISOURCEBERGEN CORPORATION
                          EARNINGS PER SHARE
                (In thousands, except per share data)
                             (unaudited)


   Basic earnings per share is computed on the basis of the weighted
   average number of shares of common stock outstanding during the
   periods presented.  Diluted earnings per share is computed on the
   basis of the weighted average number of shares of common stock
   outstanding during the period plus the dilutive effect of stock
   options.  Additionally, the diluted earnings per share calculation
   considers the convertible subordinated notes as if converted and,
   therefore, the effect of interest expense related to those notes is
   added back to net income in determining income from continuing
   operations available to common stockholders.


                                                       Three Months
                                                           Ended
                                                        December 31,
                                                       2005     2004
                                                     -------- --------

Income from continuing operations, before cumulative
 effect of change in accounting                      $97,976  $69,023
Interest expense - convertible subordinated notes,
 net of income taxes                                     -      2,511
                                                     -------- --------
Income from continuing operations available to common
 stockholders                                        $97,976  $71,534
                                                     ======== ========

Weighted average common shares outstanding - basic   208,250  211,122
Effect of dilutive securities:
   Options to purchase common stock                    2,099      846
   Convertible subordinated notes                        -     11,246
                                                     -------- --------

Weighted average common shares outstanding - diluted 210,349  223,214
                                                     ======== ========


Earnings per share:
   Basic
        Continuing operations                          $0.47    $0.33
        Discontinued operations                          -      (0.04)
        Cumulative effect of change in accounting        -      (0.05)
                                                     -------- --------
            Net income                                 $0.47    $0.24
                                                     ======== ========

   Diluted
        Continuing operations                          $0.47    $0.32
        Discontinued operations                          -      (0.04)
        Cumulative effect of change in accounting        -      (0.05)
        Rounding                                       (0.01)    0.01
                                                     -------- --------
            Net income                                 $0.46    $0.24
                                                     ======== ========

    CONTACT: AmerisourceBergen Corporation, Valley Forge
             Michael N. Kilpatric, 610-727-7118
             mkilpatric@amerisourcebergen.com

    SOURCE: AmerisourceBergen Corporation

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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