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AmerisourceBergen Reports December Quarterly Results, with Diluted Earnings Per Share from Continuing Operations of $0.66

01/25/05

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Jan. 25, 2005--AmerisourceBergen Corporation (NYSE:ABC) today reported results for its fiscal first quarter ended December 31, 2004. 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
        $0.66, down 31 percent.

    --  Operating Revenue of $12.2 billion, flat.

    --  Cash flow from operations of $122.7 million.

    --  Record low interest expense of $22.1 million.

    --  Record low total debt to total capital ratio of 22.5 percent.

"We were disappointed with our financial performance for the quarter," said R. David Yost, AmerisourceBergen's Chief Executive Officer. "However, despite a tough transitional year, we are building positive momentum. Our disciplined working capital management delivered excellent cash generation and the strongest balance sheet in our history. Operating revenue in pharmaceutical distribution was flat, despite the loss of two large customers which accounted for 14 percent of operating revenue in the first quarter of fiscal 2004. We remain enthusiastic about our future and see excellent opportunities as we expand our specialty business, complete our new distribution network, gain new generic opportunities and look to fully participate in the growth generated by the Medicare Modernization Act in 2006."

Discussion of Results

AmerisourceBergen's operating revenue was $12.2 billion in the first quarter of fiscal 2005 compared to $12.3 billion for the same period last year. Bulk deliveries in the quarter increased 32 percent to $1.4 billion.

Consolidated operating income in the quarter declined 35 percent to $137.1 million primarily due to reduced buy-side profits in the pharmaceutical distribution segment and continued competitive pressure in the PharMerica segment. In addition, an $18.8 million gain from the settlement of two drug manufacturer antitrust litigation cases, less a $5.1 million charge for facility consolidations and employee severance, had a net positive impact on consolidated operating income in the fiscal 2005 first quarter. Operating income in the first quarter of fiscal 2004 included a charge for facility consolidations and employee severance of $1.6 million and benefited from a $17.5 million recovery of a debt from a former customer.

Interest expense in the first quarter of fiscal 2005 was a record low $22.1 million compared to $31.5 million in the prior year's first quarter, a 30 percent decrease driven by debt reduction. During the quarter, AmerisourceBergen completed a new, five-year, $700 million senior unsecured revolving credit facility, replacing a $1.0 billion secured revolving credit facility. The Company also redeemed the remaining $180 million term loan under its previous credit agreement. In addition, AmerisourceBergen amended its $1.05 billion securitization program for the Company's trade receivables. In both refinancings the Company significantly improved terms. The early retirement of the term loan resulted in a charge of $1.0 million in the fiscal 2005 December quarter.

Diluted earnings per share from continuing operations were $0.66 in the first quarter of fiscal 2005, compared to $0.95 in the previous fiscal year's first quarter.

Discontinued operations in the December quarter reflect the $6.4 million loss, net of tax, from the sale and operation of the Company's Rita Ann cosmetics distribution business.

Cash generated from operations in the first quarter of FY2005 was $122.7 million compared to cash usage of $454.4 million in the prior year's first quarter. The Company's total debt to total capital ratio was a record low 22.5 percent.

"With difficult market and industry conditions, both our segments were challenged this quarter," said Kurt J. Hilzinger, AmerisourceBergen's President and Chief Operating Officer. "Significant activities are underway to improve performance and better position us for the year ahead.

"During first quarter 2005, we continued to focus on expanded offerings in the pharmaceutical supply channel. Our Specialty Group was again a bright spot. Our market-leading oncology businesses had another strong quarter and commercialization services continued to expand. Our Technology and Packaging groups began a number of new initiatives.

"In the Drug Corporation, we continued to build and gain benefits from our new distribution center network. The program remains on schedule and on budget. Our new Sacramento, California, and Columbus, Ohio, facilities are fully operational and the Dallas, Texas, facility opens this spring. Coupled with our new warehouse management system, the new network will drive additional cost savings and improved customer service in the future."

"In our PharMerica segment, we continue to face a difficult competitive environment. Continued pricing and reimbursement pressure were not offset by a significant reduction in operating expenses as operating income in the quarter was down. However, our new customer-facing technology is winning new customers in our long-term care business, and we continue our more than $30 million of technology investments in the segment," said Hilzinger.

Segment Review

AmerisourceBergen operates in two segments: Pharmaceutical Distribution (which includes the operations of AmerisourceBergen Drug Corporation, Specialty, Packaging, and Technology groups) and PharMerica (which includes the long-term care pharmacy and workers' compensation businesses). Intersegment sales of $225.3 million in the first quarter of fiscal 2005 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 of $12.0 billion in the first quarter of fiscal 2005 was essentially flat compared to the same quarter in the previous fiscal year.

Strong, above-market growth by the Specialty Group and at-market growth within the Drug Corporation offset the impact of the prior year's loss of the Department of Veterans Affairs (VA) and AdvancePCS contracts. The two contract losses accounted for 14 percent of segment operating revenue in the first quarter of fiscal 2004. Lower than anticipated pharmaceutical price increases, fewer product deals from manufacturers, reduced alternate source purchases and a strong competitive environment, including the VA impact, also reduced gross profit and operating margins in the quarter.

Pharmaceutical Distribution customer mix in the first quarter of fiscal 2005 was 55 percent institutional and 45 percent retail. Operating revenue from retail customers grew faster than operating revenue from institutional customers, which includes mail order and alternate site facilities, hospitals and specialty pharmaceutical customers.

AmerisourceBergen Specialty Group continued its excellent performance with annualized operating revenue of more than $5.5 billion. The Group continues to build on its leadership position in the distribution of products and services to physicians in numerous disease states, including its industry leading position in oncology. The Group also continues to grow its manufacturer services businesses, including third party logistics, reimbursement consulting and physician education.

AmerisourceBergen Packaging Group, which includes product packaging for manufacturers and repackaging for healthcare providers, added new product packaging contracts to its growing pipeline and is delivering new compliance packaging solutions to the marketplace. The Company's Technology Group, which provides pharmacy automation and patient safety solutions to healthcare providers, continued to build its order backlog.

PharMerica

PharMerica's operating revenue for the first quarter of fiscal 2005 was $385.6 million, compared with $402.4 million in the previous year's first quarter, down 4 percent. Operating income for the first quarter of fiscal 2005 was $23.5 million, down 17 percent from $28.5 million for the same quarter last year. Lower operating revenue and operating income reflected the competitive environment in both the long-term care and workers' compensation businesses.

Looking Ahead

"Our expectations and assumptions for fiscal 2005 remain unchanged," said Yost. "We anticipate operating revenue and operating income to be essentially flat for the remainder of fiscal 2005, and diluted earnings per share from continuing operations for fiscal 2005 of between $4.00 and $4.10. The September quarter is expected to post a diluted earnings per share from continuing operations increase of 15 percent or more over the same quarter in 2004. Our guidance is based on low double-digit growth for the U.S. pharmaceutical market, including approximately 5 percent in price appreciation in the remainder of the fiscal year, Specialty Group growing with the market, the impact of completing our $500 million share repurchase program and the expectation that the Board of Directors will approve an additional $300 million share repurchase to buy back the shares recently issued in connection with the convertible debt redemption."

Conference Call

The Company will host a conference call to discuss its results at 11:00 a.m. Eastern Standard Time on January 25, 2005. 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, Senior Vice President and Chief Financial Officer.


    To access the live conference call via telephone:

    Dial in: (612) 288-0329, 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, 2005 until 11:59 p.m. February 1, 2005. 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: 765507
             (320) 365-3844 from outside the U.S., access code: 765507

    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 largest pharmaceutical services companies in the United States. 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, bedside medication safety systems, and pharmaceutical packaging to pharmacy services for skilled nursing and assisted living facilities, reimbursement and pharmaceutical consulting services, and physician education. With more than $48 billion in operating revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs more than 14,000 people. AmerisourceBergen is ranked #22 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.

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 relationships; customer insolvencies; changes in customer mix; changes in pharmaceutical manufacturers' pricing and distribution policies or practices; regulatory changes; changes in U.S. government policies (including changes in government policies pertaining to drug reimbursement); changes in market interest rates; and other economic, business, competitive, 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 2004.

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   %
                     2004       Revenue     2003       Revenue  Change
                  ------------ --------- ------------ --------- ------
Revenue:
  Operating
   revenue        $12,204,315    100.00% $12,252,737    100.00%     0%
  Bulk deliveries
   to customer
   warehouses       1,434,727              1,089,434               32%
                  ------------           ------------
Total revenue      13,639,042             13,342,171                2%

Cost of goods
 sold              13,178,143             12,817,121                3%
                  ------------           ------------

Gross profit          460,899      3.78%     525,050      4.29%   -12%

Operating
 expenses:
  Distribution,
   selling and
   administrative     297,551      2.44%     295,383      2.41%     1%
  Depreciation
   and
   amortization        21,154      0.17%      16,716      0.14%    27%
  Facility
   consolidations
   and employee
   severance            5,133      0.04%       1,553      0.01%   231%
                  ------------           ------------

Operating income      137,061      1.12%     211,398      1.73%   -35%

Other (income)
 loss                  (1,058)    -0.01%       2,587      0.02%   N/A

Interest expense       22,076      0.18%      31,507      0.26%   -30%
Loss on early
 retirement of
 debt                   1,015      0.01%           -
                  ------------           ------------

Income from
 continuing
 operations
 before taxes         115,028      0.94%     177,304      1.45%   -35%

Income taxes           44,171      0.36%      68,263      0.56%   -35%
                  ------------           ------------

Income from
 continuing
 operations            70,857      0.58%     109,041      0.89%   -35%

Loss from
 discontinued
 operations, net
 of tax benefit        (6,408)                  (567)
                  ------------           ------------

Net income            $64,449      0.53%    $108,474      0.89%   -41%
                  ============           ============


Earnings per
 share:
  Basic
    Continuing
     operations         $0.67                  $0.98              -32%
    Discontinued
     operations         (0.06)                 (0.01)
                  ------------           ------------
      Net income        $0.61                  $0.97              -37%
                  ============           ============

  Diluted
    Continuing
     operations         $0.66                  $0.95              -31%
    Discontinued
     operations         (0.06)                 (0.01)
                  ------------           ------------
      Net income        $0.60                  $0.94              -36%
                  ============           ============

Weighted average
 common shares
 outstanding:
  Basic               105,561                111,709
  Diluted             111,607                118,029


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

                  ASSETS
                                           December 31,  September 30,
                                               2004          2004
                                           ------------- -------------
Current assets:
  Cash and cash equivalents                    $529,539      $871,343
  Accounts receivable, net                    2,210,474     2,260,973
  Merchandise inventories                     5,185,239     5,135,830
  Prepaid expenses and other                     22,170        27,243
                                           ------------- -------------
      Total current assets                    7,947,422     8,295,389

Long-term assets                              3,362,848     3,358,614
                                           ------------- -------------

      Total assets                          $11,310,270   $11,654,003
                                           ============= =============


   LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                           $5,017,561    $4,947,037
  Current portion of long-term debt             101,395       281,360
  Other current liabilities                     796,769       875,511
                                           ------------- -------------
      Total current liabilities               5,915,725     6,103,908

Long-term debt, less current portion          1,123,966     1,157,111

Other liabilities                                58,155        53,939

Stockholders' equity                          4,212,424     4,339,045
                                           ------------- -------------

      Total liabilities and stockholders'
       equity                               $11,310,270   $11,654,003
                                           ============= =============


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

                                                Three        Three
                                             Months Ended Months Ended
                                             December 31, December 31,
                                                2004         2003
                                             ------------ ------------
Operating Activities:
  Net income                                     $64,449     $108,474
  Non-cash items                                  51,686       29,811
  Changes in operating assets and
   liabilities                                     6,598     (592,683)
                                             ------------ ------------
Net cash provided by (used in) operating
 activities                                      122,733     (454,398)
                                             ------------ ------------

Investing Activities:
  Capital expenditures                           (79,182)     (51,516)
  Proceeds from sale-leaseback transactions       20,732            -
  Proceeds from sale of discontinued
   operations                                      3,560            -
  Other                                             (763)        (123)
                                             ------------ ------------
Net cash used in investing activities            (55,653)     (51,639)
                                             ------------ ------------

Financing Activities:
  Long-term debt repayments                     (180,000)     (15,000)
  Exercise of stock options                       30,084        6,577
  Cash dividends on common stock                  (2,628)      (2,802)
  Purchase of treasury stock                    (253,191)           -
  Deferred financing costs and other              (3,149)         451
                                             ------------ ------------
Net cash used in financing activities           (408,884)     (10,774)
                                             ------------ ------------

Decrease in cash and cash equivalents           (341,804)    (516,811)

Cash and cash equivalents at beginning of
 period                                          871,343      800,036
                                             ------------ ------------

Cash and cash equivalents at end of period      $529,539     $283,225
                                             ============ ============


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

                                    Three Months Ended December 31,
                                  -----------------------------------
Operating Revenue                     2004         2003     % Change
--------------------------------- -----------------------------------

Pharmaceutical Distribution       $12,043,974  $12,077,582       0%
PharMerica                            385,621      402,440      -4%
Intersegment eliminations            (225,280)    (227,285)      1%
                                  ------------ ------------

       Operating revenue          $12,204,315  $12,252,737       0%
                                  ============ ============


                                    Three Months Ended December 31,
                                  -----------------------------------
Operating Income                      2004         2003     % Change
--------------------------------- -----------------------------------

Pharmaceutical Distribution           $99,847     $184,458     -46%
PharMerica                             23,522       28,493     -17%
Facility consolidations and
 employee severance                    (5,133)      (1,553)   -231%
Gain on litigation settlement          18,825            -      N/A
                                  ------------ ------------

       Operating income              $137,061     $211,398     -35%
                                  ============ ============



Percentages of operating revenue:

Pharmaceutical Distribution
       Gross profit                      2.78%        3.32%
       Operating expenses                1.95%        1.79%
       Operating income                  0.83%        1.53%

PharMerica
       Gross profit                     27.69%       30.96%
       Operating expenses               21.59%       23.88%
       Operating income                  6.10%        7.08%

AmerisourceBergen Corporation
       Gross profit                      3.78%        4.29%
       Operating expenses                2.65%        2.56%
       Operating income                  1.12%        1.73%


                     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,
                                                     2004      2003
                                                   --------- ---------

Income from continuing operations                   $70,857  $109,041
Interest expense - convertible subordinated notes,
 net of income taxes                                  2,511     2,530
                                                   --------- ---------
Income from continuing operations available to
 common stockholders                                $73,368  $111,571
                                                   ========= =========

Weighted average common shares outstanding - basic  105,561   111,709
Effect of dilutive securities:
    Options to purchase common stock                    423       656
    Convertible subordinated notes                    5,623     5,664
                                                   --------- ---------

Weighted average common shares outstanding -
 diluted                                            111,607   118,029
                                                   ========= =========


Earnings per share:
    Basic
        Continuing operations                         $0.67     $0.98
        Discontinued operations                       (0.06)    (0.01)
                                                   --------- ---------
            Net income                                $0.61     $0.97
                                                   ========= =========

    Diluted
        Continuing operations                         $0.66     $0.95
        Discontinued operations                       (0.06)    (0.01)
                                                   --------- ---------
            Net income                                $0.60     $0.94
                                                   ========= =========

    CONTACT: AmerisourceBergen Corporation
             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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