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AmerisourceBergen Reports Strong Cash Flow from Operations and Solid Earnings Performance for the June Quarter

07/22/04

Focused Performance Generates $634 Million In Cash from Operations in the June Quarter

VALLEY FORGE, Pa.--(BUSINESS WIRE)--July 22, 2004-- AmerisourceBergen Corporation (NYSE:ABC) today reported results for its fiscal third quarter ended June 30, 2004. The following results are presented in accordance with generally accepted accounting principles (GAAP).

    Fiscal Third Quarter Highlights

        --  Diluted earnings per share of $1.09, including special
            items of $0.07, up 10 percent.

        --  Cash flow from operations of $634 million.

        --  Record low interest expense of $26.8 million.

        --  Record total debt to total capital ratio of 25 percent.

    Fiscal First Nine Months Highlights

        --  Diluted earnings per share of $3.25, including special
            items of $0.04, up 14 percent.

        --  Net income of $376.4 million, up 17 percent.

        --  Cash flow from operations of $656 million.

"Our solid performance this quarter again demonstrates our disciplined, long-term approach to our business," said R. David Yost, AmerisourceBergen's Chief Executive Officer. "Our operational focus, disciplined working capital management and an effective transition to inventory management agreements with manufacturers mitigated the impact of the loss of a major customer in May. The result was solid earnings per share performance, excellent cash generation, and the strongest balance sheet in our history."

Discussion of Results

Diluted earnings per share for the third quarter of fiscal 2004 were $1.09, a 10 percent increase over the $0.99 in the prior year's third quarter. Included in the fiscal 2004 third quarter results are a $23.4 million gain, net of tax, from an antitrust litigation settlement; a $14.5 million charge, net of tax, related to debt redemption; and a $1.0 million charge, net of tax, related to facility consolidation and employee severance costs. The previous fiscal year's third quarter included a $2.6 million charge, net of tax, due to debt redemption and a $2.4 million charge, net of tax, related to facility consolidation and employee severance costs. The earnings per share impact of these items was an increase of $0.07 in the third quarter of fiscal 2004 and a decrease of $0.04 in the last fiscal year's third quarter.

AmerisourceBergen's operating revenue was $12.1 billion in the third quarter of fiscal 2004 compared to $11.5 billion for the same period last year, a 6 percent increase. Bulk deliveries in the quarter increased 2 percent to $1.0 billion.

During the quarter, the Company changed its accounting for customer returns resulting in a one-time reduction of $320 million in both operating revenue and cost of goods sold. This change also resulted in a $320 million increase to inventory with a corresponding decrease in accounts receivable. The change had no impact on net income or diluted earnings per share.

Interest expense in the third quarter of fiscal 2004 was a record low $26.8 million compared to $37.2 million in the prior year's third quarter, a 28 percent decrease driven by significantly lower average inventory levels in the quarter.

Cash generated from operations in the fiscal 2004 third quarter was $634 million compared to cash usage of $177 million in last fiscal year's third quarter. Using its strong cash position, the Company paid down $323 million in debt during the quarter, including $300 million associated with the early redemption of the 7.80 percent Trust Originated Preferred Securities (TOPrS(SM)) which were due effectively in June 2039. The Company's total debt to total capital ratio was a record low 25 percent.

For the first nine months of fiscal 2004, diluted earnings per share were $3.25, a 14 percent increase over the $2.85 in the same nine-month period last year. The net impact of the gain from the antitrust litigation settlement and charges related to the early retirement of debt and facility consolidations and employee severance costs in the first nine months of fiscal 2004 increased earnings per share by $0.04. Charges related to early retirement of debt and facility consolidations and employee severance costs in the first nine months of fiscal 2003 decreased earnings per share by $0.06.

Operating revenue in the first nine months of fiscal 2004 increased 9 percent to $36.7 billion from $33.8 billion in the same period of the previous fiscal year. Bulk deliveries to customer warehouses were down 5 percent, reflecting the impact of the conversion of bulk business to operating revenue in fiscal 2003. In the first nine months of fiscal 2004, operating revenue and cost-of-goods-sold were both reduced by $320 million due to the change in accounting for customer returns.

"With annualized operating revenue of approximately $5 billion, our Specialty Group again led our business units with especially strong performance in the quarter," said Kurt J. Hilzinger, AmerisourceBergen's President and Chief Operating Officer. "Our Drug Corporation, Technology Group and Packaging Group also continued to build their businesses during the period as we expanded our offerings in pharmaceutical services. In the quarter, we again benefited from our merger integration cost savings and achieved our milestone goal of $150 million in annual synergy cost savings ahead of our September 30, 2004 target date that we set in 2001.

"The building of our new distribution center network continues on schedule and on budget. Our new Sacramento, California, facility has been serving customers for over a month and the new Columbus, Ohio, distribution center will open in the fall. Completion of the six new distribution centers coupled with our new warehouse management system, will facilitate additional cost savings and improved customer service in the years ahead."

"In our PharMerica segment, operational discipline and expense reduction drove operating income up 15 percent and operating margin to a record 8 percent for the quarter ended June 30, 2004," said Hilzinger.

Segment Review

AmerisourceBergen operates in two segments: Pharmaceutical Distribution (which includes the operations of AmerisourceBergen Drug Corporation and the AmerisourceBergen Specialty, Packaging and Technology groups) and PharMerica (which includes the long term care pharmacy and workers' compensation fulfillment businesses). Intersegment sales of $212.1 million in the third quarter of fiscal 2004 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 third quarter of fiscal 2004 increased to $11.9 billion compared with $11.3 billion in the third quarter of fiscal year 2003, a 6 percent increase.

In May, the Company stopped servicing the Department of Veterans Affairs (VA) pharmaceutical distribution contract, with approximately $1 billion in quarterly revenue, lowering the segment's revenue growth rate. The VA impact, as well as a strong competitive environment, also reduced gross and operating margins, although margins were positively affected by operational discipline and merger integration cost savings.

Pharmaceutical Distribution customer mix in the third quarter of fiscal 2004 was 58 percent institutional and 42 percent retail. Operating revenue from institutional customers, which includes mail order and alternate site facilities, hospitals and specialty pharmaceutical customers, continued to grow faster than operating revenue from retail customers.

AmerisourceBergen Specialty Group continued its excellent performance. 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. The Company's recent acquisition of Imedex, an accredited physician education company, added to the Specialty Group's capabilities.

AmerisourceBergen Packaging Group, which includes product packaging for manufacturers and repackaging for healthcare providers, continued to add capacity and new customers in the quarter. The Company's Technology Group, which provides patient safety and pharmacy automation solutions to healthcare providers, gained added traction as orders continued to build in the quarter.

For the segment, gross profit as a percentage of operating revenue in the third quarter of fiscal 2004 was 3.52 percent, compared to 3.82 percent in the same period in the prior fiscal year. Total operating expenses as a percentage of operating revenue in the third quarter of fiscal 2004 were 1.99 percent, a 2 basis point improvement over the same quarter last year. Operating income was $182.2 million in the third quarter of fiscal 2004, an 11 percent decline from $204.8 million for the same quarter last year. For the third quarter of fiscal 2004, operating income as a percentage of operating revenue was 1.53 percent, a 28 basis point decrease from the third quarter of fiscal 2003.

PharMerica

PharMerica's operating revenue for the third quarter of fiscal 2004 was $390.3 million, compared with $399.9 million in the previous year's third quarter reflecting the previously announced loss of several customers last fall.

Operating income for the third quarter of fiscal 2004 was $31.4 million, up 15 percent from $27.3 million for the same quarter last year due to continued expense control and the reduction in bad debt expense. Operating income as a percentage of operating revenue increased 122 basis points in the quarter ended June 30, 2004 to a record 8.05 percent from 6.83 percent in the prior year period.

Looking Ahead

"We expect fiscal 2004 diluted earnings per share, excluding special items, to be in the middle of the Company's previously announced guidance of $4.10 per share to $4.20 per share," said Yost. "We anticipate the revenue growth rate to be in the low single digits in the final quarter of the fiscal year. We are raising our cash flow from operations expectations for fiscal year 2004 to more than $650 million from $350 million to $400 million."

Looking ahead, Yost said, "Following the anniversary of the major customer loss in May 2005, we expect to return to our long-term financial performance goals, which include growing revenues with the market at a double-digit rate and growing diluted earnings per share at 15 percent or more annually."

Conference Call

The Company will host a conference call to discuss its results at 11:00 a.m. Eastern Daylight Time on July 22, 2004. 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:     (888) 428-4480 from inside the U.S., no access code
             required
             or (612) 288-0318 from outside the U.S., 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 3:00 p.m. July 22, 2004 until 11:59 p.m. July 29, 2004. 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: 731950
             (320) 365-3844 from outside the U.S., access code: 731950

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 $47 billion in annualized 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 future financial and operating results of AmerisourceBergen and the benefits and other aspects of the 2001 merger between AmeriSource Health Corporation and Bergen Brunswig Corporation.

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; regulatory changes; changes in U.S. government policies; failure to integrate the businesses of AmeriSource and Bergen Brunswig successfully; failure to obtain and retain expected synergies from the merger of AmeriSource and Bergen Brunswig; and other economic, business, competitive, regulatory and/or operational factors affecting the business of AmerisourceBergen generally.

More detailed information about these factors is set forth in AmerisourceBergen's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for fiscal 2003.

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
                    June 30,   Operating   June 30,   Operating   %
                     2004       Revenue     2003       Revenue  Change
                  ------------ --------- ------------ --------- ------

Revenue:
   Operating
    revenue       $12,114,996    100.00% $11,482,571    100.00%     6%
   Bulk
    deliveries to
    customer
    warehouses        956,598                938,100                2%
                  ------------           ------------
Total revenue      13,071,594             12,420,671

Cost of goods
 sold              12,495,865             11,860,292                5%
                  ------------           ------------

Gross profit          575,729      4.75%     560,379      4.88%     3%

Operating
 expenses:
  Distribution,
   selling and
   administrative     304,333      2.51%     311,953      2.72%    -2%
  Depreciation
   and
   amortization        19,806      0.16%      16,340      0.14%    21%
  Facility
   consolidations
   and employee
   severance            1,550      0.01%       3,880      0.03%   -60%
                  ------------           ------------

Operating income      250,040      2.06%     228,206      1.99%    10%

Other (income)/
 loss                  (4,909)    -0.04%       1,642      0.01%   N/A

Interest expense       26,845      0.22%      37,234      0.32%   -28%
Loss on early
 retirement of
 debt                  23,592      0.19%       4,220      0.04%   459%
                  ------------           ------------

Income before
 taxes                204,512      1.69%     185,110      1.61%    10%

Income taxes           78,737      0.65%      72,564      0.63%     9%
                  ------------           ------------

Net income           $125,775      1.04%    $112,546      0.98%    12%
                  ============           ============

Earnings per
 share:
   Basic                $1.12                  $1.02               10%
   Diluted              $1.09                  $0.99               10%

Weighted average
 common shares
 outstanding:
   Basic              111,956                110,332
   Diluted            118,156                116,774




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


                      Nine                   Nine
                  Months Ended   % of    Months Ended   % of
                    June 30,   Operating   June 30,   Operating   %
                     2004       Revenue     2003       Revenue  Change
                  ------------ --------- ------------ --------- ------

Revenue:
   Operating
    revenue       $36,725,329    100.00% $33,803,435    100.00%     9%
   Bulk
    deliveries to
    customer
    warehouses      3,064,951              3,214,310               -5%
                  ------------           ------------
Total revenue      39,790,280             37,017,745

Cost of goods
 sold              38,104,929             35,354,752                8%
                  ------------           ------------

Gross profit        1,685,351      4.59%   1,662,993      4.92%     1%

Operating
 expenses:
  Distribution,
   selling and
   administrative     905,926      2.47%     953,198      2.82%    -5%
  Depreciation
   and
   amortization        55,242      0.15%      50,678      0.15%     9%
  Facility
   consolidations
   and employee
   severance            5,319      0.01%       6,504      0.02%   -18%
                  ------------           ------------

Operating income      718,864      1.96%     652,613      1.93%    10%

Other (income)/
 loss                  (5,985)    -0.02%       7,558      0.02%   N/A

Interest expense       89,223      0.24%     110,018      0.33%   -19%
Loss on early
 retirement of
 debt                  23,592      0.06%       4,220      0.01%   459%
                  ------------           ------------

Income before
 taxes                612,034      1.67%     530,817      1.57%    15%

Income taxes          235,633      0.64%     209,118      0.62%    13%
                  ------------           ------------

Net income           $376,401      1.02%    $321,699      0.95%    17%
                  ============           ============


Earnings per
 share:
   Basic                $3.37                  $2.96               14%
   Diluted              $3.25                  $2.85               14%

Weighted average
 common shares
 outstanding:
   Basic              111,837                108,845
   Diluted            118,044                115,302




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


            ASSETS
                                 June 30,   September 30,   June 30,
                                  2004          2003         2003
                               ------------ ------------- ------------
Current assets:
   Cash and cash equivalents      $903,171      $800,036     $224,823
   Accounts receivable, net      2,391,514     2,295,437    2,500,776
   Merchandise inventories       5,597,240     5,733,837    6,729,477
   Prepaid expenses and other       17,169        29,208       15,161
                               ------------ ------------- ------------
     Total current assets        8,909,094     8,858,518    9,470,237

Long-term assets                 3,333,457     3,181,607    3,139,535
                               ------------ ------------- ------------

     Total assets              $12,242,551   $12,040,125  $12,609,772
                               ============ ============= ============


                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable            $5,458,916    $5,393,769   $5,588,138
    Current portion of long-
     term debt                      76,350        61,430       60,907
    Other current liabilities      872,308       800,903      789,499
                               ------------ ------------- ------------
     Total current liabilities   6,407,574     6,256,102    6,438,544

Long-term debt, less current
 portion                         1,379,722     1,722,724    2,238,790

Other liabilities                   61,817        55,982       45,258

Stockholders' equity             4,393,438     4,005,317    3,887,180
                               ------------ ------------- ------------

     Total liabilities and
      stockholders' equity     $12,242,551   $12,040,125  $12,609,772
                               ============ ============= ============




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

                                                   Nine       Nine
                                                  Months     Months
                                                   Ended      Ended
                                                 June 30,   June 30,
                                                   2004       2003
                                                 --------- -----------

Operating Activities:
   Net income                                    $376,401    $321,699
   Non-cash items                                 133,895     166,722
   Changes in operating assets and liabilities    145,626  (1,280,825)
                                                 --------- -----------
Net cash provided by (used in) operating
 activities                                       655,922    (792,404)
                                                 --------- -----------

Investing Activities:
   Capital expenditures                          (143,931)    (50,890)
   Cost of acquired companies, net of cash
    acquired, and other                           (62,510)    (93,361)
                                                 --------- -----------
Net cash used in investing activities            (206,441)   (144,251)
                                                 --------- -----------

Financing Activities:
   Net borrowings under revolving credit and
    receivables securitization facilities               -     501,000
   Net long-term debt repayments                 (353,425)    (22,704)
   Exercise of stock options                       14,578      34,911
   Cash dividends on common stock                  (8,416)     (8,197)
   Other                                              917      (6,872)
                                                 --------- -----------
Net cash (used in) provided by financing
 activities                                      (346,346)    498,138
                                                 --------- -----------

Increase/(decrease) in cash and cash equivalents  103,135    (438,517)

Cash and cash equivalents at beginning of period  800,036     663,340
                                                 --------- -----------

Cash and cash equivalents at end of period       $903,171    $224,823
                                                 ========= ===========


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



                                       Three Months Ended June 30,
                                   -----------------------------------
Operating Revenue                     2004         2003      % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution        $11,936,742  $11,285,932         6%
PharMerica                             390,332      399,886        -2%
Intersegment eliminations             (212,078)    (203,247)       -4%
                                   ------------ ------------

   Operating revenue               $12,114,996  $11,482,571         6%
                                   ============ ============



                                       Three Months Ended June 30,
                                   -----------------------------------
Operating Income                      2004         2003      % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution           $182,179     $204,777       -11%
PharMerica                              31,406       27,309        15%
Facility consolidations and
 employee severance                     (1,550)      (3,880)       60%
Gain on litigation settlement           38,005            -        N/A
                                   ------------ ------------

   Operating income                   $250,040     $228,206        10%
                                   ============ ============



Percentages of operating revenue:

Pharmaceutical Distribution
   Gross profit                           3.52%        3.82%
   Operating expenses                     1.99%        2.01%
   Operating income                       1.53%        1.81%

PharMerica
   Gross profit                          30.24%       32.27%
   Operating expenses                    22.19%       25.44%
   Operating income                       8.05%        6.83%

AmerisourceBergen Corporation
   Gross profit                           4.75%        4.88%
   Operating expenses                     2.69%        2.89%
   Operating income                       2.06%        1.99%



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


                                       Nine Months Ended June 30,
                                   -----------------------------------
Operating Revenue                     2004         2003      % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution        $36,190,616  $33,195,148         9%
PharMerica                           1,184,850    1,199,823        -1%
Intersegment eliminations             (650,137)    (591,536)      -10%
                                   ------------ ------------

   Operating revenue               $36,725,329  $33,803,435         9%
                                   ============ ============



                                       Nine Months Ended June 30,
                                   -----------------------------------
Operating Income                        2004         2003     % Change
---------------------------------- -----------------------------------

Pharmaceutical Distribution           $598,098     $584,168         2%
PharMerica                              88,080       74,949        18%
Facility consolidations and
 employee severance                     (5,319)      (6,504)       18%
Gain on litigation settlement           38,005            -        N/A
                                   ------------ ------------

   Operating income                   $718,864     $652,613        10%
                                   ============ ============


Percentages of operating revenue:

Pharmaceutical Distribution
   Gross profit                           3.55%        3.84%
   Operating expenses                     1.90%        2.08%
   Operating income                       1.65%        1.76%

PharMerica
   Gross profit                          30.60%       32.27%
   Operating expenses                    23.16%       26.02%
   Operating income                       7.43%        6.25%

AmerisourceBergen Corporation
   Gross profit                           4.59%        4.92%
   Operating expenses                     2.63%        2.99%
   Operating income                       1.96%        1.93%


                     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 available to common
stockholders.


                               Three Months Ended   Nine Months Ended
                                    June 30,            June 30,
                                 2004      2003      2004      2003
                               --------- --------- --------- ---------

Net income                     $125,775  $112,546  $376,401  $321,699
Interest expense - convertible
 subordinated notes, net of
 income taxes                     2,530     2,501     7,590     7,479
                               --------- --------- --------- ---------
Income available to common
 stockholders                  $128,305  $115,047  $383,991  $329,178
                               ========= ========= ========= =========


Weighted average common shares
 outstanding - basic            111,956   110,332   111,837   108,845
Effect of dilutive securities:
   Options to purchase common
    stock                           536       778       543       793
   Convertible subordinated
    notes                         5,664     5,664     5,664     5,664
                               --------- --------- --------- ---------

Weighted average common shares
 outstanding - diluted          118,156   116,774   118,044   115,302
                               ========= ========= ========= =========


Earnings per share:
   Basic                          $1.12     $1.02     $3.37     $2.96
   Diluted                        $1.09     $0.99     $3.25     $2.85

    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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