Fourth Quarter Earnings and Sales at Record Levels
MALVERN, Pa.--(BUSINESS WIRE)--Nov. 3, 1999--AmeriSource Health
Corporation (NYSE - AAS - news) today reported record earnings for its fiscal
1999 fourth quarter and year ended September 30, 1999, before the
impact of special charges and extraordinary items described below.
All results for fiscal 1999 and 1998 discussed below have been
restated to reflect the pooling-of-interests accounting treatment
applied with respect to the July 1999 C. D. Smith Healthcare merger
and the March 1999 two-for-one stock split. All comparisons exclude
special charges and extraordinary items in both 1999 and 1998, unless
otherwise indicated.
For the quarter, income increased to a record $23.0 million, up
28% from $18.0 million for the same period last year. Diluted earnings
per share set another record, up 29% to $.45 when compared to $.35 for
the fourth quarter of fiscal 1998. On a pre-merger basis, the fourth
quarter of fiscal 1999 was $.45, an increase of 13% over the $.40 for
the fourth quarter of fiscal 1998.
For the year, income increased to $82.9 million, up 33% from the
previous year. Diluted earnings per share set another record at $1.61,
up 31% from $1.23 in fiscal 1998.
R. David Yost, AmeriSource President and CEO said, ``This was
another outstanding year for AmeriSource. For the year, we grew our
revenue over $1.1 billion excluding three large account losses and
C.D. Smith, while maintaining a high return on committed capital.
Earnings for the year were strong. In addition, we completed one of
the best acquisitions in the Company's history. We made solid
investments during the year in technology and infrastructure and
significantly expanded our management talent base, all of which
positions us very well for the future.''
Operating revenue for the fourth quarter of fiscal 1999 increased
15% to $2.57 billion from the $2.23 billion for the same quarter of
the previous year. For the fiscal year ended September 30, 1999,
operating revenue increased by 4% to $9.76 billion from $9.37 billion
in fiscal 1998. Revenue growth for fiscal 1999 was adversely affected
by the previously discussed termination of contracts with three large
customers in fiscal 1998.
Without these customer losses, operating revenue increased 12%
for the fiscal year ended September 30, 1999. C. D. Smith contributed
approximately $200 million to sales in the fourth fiscal quarter and
$800 million for the fiscal year. Traditional AmeriSource, excluding
C.D. Smith, grew 16% in the quarter.
The combined customer mix for the year consists of 48%
institutions/hospitals, 39% independent pharmacies, and 13% retail
chains.
As a result of the C. D. Smith merger, the Company recorded
special charges of $14.9 million (pre-tax) for merger and
restructuring costs in the fourth fiscal quarter. Also during the
quarter, the Company recorded an extraordinary charge of $3.4 million
(after-tax) for costs associated with the extinguishment of debt.
These two charges represent approximately $.30 per share on a
diluted after-tax basis.
For the fourth quarter and full year of fiscal 1999, the
Company's gross margin, as a percentage of operating revenue,
decreased modestly to 4.90% and 4.85%, respectively. The comparable
1998 margins were 5.07% for the quarter and 4.93% for the full year.
AmeriSource recognized a LIFO credit in the fourth quarter of
$1.0 million versus a credit of $7.8 million in the same quarter of
fiscal 1998. For the fiscal year ended September 30, 1999, the Company
had a LIFO charge of $2.8 million versus a $4.6 million credit
reported in the prior year.
Continued focus on cost reduction and productivity improvements
contributed to reduced total operating expenses as a percentage of
operating revenue to 3.10% in the fourth quarter of fiscal 1999 from
3.14% in the fourth quarter of fiscal 1998. For the full year, cost
controls and productivity improvements established new lows of
operating expense for the Company.
Total operating expense as a percentage of operating revenue was
reduced by 9 basis points to 3.07% in fiscal 1999 versus 3.16% in
fiscal 1998. Operating expenses reflect the merger of C.D. Smith,
which had a higher ratio of expense to operating revenue than
AmeriSource.
On October 12, 1999, AmeriSource was advised by one of its retail
chain customers, Jitney Jungle Stores of America, Inc., that it had
announced reorganization under Chapter 11 of the U.S. Bankruptcy Code.
AmeriSource recorded an additional bad debt expense of $2.2 million in
the fourth quarter relating to the outstanding receivables of this
customer.
The Company's operating margin, as a percent of operating revenue
for the fiscal year ended September 30, 1999, remained relatively
stable at 1.78% vs. 1.77% for the prior year and was 1.80% for the
fourth fiscal quarter, down from 1.93% in the prior year fourth
quarter.
Interest expense declined by 22% to $9.5 million in the fourth
quarter of fiscal 1999 primarily due to lower average borrowing costs
and the elimination of expense associated with the put warrants at C.
D. Smith. These factors were partially offset by a higher average
level of debt.
For the year, interest expense declined by 32% to $39.7 million
from $58.2 million in fiscal 1998. $7.5 million of the decline was
explained by the reduction of the expense related to the C. D. Smith
put warrants.
For the full year, on a pre-merger basis, AmeriSource's return on
committed capital improved to 24.6% from the previous year's 24.2%,
with both years well above the stated target of 20%.
R. David Yost also said, ``We continue to see strong opportunities
in the distribution business, supported by several trends that are
currently driving the rapid growth of the pharmaceutical market. An
aging population is now utilizing more pharmaceuticals, the FDA has
accelerated the rate at which new drugs are approved for market, and,
pharmaceutical therapy is recognized as extremely cost efficient.
Combined, these factors are driving higher drug utilization in all
avenues of health care. AmeriSource, with its national distribution
network, value added programs, high service levels, and its ability to
capture the growing economies of scale, is poised to benefit from
these trends that should continue to fuel our growth.''
AmeriSource Health Corporation is a Fortune 200 company with
revenue of $9.8 billion for fiscal year 1999. The Company is one of
the nation's leading wholesale pharmaceutical distributors and serves
the healthcare industry from a nationwide network of 25 strategically
located distribution centers. News and additional information about
the company are available at www.amerisource.com.
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.
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AMERISOURCE HEALTH CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
Fiscal Fiscal
Year Ended % of Year Ended % of
September 30 Operating September 30 Operating %
1999 Revenue 1998 (a) Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $9,760,083 100.00% $9,373,482 100.00% 4%
Bulk
deliveries
to customer
warehouses 47,280 129,555
----------- ------------
Total revenue 9,807,363 9,503,037
Cost of goods
sold:
Operating cost
of goods sold 9,287,018 95.15% 8,911,585 95.07% 4%
Cost of goods
sold - bulk
deliveries 47,280 129,555
----------- ------------
Total cost of
goods sold 9,334,298 9,041,140
----------- ------------
Gross profit 473,065 4.85% 461,897 4.93% 2%
Operating
expenses:
Selling and
administrative 281,798 2.89% 279,392 2.98% 1%
Depreciation
and
amortization 17,373 0.18% 16,885 0.18% 3%
Facility
consolidations
and employee
severance 11,730 0.12% 8,283 0.09% 42%
Merger costs 3,162 0.03% 18,406 0.20% -83%
----------- ------------
Operating
income 159,002 1.63% 138,931 1.48% 14%
Interest
expense 39,356 0.40% 50,363 0.54% -22%
Interest
expense -
adjustment of
common stock
put warrants
to fair value 334 0.00% 7,816 0.08% -96%
----------- ------------
Income before
taxes and
extraordinary
items 119,312 1.22% 80,752 0.86% 48%
Taxes on
income 48,397 0.50% 34,722 0.37% 39%
----------- ------------
Income before
extraordinary
items 70,915 0.73% 46,030 0.49% 54%
Extraordinary
charge - early
retirement of
debt, net of
income tax
benefit 3,449 -
----------- ------------
Net income $67,466 0.69% $46,030 0.49% 47%
=========== ============
Earnings per
share (a):
Income before
extraordinary
item $1.40 $0.92
Extraordinary
charge (0.07) -
----------- ------------
Net income $1.33 $0.92
=========== ============
Earnings per
share -
assuming
dilution (a):
Income before
extraordinary
item $1.38 $0.91
Extraordinary
charge (0.07) -
----------- ------------
Net income $1.31 $0.91
=========== ============
Weighted average
common shares
outstanding (a):
Basic 50,698 49,877
Assuming
dilution 51,683 50,713
======================================================================
Pro forma results excluding $14,892 and $26,689 of merger costs
and costs related to facility consolidations and employee severance
included in the years ended September 30, 1999 and 1998, respectively:
Operating income $173,894 $165,620
Income before extraordinary item $82,922 $62,310
Net income $79,473 $62,310
Earnings per share (a):
Income before extraordinary item $1.64 $1.25
Net income $1.57 $1.25
Earnings per share - assuming dilution (a):
Income before extraordinary item $1.61 $1.23
Net income $1.54 $1.23
(a) Prior year restated for March 1999 two-for-one stock split and
July 1999 C. D. Smith merger accounted for as a pooling of
interests.
AMERISOURCE HEALTH CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
Three Three
Months Ended % of Months Ended % of
September 30 Operating September 30 Operating %
1999 Revenue 1998 (a) Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $2,568,766 100.00% $2,228,379 100.00% 15%
Bulk
deliveries to
customer
warehouses 10,154 22,767
----------- ------------
Total revenue 2,578,920 2,251,146
Cost of goods
sold:
Operating cost
of goods sold 2,442,838 95.10% 2,115,354 94.93% 15%
Cost of goods
sold - bulk
deliveries 10,154 22,767
----------- ------------
Total cost of
goods sold 2,452,992 2,138,121
----------- ------------
Gross profit 125,928 4.90% 113,025 5.07% 11%
Operating
expenses:
Selling and
administrative 75,057 2.92% 65,717 2.95% 14%
Depreciation
and
amortization 4,588 0.18% 4,291 0.19% 7%
Facility
consolidations
and employees
severance 11,730 0.46% 8,283 0.37% 42%
Merger costs 3,162 0.12% 18,406 0.83% -83%
----------- ------------
Operating
income 31,391 1.22% 16,328 0.73% 92%
Interest
expense 9,472 0.37% 9,936 0.45% -5%
Interest
expense -
adjustment of
common stock
put warrants
to fair value - 2,138 0.10% -100%
----------- ------------
Income before
taxes and
extraordinary
items 21,919 0.85% 4,254 0.19% 415%
Taxes on
income 10,878 0.42% 2,527 0.11% 330%
----------- ------------
Income before
extraordinary
items 11,041 0.43% 1,727 0.08% 539%
Extraordinary
charge - early
retirement of
debt, net of
income tax
benefit 3,449 -
----------- ------------
Net income $7,592 0.30% $1,727 0.08% 340%
=========== ============
Earnings per
share (a):
Income before
extraordinary
item $0.22 $0.03
Extraordinary
charge (0.07) -
----------- ------------
Net income $0.15 $0.03
=========== ============
Earnings per
share -
assuming
dilution (a):
Income before
extraordinary
item $0.21 $0.03
Extraordinary
charge (0.07) -
----------- ------------
Net income $0.15 (b) $0.03
=========== ============
Weighted average
common shares
outstanding (a):
Basic 51,173 50,124
Assuming
dilution 51,647 50,861
======================================================================
Pro forma results excluding $14,892 and $26,689 of merger costs
and costs related to facility consolidations and employee severance
included in the three months ended September 30, 1999 and 1998,
respectively:
Operating income $46,283 $43,017
Income before extraordinary item $23,048 $18,007
Net income $19,599 $18,007
Earnings per share (a):
Income before extraordinary item $0.45 $0.36
Net income $0.38 $0.36
Earnings per share - assuming dilution (a):
Income before extraordinary item $0.45 $0.35
Net income $0.38 $0.35
(a) Prior year restated for March 1999 two-for-one stock split and
July 1999 C. D. Smith merger accounted for as a pooling of
interests.
(b) Does not equal sum of amounts due to rounding.
AMERISOURCE HEALTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
Sept. 30, Sept. 30, Increase
1999 1998(a) (Decrease)
---------- ----------- -----------
Current assets:
Cash and cash equivalents $59,497 $48,511 $10,986
Restricted cash - 41,833 (41,833)
Accounts receivable, less
allowance for doubtful
accounts 612,520 509,130 103,390
Merchandise inventories 1,243,153 954,010 289,143
Prepaid expenses and other 4,836 5,042 (206)
---------- ---------- -----------
Total current assets 1,920,006 1,558,526 361,480
Property and equipment, net 64,384 67,955 (3,571)
Other assets, less accumulated
amortization 76,209 99,791 (23,582)
---------- ---------- -----------
Total assets $2,060,599 $1,726,272 $334,327
========== ========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,175,619 $947,016 $228,603
Accrued expenses and
other 50,329 52,188 (1,859)
Accrued income taxes 10,854 466 10,388
Deferred income taxes 90,481 93,362 (2,881)
---------- ---------- -----------
Total current
liabilities 1,327,283 1,093,032 234,251
Long-term debt:
Revolving credit facility 225,227 218,590 6,637
Receivables securitization
financing 325,000 299,948 25,052
Other debt 8,478 20,926 (12,448)
Other liabilities 8,334 8,036 298
Common stock put warrants - 10,385 (10,385)
Stockholders' equity:
Common stock and capital in
excess of par value 268,364 245,138 23,226
Retained earnings (deficit) (94,632) (162,098) 67,466
Cost of common stock in
treasury (7,269) (7,353) 84
Note receivable from ESOP (186) (332) 146
---------- ---------- -----------
Total stockholders'
equity 166,277 75,355 90,922
---------- ---------- -----------
Total liabilities
and stockholders'
equity $2,060,599 $1,726,272 $334,327
========== ========== ===========
(a) Prior year restated for March 1999 two-for-one stock split and
July 1999 C. D. Smith merger accounted for as a pooling of
interests.
Contact: AmeriSource Health Corp.
MaryBeth M. Alvin, Director, Investor Relations
610/993-3411
malvin@amerisource.com