VALLEY FORGE, Pa.--(BUSINESS WIRE)--Nov. 2, 2004--
Company Generates $825 Million in Cash from Operations in Fiscal 2004
AmerisourceBergen Corporation (NYSE:ABC) today reported results
for its fiscal fourth quarter and year ended September 30, 2004. The
following results are presented in accordance with U.S. generally
accepted accounting principles (GAAP).
Fiscal Fourth Quarter Highlights
-- Diluted earnings per share of $0.81, including special charges
of $0.01, down 22 percent.
-- Operating Revenue of $12.1 billion, up 4 percent.
-- Cash flow from operations of $164 million.
-- Record low interest expense of $23.5 million.
-- Record low total debt to total capital ratio of 24.9 percent.
Fiscal Year Highlights
-- Diluted earnings per share of $4.06, including net special
items of $0.03, up 4 percent.
-- Operating Revenue of $48.9 billion, up 7 percent.
-- Net income of $468.4 million, up 6 percent.
-- Cash flow from operations of $825 million.
"We are disappointed with our performance for the quarter and the
year, as a lack of price increases in the quarter and the loss of a
major customer in the June quarter significantly reduced earnings,"
said R. David Yost, AmerisourceBergen's Chief Executive Officer.
"However, our disciplined working capital management delivered
excellent cash generation and the strongest balance sheet in our
history. Net of two large customer losses in fiscal 2004, our Company
is building positive momentum, and we anticipate returning to our
long-term diluted earnings per share growth target by the September
quarter of 2005. We remain enthusiastic about our future, and see
excellent opportunities as we complete our new distribution network
and look to leverage the added pharmaceutical utilization of the
Medicare Modernization Act in 2006."
Discussion of Results
AmerisourceBergen's operating revenue was $12.1 billion in the
fourth quarter of fiscal 2004 compared to $11.7 billion for the same
period last year, a 4 percent increase. Bulk deliveries in the quarter
increased 37 percent to $1.2 billion.
Consolidated operating income in the quarter declined 26 percent
to $171.6 million. Lower operating expenses in both reported segments
were unable to offset the impact of fewer manufacturer drug price
increases in the pharmaceutical distribution segment and competitive
pressure in both the pharmaceutical distribution and PharMerica
segments.
Interest expense in the fourth quarter of fiscal 2004 was a record
low $23.5 million compared to $34.7 million in the prior year's fourth
quarter, a 32 percent decrease driven by significantly lower average
inventory levels in the quarter.
Diluted earnings per share for the fourth quarter of fiscal 2004
were $0.81, a decrease of 22 percent compared to the $1.04 in the
prior year's fourth quarter. Included in the fiscal 2004 fourth
quarter results is a $1.3 million charge, net of tax, related to
facility consolidation and employee severance costs. The previous
fiscal year's fourth quarter included a similar $1.5 million charge,
net of tax. The earnings per share impact of these items was a
decrease of $0.01 in each fiscal fourth quarter.
As of September 30, 2004 the Company had completed $145 million of
its $500 million share repurchase program, and as of today the program
is approximately 80 percent complete.
Operating revenue in fiscal 2004 increased 7 percent to $48.9
billion from $45.5 billion in the previous fiscal year. Bulk
deliveries to customer warehouses were up 5 percent to $4.3 billion.
Consolidated operating income for fiscal 2004 increased 1 percent
to $890.4 million as the reduction in operating expenses offset a
decline of 3 percent in gross profit.
For the fiscal year ended September 30, 2004, diluted earnings per
share were $4.06, a 4 percent increase over the $3.89 in the previous
fiscal year. The net impact of the gain from an antitrust litigation
settlement and charges related to the early retirement of debt and
facility consolidations and employee severance costs in fiscal 2004
increased earnings per share by $0.03. Charges related to early
retirement of debt and facility consolidations and employee severance
costs in fiscal year 2003 decreased earnings per share by $0.07.
Cash generated from operations in fiscal 2004 was $825 million
compared to $355 million last fiscal year. The Company's total debt to
total capital ratio was a record low 24.9 percent.
"With tough market and industry conditions, fiscal 2004 was below
our standard," said Kurt J. Hilzinger, AmerisourceBergen's President
and Chief Operating Officer. "As one would expect, significant
activities are underway to improve performance and better position us
for the years ahead.
"During fiscal 2004, we continued to expand our offerings in
pharmaceutical services. Our Specialty Group was a bright spot in the
year, with revenues exceeding $5.5 billion for the first time and
commercialization services continuing to expand. Our Technology Group
and Packaging Group gained traction with the introduction of a number
of new products and services.
"In the Drug Corporation, we continued to build our new
distribution center network. The program remains on schedule and on
budget. Our new Sacramento, California, and Columbus, Ohio, facilities
are fully operational. We anticipate having all of our six new
distribution centers completed in 2006, and now expect to have less
than 30 distribution centers in our final network configuration.
Coupled with our new warehouse management system, the new network will
drive additional cost savings and improved customer service in the
years ahead."
"In our PharMerica segment, we continue to face a difficult
competitive pricing environment with revenue down for the year due to
customer losses last fall. However, operational discipline and expense
reduction drove operating income up and operating margin was well to
over 7 percent for the year," 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 $225.7 million in the fourth 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 fourth quarter of fiscal 2004 increased
to $12.0 billion compared with $11.5 billion in the fourth quarter of
fiscal year 2003, a 4 percent increase.
In May, the Company stopped servicing the Department of Veterans
Affairs (VA) pharmaceutical distribution contract and in August
stopped supplying Advance PCS, a pharmacy benefits manager acquired by
a competitor that was not an AmerisourceBergen customer. The contract
losses reduced sales 10 percent in the quarter, lowering the segment's
overall revenue growth rate. Lower price appreciation and a strong
competitive environment, including the VA impact, also reduced gross
and operating margins in the quarter. The Company recorded a LIFO
credit of $27 million in the quarter, compared to a $14 million credit
in the same quarter of the prior year, due to the significantly fewer
price increases in the quarter.
Pharmaceutical Distribution customer mix in the fourth quarter of
fiscal 2004 was 56 percent institutional and 44 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. 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 capacity and new customers in the quarter. The Company's
Technology Group, which provides pharmacy automation and patient
safety solutions to healthcare providers, continued to build its order
backlog.
For the segment, gross profit as a percentage of operating revenue
in the fourth quarter of fiscal 2004 was 3.14 percent, compared to
3.86 percent in the same period in the prior fiscal year. Total
operating expenses as a percentage of operating revenue in the fourth
quarter of fiscal 2004 were 1.98 percent, an 11 basis point
improvement over the same quarter last year. Operating income was
$140.0 million in the fourth quarter of fiscal 2004, a 31 percent
decline from $204.0 million for the same quarter last year, and as a
percentage of operating revenue, was 1.17 percent, a 60 basis point
decrease from the fourth quarter of fiscal 2003.
PharMerica
PharMerica's operating revenue for the fourth quarter of fiscal
2004 was $390.4 million, compared with $408.4 million in the previous
year's fourth quarter reflecting the previously announced loss of
several customers last fall and a competitive pricing environment.
Operating income for the fourth quarter of fiscal 2004 was $33.8
million, up 17 percent from $28.9 million for the same quarter last
year due to a $26 million decline in operating expenses. Lower
expenses were in part the result of a $12 million reduction in sales
and use tax expense. Consistent with prior quarters, headcount
reductions and a reduction in bad debt expense also reduced expenses
in the segment.
Looking To Fiscal 2005
"Our expectations and assumptions for fiscal 2005 remain unchanged
from our announcement on October 5, 2004," said Yost. "We anticipate
operating revenue and operating income to be essentially flat for
fiscal 2005, and diluted earnings per share for fiscal 2005 of between
$4.20 and $4.30. Fiscal 2005 to fiscal 2004 comparisons are expected
to be weakest in the first part of the year, with the September
quarter of fiscal 2005 expected to post a diluted earnings per share
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 fiscal year."
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on November 2, 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: (612) 326-1011, 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. November 2, 2004 until 11:59 p.m. November 9, 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: 746975
(320) 365-3844 from outside the U.S., access code: 746975
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 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 Months Ended
September % of September % of
30, Operating 30, Operating %
2004 Revenue 2003 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $12,145,286 100.00% $11,733,254 100.00% 4%
Bulk deliveries
to customer
warehouses 1,243,388 906,329 37%
------------ ------------
Total revenue 13,388,674 12,639,583
Cost of goods
sold 12,894,843 12,055,417 7%
------------ ------------
Gross profit 493,831 4.07% 584,166 4.98% -15%
Operating
expenses:
Distribution,
selling and
administrative 299,539 2.47% 330,934 2.82% -9%
Depreciation and
amortization 20,524 0.17% 20,313 0.17% 1%
Facility
consolidations
and employee
severance 2,198 0.02% 2,426 0.02% -9%
------------ ------------
Operating income 171,570 1.41% 230,493 1.96% -26%
Other
(income)/loss (251) 0.00% 457 0.00% N/A
Interest expense 23,482 0.19% 34,726 0.30% -32%
------------ ------------
Income before
taxes 148,339 1.22% 195,310 1.66% -24%
Income taxes 56,350 0.46% 75,780 0.65% -26%
------------ ------------
Net income $91,989 0.76% $119,530 1.02% -23%
============ ============
Earnings per
share:
Basic $0.83 $1.07 -22%
Diluted $0.81 $1.04 -22%
Weighted average
common shares
outstanding:
Basic 110,962 111,503
Diluted 116,991 117,896
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Fiscal Fiscal
Year Ended Year Ended
September % of September % of
30, Operating 30, Operating %
2004 Revenue 2003 Revenue Change
--------------------- ------------ -----------------
Revenue:
Operating
revenue $48,870,615 100.00% $45,536,689 100.00% 7%
Bulk deliveries
to customer
warehouses 4,308,339 4,120,639 5%
------------ ------------
Total revenue 53,178,954 49,657,328
Cost of goods
sold 50,999,772 47,410,169 8%
------------ ------------
Gross profit 2,179,182 4.46% 2,247,159 4.93% -3%
Operating
expenses:
Distribution,
selling and
administrative 1,205,465 2.47% 1,284,132 2.82% -6%
Depreciation and
amortization 75,766 0.16% 70,991 0.16% 7%
Facility
consolidations
and employee
severance 7,517 0.02% 8,930 0.02% -16%
------------ ------------
Operating income 890,434 1.82% 883,106 1.94% 1%
Other
(income)/loss (6,236) -0.01% 8,015 0.02% N/A
Interest expense 112,705 0.23% 144,744 0.32% -22%
Loss on early
retirement of
debt 23,592 0.05% 4,220 0.01% 459%
------------ ------------
Income before
taxes 760,373 1.56% 726,127 1.59% 5%
Income taxes 291,983 0.60% 284,898 0.63% 2%
------------ ------------
Net income $468,390 0.96% $441,229 0.97% 6%
============ ============
Earnings per
share:
Basic $4.20 $4.03 4%
Diluted $4.06 $3.89 4%
Weighted average
common shares
outstanding:
Basic 111,617 109,513
Diluted 117,779 115,954
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
September 30, September 30,
2004 2003
------------- --------------
Current assets:
Cash and cash equivalents $871,343 $800,036
Accounts receivable, net 2,260,973 2,295,437
Merchandise inventories 5,135,830 5,733,837
Prepaid expenses and other 27,243 29,208
------------- --------------
Total current assets 8,295,389 8,858,518
Long-term assets 3,358,614 3,181,607
------------- --------------
Total assets $11,654,003 $12,040,125
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $4,947,037 $5,393,769
Current portion of long-term debt 181,360 61,430
Other current liabilities 875,511 800,903
------------- --------------
Total current liabilities 6,003,908 6,256,102
Long-term debt, less current portion 1,257,111 1,722,724
Other liabilities 53,939 55,982
Stockholders' equity 4,339,045 4,005,317
------------- --------------
Total liabilities and stockholders'
equity $11,654,003 $12,040,125
============= ==============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Fiscal Fiscal
Year Ended Year Ended
September 30, September 30,
2004 2003
------------- -------------
Operating Activities:
Net income $468,390 $441,229
Non-cash items 151,460 271,192
Changes in operating assets and
liabilities 205,231 (357,606)
------------- -------------
Net cash provided by operating activities 825,081 354,815
------------- -------------
Investing Activities:
Capital expenditures (189,278) (90,554)
Cost of acquired companies, net of cash
acquired, and other (68,546) (111,255)
Proceeds from sale-leaseback transaction 15,602 -
------------- -------------
Net cash used in investing activities (242,222) (201,809)
------------- -------------
Financing Activities:
Net long-term debt repayments (368,425) (38,989)
Exercise of stock options 15,151 42,564
Cash dividends on common stock (11,197) (10,995)
Treasury shares purchased (144,756) -
Other (2,325) (8,890)
------------- -------------
Net cash used in financing activities (511,552) (16,310)
------------- -------------
Increase in cash and cash equivalents 71,307 136,696
Cash and cash equivalents at beginning of
period 800,036 663,340
------------- -------------
Cash and cash equivalents at end of period $871,343 $800,036
============= =============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended September 30,
-----------------------------------
Operating Revenue 2004 2003 % Change
---------------------------------- ------------ ------------ ---------
Pharmaceutical Distribution $11,980,562 $11,536,052 4%
PharMerica 390,405 408,380 -4%
Intersegment eliminations (225,681) (211,178) -7%
------------ ------------
Operating revenue $12,145,286 $11,733,254 4%
============ ============
Three Months Ended September 30,
-----------------------------------
Operating Income 2004 2003 % Change
---------------------------------- ------------ ------------ ---------
Pharmaceutical Distribution $140,002 $204,025 -31%
PharMerica 33,766 28,894 17%
Facility consolidations and
employee severance (2,198) (2,426) 9%
------------ ------------
Operating income $171,570 $230,493 -26%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.14% 3.86%
Operating expenses 1.98% 2.09%
Operating income 1.17% 1.77%
PharMerica
Gross profit 30.02% 33.92%
Operating expenses 21.37% 26.84%
Operating income 8.65% 7.08%
AmerisourceBergen Corporation
Gross profit 4.07% 4.98%
Operating expenses 2.65% 3.01%
Operating income 1.41% 1.96%
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Fiscal Year Ended September 30,
-----------------------------------
Operating Revenue 2004 2003 % Change
---------------------------------- ------------ ------------ ---------
Pharmaceutical Distribution $48,171,178 $44,731,200 8%
PharMerica 1,575,255 1,608,203 -2%
Intersegment eliminations (875,818) (802,714) -9%
------------ ------------
Operating revenue $48,870,615 $45,536,689 7%
============ ============
Fiscal Year Ended September 30,
-----------------------------------
Operating Income 2004 2003 % Change
---------------------------------- ------------ ------------ ---------
Pharmaceutical Distribution $738,100 $788,193 -6%
PharMerica 121,846 103,843 17%
Facility consolidations and
employee severance (7,517) (8,930) 16%
Gain on litigation settlement 38,005 - N/A
------------ ------------
Operating income $890,434 $883,106 1%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.45% 3.85%
Operating expenses 1.92% 2.09%
Operating income 1.53% 1.76%
PharMerica
Gross profit 30.45% 32.69%
Operating expenses 22.72% 26.23%
Operating income 7.74% 6.46%
AmerisourceBergen Corporation
Gross profit 4.46% 4.93%
Operating expenses 2.64% 3.00%
Operating income 1.82% 1.94%
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 Fiscal Year Ended
September 30, September 30,
2004 2003 2004 2003
---------- --------- --------- ---------
Net income $91,989 $119,530 $468,390 $441,229
Interest expense - convertible
subordinated notes, net of
income taxes 2,551 2,518 10,141 9,997
---------- --------- --------- ---------
Income available to common
stockholders $94,540 $122,048 $478,531 $451,226
========== ========= ========= =========
Weighted average common shares
outstanding - basic 110,962 111,503 111,617 109,513
Effect of dilutive securities:
Options to purchase
common stock 365 729 498 777
Convertible subordinated
notes 5,664 5,664 5,664 5,664
---------- --------- --------- ---------
Weighted average common shares
outstanding - diluted 116,991 117,896 117,779 115,954
========== ========= ========= =========
Earnings per share:
Basic $0.83 $1.07 $4.20 $4.03
Diluted $0.81 $1.04 $4.06 $3.89
CONTACT: AmerisourceBergen Corporation, Valley Forge
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com
SOURCE: AmerisourceBergen Corporation