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