VALLEY FORGE, Pa.--(BUSINESS WIRE)--March 28, 2005--
Cash Flow from Operations Expected to Increase to About $1 Billion in
FY 2005
AmerisourceBergen Corporation (NYSE:ABC), a leading pharmaceutical
services company, today lowered its fiscal year 2005 estimate for
diluted earnings per share from continuing operations to $3.10 to
$3.50 from $4.00 to $4.10 due primarily to reduced buy-side profits
resulting from lower than anticipated inventory levels associated with
its ongoing transition to fee-for-service (FFS) contracts with branded
pharmaceutical manufacturers. The Company expects diluted earnings per
share from continuing operations in the March quarter to be between
$0.75 and $0.85.
With certain manufacturers restricting inventory availability
under inventory management agreements and in anticipation of FFS
contracts, AmerisourceBergen expects inventory during the March
through September fiscal 2005 quarters to be in the low to mid $4
billion range, down significantly from the $5.2 billion at the end of
the December fiscal 2005 quarter. The Company continues to expect that
the transition to FFS will provide more stable and predictable
operating margins with reduced levels of working capital and it is
making solid progress toward having most of its branded pharmaceutical
revenues under some form of FFS contract by the end of calendar 2005.
The inventory decline ahead of the completion of the FFS contracts has
resulted in a significantly lower forecast in operating earnings for
the March quarter and the fiscal year, but provides a significant
increase in expected cash from operations due to lower working capital
requirements.
Cash provided from operations for fiscal 2005 is expected to
increase to between $900 million and $1 billion from the previous
estimate of $375 million to $475 million. Most of the increase in cash
is expected in the March quarter. Capital expenditure estimates for
fiscal year 2005 remain unchanged at $175 million to $200 million. The
Company continues to expect operating revenue growth in fiscal year
2005 to be flat at about $49 billion.
"We are very disappointed in our earnings performance during this
tough transition year," said R. David Yost, AmerisourceBergen's Chief
Executive Officer. "However, the movement to FFS metrics has increased
our cash provided from operations, and I can assure investors that we
will continue to use this additional capital to benefit our
shareholders through efforts such as our aggressive stock purchase
programs. During the March quarter, we completed our $500 million
share purchase program, which has resulted in the acquisition of 9.3
million shares. Currently, we have 5.3 million shares remaining under
our 5.7 million-share purchase program. Further, investors can expect
that the anticipated $525 million in additional cash in fiscal 2005
will be deployed prudently.
"As difficult as this fiscal year is, I remain optimistic about
fiscal 2006 and beyond. The approximately $20 billion in branded
products that are scheduled to convert to generics next year combined
with the roll out of our enhanced generic program in April 2005 should
improve future margins. Completion of most FFS agreements by the
beginning of calendar year 2006 should stabilize our buy-side margin.
The implementation of the Medicare Modernization Act in 2006 is
expected to add incremental sales beginning in January 2006. The
continued contribution of our Optimiz(TM) program and the initiation
of our Transform program in the pharmaceutical distribution segment
are expected to lower our cost structure and improve our profitability
from healthcare providers.
"Though we have not yet begun our detailed planning process for
the next fiscal year, we currently estimate earnings per share from
continuing operations in fiscal 2006 to be between $3.60 and $4.40.
The bottom of the range reflects pharmaceutical market growth in the
high single digits and the full-year impact of fiscal 2005 capital
deployment initiatives. The top of the range depends on our ability to
improve our pharmaceutical distribution operating margin, expected to
be in the 100 to 110 basis points range in fiscal 2005, by 30 basis
points through margin enhancement activities including those mentioned
above."
Conference Call
The Company will host a conference call to discuss its revised
guidance at 10:00 a.m. Eastern Standard Time on March 28, 2005.
Participating in the conference call will be: R. David Yost, Chief
Executive Officer; Kurt J. Hilzinger, President and Chief Operating
Officer; and Michael D. DiCandilo, Senior Vice President and Chief
Financial Officer.
To access the live conference call via telephone:
Dial in: (612) 326-1019, no access code required.
To access the live webcast:
Go to the Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.
A replay of the telephone call and webcast will be available from
12:15 p.m. March 28, 2005 until 11:59 p.m. April 4, 2005. The Webcast
replay will be available for 30 days.
To access the replay via telephone:
Dial in: (800) 475-6701 from within the U.S., access code: 776216
(320) 365-3844 from outside the U.S., access code: 776216
To access the archived webcast:
Go to the Quarterly Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.
About AmerisourceBergen
AmerisourceBergen(R) (NYSE:ABC) is one of the largest
pharmaceutical services companies in the United States. Servicing both
pharmaceutical manufacturers and healthcare providers in the
pharmaceutical supply channel, the Company provides drug distribution
and related services designed to reduce costs and improve patient
outcomes. AmerisourceBergen's service solutions range from pharmacy
automation, bedside medication safety systems, and pharmaceutical
packaging to pharmacy services for skilled nursing and assisted living
facilities, reimbursement and pharmaceutical consulting services, and
physician education. With more than $48 billion in operating revenue,
AmerisourceBergen is headquartered in Valley Forge, PA, and employs
more than 14,000 people. AmerisourceBergen is ranked #22 on the
Fortune 500 list. For more information, go to
www.amerisourcebergen.com.
FORWARD-LOOKING STATEMENTS
This news release may contain certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements
are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained in the forward-looking
statements. Forward-looking statements may include statements
addressing AmerisourceBergen's future financial and operating results.
The following factors, among others, could cause actual results to
differ materially from those described in any forward-looking
statements: competitive pressures; the loss of one or more key
customer relationships; customer insolvencies; changes in customer
mix; changes in pharmaceutical manufacturers' pricing and distribution
policies or practices; regulatory changes; changes in U.S. government
policies (including changes in government policies pertaining to drug
reimbursement); changes in market interest rates; and other economic,
business, competitive, regulatory and/or operational factors affecting
the business of AmerisourceBergen generally.
More detailed information about these and other factors is set
forth in AmerisourceBergen's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for fiscal 2004.
AmerisourceBergen is under no obligation to (and expressly
disclaims any such obligation to) update or alter any forward looking
statements whether as a result of new information, future events or
otherwise.
CONTACT: AmerisourceBergen Corporation
Michael N. Kilpatric, 610-727-7118
[email protected]
SOURCE: AmerisourceBergen Corporation