VALLEY FORGE, Pa.--(BUSINESS WIRE)--Jan. 25,
2005--AmerisourceBergen Corporation (NYSE:ABC) today reported results
for its fiscal first quarter ended December 31, 2004. The following
results are presented in accordance with U.S. generally accepted
accounting principles (GAAP).
Fiscal First Quarter Highlights
-- Diluted earnings per share from continuing operations of
$0.66, down 31 percent.
-- Operating Revenue of $12.2 billion, flat.
-- Cash flow from operations of $122.7 million.
-- Record low interest expense of $22.1 million.
-- Record low total debt to total capital ratio of 22.5 percent.
"We were disappointed with our financial performance for the
quarter," said R. David Yost, AmerisourceBergen's Chief Executive
Officer. "However, despite a tough transitional year, we are building
positive momentum. Our disciplined working capital management
delivered excellent cash generation and the strongest balance sheet in
our history. Operating revenue in pharmaceutical distribution was
flat, despite the loss of two large customers which accounted for 14
percent of operating revenue in the first quarter of fiscal 2004. We
remain enthusiastic about our future and see excellent opportunities
as we expand our specialty business, complete our new distribution
network, gain new generic opportunities and look to fully participate
in the growth generated by the Medicare Modernization Act in 2006."
Discussion of Results
AmerisourceBergen's operating revenue was $12.2 billion in the
first quarter of fiscal 2005 compared to $12.3 billion for the same
period last year. Bulk deliveries in the quarter increased 32 percent
to $1.4 billion.
Consolidated operating income in the quarter declined 35 percent
to $137.1 million primarily due to reduced buy-side profits in the
pharmaceutical distribution segment and continued competitive pressure
in the PharMerica segment. In addition, an $18.8 million gain from the
settlement of two drug manufacturer antitrust litigation cases, less a
$5.1 million charge for facility consolidations and employee
severance, had a net positive impact on consolidated operating income
in the fiscal 2005 first quarter. Operating income in the first
quarter of fiscal 2004 included a charge for facility consolidations
and employee severance of $1.6 million and benefited from a $17.5
million recovery of a debt from a former customer.
Interest expense in the first quarter of fiscal 2005 was a record
low $22.1 million compared to $31.5 million in the prior year's first
quarter, a 30 percent decrease driven by debt reduction. During the
quarter, AmerisourceBergen completed a new, five-year, $700 million
senior unsecured revolving credit facility, replacing a $1.0 billion
secured revolving credit facility. The Company also redeemed the
remaining $180 million term loan under its previous credit agreement.
In addition, AmerisourceBergen amended its $1.05 billion
securitization program for the Company's trade receivables. In both
refinancings the Company significantly improved terms. The early
retirement of the term loan resulted in a charge of $1.0 million in
the fiscal 2005 December quarter.
Diluted earnings per share from continuing operations were $0.66
in the first quarter of fiscal 2005, compared to $0.95 in the previous
fiscal year's first quarter.
Discontinued operations in the December quarter reflect the $6.4
million loss, net of tax, from the sale and operation of the Company's
Rita Ann cosmetics distribution business.
Cash generated from operations in the first quarter of FY2005 was
$122.7 million compared to cash usage of $454.4 million in the prior
year's first quarter. The Company's total debt to total capital ratio
was a record low 22.5 percent.
"With difficult market and industry conditions, both our segments
were challenged this quarter," said Kurt J. Hilzinger,
AmerisourceBergen's President and Chief Operating Officer.
"Significant activities are underway to improve performance and better
position us for the year ahead.
"During first quarter 2005, we continued to focus on expanded
offerings in the pharmaceutical supply channel. Our Specialty Group
was again a bright spot. Our market-leading oncology businesses had
another strong quarter and commercialization services continued to
expand. Our Technology and Packaging groups began a number of new
initiatives.
"In the Drug Corporation, we continued to build and gain benefits
from our new distribution center network. The program remains on
schedule and on budget. Our new Sacramento, California, and Columbus,
Ohio, facilities are fully operational and the Dallas, Texas, facility
opens this spring. Coupled with our new warehouse management system,
the new network will drive additional cost savings and improved
customer service in the future."
"In our PharMerica segment, we continue to face a difficult
competitive environment. Continued pricing and reimbursement pressure
were not offset by a significant reduction in operating expenses as
operating income in the quarter was down. However, our new
customer-facing technology is winning new customers in our long-term
care business, and we continue our more than $30 million of technology
investments in the segment," said Hilzinger.
Segment Review
AmerisourceBergen operates in two segments: Pharmaceutical
Distribution (which includes the operations of AmerisourceBergen Drug
Corporation, Specialty, Packaging, and Technology groups) and
PharMerica (which includes the long-term care pharmacy and workers'
compensation businesses). Intersegment sales of $225.3 million in the
first quarter of fiscal 2005 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 of $12.0 billion in the first quarter of fiscal
2005 was essentially flat compared to the same quarter in the previous
fiscal year.
Strong, above-market growth by the Specialty Group and at-market
growth within the Drug Corporation offset the impact of the prior
year's loss of the Department of Veterans Affairs (VA) and AdvancePCS
contracts. The two contract losses accounted for 14 percent of segment
operating revenue in the first quarter of fiscal 2004. Lower than
anticipated pharmaceutical price increases, fewer product deals from
manufacturers, reduced alternate source purchases and a strong
competitive environment, including the VA impact, also reduced gross
profit and operating margins in the quarter.
Pharmaceutical Distribution customer mix in the first quarter of
fiscal 2005 was 55 percent institutional and 45 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 with annualized operating revenue of more than $5.5
billion. 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 new product packaging contracts to its growing pipeline and is
delivering new compliance packaging solutions to the marketplace. The
Company's Technology Group, which provides pharmacy automation and
patient safety solutions to healthcare providers, continued to build
its order backlog.
PharMerica
PharMerica's operating revenue for the first quarter of fiscal
2005 was $385.6 million, compared with $402.4 million in the previous
year's first quarter, down 4 percent. Operating income for the first
quarter of fiscal 2005 was $23.5 million, down 17 percent from $28.5
million for the same quarter last year. Lower operating revenue and
operating income reflected the competitive environment in both the
long-term care and workers' compensation businesses.
Looking Ahead
"Our expectations and assumptions for fiscal 2005 remain
unchanged," said Yost. "We anticipate operating revenue and operating
income to be essentially flat for the remainder of fiscal 2005, and
diluted earnings per share from continuing operations for fiscal 2005
of between $4.00 and $4.10. The September quarter is expected to post
a diluted earnings per share from continuing operations 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
remainder of the fiscal year, Specialty Group growing with the market,
the impact of completing our $500 million share repurchase program and
the expectation that the Board of Directors will approve an additional
$300 million share repurchase to buy back the shares recently issued
in connection with the convertible debt redemption."
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on January 25, 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) 288-0329, 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
2:30 p.m. January 25, 2005 until 11:59 p.m. February 1, 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: 765507
(320) 365-3844 from outside the U.S., access code: 765507
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 and other risk 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.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Three Three
Months Ended % of Months Ended % of
December 31, Operating December 31, Operating %
2004 Revenue 2003 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $12,204,315 100.00% $12,252,737 100.00% 0%
Bulk deliveries
to customer
warehouses 1,434,727 1,089,434 32%
------------ ------------
Total revenue 13,639,042 13,342,171 2%
Cost of goods
sold 13,178,143 12,817,121 3%
------------ ------------
Gross profit 460,899 3.78% 525,050 4.29% -12%
Operating
expenses:
Distribution,
selling and
administrative 297,551 2.44% 295,383 2.41% 1%
Depreciation
and
amortization 21,154 0.17% 16,716 0.14% 27%
Facility
consolidations
and employee
severance 5,133 0.04% 1,553 0.01% 231%
------------ ------------
Operating income 137,061 1.12% 211,398 1.73% -35%
Other (income)
loss (1,058) -0.01% 2,587 0.02% N/A
Interest expense 22,076 0.18% 31,507 0.26% -30%
Loss on early
retirement of
debt 1,015 0.01% -
------------ ------------
Income from
continuing
operations
before taxes 115,028 0.94% 177,304 1.45% -35%
Income taxes 44,171 0.36% 68,263 0.56% -35%
------------ ------------
Income from
continuing
operations 70,857 0.58% 109,041 0.89% -35%
Loss from
discontinued
operations, net
of tax benefit (6,408) (567)
------------ ------------
Net income $64,449 0.53% $108,474 0.89% -41%
============ ============
Earnings per
share:
Basic
Continuing
operations $0.67 $0.98 -32%
Discontinued
operations (0.06) (0.01)
------------ ------------
Net income $0.61 $0.97 -37%
============ ============
Diluted
Continuing
operations $0.66 $0.95 -31%
Discontinued
operations (0.06) (0.01)
------------ ------------
Net income $0.60 $0.94 -36%
============ ============
Weighted average
common shares
outstanding:
Basic 105,561 111,709
Diluted 111,607 118,029
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31, September 30,
2004 2004
------------- -------------
Current assets:
Cash and cash equivalents $529,539 $871,343
Accounts receivable, net 2,210,474 2,260,973
Merchandise inventories 5,185,239 5,135,830
Prepaid expenses and other 22,170 27,243
------------- -------------
Total current assets 7,947,422 8,295,389
Long-term assets 3,362,848 3,358,614
------------- -------------
Total assets $11,310,270 $11,654,003
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,017,561 $4,947,037
Current portion of long-term debt 101,395 281,360
Other current liabilities 796,769 875,511
------------- -------------
Total current liabilities 5,915,725 6,103,908
Long-term debt, less current portion 1,123,966 1,157,111
Other liabilities 58,155 53,939
Stockholders' equity 4,212,424 4,339,045
------------- -------------
Total liabilities and stockholders'
equity $11,310,270 $11,654,003
============= =============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Three
Months Ended Months Ended
December 31, December 31,
2004 2003
------------ ------------
Operating Activities:
Net income $64,449 $108,474
Non-cash items 51,686 29,811
Changes in operating assets and
liabilities 6,598 (592,683)
------------ ------------
Net cash provided by (used in) operating
activities 122,733 (454,398)
------------ ------------
Investing Activities:
Capital expenditures (79,182) (51,516)
Proceeds from sale-leaseback transactions 20,732 -
Proceeds from sale of discontinued
operations 3,560 -
Other (763) (123)
------------ ------------
Net cash used in investing activities (55,653) (51,639)
------------ ------------
Financing Activities:
Long-term debt repayments (180,000) (15,000)
Exercise of stock options 30,084 6,577
Cash dividends on common stock (2,628) (2,802)
Purchase of treasury stock (253,191) -
Deferred financing costs and other (3,149) 451
------------ ------------
Net cash used in financing activities (408,884) (10,774)
------------ ------------
Decrease in cash and cash equivalents (341,804) (516,811)
Cash and cash equivalents at beginning of
period 871,343 800,036
------------ ------------
Cash and cash equivalents at end of period $529,539 $283,225
============ ============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended December 31,
-----------------------------------
Operating Revenue 2004 2003 % Change
--------------------------------- -----------------------------------
Pharmaceutical Distribution $12,043,974 $12,077,582 0%
PharMerica 385,621 402,440 -4%
Intersegment eliminations (225,280) (227,285) 1%
------------ ------------
Operating revenue $12,204,315 $12,252,737 0%
============ ============
Three Months Ended December 31,
-----------------------------------
Operating Income 2004 2003 % Change
--------------------------------- -----------------------------------
Pharmaceutical Distribution $99,847 $184,458 -46%
PharMerica 23,522 28,493 -17%
Facility consolidations and
employee severance (5,133) (1,553) -231%
Gain on litigation settlement 18,825 - N/A
------------ ------------
Operating income $137,061 $211,398 -35%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 2.78% 3.32%
Operating expenses 1.95% 1.79%
Operating income 0.83% 1.53%
PharMerica
Gross profit 27.69% 30.96%
Operating expenses 21.59% 23.88%
Operating income 6.10% 7.08%
AmerisourceBergen Corporation
Gross profit 3.78% 4.29%
Operating expenses 2.65% 2.56%
Operating income 1.12% 1.73%
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 from continuing operations available to
common stockholders.
Three Months Ended
December 31,
2004 2003
--------- ---------
Income from continuing operations $70,857 $109,041
Interest expense - convertible subordinated notes,
net of income taxes 2,511 2,530
--------- ---------
Income from continuing operations available to
common stockholders $73,368 $111,571
========= =========
Weighted average common shares outstanding - basic 105,561 111,709
Effect of dilutive securities:
Options to purchase common stock 423 656
Convertible subordinated notes 5,623 5,664
--------- ---------
Weighted average common shares outstanding -
diluted 111,607 118,029
========= =========
Earnings per share:
Basic
Continuing operations $0.67 $0.98
Discontinued operations (0.06) (0.01)
--------- ---------
Net income $0.61 $0.97
========= =========
Diluted
Continuing operations $0.66 $0.95
Discontinued operations (0.06) (0.01)
--------- ---------
Net income $0.60 $0.94
========= =========
CONTACT: AmerisourceBergen Corporation
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com
SOURCE: AmerisourceBergen Corporation