VALLEY FORGE, Pa., Nov 03, 2005 (BUSINESS WIRE) -- AmerisourceBergen Corporation (NYSE:ABC) today reported
results for its fiscal fourth quarter and year ended September 30,
2005. The following results are presented in accordance with U.S.
generally accepted accounting principles (GAAP).
Fiscal Fourth Quarter Highlights
-- Diluted earnings per share from continuing operations of
$0.20, including special charges of $0.75 related primarily to
early debt retirement.
-- Record operating revenue of $13.0 billion, up 7 percent.
-- Record low interest expense of $9.4 million.
-- Low total debt to total capital ratio of 18.2 percent.
Fiscal Year Highlights
-- Diluted earnings per share from continuing operations of $2.73
before the cumulative effect of an accounting change,
including net special charges of $0.60.
-- Record operating revenue of $50.0 billion, up 2 percent.
-- Record cash flow from operations of $1.53 billion.
"In the fiscal fourth quarter, excluding special charges, we
delivered strong operating performance that represents positive
momentum as we exit a challenging year and begin a promising fiscal
2006," said R. David Yost, AmerisourceBergen's Chief Executive
Officer. "Our disciplined working capital management and timely
refinancing has produced the strongest balance sheet in our history.
The transition to a fee-for-service model with our branded
pharmaceutical manufacturers is largely complete. We are enthusiastic
about our future with increasing business opportunities including our
recent entry into the Canadian market, completion of our new
distribution network, continued expansion of generic usage,
continuation of our specialty business's strong growth and our ability
to leverage over time the added pharmaceutical utilization of the
Medicare Modernization Act which begins in January 2006."
Discussion of Results
AmerisourceBergen's operating revenue was a record $13.0 billion
in the fourth quarter of fiscal 2005 compared to $12.1 billion for the
same period last year, a 7 percent increase. Bulk deliveries in the
quarter decreased 23 percent to $953.5 million.
Consolidated operating income in the September quarter declined 11
percent to $155.0 million compared to the prior year's fourth quarter.
A $12.0 million charge for facility consolidation and employee
severance, most of which was for the outsourcing of information
technology activities, negatively impacted operating income. An
anticipated gain from an antitrust settlement was not received until
October and will benefit operating income by approximately $15 million
in the first quarter of fiscal 2006, although the gain is expected to
be offset by facility consolidation and employee severance costs. In
the September quarter of 2004, the facility consolidation and employee
severance charge was $2.2 million.
During the fourth fiscal quarter, the Company successfully
tendered for and retired its $500 million, 8.125 percent bonds due
2008 and its $300 million, 7.25 percent bonds due 2012, replacing them
with two new bonds, a $400 million, seven-year bond with an effective
rate of 5.71 percent and a 10-year, $500 million bond with an
effective rate of 5.94 percent.
Interest expense in the fourth quarter of fiscal 2005 was a record
low $9.4 million compared to $23.5 million in the prior year's fourth
quarter, a 60 percent decrease driven by net debt reduction.
The effective tax rate for the fourth quarter of fiscal 2005 was
38.3 percent compared to 38.0 percent in the same quarter of the
previous year. The tax rate applied to the early retirement of debt in
fiscal 2005's fourth quarter was 36.1 percent as its costs are not
deductible in certain states.
Diluted earnings per share from continuing operations for the
fourth quarter of fiscal 2005 were $0.20 compared to $0.82 in the
prior year's fourth quarter. Included in the fiscal 2005 fourth
quarter results is a charge of $0.68 per diluted share, net of tax,
related to the retirement of debt and a $0.07 per diluted share, net
of tax, charge for facility consolidation and employee severance
costs. The previous fiscal year's fourth quarter included a facility
consolidation and employee severance charge of $0.01 per diluted
share, net of tax.
Weighted average diluted shares outstanding for the fourth quarter
of fiscal year 2005 were 104.8 million, a reduction from 117.0 million
in the same period last year primarily due to the Company's share
repurchase programs during the year.
Operating revenue in fiscal year 2005 increased 2 percent to a
record $50.0 billion from $48.8 billion in the previous fiscal year.
Bulk deliveries to customer warehouses were up 6 percent to $4.6
billion.
Consolidated operating income for fiscal 2005 decreased 29 percent
to $636.9 million as gross profit declined and operating expenses
increased for the fiscal year.
For the fiscal year ended September 30, 2005, diluted earnings per
share from continuing operations were $2.73 before the cumulative
effect of a change in accounting and included a net charge of $0.60,
net of tax, for special items, which were primarily the costs related
to the early retirement of debt, facility consolidations and employee
severance and the gains from litigation settlements. Diluted earnings
per share from continuing operations in fiscal 2004 were $4.12, which
included a net benefit of $0.04 related to gains from litigation
settlements, net the costs related to the early retirement of debt,
facility consolidations and employee severance.
Cash generated from operations in fiscal 2005 was $1.53 billion
compared to $825 million last fiscal year. The Company's total debt to
total capital ratio was a low 18.2 percent.
"In the fourth quarter of fiscal 2005, the strong operating
performance in pharmaceutical distribution overcame performance in
PharMerica that was below our expectations," said Kurt J. Hilzinger,
AmerisourceBergen's President and Chief Operating Officer.
"AmerisourceBergen Specialty Group continued to be a growth driver
with annual operating revenue of more than $7 billion. Led by its
market-leading oncology business, with strong performances in the
plasma and reimbursement consulting businesses, the Group delivered
outstanding growth in the quarter.
"In the Drug Corporation, our customer-focused Transform program
continued to gain momentum in the quarter, and our generics program
also was a significant contributor. Our Optimiz(R) program, which is
designed to lower our operating costs, continued on schedule and on
budget. In fiscal 2005, we opened new state-of-the-art facilities in
Columbus, Dallas, and Chicago, and we consolidated six distribution
centers for a total of 32 in the U.S. at the end of the fiscal year.
In fiscal 2006, we opened our new Kansas City distribution center in
October, 2005 and expect to open the final of our six new facilities
in Bethlehem, Pennsylvania, in the spring. We expect to consolidate
six facilities in fiscal 2006, bringing the number of distribution
centers in our U.S. network to 28, and expect the total number of U.S.
distribution centers to be in the mid-twenties by the end of fiscal
2007."
"In the fourth quarter, our PharMerica segment continued to face a
difficult and competitive long-term care environment, especially
around market pricing and government reimbursement. Although the
market is beginning to present some opportunities with completion of
the merger between the two other national long-term care institutional
pharmacy companies, the challenges remaining in the move to Medicare
Part D will make 2006 a transition year for PharMerica. Our
expectation in fiscal 2006 is for mid single-digit revenue growth and
slightly lower operating margins," 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 $219.5 million in the fourth 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 in the fourth quarter of fiscal 2005 increased
to a record $12.8 billion compared with $12.0 billion in the fourth
quarter of fiscal year 2004, a 7 percent increase.
Pharmaceutical Distribution customer mix in the fourth quarter of
fiscal 2005 was 59 percent institutional and 41 percent retail,
reflecting strong growth in the Specialty Group.
For the segment, gross profit as a percentage of operating revenue
in the fourth quarter of fiscal 2005 was 3.20 percent, compared to
3.12 percent in the same period in the prior fiscal year. Operating
income as a percentage of operating revenue was 1.18 percent in the
September quarter of fiscal 2005 compared with 1.20 percent in the
prior fiscal year's September quarter. The Company recorded a LIFO
credit of $15.0 million in the quarter, compared to a $27.4 million
credit in the same quarter of the prior year, due to the significant
reduction in inventory during the year. The positive impact of the
credit was offset by losses from hurricanes Katrina and Rita as well
as higher than average bad debt expense.
PharMerica
PharMerica's operating revenue for the fourth quarter of fiscal
2005 was $401.6 million, a 3 percent increase over the previous year's
fourth quarter. Operating income for the same period was $15.9
million, compared to $33.8 million for the same quarter last year,
which was favorably impacted by a $12 million reduction in sales and
use tax expense.
Looking To Fiscal 2006
"For fiscal 2006, we expect diluted earnings per share to be
between $3.95 and $4.25 and operating revenue growth to be in the
range of 6 percent to 8 percent," said Yost. "Our earnings per share
expectations include the impact of a $0.09 charge for equity
compensation expense and the anticipation that litigation recovery
gains will be offset by facility consolidation and employee severance
expense. In the pharmaceutical distribution segment, we expect
operating margins for fiscal 2006 to be in the range of 115 to 125
basis points. Cash flow from operations in fiscal 2006 is expected to
be in the range of $500 million to $600 million."
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on November 3, 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, Executive 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 4, 2005 until 11:59 p.m. November 10, 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: 799257
(320) 365-3844 from outside the U.S., access code: 799257
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
and pharmaceutical packaging to pharmacy services for skilled nursing
and assisted living facilities, reimbursement and pharmaceutical
consulting services, and physician education. With more than $54
billion in annual revenue, AmerisourceBergen is headquartered in
Valley Forge, PA, and employs more than 14,000 people.
AmerisourceBergen is ranked #23 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
and the benefits, efficiencies and savings to be derived from the
Company's integration plans to consolidate its distribution network.
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 or supplier relationships; customer defaults or insolvencies;
changes in customer mix; supplier defaults or insolvencies; changes in
pharmaceutical manufacturers' pricing and distribution policies or
practices; adverse resolution of any contract or other disputes with
customers (including departments and agencies of the U.S. Government)
or suppliers; regulatory changes; changes in U.S. government policies
(including reimbursement changes arising from the Medicare
Modernization Act); market interest rates; operational or control
issues arising from AmerisourceBergen's outsourcing of information
technology activities; success of the Pharmaceutical Distribution
segment's ability to transition its business model to fee-for-service;
success of integration, restructuring or systems initiatives;
fluctuations in the U.S. dollar - Canadian dollar exchange rate;
economic, business, competitive and/or regulatory developments in
Canada; acquisition of businesses that do not perform as we expect or
that are difficult for us to integrate or control; and other economic,
business, competitive, legal, 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
September Operating September Operating %
30, 2005 Revenue 30, 2004 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $12,964,857 100.00% $12,130,843 100.00% 7%
Bulk deliveries
to customer
warehouses 953,496 1,243,388 -23%
------------ ------------
Total revenue 13,918,353 13,374,231 4%
Cost of goods
sold 13,396,579 12,883,536 4%
------------ ------------
Gross profit 521,774 4.02% 490,695 4.05% 6%
Operating
expenses:
Distribution,
selling and
administrative 333,874 2.58% 294,046 2.42% 14%
Depreciation
and
amortization 20,896 0.16% 19,812 0.16% 5%
Facility
consolidations,
employee
severance, and
other 12,006 0.09% 2,198 0.02% 446%
------------ ------------
Operating income 154,998 1.20% 174,639 1.44% -11%
Other loss
(income) 160 0.00% (251) 0.00% N/A
Interest expense,
net 9,355 0.07% 23,482 0.19% -60%
Loss on early
retirement of
debt 110,873 0.86% - 0.00% N/A
------------ ------------
Income from
continuing
operations
before taxes 34,610 0.27% 151,408 1.25% -77%
Income taxes 13,268 0.10% 57,521 0.47% -77%
------------ ------------
Income from
continuing
operations 21,342 0.16% 93,887 0.77% -77%
Loss from
discontinued
operations, net
of taxes 1,842 1,898
------------ ------------
Net income $19,500 0.15% $91,989 0.76% -79%
============ ============
Earnings per
share:
Basic
Continuing
operations $0.21 $0.85 -75%
Discontinued
operations (0.02) (0.02)
------------ ------------
Net income $0.19 $0.83 -77%
============ ============
Diluted
Continuing
operations $0.20 $0.82 -76%
Discontinued
operations (0.02) (0.02)
Rounding 0.01 0.01
------------ ------------
Net income $0.19 $0.81 -77%
============ ============
Weighted average
common shares
outstanding:
Basic 103,753 110,962
Diluted 104,848 116,991
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Fiscal Fiscal
Year Ended % of Year Ended % of
September Operating September Operating %
30, 2005 Revenue 30, 2004 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $50,012,598 100.00% $48,812,452 100.00% 2%
Bulk deliveries
to customer
warehouses 4,564,723 4,308,339 6%
------------ ------------
Total revenue 54,577,321 53,120,791 3%
Cost of goods
sold 52,597,137 50,954,361 3%
------------ ------------
Gross profit 1,980,184 3.96% 2,166,430 4.44% -9%
Operating
expenses:
Distribution,
selling and
administrative 1,234,057 2.47% 1,184,529 2.43% 4%
Depreciation
and
amortization 81,199 0.16% 73,425 0.15% 11%
Facility
consolidations,
employee
severance, and
other 22,723 0.05% 7,517 0.02% 202%
Impairment
charge 5,259 0.01% - 0.00% N/A
------------ ------------
Operating income 636,946 1.27% 900,959 1.85% -29%
Other income (990) 0.00% (6,236) -0.01% N/A
Interest expense,
net 57,223 0.11% 112,704 0.23% -49%
Loss on early
retirement of
debt 111,888 0.22% 23,592 0.05% N/A
------------ ------------
Income before
taxes,
discontinued
operations, and
cumulative
effect of change
in accounting 468,825 0.94% 770,899 1.58% -39%
Income taxes 176,903 0.35% 296,025 0.61% -40%
------------ ------------
Income from
continuing
operations
before
cumulative
effect of change
in accounting 291,922 0.58% 474,874 0.97% -39%
Loss from
discontinued
operations, net
of taxes 17,105 6,484
Cumulative effect
of change in
accounting, net
of taxes 10,172 -
------------ ------------
Net income $264,645 0.53% $468,390 0.96% -43%
============ ============
Earnings per
share:
Basic
Continuing
operations $2.76 $4.25 -35%
Discontinued
operations (0.16) (0.06)
Cumulative
effect of
change in
accounting (0.10) -
Rounding - 0.01
------------ ------------
Net income $2.50 $4.20 -40%
============ ============
Diluted
Continuing
operations $2.73 $4.12 -34%
Discontinued
operations (0.16) (0.06)
Cumulative
effect of
change in
accounting (0.09) -
------------ ------------
Net income $2.48 $4.06 -39%
============ ============
Weighted average
common shares
outstanding:
Basic 105,667 111,617
Diluted 107,770 117,779
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
September 30, September 30,
2005 2004
------------- -------------
Current assets:
Cash and cash equivalents $1,315,683 $871,343
Accounts receivable, net 2,640,646 2,260,973
Merchandise inventories 4,003,690 5,135,830
Prepaid expenses and other 27,673 27,243
------------- -------------
Total current assets 7,987,692 8,295,389
Long-term assets 3,393,482 3,358,614
------------- -------------
Total assets $11,381,174 $11,654,003
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,292,253 $4,947,037
Current portion of long-term debt 1,232 281,360
Other current liabilities 758,611 875,511
------------- -------------
Total current liabilities 6,052,096 6,103,908
Long-term debt, less current portion 951,479 1,157,111
Other liabilities 97,242 53,939
Stockholders' equity 4,280,357 4,339,045
------------- -------------
Total liabilities and stockholders'
equity $11,381,174 $11,654,003
============= =============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Fiscal Fiscal
Year Ended Year Ended
September 30, September 30,
2005 2004
------------- -------------
Operating Activities:
Net income $264,645 $468,390
Changes in operating assets and
liabilities 976,688 205,231
Adjustments to reconcile net income to
net cash provided by operating
activities 285,305 151,460
------------- -------------
Net cash provided by operating activities 1,526,638 825,081
------------- -------------
Investing Activities:
Capital expenditures (203,376) (189,278)
Cost of acquired companies, net of cash
acquired and other (4,404) (68,882)
Proceeds from sale-leaseback
transactions 36,696 15,602
Proceeds from sales of discontinued
operations 14,560 -
Proceeds from sales of property and
equipment 4,219 336
------------- -------------
Net cash used in investing activities (152,305) (242,222)
------------- -------------
Financing Activities:
Long-term debt borrowings 895,500 -
Long-term debt repayments (1,182,339) (368,425)
Exercise of stock options 174,063 15,151
Cash dividends on common stock (10,598) (11,197)
Purchases of common stock (786,192) (144,756)
Deferred financing costs and other (20,427) (2,325)
------------- -------------
Net cash used in financing activities (929,993) (511,552)
------------- -------------
Increase in cash and cash equivalents 444,340 71,307
Cash and cash equivalents at beginning of
period 871,343 800,036
------------- -------------
Cash and cash equivalents at end of
period $1,315,683 $871,343
============= =============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended September 30,
-----------------------------------
Operating Revenue 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $12,782,748 $11,966,119 7%
PharMerica 401,627 390,405 3%
Intersegment eliminations (219,518) (225,681) 3%
------------ ------------
Operating revenue $12,964,857 $12,130,843 7%
============ ============
Three Months Ended September 30,
-----------------------------------
Operating Income 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $151,151 $143,071 6%
PharMerica 15,853 33,766 -53%
Facility consolidations, employee
severance, and other (12,006) (2,198) -446%
------------ ------------
Operating income $154,998 $174,639 -11%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.20% 3.12%
Operating expenses 2.02% 1.93%
Operating income 1.18% 1.20%
PharMerica
Gross profit 27.98% 30.02%
Operating expenses 24.03% 21.37%
Operating income 3.95% 8.65%
AmerisourceBergen Corporation
Gross profit 4.02% 4.05%
Operating expenses 2.83% 2.61%
Operating income 1.20% 1.44%
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Fiscal Year Ended September 30,
-----------------------------------
Operating Revenue 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $49,319,371 $48,113,015 3%
PharMerica 1,571,369 1,575,255 0%
Intersegment eliminations (878,142) (875,818) 0%
------------ ------------
Operating revenue $50,012,598 $48,812,452 2%
============ ============
Fiscal Year Ended September 30,
-----------------------------------
Operating Income 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $532,887 $748,625 -29%
PharMerica 91,947 121,846 -25%
Facility consolidations, employee
severance, and other (22,723) (7,517) -202%
Gain on litigation settlements 40,094 38,005 5%
Impairment charge (5,259) - N/A
------------ ------------
Operating income $636,946 $900,959 -29%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.03% 3.43%
Operating expenses 1.95% 1.87%
Operating income 1.08% 1.56%
PharMerica
Gross profit 28.40% 30.45%
Operating expenses 22.54% 22.72%
Operating income 5.85% 7.74%
AmerisourceBergen Corporation
Gross profit 3.96% 4.44%
Operating expenses 2.69% 2.59%
Operating income 1.27% 1.85%
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 Fiscal Year Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
Income from continuing
operations, before cumulative
effect of change in
accounting $21,342 $93,887 $291,922 $474,874
Interest expense - convertible
subordinated notes, net of
income taxes - 2,551 2,539 10,141
--------- --------- --------- ---------
Income from continuing
operations available to
common stockholders $21,342 $96,438 $294,461 $485,015
========= ========= ========= =========
Weighted average common shares
outstanding - basic 103,753 110,962 105,667 111,617
Effect of dilutive securities:
Options to purchase common
stock 1,095 365 658 498
Convertible subordinated
notes - 5,664 1,445 5,664
--------- --------- --------- ---------
Weighted average common shares
outstanding - diluted 104,848 116,991 107,770 117,779
========= ========= ========= =========
Earnings per share:
Basic
Continuing operations $0.21 $0.85 $2.76 $4.25
Discontinued operations (0.02) (0.02) (0.16) (0.06)
Cumulative effect of
change in accounting - - (0.10) -
Rounding - - - 0.01
--------- --------- --------- ---------
Net income $0.19 $0.83 $2.50 $4.20
========= ========= ========= =========
Diluted
Continuing operations $0.20 $0.82 $2.73 $4.12
Discontinued operations (0.02) (0.02) (0.16) (0.06)
Cumulative effect of
change in accounting - - (0.09) -
Rounding 0.01 0.01 - -
--------- --------- --------- ---------
Net income $0.19 $0.81 $2.48 $4.06
========= ========= ========= =========
AMERISOURCEBERGEN CORPORATION
CHANGE IN ACCOUNTING
(UNAUDITED)
Effective October 1, 2004, the Company changed its method of
recognizing cash discounts and other related manufacturer incentives.
The Company previously recognized cash discounts as a reduction of
cost of goods sold when earned, which was primarily upon payment of
vendor invoices. The Company now records cash discounts as a component
of inventory cost and recognizes such discounts as a reduction to cost
of goods sold upon the sale of the inventory. In connection with the
Company's transition to a fee-for-service model, the Company believes
the change in accounting method provides a more objectively
determinable method of recognizing cash discounts and a better
matching of inventory cost to revenue, as inventory turnover rates are
expected to continue to improve.
The Company recorded a $10.2 million cumulative effect of change in
accounting (net of tax of $6.3 million) in the consolidated statement
of operations for the fiscal year ended September 30, 2005. This $10.2
million cumulative effect adjustment reduced diluted earnings per
share by $0.09 for the fiscal year ended September 30, 2005. The
accounting change is incorporated in the Company's results for the
three months ended September 30, 2005, and the change decreased
earnings from continuing operations in the September quarter by
approximately $0.5 million, net of tax, and had no impact on diluted
earnings per share from continuing operations. The accounting change
improved earnings from continuing operations in the fiscal year ended
September 30, 2005 by approximately $11.5 million, net of tax, or
$0.11 per diluted share from continuing operations.
The pro forma effect of this accounting change on prior periods is as
follows:
Three Months Fiscal Year
Ended Ended
(in thousands, except per share data) September 30, September 30,
2004 2004
----------------------------------------- ------------- -------------
Income from continuing operations before
cumulative effect of change in accounting:
As Reported $93,887 $474,874
Pro Forma $91,879 $472,653
Net income:
As Reported $91,989 $468,390
Pro Forma $89,981 $466,169
Basic earnings per share from continuing
operations:
As Reported $0.85 $4.25
Pro Forma $0.83 $4.23
Diluted earnings per share from
continuing operations:
As Reported $0.82 $4.12
Pro Forma $0.81 $4.10
SOURCE: AmerisourceBergen Corporation
AmerisourceBergen Corporation, Valley Forge
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com