VALLEY FORGE, Pa.--(BUSINESS WIRE)--Jan. 25,
2006--AmerisourceBergen Corporation (NYSE:ABC) today reported results
for its fiscal first quarter ended December 31, 2005. 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
$0.47, up 47 percent before the cumulative effect of the prior
fiscal year accounting change.
-- Record operating revenue of $13.5 billion, up 11 percent.
-- Cash flow from operations of $230.5 million.
-- Record low net interest expense of $6.5 million.
"Our outstanding performance in the December quarter exceeded our
internal expectations and provides strong momentum for the remainder
of fiscal 2006," said R. David Yost, AmerisourceBergen's Chief
Executive Officer. "Operating revenue was a record $13.5 billion, and
the excellent earnings per share results were driven by strong
performance under our new fee-for-service agreements, the continued
strength of our specialty pharmaceutical business and our significant
financial leverage. With $1.5 billion in cash at the end of the first
quarter, our balance sheet is the strongest in our history, and we
maintain considerable financial flexibility."
Discussion of Results
AmerisourceBergen's operating revenue was $13.5 billion in the
first quarter of fiscal 2006 compared to $12.2 billion for the same
period last year, an 11 percent increase. Bulk deliveries in the
quarter decreased 22 percent to $1.1 billion from $1.4 billion in last
fiscal year's first quarter.
Consolidated operating income in the quarter increased 24 percent
to $166.6 million, primarily due to increased gross margin in the
Pharmaceutical Distribution segment. In addition, an $18.0 million
gain from the settlements of drug manufacturer antitrust litigation
cases, less $8.8 million of charges for facility consolidations,
employee severance, and costs related to the outsourcing of
information technology activities, had a net $9.2 million positive
impact on consolidated operating income in the fiscal 2006 first
quarter. Operating income in the first quarter of fiscal 2005 included
an $18.8 million gain from antitrust litigation cases and charges for
facility consolidations and employee severance of $5.1 million for a
net positive impact of $13.7 million. Also impacting operating income
this quarter was the Company's adoption of FAS 123R, which resulted in
the Company's expensing stock options for the first time. As a result,
equity compensation expense in the first quarter of fiscal 2006 was
$2.6 million.
Net interest expense in the fiscal 2006 first quarter was a record
low $6.5 million compared to $22.1 million in the prior year's first
quarter, a 71 percent decrease driven by net debt reduction.
The effective tax rate for the first quarter of fiscal 2006 was
38.5 percent compared to 38.4 percent in the same period in fiscal
2005.
Diluted earnings per share were $0.46 in the first quarter of
fiscal 2006, compared to $0.24 in the previous fiscal year's first
quarter. Diluted earnings per share from continuing operations, before
the cumulative effect of an accounting change, in the first quarter of
fiscal years 2006 and 2005 were $0.47 and $0.32, respectively, a 47
percent increase. The net per share impact of the gain from the
litigation settlements and the charges from facility consolidations,
employee severance and information technology outsourcing was a
positive $0.03 in first quarter fiscal 2006. In the first quarter of
fiscal 2005, the net per share impact of the gain from litigation
settlements and the charges from facility consolidations, employee
severance, and the early retirement of debt, was also a positive
$0.03.
Average diluted shares outstanding for the first quarter of fiscal
2006 were 210.3 million, down from 223.2 million shares in the prior
fiscal year's first quarter. The number of shares outstanding and the
per share results reflect AmerisourceBergen's two-for-one stock split
on December 28, 2005.
"In the first quarter of fiscal 2006, outstanding operating
performance in Pharmaceutical Distribution offset weak performance in
PharMerica," said Kurt J. Hilzinger, AmerisourceBergen's President and
Chief Operating Officer.
"Our Specialty Group again delivered strong growth with annualized
operating revenue of more than $8 billion, as our market-leading
oncology businesses continued to grow faster than the overall
pharmaceutical market and strong performances in the Group's other
distribution businesses also contributed to revenue and earnings
growth in the quarter. During the quarter, we signed a definitive
agreement to purchase Network for Medical Communications & Research,
LLC (NMCR), a privately held provider of physician accredited
continuing medical education and analytical research for the oncology
market for approximately $90 million, including assumed debt. The
addition of NMCR will strengthen our oncology platform.
"In the Drug Corporation, we significantly improved the gross
margin through our efforts over the past several quarters, including
completing and performing on fee-for-service agreements, improved
generics contribution, and the customer-focused Transform initiatives.
Benefits from Optimiz(R), our program to enhance the efficiency of our
distribution center network, continued to improve our cost structure.
Optimiz remains on schedule and on budget.
"The Packaging Group continued to perform well in the quarter,
exceeding internal revenue and gross margin expectations. The Group
added new product packaging contracts to its growing pipeline, and is
delivering new compliance and generic packaging solutions to the
marketplace."
"In our PharMerica segment, we continue to face a difficult
environment. Increased revenue from new customers in the first quarter
of fiscal 2006 could not offset the impact of larger than expected bad
debt expense and the added cost of preparing for the implementation of
Medicare Part D on January 1, 2006. With Medicare Part D
implementation, this will continue to be a transition year for
PharMerica," said Hilzinger.
Segment Review
AmerisourceBergen operates in two segments: Pharmaceutical
Distribution (which includes the operations of AmerisourceBergen Drug
Corporation, Specialty Group, and Packaging Group) and PharMerica
(which includes the long-term care pharmacy and workers' compensation
businesses). Intersegment sales of $221.6 million in the first quarter
of fiscal 2006 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 Pharmaceutical Distribution segment was
$13.3 billion in the first quarter of fiscal 2006, an increase of 11
percent over the $12.0 billion of operating revenue in the same
quarter of the previous fiscal year.
Strong growth in the Specialty Group and Drug Corporation,
especially in a few large institutional alternate site customers,
drove operating revenues above the Company's expectations in the
quarter.
Pharmaceutical Distribution customer mix in the first quarter of
fiscal 2006 was 59 percent institutional and 41 percent retail.
For the segment, gross profit as a percentage of operating revenue
in the first quarter of fiscal 2006 was 2.97 percent, a 24 basis point
improvement over 2.73 percent in the same period in the prior fiscal
year. Total expenses as a percentage of operating revenue in the
fiscal 2006 first quarter were 1.93 percent, the same as the first
quarter of last fiscal year. Segment operating income for the first
quarter of fiscal 2006 was $138.9 million, a 43 percent increase over
the previous fiscal year's first quarter, and as a percentage of
operating revenue, was 1.04 percent, a 24 basis point improvement from
the first quarter of fiscal 2005.
PharMerica
PharMerica's operating revenue for the first quarter of fiscal
2006 was $409.3 million, compared with $385.6 million in the previous
year's first quarter, up 6 percent. Operating income for the first
quarter of fiscal 2006 was $18.5 million, down 21 percent from $23.5
million for the same quarter last fiscal year. Lower operating income
was due primarily to increased bad debt expense and the cost of
preparing for the implementation of the Medicare Modernization Act.
Operating income as a percentage of revenue was 4.52 percent in the
first quarter of fiscal 2006.
Looking Ahead
"As announced earlier this month, we expect the fiscal year 2006
revenue growth to be in the range of 7 percent to 9 percent, up from
the previous range of 6 percent to 8 percent," said Yost. "We continue
to expect diluted earnings per share from continuing operations in the
range of $1.98 to $2.13 for fiscal year 2006. Diluted earnings per
share from continuing operations expectations for the fiscal year
include the impact of a $0.04 to $0.05 charge for equity compensation
expense and the anticipation that expected litigation recovery gains
will be offset by expenses from facility consolidations, employee
severance, and costs related to the outsourcing of information
technology activities. Cash flow from operations is anticipated to be
in the range of $500 million to $600 million.
"For fiscal year 2006, we continue to expect operating margins for
the Pharmaceutical Distribution segment to be in the range of 1.15
percent to 1.25 percent. For the PharMerica segment, we continue to
expect the revenue growth rate in fiscal year 2006 to be in the mid
single digits. However, due to the impact of Medicare Part D, we have
lowered our operating margin expectations to the 4 percent to 5
percent range from the previous expectation of the middle of the 5
percent to 6 percent range."
AmerisourceBergen also continues to expect to repurchase a total
of approximately $400 million to $450 million of its stock by the end
of fiscal 2006.
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on January 25, 2006. 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) 332-1025, 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, 2006 until 11:59 p.m. February 1, 2006. 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: 813006
(320) 365-3844 from outside the U.S., access code: 813006
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 world's largest
pharmaceutical services companies serving the United States and
Canada. 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 13,000 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 2005.
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 %
2005 Revenue 2004 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $13,535,854 100.00% $12,202,109 100.00% 11%
Bulk deliveries
to customer
warehouses 1,117,293 1,434,727 -22%
------------ ------------
Total revenue 14,653,147 13,636,836 7%
Cost of goods
sold 14,124,769 13,182,244 7%
------------ ------------
Gross profit 528,378 3.90% 454,592 3.73% 16%
Operating
expenses:
Distribution,
selling and
administrative 331,859 2.45% 294,825 2.42% 13%
Depreciation and
amortization 21,087 0.16% 20,549 0.17% 3%
Facility
consolidations,
employee
severance, and
other 8,827 0.07% 5,133 0.04% 72%
------------ ------------
Operating income 166,605 1.23% 134,085 1.10% 24%
Other loss
(income) 783 0.01% (1,058) -0.01% N/A
Interest expense,
net 6,512 0.05% 22,078 0.18% -71%
Loss on early
retirement of
debt - 1,015 0.01% N/A
------------ ------------
Income from
continuing
operations
before income
taxes and
cumulative
effect of change
in accounting 159,310 1.18% 112,050 0.92% 42%
Income taxes 61,334 0.45% 43,027 0.35% 43%
------------ ------------
Income from
continuing
operations
before
cumulative
effect of change
in accounting 97,976 0.72% 69,023 0.57% 42%
Loss from
discontinued
operations, net
of tax 709 7,905
Cumulative effect
of change in
accounting, net
of tax - 10,172
------------ ------------
Net income $97,267 0.72% $50,946 0.42% 91%
============ ============
Earnings per
share:
Basic
Continuing
operations $0.47 $0.33 42%
Discontinued
operations - (0.04)
Cumulative
effect of
change in
accounting - (0.05)
------------ ------------
Net income $0.47 $0.24 96%
============ ============
Diluted
Continuing
operations $0.47 $0.32 47%
Discontinued
operations - (0.04)
Cumulative
effect of
change in
accounting - (0.05)
Rounding (0.01) 0.01
------------ ------------
Net income $0.46 $0.24 92%
============ ============
Weighted average
common shares
outstanding:
Basic 208,250 211,122
Diluted 210,349 223,214
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31, September 30,
2005 2005
------------- -------------
Current assets:
Cash and cash equivalents $1,506,088 $1,315,683
Accounts receivable, net 2,663,779 2,640,646
Merchandise inventories 4,972,288 4,003,690
Prepaid expenses and other 24,305 27,673
------------- -------------
Total current assets 9,166,460 7,987,692
Long-term assets 3,409,418 3,393,482
------------- -------------
Total assets $12,575,878 $11,381,174
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,307,065 $5,292,253
Current portion of long-term debt 1,243 1,232
Other current liabilities 797,799 758,611
------------- -------------
Total current liabilities 7,106,107 6,052,096
Long-term debt, less current portion 1,051,433 951,479
Other liabilities 98,625 97,242
Stockholders' equity 4,319,713 4,280,357
------------- -------------
Total liabilities and
stockholders' equity $12,575,878 $11,381,174
============= =============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Three
Months Ended Months Ended
December 31, December 31,
2005 2004
------------ ------------
Operating Activities:
Net income $97,267 $50,946
Changes in operating assets and
liabilities 81,077 9,929
Adjustments to reconcile net income to
net cash provided by operating
activities 52,163 61,858
------------ ------------
Net cash provided by operating activities 230,507 122,733
------------ ------------
Investing Activities:
Capital expenditures (27,913) (79,182)
Cost of acquired companies, net of cash
acquired (81,119) (786)
Proceeds from sale-leaseback transactions 28,143 20,732
Proceeds from sale of discontinued
operations - 3,560
Proceeds from sales of property and
equipment 1,868 23
------------ ------------
Net cash used in investing activities (79,021) (55,653)
------------ ------------
Financing Activities:
Net debt borrowings (repayments) 99,739 (180,000)
Exercise of stock options 33,607 30,084
Cash dividends on common stock (5,210) (2,628)
Purchases of common stock (88,922) (253,191)
Deferred financing costs and other (295) (3,149)
------------ ------------
Net cash provided by (used in) financing
activities 38,919 (408,884)
------------ ------------
Increase (decrease) in cash and cash
equivalents 190,405 (341,804)
Cash and cash equivalents at beginning of
period 1,315,683 871,343
------------ ------------
Cash and cash equivalents at end of period $1,506,088 $529,539
============ ============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended December 31,
-----------------------------------
Operating Revenue 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $13,348,153 $12,041,768 11%
PharMerica 409,258 385,621 6%
Intersegment eliminations (221,557) (225,280) 2%
------------ ------------
Operating revenue $13,535,854 $12,202,109 11%
============ ============
Three Months Ended December 31,
-----------------------------------
Operating Income 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $138,876 $96,871 43%
PharMerica 18,507 23,522 -21%
Facility consolidations, employee
severance, and other (8,827) (5,133) -72%
Gain on antitrust litigation
settlements 18,049 18,825 -4%
------------ ------------
Operating income $166,605 $134,085 24%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 2.97% 2.73%
Operating expenses 1.93% 1.93%
Operating income 1.04% 0.80%
PharMerica
Gross profit 27.80% 27.69%
Operating expenses 23.27% 21.59%
Operating income 4.52% 6.10%
AmerisourceBergen Corporation
Gross profit 3.90% 3.73%
Operating expenses 2.67% 2.63%
Operating income 1.23% 1.10%
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,
2005 2004
-------- --------
Income from continuing operations, before cumulative
effect of change in accounting $97,976 $69,023
Interest expense - convertible subordinated notes,
net of income taxes - 2,511
-------- --------
Income from continuing operations available to common
stockholders $97,976 $71,534
======== ========
Weighted average common shares outstanding - basic 208,250 211,122
Effect of dilutive securities:
Options to purchase common stock 2,099 846
Convertible subordinated notes - 11,246
-------- --------
Weighted average common shares outstanding - diluted 210,349 223,214
======== ========
Earnings per share:
Basic
Continuing operations $0.47 $0.33
Discontinued operations - (0.04)
Cumulative effect of change in accounting - (0.05)
-------- --------
Net income $0.47 $0.24
======== ========
Diluted
Continuing operations $0.47 $0.32
Discontinued operations - (0.04)
Cumulative effect of change in accounting - (0.05)
Rounding (0.01) 0.01
-------- --------
Net income $0.46 $0.24
======== ========
CONTACT: AmerisourceBergen Corporation, Valley Forge
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com
SOURCE: AmerisourceBergen Corporation