AmerisourceBergen Reports June Quarterly Results with $0.96 Diluted Earnings Per Share from Continuing Operations.VALLEY FORGE Valley Forge, on the Schuylkill River, SE Pa., NW of Philadelphia. There, during the American Revolution, the main camp of the Continental Army was established (Dec., 1777–June, 1778) under the command of Gen. George Washington. , Pa. -- AmerisourceBergen AmerisourceBergen NYSE: ABC is a Chesterbrook, PA based Drug Wholesale company that was formed by the merger of Bergen Brunswig and AmeriSource in 2001. They provide drug distribution and related services designed to reduce costs and improve patient outcomes, distribute a line Corporation (NYSE NYSE See: New York Stock Exchange :ABC ABC in full American Broadcasting Co. Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. ) today reported results for its fiscal third quarter ended June June: see month. 30, 2005. The following results are presented in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Fiscal Third Quarter Highlights --Diluted earnings per share from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the of $0.96. --Record operating revenue operating revenue Revenue from any regular source. Revenue from sales is adjusted for discounts and returns when calculating operating revenue. Compare other revenue. of $12.6 billion, up 4 percent. --Cash flow from operations of $58 million. --Record low interest expense of $11.3 million, down 58 percent. --Announced $450 million share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program -- $94 million purchased in the quarter. Fiscal First Nine Months Highlights --Diluted earnings per share from continuing operations of $2.51, before the cumulative effect of accounting change. --Record operating revenue of $37.0 billion, up 1 percent. --Cash flow from operations of $1.25 billion. "AmerisourceBergen delivered solid results in the quarter as we began to overcome a challenging transition year," said R. David Yost David Harold Yost (born January 7, 1969) is an American actor known for his role on the television series Mighty Morphin Power Rangers. Biography Early life , AmerisourceBergen's Chief Executive Officer. "Operating revenue was up 4 percent despite two customer losses that accounted for more than 8 percent of operating revenue in last fiscal year's third quarter. We are making solid progress in converting to a fee-for-service fee-for-ser·vice adj. Charging a fee for each service performed. model with our manufacturers and continue to expect to have this model change substantially complete by the end of calendar year 2005. With lower inventories and disciplined working capital management, we continue to generate cash and have the strongest balance sheet in our history. We remain enthusiastic about the future as we gain traction Traction Definition Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. around our margin enhancement activities, continue the rapid growth of our specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. business, complete our new distribution network, capture new generic Generic Describes the characteristics and/or experience of the total universe of a coupon of MBS sector type; that is, in contrast to a specific pool or collateral group, as in a specific CMO issue. opportunities, and look to fully participate in the growth generated in 2006 by the Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, Act." Discussion of Results In the June quarter of fiscal 2005, AmerisourceBergen's operating revenue was a record $12.6 billion compared to $12.1 billion in the same period last year, a 4 percent increase. Bulk deliveries in the quarter increased 28 percent to $1.2 billion. In the fiscal 2004 third quarter, operating revenue and cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold were reduced by $320 million due to a change in the Company's accounting for customer returns. Consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. in the June 2005 quarter declined 33 percent to $168.6 million compared to the prior year's third quarter. A $21.3 million gain from settlements of antitrust cases Although many in the computer field might equate "antitrust" with the long-running Microsoft trial (1998-2004), the U.S. government sued IBM three times in its history for antitrust violations. involving drug manufacturers, less a $3.7 million charge for facility consolidations and employee severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when , a $6.6 million charge for a generic manufacturer's bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most , and a $6.9 million charge for product rationalization rationalization, in psychology: see defense mechanism. in the Company's technology business had a net positive impact on consolidated operating income in the fiscal 2005 third quarter. Operating income in the third quarter of fiscal 2004 was positively impacted by a $38.0 million gain from an antitrust case Noun 1. antitrust case - a legal action brought against parties who are charged with limiting free competition in the market place action at law, legal action, action - a judicial proceeding brought by one party against another; one party prosecutes another for a and negatively impacted by a charge for facility consolidations and employee severance of $1.6 million. Interest expense in the third quarter of fiscal 2005 was a record low $11.3 million compared to $26.8 million in the prior year's third quarter, a 58 percent decrease driven by net debt reduction. Fiscal 2004 third quarter results also were impacted by a $23.6 million charge for the early retirement of debt and a gain of $4.9 million as a result of a liquidating dividend Liquidating Dividend Payment by a firm to its owners from capital rather than from earnings. Notes: This isn't really a good thing. It would be preferable to have dividends come from earnings. from one of the Company's technology equity investments. The Company's tax rate in the third quarter of fiscal 2005 was 36.4 percent, down from 38.5 percent in the same quarter in fiscal 2004 due to the resolution of certain federal and state income tax issues. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of from continuing operations were $0.96 in the third quarter of fiscal 2005, compared to $1.10 in the previous fiscal year's third quarter. Included in the third quarter fiscal 2005 results is a gain of $0.13 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share due to the antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. settlements. The third quarter of fiscal 2005 also included losses per diluted share of $0.02 for facility consolidations and employee severance, $0.04 for the generic manufacturer's bankruptcy, and $0.04 for the technology product rationalization. The lower tax rate in the June quarter of fiscal 2005 positively impacted the diluted earnings per share in the quarter by $0.03. Weighted average diluted shares outstanding for the third quarter of fiscal year 2005 were 104.4 million, a reduction from 118.2 million in the same period last year primarily due to the Company's share repurchase programs. Discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. in the June quarter reflect a $5.1 million loss, net of tax, from the operations and sale of the assets of the Company's Bridge Medical, Inc. bedside point-of-care technology business, which was announced in June and completed in early July July: see month. . For the first nine months of fiscal 2005, AmerisourceBergen's operating revenue was a record $37.0 billion compared to $36.7 billion for the same period last year, a 1 percent increase. Bulk deliveries in the nine-month period increased 18 percent to $3.6 billion. Consolidated operating income in the first nine months of the fiscal year declined 34 percent to $481.9 million primarily due to reduced buy-side profits in the pharmaceutical distribution segment. For the first nine months of fiscal 2005, diluted earnings per share from continuing operations before the cumulative effect of the change in accounting were $2.51, compared to $3.29 in the same nine-month period last year. The impact of this change in accounting, effective at the beginning of fiscal 2005, is a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. cumulative effect charge of $10.2 million, net of tax, or $0.09 per diluted share, which is reflected in the nine-month results ended June 30, 2005. "During the quarter we gained traction in a number of our initiatives to improve operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and better position us for the opportunities ahead," said Kurt Kurt is a given name. Its principal English variant is Curt, while others include Cord, Curd, and Kort. It originated as a short form of Curtis, Konrad (Conrad), and Kunibert. J. Hilzinger, AmerisourceBergen's President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. . "Our transition to fee-for-service relationships continues on plan as we sign agreements with manufacturers and expect that a large majority of our manufacturer-contributed margin will not be contingent on Adj. 1. contingent on - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent upon, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent manufacturer's price increases by the end of calendar 2005. "AmerisourceBergen Specialty Group  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . continued its excellent performance in the quarter with annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. operating revenue of more than $6.5 billion. Led by its market-leading oncology oncology /on·col·o·gy/ (ong-kol´ah-je) the sum of knowledge regarding tumors; the study of tumors. on·col·o·gy n. business, with strong performances in plasma and nephrology nephrology Branch of medicine dealing with kidney function and diseases. An understanding of kidney physiology is important not only in treating kidney disease but in knowing the effect of drugs, diet, and hypertension on kidney disease, and vice versa. , its specialty distribution businesses had outstanding growth. Its pharmaceutical commercialization businesses also had a solid quarter as they added manufacturer customers. "In the Drug Corporation, our Optimiz(TM) program, which is designed to lower our operating costs operating costs npl → gastos mpl operacionales , continued on schedule and on budget. Our new Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. facility, the fourth of our six new distribution centers, opened during the quarter and is fully operational. We expect to open Kansas City Kansas City, two adjacent cities of the same name, one (1990 pop. 149,767), seat of Wyandotte co., NE Kansas (inc. 1859), the other (1990 pop. 435,146), Clay, Jackson, and Platte counties, NW Mo. (inc. 1850). this fall, and will have completed the consolidation of six older and less efficient facilities by the end of the fiscal year as planned. Our generics program was a significant contributor in the quarter and our customer-focused Transform program continues to gain momentum. "In July we commenced a strategic outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. relationship with IBM Global Services IBM Global Services is the world's largest business and technology services provider. It is the fastest growing part of IBM, with over 190,000 professionals serving customers in more than 160 countries. , which includes the outsourcing of a significant portion of the Company's corporate and Drug Corporation information technology activities. The relationship provides AmerisourceBergen greater speed and flexibility in the use and development of technology, improved information technology scale and direct access to emerging technologies. We also expect greater cost efficiency, faster product development cycles, and expanded capability for our customers and suppliers." "In our PharMerica PharMerica is a publicly-traded Fortune 1000 company formed in January 2007 from the merger of Kindred Healthcare's pharmacy business with a subsidiary of AmerisourceBergen. segment, we continue to face a difficult and competitive long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. environment, especially around market pricing and government reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. . At the same time we are actively involved in cost reduction efforts and preparation for the impact of Medicare Part D, which takes effect in January January: see month. 2006. Our new customer-facing technology continues to win new customers in our long-term care business," said Hilzinger. Segment Review AmerisourceBergen operates in two segments: Pharmaceutical Distribution (which includes the operations of AmerisourceBergen Drug Corporation and AmerisourceBergen Specialty, Technology and Packaging groups) and PharMerica (which includes the long-term care pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. businesses). Intersegment sales of $215.2 million in the third 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 Record operating revenue of $12.4 billion in the third quarter of fiscal 2005 was up 4 percent compared to the same quarter in the previous fiscal year. Lower than anticipated buy-side contribution due to the ongoing transition to a new manufacturer compensation model based on fee-for-service reduced gross profit and operating margins compared to this quarter last fiscal year. Pharmaceutical Distribution customer mix in the third quarter of fiscal 2005 was 58 percent institutional and 42 percent retail. PharMerica PharMerica's operating revenue for the third quarter of fiscal 2005 was $393.0 million, up slightly compared to the previous year's third quarter. Operating income for the third quarter of fiscal 2005 was $20.6 million, down 34 percent from $31.4 million for the same quarter last year reflecting strong competitive pricing, government reimbursement pressure in third quarter 2005 and a $4.6 million debt recovery from a customer in the third quarter of 2004. Higher expenses in the June quarter of 2005 were due primarily to adverse health benefit costs. The Company continues to expect revenues in the segment to be flat for the 2005 fiscal year, with operating margins expected to be in the 6 percent to 7 percent range. Looking Ahead "For fiscal year 2005, we expect operating revenue growth to be 1 percent to 2 percent, and diluted earnings per share from continuing operations before the cumulative effect of an accounting change to be between $3.30 and $3.50 on a GAAP basis, the upper end of our previous range of $3.10 to $3.50," said Yost. "Also we expect the fourth quarter of fiscal 2005 to be negatively impacted by between $10 million and $13 million in expenses due to the outsourcing of our information technology activities to IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , offset by the positive impact of an expected antitrust litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlement." "We continue to estimate that diluted earnings per share in fiscal 2006 will be between $3.60 and $4.40, also on a GAAP basis. The bottom of the range reflects pharmaceutical market growth in the high single digits and the full-year impact of fiscal 2005 capital deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. 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. We are currently in the middle of our extensive annual planning process, and we expect to update our guidance for fiscal year 2006 in early November November: see month. , when we announce results for fiscal year 2005." Conference Call The Company will host a conference call to discuss its results at 11:00 a.m. Eastern Standard Time on July 21, 2005. Participating in the conference call will be: R. David Yost, Chief Executive Officer; Kurt J. Hilzinger, President and Chief Operating Officer; and Michael Michael, archangel Michael (mī`kəl) [Heb.,=who is like God?], archangel prominent in Christian, Jewish, and Muslim traditions. In the Bible and early Jewish literature, Michael is one of the angels of God's presence. D. DiCandilo, Executive Vice President and Chief Financial Officer.
To access the live conference call via telephone:
Dial in: 612-326-1027, 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. July 21, 2005 until 11:59 p.m. July 28, 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: 788122
(320) 365-3844 from outside the U.S., access code: 788122
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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . 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 medication /med·i·ca·tion/ (med?i-ka´shun) 1. medicine (1). 2. impregnation with a medicine. 3. administration of a medicine or other remedy. safety systems, and pharmaceutical packaging to pharmacy services for skilled nursing and assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. facilities, reimbursement and pharmaceutical consulting services Noun 1. consulting service - service provided by a professional advisor (e.g., a lawyer or doctor or CPA etc.) service - work done by one person or group that benefits another; "budget separately for goods and services" , and physician education. With more than $54 billion in 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . 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 reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. changes; changes in U.S. government policies (including changes in government policies pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to drug reimbursement); changes in market interest rates; operational difficulties arising from AmerisourceBergen's outsourcing of information technology activities; and other economic, business, competitive, legal, regulatory and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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
June 30, Operating June 30, Operating %
2005 Revenue 2004 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $12,603,893 100.00% $12,099,815 100.00% 4%
Bulk deliveries
to customer
warehouses 1,228,073 956,598 28%
------------ ------------
Total revenue 13,831,966 13,056,413 6%
Cost of goods
sold 13,329,897 12,484,345 7%
------------ ------------
Gross profit 502,069 3.98% 572,068 4.73% -12%
Operating
expenses:
Distribution,
selling and
administrative 310,112 2.46% 298,970 2.47% 4%
Depreciation
and
amortization 19,602 0.16% 19,233 0.16% 2%
Facility
consolidations
and employee
severance 3,747 0.03% 1,550 0.01% 142%
------------ ------------
Operating income 168,608 1.34% 252,315 2.09% -33%
Other loss
(income) 291 0.00% (4,909) -0.04% N/A
Interest expense 11,271 0.09% 26,844 0.22% -58%
Loss on early
retirement of
debt - 0.00% 23,592 0.19% N/A
------------ ------------
Income from
continuing
operations
before taxes 157,046 1.25% 206,788 1.71% -24%
Income taxes 57,202 0.45% 79,613 0.66% -28%
------------ ------------
Income from
continuing
operations 99,844 0.79% 127,175 1.05% -21%
Loss from
discontinued
operations, net
of taxes (5,067) (1,400)
------------ ------------
Net income $94,777 0.75% $125,775 1.04% -25%
============ ============
Earnings per
share:
Basic
Continuing
operations $0.96 $1.13 -15%
Discontinued
operations ($0.05) ($0.01)
------------ ------------
Net income $0.91 $1.12 -19%
============ ============
Diluted
Continuing
operations $0.96 $1.10 -13%
Discontinued
operations (0.05) (0.01)
------------ ------------
Net income $0.91 $1.09 -17%
============ ============
Weighted average
common shares
outstanding:
Basic 103,782 111,956
Diluted 104,420 118,156
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 %
2005 Revenue 2004 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $37,047,741 100.00% $36,681,609 100.00% 1%
Bulk deliveries
to customer
warehouses 3,611,227 3,064,951 18%
------------ ------------
Total revenue 40,658,968 39,746,560 2%
Cost of goods
sold 39,200,558 38,070,825 3%
------------ ------------
Gross profit 1,458,410 3.94% 1,675,735 4.57% -13%
Operating
expenses:
Distribution,
selling and
administrative 900,183 2.43% 890,483 2.43% 1%
Depreciation
and
amortization 60,303 0.16% 53,613 0.15% 12%
Facility
consolidations
and employee
severance 10,717 0.03% 5,319 0.01% 101%
Impairment
charge 5,259 0.01% - 0.00% N/A
------------ ------------
Operating income 481,948 1.30% 726,320 1.98% -34%
Other income (1,150) 0.00% (5,985) -0.02% N/A
Interest expense 47,868 0.13% 89,222 0.24% -46%
Loss on early
retirement of
debt 1,015 0.00% 23,592 0.06% N/A
------------ ------------
Income before
taxes,
discontinued
operations, and
cumulative
effect of change
in accounting 434,215 1.17% 619,491 1.69% -30%
Income taxes 163,636 0.44% 238,504 0.65% -31%
------------ ------------
Income from
continuing
operations
before
cumulative
effect of change
in accounting 270,579 0.73% 380,987 1.04% -29%
Loss from
discontinued
operations, net
of taxes (15,263) (4,586)
Cumulative effect
of change in
accounting, net
of taxes (10,172) -
------------ ------------
Net income $245,144 0.66% $376,401 1.03% -35%
============ ============
Earnings per
share:
Basic
Continuing
operations $2.55 $3.41 -25%
Discontinued
operations (0.14) (0.04)
Cumulative
effect of
change in
accounting (0.10) -
------------ ------------
Net income $2.31 $3.37 -31%
============ ============
Diluted
Continuing
operations $2.51 $3.29 -24%
Discontinued
operations (0.14) (0.04)
Cumulative
effect of
change in
accounting (0.09) -
------------ ------------
Net income $2.28 $3.25 -30%
============ ============
Weighted average
common shares
outstanding:
Basic 106,316 111,837
Diluted 108,761 118,044
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
June 30, September 30,
2005 2004
------------ -------------
Current assets:
Cash and cash equivalents $993,731 $871,343
Accounts receivable, net 2,455,124 2,260,973
Merchandise inventories 4,533,744 5,135,830
Prepaid expenses and other 19,316 27,243
------------ -------------
Total current assets 8,001,915 8,295,389
Long-term assets 3,405,046 3,358,614
------------ -------------
Total assets $11,406,961 $11,654,003
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $5,467,417 $4,947,037
Current portion of long-term debt 1,464 281,360
Other current liabilities 801,454 875,511
------------ -------------
Total current liabilities 6,270,335 6,103,908
Long-term debt, less current portion 856,068 1,157,111
Other liabilities 96,193 53,939
Stockholders' equity 4,184,365 4,339,045
------------ -------------
Total liabilities and stockholders'
equity $11,406,961 $11,654,003
============ =============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Nine
Months Ended Months Ended
June 30, June 30,
2005 2004
------------ ------------
Operating Activities:
Net income $245,144 $376,401
Non-cash items 137,509 138,817
Changes in operating assets and
liabilities 867,897 146,154
------------ ------------
Net cash provided by operating activities 1,250,550 661,372
------------ ------------
Investing Activities:
Capital expenditures (163,592) (143,931)
Cost of acquired companies, net of cash
acquired and other (3,460) (67,960)
Proceeds from sale-leaseback transactions 22,211 -
Proceeds from sale of discontinued
operations 3,560 -
------------ ------------
Net cash used in investing activities (141,281) (211,891)
------------ ------------
Financing Activities:
Long-term debt repayments (280,000) (353,425)
Exercise of stock options 91,773 14,578
Cash dividends on common stock (7,992) (8,416)
Purchase of common stock (786,192) -
Deferred financing costs and other (4,470) 917
------------ ------------
Net cash used in financing activities (986,881) (346,346)
------------ ------------
Increase in cash and cash equivalents 122,388 103,135
Cash and cash equivalents at beginning of
period 871,343 800,036
------------ ------------
Cash and cash equivalents at end of period $993,731 $903,171
============ ============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended June 30,
-----------------------------------
Operating Revenue 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $12,426,079 $11,921,561 4%
PharMerica 393,031 390,332 1%
Intersegment eliminations (215,217) (212,078) -1%
------------ ------------
Operating revenue $12,603,893 $12,099,815 4%
============ ============
Three Months Ended June 30,
-----------------------------------
Operating Income 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $130,486 $184,454 -29%
PharMerica 20,600 31,406 -34%
Facility consolidations and
employee severance (3,747) (1,550) -142%
Gain on litigation settlements 21,269 38,005 -44%
------------ ------------
Operating income $168,608 $252,315 -33%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 2.96% 3.49%
Operating expenses 1.91% 1.94%
Operating income 1.05% 1.55%
PharMerica
Gross profit 28.67% 30.24%
Operating expenses 23.43% 22.19%
Operating income 5.24% 8.05%
AmerisourceBergen Corporation
Gross profit 3.98% 4.73%
Operating expenses 2.65% 2.64%
Operating income 1.34% 2.09%
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Nine Months Ended June 30,
-----------------------------------
Operating Revenue 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $36,536,623 $36,146,896 1%
PharMerica 1,169,742 1,184,850 -1%
Intersegment eliminations (658,624) (650,137) -1%
------------ ------------
Operating revenue $37,047,741 $36,681,609 1%
============ ============
Nine Months Ended June 30,
-----------------------------------
Operating Income 2005 2004 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $381,736 $605,554 -37%
PharMerica 76,094 88,080 -14%
Facility consolidations and
employee severance (10,717) (5,319) -101%
Gain on litigation settlements 40,094 38,005 5%
Impairment charge (5,259) - N/A
------------ ------------
Operating income $481,948 $726,320 -34%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 2.97% 3.53%
Operating expenses 1.92% 1.85%
Operating income 1.04% 1.68%
PharMerica
Gross profit 28.54% 30.60%
Operating expenses 22.03% 23.16%
Operating income 6.51% 7.43%
AmerisourceBergen Corporation
Gross profit 3.94% 4.57%
Operating expenses 2.64% 2.59%
Operating income 1.30% 1.98%
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 Nine Months Ended
June 30, June 30,
2005 2004 2005 2004
-------- --------- --------- ---------
Income from continuing
operations, before cumulative
effect of change in accounting $99,844 $127,175 $270,579 $380,987
Interest expense - convertible
subordinated notes, net of
income taxes - 2,530 2,539 7,590
-------- --------- --------- ---------
Income from continuing
operations available to common
stockholders $99,844 $129,705 $273,118 $388,577
======== ========= ========= =========
Weighted average common shares
outstanding - basic 103,782 111,956 106,316 111,837
Effect of dilutive securities:
Options to purchase common
stock 638 536 513 543
Convertible subordinated
notes - 5,664 1,932 5,664
-------- --------- --------- ---------
Weighted average common shares
outstanding - diluted 104,420 118,156 108,761 118,044
======== ========= ========= =========
Earnings per share:
Basic
Continuing operations $0.96 $1.13 $2.55 $3.41
Discontinued operations (0.05) (0.01) (0.14) (0.04)
Cumulative effect of change
in accounting - - (0.10) -
-------- --------- --------- ---------
Net income $0.91 $1.12 $2.31 $3.37
======== ========= ========= =========
Diluted
Continuing operations $0.96 $1.10 $2.51 $3.29
Discontinued operations (0.05) (0.01) (0.14) (0.04)
Cumulative effect of change
in accounting - - (0.09) -
-------- --------- --------- ---------
Net income $0.91 $1.09 $2.28 $3.25
======== ========= ========= =========
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 nine months ended June 30, 2005. This $10.2
million cumulative effect adjustment reduced diluted earnings per
share by $0.09 for the nine months ended June 30, 2005. The
accounting change is incorporated in the Company's results for the
three months ended June 30, 2005, and the change improved earnings
from continuing operations in the June quarter by approximately $0.9
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 nine months ended June 30, 2005 by
approximately $9.8 million, net of tax, or $0.08 per diluted share
from continuing operations.
The pro forma effect of this accounting change on prior periods is as
follows:
Three Months Nine Months
Ended Ended
(in thousands, except per share data) June 30, 2004 June 30, 2004
----------------------------------------- ------------- --------------
Income from continuing operations before
cumulative effect of change in
accounting:
As Reported $127,175 $380,987
Pro Forma $131,426 $380,761
Net income:
As Reported $125,775 $376,401
Pro Forma $130,026 $376,175
Basic earnings per share from continuing
operations:
As Reported $1.13 $3.41
Pro Forma $1.17 $3.40
Diluted earnings per share from
continuing operations:
As Reported $1.10 $3.29
Pro Forma $1.13 $3.29
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