AmerisourceBergen Corporation (NYSE:ABC)
Operating Revenue Up 13 percent, and
Diluted EPS Up 23 percent
AmerisourceBergen Corporation (NYSE:ABC) today reported record
results for its fiscal second quarter ended March 31, 2003.
The following results are presented in accordance with generally
accepted accounting principles (GAAP).
Fiscal Second Quarter Highlights
- Record diluted earnings per share of $1.03, including special
charges of $0.02, up 23 percent.
- Record net income of $116.4 million, up 27 percent.
- Record operating revenue of $11.2 billion, up 13 percent.
- Return On Committed Capital (ROCC) of 26.2 percent.
Fiscal First Six Months Highlights
- Record diluted earnings per share of $1.87, including special
charges of $0.01, up 26 percent.
- Record net income of $209.2 million, up 31 percent.
- Record operating revenue of $22.3 billion, up 14 percent.
"AmerisourceBergen again delivered outstanding performance," said
R. David Yost, AmerisourceBergen's Chief Executive Officer. "We had
excellent results across all of our businesses. Strong operating
revenues in combination with operating expense efficiency drove
significant operating margin expansion. This performance combined with
solid working capital management resulted in improved return on
committed capital and excellent earnings per share."
Discussion of Results
Diluted earnings per share for the second quarter of fiscal 2003
were $1.03, a 23 percent increase over the $0.84 in the prior year's
second quarter. Included in these results were special charges of $2.4
million, net of tax, in the second quarter of fiscal 2003 for facility
consolidations and employee severance and a $2.9 million charge, net
of tax, in the same period of the previous fiscal year for merger
integration activities. The earnings per share impact of the special
charges was a decrease of $0.02 in the second quarter of fiscal 2003
and a decrease of $0.03 in the second quarter of fiscal 2002.
Also in the second quarter of fiscal 2003, the Company wrote down
$5.5 million of its equity investment in a technology company, which
is included in the "equity in losses of affiliates and other" line in
the income statement.
AmerisourceBergen's operating revenue, which excludes bulk
deliveries to customer warehouses, rose 13 percent to $11.2 billion in
the second quarter of fiscal 2003 compared to $9.9 billion for the
same period last year.
For the first six months of fiscal 2003, diluted earnings per
share were $1.87, a 26 percent increase over the $1.48 in the same
six-month period last year. Special items related to facility
consolidations and employee severance in the first half of fiscal 2003
and merger costs in the first six months of fiscal 2002 resulted in a
net decrease in earnings per share of $0.01 and $0.06, respectively.
Operating revenue in the first six months of fiscal 2003 increased
14 percent to $22.3 billion from $19.6 billion in the same period of
the previous fiscal year.
"Our excellent operating performance in the quarter was driven
primarily by continued strong merger integration cost savings,
excellent growth in our specialty pharmaceuticals business, and
contributions from recent acquisitions," said Kurt J. Hilzinger,
AmerisourceBergen's President and Chief Operating Officer.
"Throughout the period, the building of our new pharmaceutical
distribution network continued on time and on budget," he continued.
"We consolidated two distribution centers, one in Lynchburg, Virginia,
and one in Joplin, Missouri, into other facilities and remain on track
to consolidate three more facilities before the end of this fiscal
year. We have now consolidated ten distribution centers."
"In our PharMerica segment, strong, disciplined operating revenue
growth of 10 percent reflects improved growth in both our long term
care pharmacy and workers' compensation fulfillment businesses," said
Hilzinger. "Continued focus on improved operating practices and
customer mix drove operating expenses down and expanded operating
margins in the quarter to record levels."
Segment Review
AmerisourceBergen operates in two segments: Pharmaceutical
Distribution (which includes the AmerisourceBergen Drug Company and
AmerisourceBergen Specialty Group operations) and PharMerica (which
includes the long term care pharmacy and workers' compensation
fulfillment businesses). Intersegment sales of $192.8 million in the
second quarter of fiscal 2003 from AmerisourceBergen Drug Company 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 second quarter of fiscal 2003 increased
to $11.0 billion compared with $9.8 billion in the second quarter of
fiscal year 2002, a 13 percent increase.
Pharmaceutical Distribution customer mix in the second quarter of
fiscal 2003 was 55 percent institutional and 45 percent retail.
Institutional customers, which include mail order facilities,
hospitals and specialty pharmaceutical customers, continued to grow
faster than retail customers.
Gross profit as a percentage of operating revenue was 4.11 percent
in the second quarter of fiscal 2003, a 7 basis point improvement over
the same period in the prior fiscal year. Higher gross margins were
positively impacted by recent acquisitions, which offset the impacts
of customer mix and the competitive environment.
Total operating expenses as a percentage of operating revenue in
the second quarter of fiscal 2003 were 2.15 percent, an 8 basis point
improvement over the same quarter last year, driven by merger
integration cost savings, customer mix, and operating efficiencies,
offset in part by higher expense ratios within recent acquisitions.
Operating income as a percentage of operating revenue in the
second quarter of fiscal 2003 expanded 17 basis points to 1.97 percent
compared to the second quarter of fiscal 2002.
AmerisourceBergen Specialty Group, with annualized revenue of more
than $3 billion, continued its strong quarterly performance, building
significant positions in oncology, blood plasma, and injectables
distribution primarily to physicians, as well as growing its
manufacturing services businesses.
PharMerica
PharMerica's operating revenue for the second quarter of fiscal
2003 increased 10 percent to $397.1 million from $359.8 million in the
previous year's second quarter.
Gross profit as a percentage of operating revenue was 32.35
percent in the second quarter of fiscal 2003, a 117 basis point
decline over the same period in the prior fiscal year due primarily to
the more rapid growth of the lower gross margin workers' compensation
business. The decline in gross margin was more than offset by a 181
basis point improvement in total operating expenses as a percentage of
operating revenue due primarily to improved operating practices and
the change in customer mix. Operating income as a percentage of
operating revenue expanded 64 basis points in the quarter ended March
31, 2003 to 6.07 percent from 5.43 percent in the same period of the
prior year.
Looking Ahead
"For the fiscal year ending September 30, 2003, we continue to
expect to grow operating revenue approximately 13 percent, with the
second half of the fiscal year growing between 11 percent and 12
percent. We continue to expect earnings per share growth of 20 percent
for the remainder of fiscal year 2003, excluding the impact of special
items and the cost of exercising the call option on the PharMerica
bonds in April 2003," said Yost. "ROCC is expected to remain well
above our 20 percent long-term target, and we continue to be confident
in our ability to achieve annual merger integration cost savings of
approximately $150 million by the end of fiscal year 2004, followed by
additional cost savings as we complete the build out of our
distribution network."
Conference Call
The Company will host a conference call to discuss the results at
11:00 a.m. Eastern Daylight Time on April 24, 2003. Participating in
the conference call will be: R. David Yost, Chief Executive Officer;
Kurt J. Hilzinger, President and Chief Operating Officer; and Michael
D. DiCandilo, Senior Vice President and Chief Financial Officer.
To access the live conference call via telephone:
Dial in: (866) 269-9612 from inside the U.S., no access code required
or (612) 332-0802 from outside the U.S., 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
4:15 p.m. April 24, 2003 until 11:59 p.m. May 1, 2003.
To access the replay via telephone:
Dial in: (800) 475-6701 from within the U.S., access code: 673719
(320) 365-3844 from outside the U.S., access code: 673719
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 the largest pharmaceutical
services company in the United States dedicated solely to the
pharmaceutical supply chain. It is the leading distributor of
pharmaceutical products and services to the hospital systems/acute
care market, physician's offices, alternate care and mail order
facilities, independent community pharmacies, and regional chain
pharmacies. The Company is also a leader in the long term care
pharmacy and workers' compensation fulfillment marketplaces. With more
than $40 billion in annualized operating revenue, AmerisourceBergen is
headquartered in Valley Forge, PA, and employs more than 13,000
people. AmerisourceBergen is ranked #24 on the Fortune 500 list and
was ranked #6 in the 2003 Business Week 50, a list of the 50 best
performing companies in the S & P 500. 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 future financial and operating results of AmerisourceBergen
and the benefits and other aspects of the 2001 merger between
AmeriSource Health Corporation and Bergen Brunswig Corporation.
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; regulatory changes; changes in U.S. government policies;
failure to integrate the businesses of AmeriSource and Bergen Brunswig
successfully; failure to obtain and retain expected synergies from the
merger of AmeriSource and Bergen Brunswig; and other economic,
business, competitive, regulatory and/or operational factors affecting
the business of AmerisourceBergen generally.
More detailed information about these factors is set forth in
AmerisourceBergen's filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for fiscal 2002.
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
March 31, Operating March 31, Operating %
2003 Revenue 2002 Revenue Change
------------ -------- ----------- -------- ------
Revenue:
Operating
revenue $11,213,959 100.00% $9,918,609 100.00% 13%
Bulk
deliveries to
customer
warehouses 948,582 1,025,658 -8%
------------ -----------
Total revenue 12,162,541 10,944,267
Cost of goods sold 11,581,352 10,429,774 11%
------------ -----------
Gross profit 581,189 5.18% 514,493 5.19% 13%
Operating expenses:
Distribution,
selling and
administrative 323,563 2.89% 304,576 3.07% 6%
Depreciation
and
amortization 17,069 0.15% 14,402 0.15% 19%
Facility
consolidations
and employee
severance 4,005 0.04% - 0.00% N/A
Merger costs - 0.00% 4,741 0.05% N/A
------------ -----------
Operating income 236,552 2.11% 190,774 1.92% 24%
Equity in losses
(income) of
affiliates and
other 5,733 0.05% (354) 0.00% N/A
Interest expense 38,399 0.34% 38,752 0.39% -1%
------------ -----------
Income before taxes 192,420 1.72% 152,376 1.54% 26%
Income taxes 76,006 0.68% 60,502 0.61% 26%
------------ -----------
Net income $116,414 1.04% $91,874 0.93% 27%
============ ===========
Earnings per
share:
Basic $1.06 $0.88
Diluted $1.03 $0.84
Weighted average
common shares
outstanding:
Basic 109,438 104,404
Diluted 115,756 111,704
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Six Six
Months Ended % of Months Ended % of
March 31, Operating March 31, Operating %
2003 Revenue 2002 Revenue Change
------------ -------- ------------ -------- ------
Revenue:
Operating
revenue $22,320,864 100.00% $19,604,885 100.00% 14%
Bulk
deliveries to
customer
warehouses 2,276,210 2,408,162 -5%
------------ ------------
Total revenue 24,597,074 22,013,047
Cost of goods
sold 23,494,460 21,027,121 12%
------------ ------------
Gross profit 1,102,614 4.94% 985,926 5.03% 12%
Operating
expenses:
Distribution,
selling and
administrative 641,245 2.87% 602,168 3.07% 6%
Depreciation
and
amortization 34,338 0.15% 29,449 0.15% 17%
Facility
consolidations
and employee
severance 2,624 0.01% - 0.00% N/A
Merger costs - 0.00% 12,238 0.06% N/A
------------ ------------
Operating income 424,407 1.90% 342,071 1.74% 24%
Equity in losses of
affiliates and
other 5,916 0.03% 1,377 0.01% 330%
Interest expense 72,784 0.33% 75,745 0.39% -4%
------------ ------------
Income before
taxes 345,707 1.55% 264,949 1.35% 30%
Income taxes 136,554 0.61% 105,192 0.54% 30%
------------ ------------
Net income $209,153 0.94% $159,757 0.81% 31%
============ ============
Earnings per
share:
Basic $1.93 $1.54
Diluted $1.87 $1.48
Weighted average
common shares
outstanding:
Basic 108,101 104,070
Diluted 114,566 111,443
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
March September $
31, 2003 30, 2002 Change
------------ ------------ -----------
Current
assets:
Cash and cash
equivalents $225,956 $663,340 ($437,384)
Accounts
receivable, net 2,163,665 2,222,156 (58,491)
Merchandise
inventories 6,898,825 5,437,878 1,460,947
Prepaid expenses and
other 16,211 26,263 (10,052)
------------ ------------ -----------
Total current
assets 9,304,657 8,349,637 955,020
Long-term
assets 3,018,982 2,863,375 155,607
------------ ------------ -----------
Total assets $12,323,639 $11,213,012 $1,110,627
============ ============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
liabilities:
Accounts payable $5,782,858 $5,367,837 $415,021
Current portion of long-
term debt 60,948 60,819 129
Other current
liabilities 744,518 670,861 73,657
------------ ------------ -----------
Total current
liabilities 6,588,324 6,099,517 488,807
Long-term debt, less current
portion 2,000,790 1,756,494 244,296
Other
liabilities 42,571 40,663 1,908
Stockholders'
equity 3,691,954 3,316,338 375,616
------------ ------------ -----------
Total liabilities
and stockholders'
equity $12,323,639 $11,213,012 $1,110,627
============ ============ ===========
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended March 31,
-------------------------------
Operating Revenue 2003 2002 % Change
-------------------------------------- -------------------------------
Pharmaceutical Distribution $11,009,646 $9,750,903 13%
PharMerica 397,095 359,761 10%
Intersegment Eliminations (192,782) (192,055) 0%
------------ -----------
Operating revenue $11,213,959 $9,918,609 13%
============ ===========
Three Months Ended March 31,
-------------------------------
Operating Income 2003 2002 % Change
-------------------------------------- -------------------------------
Pharmaceutical Distribution $216,456 $175,968 23%
PharMerica 24,101 19,547 23%
Merger costs, facility consolidations
and employee severance (4,005) (4,741) 16%
------------ -----------
Operating income $236,552 $190,774 24%
============ ===========
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 4.11% 4.04%
Operating expenses 2.15% 2.23%
Operating income 1.97% 1.80%
PharMerica
Gross profit 32.35% 33.52%
Operating expenses 26.28% 28.09%
Operating income 6.07% 5.43%
AmerisourceBergen Corporation
Gross profit 5.18% 5.19%
Operating expenses 3.07% 3.26%
Operating income 2.11% 1.92%
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Six Months Ended March 31,
-----------------------------------
Operating Revenue 2003 2002 % Change
--------------------------------- -----------------------------------
Pharmaceutical Distribution $21,909,216 $19,272,979 14%
PharMerica 799,937 715,176 12%
Intersegment Eliminations (388,289) (383,270) -1%
------------ ------------
Operating revenue $22,320,864 $19,604,885 14%
============ ============
Six Months Ended March 31,
-----------------------------------
Operating Income 2003 2002 % Change
--------------------------------- -----------------------------------
Pharmaceutical Distribution $379,391 $315,452 20%
PharMerica 47,640 38,857 23%
Merger costs, facility
consolidations and employee
severance (2,624) (12,238) 79%
------------ ------------
Operating income $424,407 $342,071 24%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.85% 3.87%
Operating expenses 2.12% 2.23%
Operating income 1.73% 1.64%
PharMerica
Gross profit 32.26% 33.57%
Operating expenses 26.31% 28.14%
Operating income 5.96% 5.43%
AmerisourceBergen Corporation
Gross profit 4.94% 5.03%
Operating expenses 3.04% 3.28%
Operating income 1.90% 1.74%
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 available to common stockholders.
Three months ended Six months ended
March 31, March 31,
2003 2002 2003 2002
--------- -------- --------- ---------
Net income $116,414 $91,874 $209,153 $159,757
Interest expense - convertible
subordinated notes, net of
income taxes 2,489 2,481 4,978 4,961
--------- -------- --------- ---------
Income available to common
stockholders $118,903 $94,355 $214,131 $164,718
========= ======== ========= =========
Weighted average common shares
outstanding - basic 109,438 104,404 108,101 104,070
Effect of dilutive securities:
Options to purchase common
stock 654 1,636 801 1,709
Convertible subordinated
notes 5,664 5,664 5,664 5,664
--------- -------- --------- ---------
Weighted average common shares
outstanding - diluted 115,756 111,704 114,566 111,443
========= ======== ========= =========
Earnings per share:
Basic $1.06 $0.88 $1.93 $1.54
Diluted $1.03 $0.84 $1.87 $1.48
AmerisourceBergen Corporation, Valley Forge
Michael N. Kilpatric, 610/727-7118
mkilpatric@amerisourcebergen.com