Company Pursues Sale of PMSI, Its Workers' Compensation BusinessAmerisourceBergen also announced that it is pursuing the sale of
PMSI, its market-leading workers' compensation business, so that it
can focus on its core pharmaceutical distribution and related services
businesses. The Company, which is being assisted by Citi, has
solicited buyers and is currently reviewing initial bids for the
business.
Fiscal First Quarter Highlights
-- Operating revenue of $16.2 billion, up 3.5 percent.
-- Diluted earnings per share of $0.66, a 5 percent increase.
-- Net $0.04 per diluted share benefit from a $10 million
litigation settlement and special items.
-- Cash used in operations of $101 million.
-- $311 million of share repurchases.
"In the December quarter, we delivered solid performance in our
core businesses in a quarter that was a tough comparison with last
year, and we look forward to stronger performance for the remainder of
the 2008 fiscal year," said R. David Yost, AmerisourceBergen's
President and Chief Executive Officer. "With a seasonally strong March
quarter ahead, our increased sales momentum over the remainder of the
fiscal year and the ongoing benefit from our share repurchase program,
we continue to expect fiscal year 2008 diluted earnings per share to
be 13 percent to 20 percent ahead of last year, excluding PharMerica
Long-Term Care and special items in fiscal 2007. Our balance sheet
continues to be strong and our financial flexibility remains
significant."
Commenting on PMSI, Yost said, "Although PMSI's performance in the
quarter was below our expectations, our investment in PMSI's
technology and service delivery infrastructure as well as its
aggressive profitability initiatives are expected to drive greater
operational leverage and margin expansion. The result should be
significant performance improvement by fall 2008. Nevertheless, we
believe that for the appropriate value, this is the right time to sell
the business as we focus on AmerisourceBergen's core pharmaceutical
distribution and related services businesses to maximize shareholder
value."
Consolidated Results
-- Consolidated operating income in the fiscal 2008 first quarter
decreased 7 percent to $195.0 million, due primarily to the
inclusion of $9.1 million of operating income in the previous
year's first quarter from PharMerica LTC, which was spun off
to shareholders in July 2007, and the disappointing
performance of PMSI in this first quarter. Operating income
was positively impacted by a $10 million settlement of
litigation with a major competitor related to sales activities
involving an independent retail group purchasing organization,
as well as by $1.4 million representing the net positive
impact from pharmaceutical manufacturer antitrust litigation
and facility consolidation, employee severance and other
costs.
In the prior year's fiscal first quarter, $6.0 million of charges
for facility consolidations, employee severance and other costs, and a
$1.9 million gain from pharmaceutical manufacturer antitrust
litigation cases, resulted in a net $4.1 million negative impact on
consolidated operating income.
-- The effective tax rate for the first quarter of fiscal 2008
was 38.2 percent, compared to 39.1 percent in the previous
fiscal year's first quarter.
-- Diluted earnings per share were up 5 percent to $0.66 in the
first quarter of fiscal 2008 compared to $0.63 in the previous
fiscal year's first quarter. In the fiscal 2008 first quarter,
the net positive impact of the litigation settlement with a
competitor and special items was $0.04 per diluted share.
-- In the fiscal 2007 first quarter, the PharMerica Long-Term
Care business, spun-off in July 2007, benefited the quarter by
$0.03, and the net per-share impact of special items in the
quarter was a negative $0.02.
-- Diluted average shares outstanding for the first quarter of
fiscal year 2008 were 167.1 million, down nearly 28 million
from the previous fiscal year's first quarter due to share
repurchases, net of option exercises.
AmerisourceBergen consists of the following two reportable
segments: Pharmaceutical Distribution (which includes the operations
of AmerisourceBergen Drug Corporation, Specialty Group, Packaging
Group and Bellco Health) and Other (which includes PharMerica
Long-Term Care through July 31, 2007 and PMSI). Intersegment sales of
$15.1 million in the first quarter of fiscal 2008 from
AmerisourceBergen Drug Corporation to PMSI, which are included in the
Pharmaceutical Distribution Segment operating revenue, are eliminated
for consolidated reporting purposes.
Pharmaceutical Distribution Segment Results
-- Operating revenue of $16.1 billion in the first quarter of
fiscal 2008 was up 4 percent compared to the same quarter in
the previous fiscal year primarily due to the acquisition of
Bellco Health in the beginning of the quarter. A 3 percent
decrease in Specialty Group revenue due to the expected impact
from lower anemia drug sales and lost sales from the
acquisition of a large Specialty Group customer by a
competitor was offset by increases in the Drug Corporation.
The loss of a large, low-margin Drug Corporation customer in
January 2007 negatively impacted segment revenue growth by 2
percent in the quarter.
-- Segment operating income was down 1 percent in the first
quarter compared with the previous year's first quarter
primarily due to a decline in manufacturer price appreciation,
as anticipated, a slow flu season, and fewer new generic drug
introductions. These impacts were partly offset by the Bellco
acquisition and the litigation settlement with a competitor.
Other Segment Results
-- In the fiscal 2008 first quarter, PMSI contributed $108.6
million in revenue and $1.6 million of operating income
compared to $117.9 million and $9.8 million, respectively, in
the previous fiscal year's first quarter. The decline in
operating income in the fiscal 2008 first quarter was due to
customer losses, price competition and a significant increase
in operating expenses related to the ongoing information
technology infrastructure and customer-facing projects.
Fiscal Year 2008 Expectations
"Looking ahead, we continue to expect fiscal year 2008 diluted
earnings per share to be in the range of $2.77 to $2.95," said Yost.
"This diluted earnings per share range represents an increase of about
13 percent to 20 percent over the $2.46 per share from continuing
operations for fiscal year 2007, which excludes the $0.09 benefit from
special items and the $0.08 contribution from PharMerica Long-Term
Care in fiscal year 2007.
"However, we have changed some of our key assumptions supporting
our diluted earnings per share expectations in fiscal year 2008: we
are raising our operating revenue growth assumption to a range of 7
percent to 9 percent from the previous expectation of 5 percent to 7
percent, primarily due to the expected growth of certain large
institutional customers; and because of the lower operating margins in
this customer mix, we now expect operating margin expansion in the
Pharmaceutical Distribution Segment will be in the low single digit
basis points range.
"Remaining unchanged for fiscal year 2008, is our expected free
cash flow in the range of $450 million to $525 million, which includes
capital expenditures in the $125 million range, and our anticipated
spending of $400 million to $500 million to repurchase our common
shares."
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on January 24, 2008. Participating in
the conference call will be: R. David Yost, President and Chief
Executive Officer and Michael D. DiCandilo, Executive Vice President
and Chief Financial Officer.
To access the live conference call via telephone:
Dial in: (612) 332-0228, 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 24, 2008 until 11:59 p.m. January 31, 2008. 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: 905038
(320) 365-3844 from outside the U.S., access code: 905038
To access the archived webcast:
Go to the Quarterly Webcasts section on the Investor Relations
page at http://www.amerisourcebergen.com.
About AmerisourceBergen
AmerisourceBergen is one of the world's largest pharmaceutical
services companies serving the United States, Canada and selected
global markets. 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 reimbursement and pharmaceutical consulting services. With more
than $66 billion in annual revenue, AmerisourceBergen is headquartered
in Valley Forge, PA, and employs more than 11,500 people.
AmerisourceBergen is ranked #29 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. 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 (including
increased government regulation of the pharmaceutical supply channel);
government enforcement initiatives (including (i) the imposition of
increased obligations upon pharmaceutical distributors to detect and
prevent suspicious orders of controlled substances (ii) the
commencement of further administrative actions by the U. S. Drug
Enforcement Administration seeking to suspend or revoke the license of
any of the Company's distribution facilities to distribute controlled
substances, (iii) the commencement of any enforcement actions by any
U.S. Attorney alleging violation of laws and regulations regarding
diversion of controlled substances and suspicious order monitoring),
or (iv) the commencement of any administrative actions by the board of
pharmacy of any state seeking to suspend, revoke or otherwise restrict
the ability of any of the Company's distribution facilities or
businesses to distribute or dispense pharmaceuticals in such state;
changes in U.S. government policies (including reimbursement changes
arising from federal legislation, including the Medicare Modernization
Act and the Deficit Reduction Act of 2005); changes in regulatory or
clinical medical guidelines and/or reimbursement practices for the
pharmaceuticals we distribute, including erythropoiesis-stimulating
agents (ESAs) used to treat anemia patients; price inflation in
branded pharmaceuticals and price deflation in generics; fluctuations
in market interest rates; operational or control issues arising from
the Company's outsourcing of information technology activities;
success of integration, restructuring or systems initiatives;
fluctuations in the U.S. dollar - Canadian dollar exchange rate and
other foreign exchange rates; economic, business, competitive and/or
regulatory developments in Canada, the United Kingdom and elsewhere
outside of the United States; acquisition of businesses that do not
perform as we expect or that are difficult for us to integrate or
control; any disruption to or other adverse effects upon the PMSI
workers' compensation business caused by the Company's announcement
that it is pursuing the sale of PMSI; the inability of the Company to
successfully complete the sale of PMSI; the inability of the Company
to successfully complete any other transaction that the Company may
wish to pursue from time to time; changes in tax legislation or
adverse resolution of challenges to our tax positions; and other
economic, business, competitive, legal, tax, regulatory and/or
operational factors affecting the business of the Company generally.
Certain additional factors that management believes could cause actual
outcomes and results to differ materially from those described in
forward-looking statements are set forth (i) in Item 1A (Risk Factors)
in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2007 and elsewhere in that report and (ii) in other
reports filed by the Company pursuant to the Securities Exchange Act
of 1934.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Three Three
Months Months
Ended Ended
December % of December % of
31, Operating 31, Operating %
2007 Revenue 2006 Revenue Change
----------- --------- ----------- --------- ------
Revenue:
Operating
revenue $16,239,427 100.00% $15,696,539 100.00% 3%
Bulk deliveries
to customer
warehouses 1,133,488 1,028,854 10%
----------- -----------
Total revenue 17,372,915 16,725,393 4%
Cost of goods sold 16,865,455 16,130,750 5%
----------- -----------
Gross profit 507,460 3.12% 594,643 3.79% -15%
Operating expenses:
Distribution,
selling and
administrative 289,940 1.79% 356,961 2.27% -19%
Depreciation and
amortization 22,353 0.14% 22,800 0.15% -2%
Facility
consolidations,
employee
severance and
other 177 - 6,023 0.04% N/M
----------- -----------
Operating income 194,990 1.20% 208,859 1.33% -7%
Other loss 737 - 66 - N/M
Interest expense,
net 16,424 0.10% 8,143 0.05% 102%
----------- -----------
Income before
income taxes 177,829 1.10% 200,650 1.28% -11%
Income taxes 68,009 0.42% 78,463 0.50% -13%
----------- -----------
Net income $ 109,820 0.68% $ 122,187 0.78% -10%
=========== ===========
Earnings per share:
Basic $ 0.67 $ 0.64 5%
Diluted $ 0.66 $ 0.63 5%
Weighted average
common shares
outstanding:
Basic 164,905 192,391
Diluted 167,062 194,970
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31, September 30,
2007 2007
------------ -------------
Current assets:
Cash and cash equivalents $ 524,139 $ 640,204
Short-term investment securities
available-for-sale - 467,419
Accounts receivable, net 3,461,562 3,472,358
Merchandise inventories 4,822,362 4,101,502
Prepaid expenses and other 30,773 32,817
------------ -------------
Total current assets 8,838,836 8,714,300
Property and equipment, net 523,747 506,984
Other long-term assets 3,249,174 3,088,780
------------ -------------
Total assets $ 12,611,757 $ 12,310,064
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,414,854 $ 6,988,782
Current portion of long-term debt 1,487 476
Other current liabilities 894,530 867,778
------------ -------------
Total current liabilities 8,310,871 7,857,036
Long-term debt, less current portion 1,250,284 1,227,298
Other long-term liabilities 164,644 126,010
Stockholders' equity 2,885,958 3,099,720
------------ -------------
Total liabilities and stockholders'
equity $ 12,611,757 $ 12,310,064
============ =============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Three
Months Ended Months Ended
December 31, December 31,
2007 2006
------------ ------------
Operating Activities:
Net income $109,820 $122,187
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities 24,934 56,583
Changes in operating assets and
liabilities (235,784) 109,101
------------ ------------
Net cash (used in) provided by operating
activities (101,030) 287,871
------------ ------------
Investing Activities:
Capital expenditures (26,931) (28,135)
Cost of acquired companies, net of cash
acquired (162,506) (143,543)
Proceeds from sales of property and
equipment 20 1,980
Net short-term investment activity 467,419 (377,813)
------------ ------------
Net cash provided by (used in) investing
activities 278,002 (547,511)
------------ ------------
Financing Activities:
Net borrowings 26,806 121,816
Deferred financing costs and other (152) (1,605)
Purchases of common stock (311,442) (325,632)
Exercises of stock options 4,249 11,841
Cash dividends on common stock (12,498) (9,659)
------------ ------------
Net cash used in financing activities (293,037) (203,239)
------------ ------------
Decrease in cash and cash equivalents (116,065) (462,879)
Cash and cash equivalents at beginning of
period 640,204 1,261,268
------------ ------------
Cash and cash equivalents at end of period $524,139 $798,389
============ ============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended December 31,
----------------------------------
Operating Revenue 2007 2006 % Change
----------------------------------- ----------------------------------
Pharmaceutical Distribution $16,145,895 $15,493,123 4%
Other
PharMerica Long-Term Care - 317,955 N/M
PMSI 108,641 117,930 -8%
------------ ------------
Total Other 108,641 435,885 N/M
------------ ------------
Intersegment eliminations (15,109) (232,469) N/M
------------ ------------
Operating revenue $16,239,427 $15,696,539 3%
============ ============
Three Months Ended December 31,
----------------------------------
Operating Income 2007 2006 % Change
----------------------------------- ----------------------------------
Pharmaceutical Distribution $192,018 $194,133 -1%
Other
PharMerica Long-Term Care - 9,083 N/M
PMSI 1,564 9,776 -84%
------------ ------------
Total Other 1,564 18,859 N/M
------------ ------------
Facility consolidations, employee
severance and other (177) (6,023) N/M
Gain on antitrust litigation
settlements 1,585 1,890 -16%
------------ ------------
Operating income $194,990 $208,859 -7%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 2.99% 3.03%
Operating expenses 1.80% 1.78%
Operating income 1.19% 1.25%
Other
PharMerica Long-Term Care
Gross profit N/A 29.63%
Operating expenses N/A 26.78%
Operating income N/A 2.86%
PMSI
Gross profit 21.40% 24.24%
Operating expenses 19.96% 15.95%
Operating income 1.44% 8.29%
Total Other
Gross profit 21.40% 28.17%
Operating expenses 19.96% 23.85%
Operating income 1.44% 4.33%
AmerisourceBergen Corporation
Gross profit 3.12% 3.79%
Operating expenses 1.92% 2.46%
Operating income 1.20% 1.33%
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 periods presented plus the dilutive effect of
stock options and restricted stock.
Three Months Ended
December 31,
2007 2006
--------- ---------
Net income $ 109,820 $ 122,187
========= =========
Weighted average common shares outstanding - basic 164,905 192,391
Effect of dilutive securities - stock options and
restricted stock 2,157 2,579
--------- ---------
Weighted average common shares outstanding -
diluted 167,062 194,970
========= =========
Earnings per share:
Basic $ 0.67 $ 0.64
Diluted $ 0.66 $ 0.63
SOURCE: AmerisourceBergen Corporation
AmerisourceBergen Corporation
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com