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AmerisourceBergen Reports Third Quarter Fiscal Year 2014 Results

Companies mentioned in this article: AmerisourceBergen Corporation

VALLEY FORGE, Pa. -- (BUSINESS WIRE) -- AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2014 third quarter ended June 30, 2014, adjusted diluted earnings per share from continuing operations increased 29.5% percent to $1.01. Revenue increased 38.5 percent to $30.3 billion in the quarter. On the basis of U.S. generally accepted accounting principles (GAAP), diluted loss per share from continuing operations was $0.06 for the June quarter of fiscal 2014. In the tables that follow, we present our GAAP results as well as a reconciliation of GAAP (loss) income from continuing operations to adjusted non-GAAP income from continuing operations.

“We delivered very strong performance in our June quarter, driven by the onboarding of substantial new business, and excellent operational and financial results,” said Steven H. Collis, AmerisourceBergen President and Chief Executive Officer. “In addition, we made important progress with our strategic objectives, and continued to make significant long-term investments in our business. We finalized our agreement to acquire a minority stake in Profarma Distribuidora de Produtos Farmacêuticos S.A., and launched the specialty joint venture in Brazil. We generated substantial free cash flow, continued to take steps to improve our balance sheet, and positioned ourselves well to meet or exceed our financial objectives for the full fiscal year.”

The comments below compare adjusted results from continuing operations, which exclude:

  • Warrant expense;
  • Gains on antitrust litigation settlements;
  • LIFO expense;
  • Acquisition related intangibles amortization;
  • Employee severance, litigation, and other expenses; and
  • Loss on early retirement of debt.

In addition, we calculate our adjusted earnings per share for each period using a diluted weighted average share count, which excludes the accounting dilution resulting from the impact of the unexercised equity warrants, and the impact from the shares repurchased under our special $650 million share repurchase program. Solely in connection with the special share repurchase program, we issued $600 million of 1.15% senior notes due in May 2017. The interest expense incurred relating to this borrowing is also excluded from the non-GAAP presentation.

Summary of Adjusted Quarterly Results

  • Revenue: In the third quarter of fiscal 2014, revenue was $30.3 billion, up 38.5 percent compared to the same quarter in the previous fiscal year, reflecting a 45 percent increase in AmerisourceBergen Drug Corporation (ABDC) revenue, and a 13 percent increase in AmerisourceBergen Specialty Group (ABSG) revenue.
  • Gross Profit: Gross profit in the fiscal 2014 third quarter was $822.7 million, a 21.2 percent increase over the same period in the previous year, driven by strong overall revenue growth and generic sales in ABDC. Gross profit as a percentage of revenue decreased 39 basis points to 2.71 percent, primarily due to the substantial increase in lower margin brand business.
  • Operating Expenses: In the third quarter of fiscal 2014, operating expenses were $429.2 million, up 17.2 percent over the same period in the last fiscal year. The increase in operating expenses in the quarter was due primarily to costs associated with onboarding the new Walgreen Co. business. Operating expenses as a percentage of revenue in the fiscal 2014 third quarter were 1.41 percent compared with 1.67 percent for the same period in the previous fiscal year.
  • Operating Income: In the fiscal 2014 third quarter, operating income of $393.5 million was up 26.0 percent versus the prior year, as the percentage increase in gross profit was higher than the percentage increase in operating expenses. Operating income as a percentage of revenue decreased 13 basis points to 1.30 percent in the fiscal 2014 third quarter compared to the previous year’s third quarter.
  • Tax Rate: The effective tax rate for the third quarter of fiscal 2014 was 38.0 percent, slightly higher than the previous fiscal year’s third quarter. Going forward, we expect our annualized effective tax rate to be approximately 38 percent.
  • Earnings Per Share: Diluted earnings per share from continuing operations were up 29.5 percent to $1.01 in the third quarter of fiscal year 2014 compared to $0.78 in the previous fiscal year’s third quarter, driven by the strong increase in operating income.
  • Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal year 2014 were 230.7 million, a 2.1 percent decrease versus the prior year due to share repurchases, offset in part by option exercises.

Segment Discussion

The Pharmaceutical Distribution segment includes both AmerisourceBergen Drug Corporation and AmerisourceBergen Specialty Group. Other includes AmerisourceBergen Consulting Services (ABCS) and World Courier.

Pharmaceutical Distribution Segment

In the third fiscal quarter of 2014, Pharmaceutical Distribution revenues were $29.8 billion, an increase of 39 percent compared to the same quarter in the prior year. ABDC revenues increased 45 percent, due primarily to the onboarding of all of the new Walgreens branded pharmaceuticals business and a substantial portion of their generic pharmaceuticals business, and increased branded pharmaceutical sales to our other large customers. ABSG revenues increased 13 percent, driven by strong performance in our blood products, vaccine and physician office distribution businesses. Intrasegment revenues between ABDC and ABSG have been eliminated in the presentation of total Pharmaceutical Distribution revenue. Total intrasegment revenues were $1.1 billion and $809.2 million in the quarters ended June 30, 2014 and 2013, respectively.

Operating income of $359.8 million in the June quarter of fiscal 2014 increased 29 percent compared to the same period in the previous year due to the new Walgreens branded and generic pharmaceuticals business in ABDC, strong contributions from generics overall, and solid performance in ABSG, as slightly lower performance in our community oncology business was offset by strong performance in our blood products and vaccine distribution businesses.

Other

Revenues in Other were $620.3 million in the third quarter of fiscal 2014, an increase of 13 percent over the same period in the prior year. Operating income of $33.7 million was essentially flat in the third quarter of fiscal 2014, due to solid performance in World Courier being offset by a decline in our consulting businesses.

Fiscal Year 2014 Expectations

AmerisourceBergen now expects adjusted diluted earnings per share from continuing operations in fiscal year 2014 to be in the range of $3.89 to $3.94, an increase of 21 to 23 percent over fiscal 2013. We expect revenue growth in the 35 percent range, and operating income growth in the high-teens percentage range. Adjusted operating margin is expected to decline in the high-teens basis points range due to the onboarding of significant new lower margin business and growth in brand pharmaceutical business with our large customers. We expect free cash flow to be in the high end of the range of $500 to $700 million, with capital expenditures in the $275 million range, and to spend approximately $500 million in share repurchases, subject to market conditions.

Conference Call

The Company will host a conference call to discuss the results at 11:00 a.m. Eastern Time on July 24, 2014.

Participating in the conference call will be:

Steven H. Collis, President & Chief Executive Officer
Tim G. Guttman, Senior Vice President & Chief Financial Officer

The dial-in number for the live call is (612) 332-0720. No access code is required. The live call will also be webcast via the Company’s website at www.amerisourcebergen.com. Users are encouraged to log on to the webcast approximately 10 minutes in advance of the scheduled start time of the call.

Replays of the call will be made available via telephone and webcast. A replay of the webcast will be posted on www.amerisourcebergen.com approximately two hours after the completion of the call and will remain available for thirty days. The telephone replay will also be available approximately two hours after the completion of the call and will remain available for seven days. To access the telephone replay from within the US, dial (800) 475-6701. From outside the US, dial (320) 365-3844. The access code for the replay is 331334.

About AmerisourceBergen

AmerisourceBergen is one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. With services ranging from drug distribution and niche premium logistics to reimbursement and pharmaceutical consulting services, AmerisourceBergen delivers innovative programs and solutions across the pharmaceutical supply channel. With over $100 billion in annualized revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs approximately 13,000 people. AmerisourceBergen is ranked #28 on the Fortune 500 list. For more information, go to www.amerisourcebergen.com.

AmerisourceBergen's Cautionary Note Regarding Forward-Looking Statements

Certain of the statements contained in this news release are “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. Words such as “expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “will,” “project,” “intend,” “plan,” “continue,” “sustain,” “synergy,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and change in circumstances. These statements are not guarantees of future performance and are based on assumptions that could prove incorrect or could cause actual results to vary materially from those indicated. Among the factors that could cause actual results to differ materially from those projected, anticipated, or implied are the following: changes in pharmaceutical market growth rates; the loss of one or more key customer or supplier relationships; the retention of key customer or supplier relationships under less favorable economics; changes in customer mix; customer delinquencies, defaults or insolvencies; supplier defaults or insolvencies; changes in branded and/or generic pharmaceutical manufacturers’ pricing and distribution policies or practices; adverse resolution of any contract or other dispute with customers or suppliers; federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances, federal and state prosecution of alleged violations of related laws and regulations, and any related litigation, including shareholder derivative lawsuits or other disputes relating to AmerisourceBergen’s distribution of controlled substances; qui tam litigation for alleged violations of fraud and abuse laws and regulations and/or any other laws and regulations governing the marketing, sale, purchase and/or dispensing of pharmaceutical products or services and any related litigation, including shareholder derivative lawsuits; changes in federal and state legislation or regulatory action affecting pharmaceutical product pricing or reimbursement policies, including under Medicaid and Medicare, and the effect of such changes on AmerisourceBergen’s customers; changes in regulatory or clinical medical guidelines and/or labeling for the pharmaceutical products we distribute; price inflation in branded and generic pharmaceuticals and price deflation in generics; greater or less than anticipated benefit from launches of the generic versions of previously patented pharmaceutical products; significant breakdown or interruption of AmerisourceBergen’s information technology systems; AmerisourceBergen’s inability to realize the anticipated benefits of the implementation of an enterprise resource planning (ERP) system; interest rate and foreign currency exchange rate fluctuations; risks associated with international business operations, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws and economic sanctions and import laws and regulations; economic, business, competitive and/or regulatory developments in countries where we do business and/or operate outside of the United States; risks associated with the strategic, long-term relationship among Walgreen Co., Alliance Boots GmbH, and AmerisourceBergen, the occurrence of any event, change or other circumstance that could give rise to the termination, cross-termination or modification of any of the transaction documents among the parties (including, among others, the distribution agreement or the generics agreement), an impact on AmerisourceBergen’s earnings per share resulting from the issuance of the warrants to subsidiaries of Walgreen Co. and Alliance Boots GmbH (the “Warrants”), an inability to realize anticipated benefits (including benefits resulting from participation in the Walgreens Boots Alliance Development GmbH joint venture), the disruption of AmerisourceBergen’s cash flow and ability to return value to its stockholders in accordance with its past practices, disruption of or changes in vendor, payer and customer relationships and terms, and the reduction of AmerisourceBergen’s operational, strategic or financial flexibility; the acquisition of businesses that do not perform as we expect or that are difficult for us to integrate or control; AmerisourceBergen’s inability to implement its hedging strategy to mitigate the potentially dilutive effect of the issuance of shares of its common stock upon exercise of the Warrants, including its inability to repurchase shares of its common stock under its new share repurchase program due to its financial performance, the current and future share price of its common stock, its expected cash flows, competing priorities for capital, and overall market conditions; AmerisourceBergen’s inability to successfully complete any other transaction that we may wish to pursue from time to time; changes in tax laws or legislative initiatives that could adversely affect AmerisourceBergen’s tax positions and/or AmerisourceBergen’s tax liabilities or adverse resolution of challenges to AmerisourceBergen’s tax positions; increased costs of maintaining, or reductions in AmerisourceBergen’s ability to maintain, adequate liquidity and financing sources; volatility and deterioration of the capital and credit markets; natural disasters or other unexpected events that affect AmerisourceBergen’s operations; and other economic, business, competitive, legal, tax, regulatory and/or operational factors affecting AmerisourceBergen’s business 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) and Item 1 (Business) in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2013 and elsewhere in that report and (ii) in other reports.

         
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
 
 
Three Three
Months Ended Months Ended
June 30, % of June 30, % of %
2014 Revenue 2013 Revenue Change
 
Revenue $30,348,154 100.00 % $21,906,648 100.00 % 38.5 %
 
Cost of goods sold 29,656,150 21,344,198 38.9 %
 
Gross profit (1) 692,004 2.28 % 562,450 2.57 % 23.0 %
 
Operating expenses:
Distribution, selling and administrative 387,611 1.28 % 331,173 1.51 % 17.0 %
Depreciation and amortization 47,334 0.16 % 41,138 0.19 % 15.1 %
Warrants 145,040 0.48 % 35,815 0.16 %
Employee severance, litigation and other 1,142 - % 19,678 0.09 %
Total operating expenses 581,127 1.91 % 427,804 1.95 % 35.8 %
 
Operating income 110,877 0.37 % 134,646 0.61 % -17.7 %
 
Other (income) loss (1,312 ) - % 525 - %
 
Interest expense, net 20,903 0.07 % 18,190 0.08 % 14.9 %
 
Loss on early retirement of debt 32,954 0.11 % - - %
 
Income before income taxes 58,332 0.19 % 115,931 0.53 % -49.7 %
 
Income taxes 71,112 0.23 % 51,821 0.24 % 37.2 %
 
(Loss) income from continuing operations (12,780 ) -0.04 % 64,110 0.29 % -119.9 %
 
Income from discontinued operations, net of income taxes - 104,329
 
Net (loss) income ($12,780 ) -0.04 % $168,439 0.77 %
 
 
Basic earnings per share:
Continuing operations ($0.06 ) $0.28 -121.4 %
Discontinued operations - 0.45
Total ($0.06 ) $0.73
 
Diluted earnings per share:
Continuing operations ($0.06 ) $0.27 -122.2 %
Discontinued operations - 0.44
Total ($0.06 ) $0.71
 
Weighted average common shares outstanding:
Basic 225,727 231,002
Diluted (2) 225,727 235,669 -4.2 %
 

(1)

 

Includes a $2.5 million gain from antitrust litigation settlements and a $133.2 million LIFO expense in the three months ended June 30, 2014. Includes a $6.0 million gain from antitrust litigation settlements and a $122.1 million LIFO expense in the three months ended June 30, 2013.

(2)

Stock options, restricted stock, restricted stock units and the Warrants issued to Walgreens and Alliance Boots were anti-dilutive for the three months ended June 30, 2014. The dilutive effect of these items is included in the three months ended June 30, 2013.

 
         
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
 
 
Nine Nine
Months Ended Months Ended
June 30, % of June 30, % of %
2014 Revenue 2013 Revenue Change
 
Revenue $87,980,419 100.00 % $63,490,127 100.00 % 38.6 %
 
Cost of goods sold 85,870,597   61,549,860   39.5 %
 
Gross profit (1) 2,109,822 2.40 % 1,940,267 3.06 % 8.7 %
 
Operating expenses:
Distribution, selling and administrative 1,128,012 1.28 % 975,409 1.54 % 15.6 %
Depreciation and amortization 135,778 0.15 % 119,690 0.19 % 13.4 %
Warrants 267,000 0.30 % 39,576 0.06 %
Employee severance, litigation and other 7,411   0.01 % 21,383   0.03 %
Total operating expenses 1,538,201 1.75 % 1,156,058 1.82 % 33.1 %
 
Operating income 571,621 0.65 % 784,209 1.24 % -27.1 %
 
Other (income) loss (5,692 ) -0.01 % 1,251 - %
 
Interest expense, net 59,209 0.07 % 55,225 0.09 % 7.2 %
 
Loss on early retirement of debt 32,954   0.04 % -   - %
 
Income before income taxes 485,150 0.55 % 727,733 1.15 % -33.3 %
 
Income taxes 268,922   0.31 % 284,859   0.45 % -5.6 %
 
Income from continuing operations 216,228 0.25 % 442,874 0.70 % -51.2 %
 
Loss from discontinued operations, net of income taxes (7,546 ) (60,190 )
 
Net income $208,682   0.24 % $382,684   0.60 %
 
 
Basic earnings per share:
Continuing operations $0.95 $1.91 -50.3 %
Discontinued operations (0.03 ) (0.26 )
Rounding (0.01 ) -  
Total $0.91   $1.65  
 
Diluted earnings per share:
Continuing operations $0.92 $1.88 -51.1 %
Discontinued operations (0.03 ) (0.26 )
Rounding -   0.01  
Total $0.89   $1.63  
 
Weighted average common shares outstanding:
Basic 228,477 231,273
Diluted (2) 235,532 235,428 - %
 

(1)

 

Includes a $24.4 million gain from antitrust litigation settlements and a $293.6 million LIFO expense in the nine months ended June 30, 2014. Includes a $21.7 million gain from antitrust litigation settlements and a $123.0 million LIFO expense in the nine months ended June 30, 2013.

(2)

Includes the dilutive effect of stock options, restricted stock, restricted stock units and the Warrants issued to Walgreens and Alliance Boots.

 
                 
AMERISOURCEBERGEN CORPORATION
RECONCILIATION OF CONTINUING OPERATIONS (GAAP) TO ADJUSTED CONTINUING OPERATIONS (NON-GAAP)
(in thousands, except per share data)
(unaudited)

% Change
vs.

Three Months Ended June 30, 2014

Prior Year
Quarter

GAAP

Warrants (2)

Gain on
Antitrust
Litigation
Settlements

LIFO
Expense

Acquisition
Related
Intangibles
Amortization

Employee
Severance,
Litigation and
Other

Loss on Early
Retirement of
Debt

Adjusted
Non-GAAP

Adjusted
Non-GAAP

 
Revenue $30,348,154 $- $- $- $- $- $- $30,348,154 38.5 %
Cost of goods sold 29,656,150   -   2,524   (133,237 ) -   -   -   29,525,437   39.1 %
Gross profit 692,004 - (2,524 ) 133,237 - - - 822,717 21.2 %
Operating expenses 581,127   (145,040 ) -   -   (5,701 ) (1,142 ) -   429,244   17.2 %
Operating income 110,877 145,040 (2,524 ) 133,237 5,701 1,142 - 393,473 26.0 %
Other income (1,312 ) - - - - - - (1,312 )
Interest expense, net 20,903 (926 ) - - - - - 19,977 9.8 %
Loss on early retirement of debt 32,954   -   -   -   -   -   (32,954 ) -  
Income before income taxes 58,332 145,966 (2,524 ) 133,237 5,701 1,142 32,954 374,808 27.7 %
Income taxes (1) 71,112   6,665   (981 ) 50,564   2,170   439   12,458   142,427   29.7 %
(Loss) income from continuing operations $(12,780 ) $139,301   $(1,543 ) $82,673   $3,531   $703   $20,496   $232,381   26.4 %
 
Diluted earnings per share from continuing operations (2) -$0.06 $0.61 -$0.01 $0.36 $0.02 $- $0.09

$1.01

(3)

29.5

%

 
Diluted weighted average common shares outstanding (2) 225,727 230,674 230,674 230,674 230,674 230,674 230,674 230,674
 
Percentages of revenue:
 
Gross profit 2.28 % 2.71 %
Operating expenses 1.91 % 1.41 %
Operating income 0.37 % 1.30 %
 
(1) The amount of Warrant expense deductible for tax purposes is based on the initial valuation of the Warrants. Therefore, the income tax rate on Warrant expense will vary by quarter depending upon the quarterly changes in the fair value of the Warrants.
 
(2) Warrant expense is recorded as an operating expense. For the reconciling items and the non-GAAP presentation, diluted earnings per share from continuing operations and diluted weighted average common shares outstanding have been adjusted to exclude the impact from the shares repurchased under the special $650 million share repurchase program (415 shares) and to include the dilutive effect of outstanding stock options and restricted stock (4,532 shares) that were considered anti-dilutive for the GAAP presentation. In connection with the special share repurchase program, which was previously announced in May 2014, the Company issued $600 million of 1.15% senior notes due in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation.
 
(3) The sum of the components may not equal the total due to rounding.
 
Note: Management considers GAAP financial measures as well as the presented non-GAAP financial measures in evaluating the Company's operating performance. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors.
 
   
AMERISOURCEBERGEN CORPORATION
RECONCILIATION OF CONTINUING OPERATIONS (GAAP) TO ADJUSTED CONTINUING OPERATIONS (NON-GAAP)
(in thousands, except per share data)
(unaudited)
         
Three Months Ended June 30, 2013

GAAP

Warrant
Expense

Gain on
Antitrust
Litigation
Settlements

LIFO Expense

Acquisition
Related
Intangibles
Amortization

Employee
Severance,
Litigation and
Other

Adjusted
Non-GAAP

 
 
Revenue $21,906,648 $- $- $- $- $- $21,906,648
Cost of goods sold 21,344,198   -   5,984   (122,077 ) -   -   21,228,105  
Gross profit 562,450 - (5,984 ) 122,077 - - 678,543
Operating expenses 427,804   (35,815 ) -   -   (6,096 ) (19,678 ) 366,215  
Operating income 134,646 35,815 (5,984 ) 122,077 6,096 19,678 312,328
Other loss 525 - - - - - 525
Interest expense, net 18,190   -   -   -   -   -   18,190  
Income before income taxes 115,931 35,815 (5,984 ) 122,077 6,096 19,678 293,613
Income taxes (1) 51,821   3,137   (2,238 ) 47,451   2,280   7,360   109,811  
Income from continuing operations $64,110   $32,678   $(3,746 ) $74,626   $3,816   $12,318   $183,802  
 
Diluted earnings per share from continuing operations $0.27 $0.14 $(0.02 ) $0.32 $0.02 $0.05 $0.78

(2)

 
Diluted weighted average common shares outstanding 235,669 235,669 235,669 235,669 235,669 235,669 235,669
 
Percentages of revenue:
 
Gross profit 2.57 % 3.10 %
Operating expenses 1.95 % 1.67 %
Operating income 0.61 % 1.43 %
 
(1) The amount of Warrant expense deductible for tax purposes is based on the initial valuation of the Warrants. Therefore, the income tax rate on Warrant expense will vary by quarter depending upon the quarterly changes in the fair value of the Warrants.
 
(2) The sum of the components may not equal the total due to rounding.
 
Note: Management considers GAAP financial measures as well as the presented non-GAAP financial measures in evaluating the Company's operating performance. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors.
 
               
AMERISOURCEBERGEN CORPORATION
RECONCILIATION OF CONTINUING OPERATIONS (GAAP) TO ADJUSTED CONTINUING OPERATIONS (NON-GAAP)
(in thousands, except per share data)
(unaudited)
 

% Change vs.

Nine Months Ended June 30, 2014 Prior Year
GAAP Warrants (2)

Gain on
Antitrust
Litigation
Settlements

LIFO
Expense

Acquisition
Related
Intangibles
Amortization

Employee
Severance,
Litigation and
Other

Loss on Early
Retirement of
Debt

Adjusted
Non-GAAP

Adjusted
Non-GAAP

 
Revenue $87,980,419 $- $- $- $- $- $- $87,980,419 38.6 %
Cost of goods sold 85,870,597   -   24,396   (293,647 ) -   -   -   85,601,346   39.3 %
Gross profit 2,109,822 - (24,396 ) 293,647 - - - 2,379,073 16.5 %
Operating expenses 1,538,201   (267,000 ) -   -   (17,484 ) (7,411 ) -   1,246,306   15.7 %
Operating income 571,621 267,000 (24,396 ) 293,647 17,484 7,411 - 1,132,767 17.4 %
Other income (5,692 ) - - - - - - (5,692 )
Interest expense, net 59,209 (926 ) - - - - - 58,283 5.5 %
Loss on early retirement of debt 32,954   -   -   -   -   -   (32,954 ) -  
Income before income taxes 485,150 267,926 (24,396 ) 293,647 17,484 7,411 32,954 1,080,176 18.9 %
Income taxes (1) 268,922   19,295   (9,224 ) 111,014   6,611   2,802   12,458   411,878   19.9 %
Income from continuing operations $216,228   $248,631   $(15,172 ) $182,633   $10,873   $4,609   $20,496   $668,298   18.4 %
 
Diluted earnings per share from continuing operations (2) $0.92 $1.07 $(0.06 ) $0.78 $0.05 $0.02 $0.09

$2.86

(3)

19.2

%

 
Diluted weighted average common shares outstanding (2) 235,532 233,450 233,450 233,450 233,450 233,450 233,450 233,450
 
Percentages of revenue:
 
Gross profit 2.40 % 2.70 %
Operating expenses 1.75 % 1.42 %
Operating income 0.65 % 1.29 %
 
(1) The amount of Warrant expense deductible for tax purposes is based on the initial valuation of the Warrants. Therefore, the income tax rate on Warrant expense will vary by quarter depending upon the quarterly changes in the fair value of the Warrants.
 
(2) Warrant expense is recorded as an operating expense. For the reconciling items and the non-GAAP presentation, diluted earnings per share from continuing operations and diluted weighted average common shares outstanding have been adjusted to exclude the impact of the accounting dilution from the unexercised Warrants (2,221 shares), and the impact from the shares repurchased under the special $650 million share repurchase program (139 shares). In connection with the special share repurchase program, which was previously announced in May 2014, the Company issued $600 million of 1.15% senior notes due in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation.
 
(3) The sum of the components may not equal the total due to rounding.
 
Note: Management considers GAAP financial measures as well as the presented non-GAAP financial measures in evaluating the Company's operating performance. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors.
 
 
AMERISOURCEBERGEN CORPORATION
RECONCILIATION OF CONTINUING OPERATIONS (GAAP) TO ADJUSTED CONTINUING OPERATIONS (NON-GAAP)
(in thousands, except per share data)
(unaudited)
             
Nine Months Ended June 30, 2013
GAAP

Warrant
Expense

Gain on
Antitrust
Litigation
Settlements

LIFO Expense

Acquisition
Related
Intangibles
Amortization

Employee
Severance,
Litigation and
Other

Adjusted
Non-GAAP

 
Revenue $63,490,127 $- $- $- $- $- $63,490,127
Cost of goods sold 61,549,860   -   21,748   (123,029 ) -   -   61,448,579  
Gross profit 1,940,267 - (21,748 ) 123,029 - - 2,041,548
Operating expenses 1,156,058   (39,576 ) -   -   (18,293 ) (21,383 ) 1,076,806  
Operating income 784,209 39,576 (21,748 ) 123,029 18,293 21,383 964,742
Other loss 1,251 - - - - - 1,251
Interest expense, net 55,225   -   -   -   -   -   55,225  
Income before income taxes 727,733 39,576 (21,748 ) 123,029 18,293 21,383 908,266
Income taxes (1) 284,859   4,267   (8,216 ) 47,813   6,918   8,004   343,645  
Income from continuing operations $442,874   $35,309   $(13,532 ) $75,216   $11,375   $13,379   $564,621  
 
Diluted earnings per share from continuing operations $1.88 $0.15 $(0.06 ) $0.32 $0.05 $0.06 $2.40

(2)

 
Diluted weighted average common shares outstanding 235,428 235,428 235,428 235,428 235,428 235,428 235,428
 
Percentages of revenue:
 
Gross profit 3.06 % 3.22 %
Operating expenses 1.82 % 1.70 %
Operating income 1.24 % 1.52 %
 
(1) The amount of Warrant expense deductible for tax purposes is based on the initial valuation of the Warrants. Therefore, the income tax rate on Warrant expense will vary by quarter depending upon the quarterly changes in the fair value of the Warrants.
 
(2) The sum of the components may not equal the total due to rounding.
 
Note: Management considers GAAP financial measures as well as the presented non-GAAP financial measures in evaluating the Company's operating performance. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors.
 
 
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
   
 
Three Months Ended June 30,
Revenue 2014 2013 % Change
 
Pharmaceutical Distribution $29,812,837 $21,407,853 39.3 %
Other 620,275 549,400 12.9 %
Intersegment eliminations (84,958 ) (50,605 ) 67.9 %
 
Revenue $30,348,154   $21,906,648   38.5 %
 
 
 
 
Three Months Ended June 30,
Operating Income 2014 2013 % Change
 
Pharmaceutical Distribution $359,795 $278,728 29.1 %
Other 33,678 33,600 0.2 %
Gain on antitrust litigation settlements 2,524 5,984
LIFO expense (133,237 ) (122,077 )
Acquisition related intangibles amortization (5,701 ) (6,096 )
Warrant expense (145,040 ) (35,815 )
Employee severance, litigation and other (1,142 ) (19,678 )
 
Operating income $110,877   $134,646   -17.7 %
 
 
 
Percentages of revenue:
 
Pharmaceutical Distribution
Gross profit 2.32 % 2.58 %
Operating expenses 1.11 % 1.28 %
Operating income 1.21 % 1.30 %
 
Other
Gross profit 21.19 % 23.04 %
Operating expenses 15.76 % 16.92 %
Operating income 5.43 % 6.12 %
 
AmerisourceBergen Corporation (GAAP)
Gross profit 2.28 % 2.57 %
Operating expenses 1.91 % 1.95 %
Operating income 0.37 % 0.61 %
 
AmerisourceBergen Corporation (Non-GAAP)
Gross profit 2.71 % 3.10 %
Operating expenses 1.41 % 1.67 %
Operating income 1.30 % 1.43 %
 
 
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
   
 
Nine Months Ended June 30,
Revenue 2014 2013 % Change
 
Pharmaceutical Distribution $86,367,923 $62,061,060 39.2 %
Other 1,796,910 1,569,392 14.5 %
Intersegment eliminations (184,414 ) (140,325 ) 31.4 %
 
Revenue $87,980,419   $63,490,127   38.6 %
 
 
 
 
Nine Months Ended June 30,
Operating Income 2014 2013 % Change
 
Pharmaceutical Distribution $1,019,506 $866,482 17.7 %
Other 113,261 98,260 15.3 %
Gain on antitrust litigation settlements 24,396 21,748
LIFO expense (293,647 ) (123,029 )
Acquisition related intangibles amortization (17,484 ) (18,293 )
Warrant expense (267,000 ) (39,576 )
Employee severance, litigation and other (7,411 ) (21,383 )
 
Operating income $571,621   $784,209   -27.1 %
 
 
 
Percentages of revenue:
 
Pharmaceutical Distribution
Gross profit 2.29 % 2.69 %
Operating expenses 1.11 % 1.29 %
Operating income 1.18 % 1.40 %
 
Other
Gross profit 22.17 % 23.81 %
Operating expenses 15.87 % 17.55 %
Operating income 6.30 % 6.26 %
 
AmerisourceBergen Corporation (GAAP)
Gross profit 2.40 % 3.06 %
Operating expenses 1.75 % 1.82 %
Operating income 0.65 % 1.24 %
 
AmerisourceBergen Corporation (Non-GAAP)
Gross profit 2.70 % 3.22 %
Operating expenses 1.42 % 1.70 %
Operating income 1.29 % 1.52 %
 
   
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
 
 
ASSETS
June 30, September 30,
2014 2013
Current assets:
Cash and cash equivalents $1,261,864 $1,231,006
Accounts receivable, net 6,133,228 6,051,920
Merchandise inventories 8,421,977 6,981,494
Prepaid expenses and other 74,317 129,231
Total current assets 15,891,386 14,393,651
 
Property and equipment, net 882,162 803,561
Other long-term assets 3,857,058 3,721,426
 
Total assets $20,630,606 $18,918,638
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Accounts payable $14,809,789 $13,335,792
Other current liabilities 1,529,570 1,534,843
Total current liabilities 16,339,359 14,870,635
 
Long-term debt 1,995,482 1,396,606
 
Other long-term liabilities 309,410 331,652
 
Stockholders' equity 1,986,355 2,319,745
 
Total liabilities and stockholders' equity $20,630,606 $18,918,638
 
   
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
Nine Nine
Months Ended Months Ended
June 30, June 30,
2014 2013
 
Operating Activities:
Net income $208,682 $382,684
Loss from discontinued operations 7,546   60,190  
Income from continuing operations 216,228 442,874

Adjustments to reconcile income from continuing operations to net cash provided by operating activities (1)

456,446 207,560
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable (535,806 ) (835,697 )
Merchandise inventories (2) (1,002,589 ) (399,087 )
Accounts payable, accrued expenses, and income taxes 1,475,627 1,380,353
Other 30,135   (60,964 )
Net cash provided by operating activities - continuing operations 640,041 735,039
Net cash (used in) provided by operating activities - discontinued operations (7,546 ) 84,025  
Net cash provided by operating activities 632,495   819,064  
 
Investing Activities:
Capital expenditures (198,670 ) (137,927 )
Proceeds from sales of businesses - 331,630
Cost of equity investments (117,794 ) -
Other (2,737 ) 523  
Net cash (used in) provided by investing activities - continuing operations (319,201 ) 194,226
Net cash used in investing activities - discontinued operations -   (11,672 )
Net cash (used in) provided by investing activities (319,201 ) 182,554  
 
Financing Activities:
Net borrowings 566,402 -

Purchases of common stock (3)

(570,593 ) (401,091 )
Exercises of stock options 109,694 132,766
Cash dividends on common stock (161,558 ) (147,005 )
Purchases of capped call options (211,397 ) (27,906 )
Other (14,984 ) (6,867 )
Net cash used in financing activities - continuing operations (282,436 ) (450,103 )
Net cash used in financing activities - discontinued operations -   (50,538 )
Net cash used in financing activities (282,436 ) (500,641 )
 
Increase in cash and cash equivalents 30,858 500,977
 
Cash and cash equivalents at beginning of period 1,231,006   1,066,608  
 
Cash and cash equivalents at end of period $1,261,864   $1,567,585  
 

(1)

 

Adjustments include non-cash warrant expense of $267.0 million and $39.6 million for the nine months ended June 30, 2014 and 2013, respectively.

 

(2)

Merchandise inventories include LIFO expense of $293.6 million and $123.0 million for the nine months ended June 30, 2014 and 2013, respectively.

 

(3)

Includes purchases made under the special share repurchase program totaling $138.8 million.  Additional purchases made in June 2014 under the special program totaling $2.9 million cash settled in July 2014.

 


Copyright © Business Wire 2014
Contact:

AmerisourceBergen Corporation
Barbara Brungess
Vice President, Corporate & Investor Relations
610-727-7199
bbrungess@amerisourcebergen.com