AmerisourceBergen Reports Revenue of $21.9 Billion and Adjusted Diluted EPS from Continuing Operatio

AmerisourceBergen Reports Revenue of $21.9 Billion and Adjusted Diluted EPS from Continuing Operations of $0.73

Company Now Expects Fiscal Year 2013 Adjusted Diluted EPS from Continuing Operations in the Range of $3.06 to $3.11

VALLEY FORGE, Pa.--(BUSINESS WIRE)-- AmerisourceBergen Corporation (NYS: ABC) today reported that in its fiscal year third quarter ended June 30, 2013, adjusted diluted earnings per share from continuing operations were $0.73, which excludes LIFO expense of $122.1 million and warrant expense of $35.8 million. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share from continuing operations were $0.27 in the quarter. Revenue in the quarter was $21.9 billion, up 13.3 percent. The Company also narrowed the range of its expectations for the full fiscal year 2013 adjusted diluted earnings per share from continuing operations to $3.06 to $3.11 from its previous range of $3.04 to $3.14.


In the tables that follow, we present our GAAP results as well as a reconciliation of GAAP income from continuing operations to non-GAAP adjusted income from continuing operations for the June quarter and the first nine months of fiscal 2013. Fiscal 2012 results are presented on a GAAP basis only, and include a LIFO expense of $4.7 million in the June quarter, and $11.4 million for the first nine months of fiscal 2012. There was no warrant expense in fiscal 2012.

"In our June quarter, AmerisourceBergen delivered solid performance and made significant progress on strategic initiatives," said Steven H. Collis, AmerisourceBergen President and Chief Executive Officer. "We completed two previously announced divestitures, obtained the required regulatory approvals on certain aspects of our new strategic long-term relationship with Walgreen Co. and Alliance Boots GmbH, and have begun to prepare our network for the onboarding of the new Walgreens distribution contract in September. In addition, we recently enhanced our financial flexibility by increasing the borrowing capacity of our revolver and our securitization programs. Not only are we on track to meet our objectives for the full fiscal year, but we have taken important steps to strengthen our ability to generate sustainable long term growth that benefits all of our stakeholders."

The comments below compare adjusted results for fiscal 2013 to GAAP results for fiscal 2012.

Summary of Quarterly Results

  • Revenue: Revenue was $21.9 billion in the third quarter of fiscal 2013, a 13.3 percent increase over the same quarter in the previous fiscal year, driven by a 16 percent increase in AmerisourceBergen Drug Corporation (ABDC) revenue, and a 5 percent increase in AmerisourceBergen Specialty Group (ABSG) revenue.
  • Gross Profit: Gross profit in the fiscal 2013 third quarter was $684.5 million, a 2.5 percent increase over the year-ago same period, driven by contributions from one incremental month of World Courier results in the third quarter of fiscal 2013, offset by lower contributions from our Pharmaceutical Distribution Segment. The World Courier acquisition anniversaried in May 2013. Gross profit as a percentage of revenue decreased 34 basis points to 3.12 percent over the same period in the previous year.
  • Operating Expenses: For the third quarter of fiscal 2013, operating expenses were $392.0 million compared with $343.5 million in the prior fiscal year's third quarter, a 14.1 percent increase. The increase in operating expenses was due primarily to World Courier, and deal related transaction costs, primarily related to professional fees relating to the Walgreens and Alliance Boots transaction. In the fiscal third quarter of 2013, operating expenses as a percentage of revenue were 1.79 percent, up 1 basis point from the same period in the previous fiscal year.
  • Operating Income: In the fiscal 2013 third quarter, operating income decreased 9.8 percent to $292.5 million, due to lower gross profit in our Pharmaceutical Distribution segment, and deal related transaction costs. Operating income as a percentage of revenue decreased 34 basis points to 1.34 percent in the period compared with the previous year's third quarter.
  • Tax Rate: The adjusted effective tax rate for the third quarter of fiscal 2013 was 37.4 percent, compared to 37.7 percent in the previous fiscal year's third quarter.
  • Earnings Per Share: Adjusted diluted earnings per share from continuing operations were down 1.4 percent to $0.73 in the third quarter of fiscal 2013 compared to $0.74 in the previous fiscal year's third quarter. While income from continuing operations decreased 9.9 percent, adjusted diluted earnings per share only decreased 1.4 percent due to the 7.8 percent reduction in diluted weighted average shares outstanding.
  • Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal year 2013 were 235.7 million, down 20.1 million shares from the previous fiscal year's third quarter due primarily to share repurchases, net of option exercises over the last twelve months.

Segment Discussion

The Pharmaceutical Distribution segment includes both AmerisourceBergen Drug Corporation and AmerisourceBergen Specialty Group. Other includes AmerisourceBergen Consulting Services (ABCS) and World Courier. The results of operations from AndersonBrecon and AmerisourceBergen Canada Corporation, both of which were sold in the third quarter of fiscal 2013, are reported as discontinued operations.

Pharmaceutical Distribution Segment

In the third fiscal quarter of 2013, Pharmaceutical Distribution revenues were $21.5 billion, an increase of 13 percent compared to the same quarter in the prior year. ABDC revenues increased 16 percent, due primarily to the previously announced contract with our large PBM customer, and a smaller negative impact from brand to generic conversions. ABSG revenues increased 5 percent, which was driven by strong performance in our blood products, vaccine and physician office distribution businesses partially offset by a revenue decline in our oncology business. Intrasegment revenues between ABDC and ABSG have been eliminated in the presentation of total Pharmaceutical Distribution revenue. Total intrasegment revenues were $810.1 million and $673.3 million in the quarters ended June 30, 2013 and 2012, respectively.

Operating income of $287.2 million in the June quarter of fiscal 2013 decreased 7 percent compared to the same period in the previous year driven by a 28 basis point decline in operating margin due to a shift in customer mix towards lower margin business in both ABDC and ABSG, disappointing performance in our oncology business, and fewer new generic launches to offset those impacts.

Other

Revenues in Other increased 17% and were $466.7 million in the third quarter of fiscal 2013, including significant contributions from an incremental month of World Courier operating results compared to the prior year. Gross profit and expenses also increased compared to the prior year due primarily to contributions from World Courier. Operating income increased significantly to $25.1 million in the third quarter of 2013, with the majority of the increase provided by improved World Courier performance.

Fiscal Year 2013 Expectations

"Looking ahead, the Company now expects adjusted diluted earnings per share from continuing operations in fiscal year 2013 to be in the range of $3.06 to $3.11," said Steven H. Collis, AmerisourceBergen President and Chief Executive Officer. "We continue to expect revenue growth in the 11 percent to 13 percent range; operating income decline in the 3 percent to 5 percent range; an operating margin decline in the range of 24 to 29 basis points; and free cash flow in the range of $100 million to $200 million, which includes capital expenditures of approximately $240 million. We have repurchased $401 million in shares through June 30, 2013, in line with our expectations for the full fiscal year."

Conference Call

The Company will host a conference call to discuss the results at 11:00 a.m. Eastern Time on July 24, 2013.

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 will be (612) 288-0329. No access code is required for the call. 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 297735.

About AmerisourceBergen

AmerisourceBergen is one of the world's largest pharmaceutical services companies serving the United States, Canada and selected global markets. Servicing both healthcare providers and pharmaceutical manufacturers 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 niche premium logistics and pharmaceutical packaging to reimbursement and pharmaceutical consulting services. With over $80 billion in annualized revenue, AmerisourceBergen is headquartered in Valley Forge, PA, and employs approximately 13,000 people. AmerisourceBergen is ranked #32 on the Fortune 500 list. For more information, go to www.amerisourcebergen.com.

Cautionary Note Regarding Forward-Looking Statements

Certain of the statements contained in this press 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; changes in customer mix; customer delinquencies, defaults or insolvencies; supplier defaults or insolvencies; changes in 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; 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; changes in regulatory or clinical medical guidelines and/or labeling for the pharmaceutical products we distribute, including certain anemia products; price inflation in branded 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 our information technology systems; our 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 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 our earnings per share resulting from the issuance of 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; our 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 our tax positions and/or our tax liabilities or adverse resolution of challenges to our tax positions; increased costs of maintaining, or reductions in our ability to maintain, adequate liquidity and financing sources; volatility and deterioration of the capital and credit markets; and other economic, business, competitive, legal, tax, regulatory and/or operational factors affecting our 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) in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2012 and elsewhere in that report and (ii) in other reports filed by the Company pursuant to the Securities Exchange Act of 1934. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, AmerisourceBergen does not undertake, and expressly disclaims, any duty or obligation to publicly update any forward-looking statement after the date of this report, whether as a result of new information, future events, changes in assumptions or otherwise.

         
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
 
 
Three Three
Months Ended Months Ended
June 30, % of June 30, % of %
2013 Revenue 2012 Revenue Change
 
Revenue $21,906,648 100.00 % $19,326,807 100.00 % 13.3 %
 
Cost of goods sold 21,344,198 18,658,941   14.4 %
 
Gross profit (1) 562,450 2.57 % 667,866 3.46 % -15.8 %
 
Operating expenses:
Distribution, selling and administrative 331,173 1.51 % 303,812 1.57 % 9.0 %
Depreciation and amortization 41,138 0.19 % 35,533 0.18 % 15.8 %
Warrants (2) 35,815 0.16 % - - %
Employee severance, litigation and other, net (3) 19,678 0.09 % 4,135   0.02 %
Total operating expenses 427,804 1.95 % 343,480 1.78 % 24.5 %
 
Operating income 134,646 0.61 % 324,386 1.68 % -58.5 %
 
Other loss (income) 525 - % (4,785 ) -0.02 %
 
Interest expense, net 18,190 0.08 % 23,771   0.12 % -23.5 %
 
Income before income taxes 115,931 0.53 % 305,400 1.58 % -62.0 %
 
Income taxes 51,821 0.24 % 115,223   0.60 % -55.0 %
 
Income from continuing operations 64,110 0.29 % 190,177 0.98 % -66.3 %
 
Income (loss) from discontinued operations, net of income taxes 104,329 (8,906 )
 
Net income $168,439 0.77 % $181,271   0.94 %
 
 
Basic earnings per share:
Continuing operations $0.28 $0.75 -62.7 %
Discontinued operations 0.45 (0.04 )
Rounding - 0.01  
Total $0.73 $0.72  
 
Diluted earnings per share:
Continuing operations $0.27 $0.74 -63.5 %
Discontinued operations 0.44 (0.03 )
Total $0.71 $0.71  
 
Weighted average common shares outstanding:
Basic 231,002 252,116
Diluted (4) 235,669 255,725 -7.8 %
 

(1)

 

Includes a $6.0 million gain from antitrust litigation settlements and a $122.1 million LIFO expense charge in the three months ended June 30, 2013. Includes a $4.7 million LIFO expense charge in the three months ended June 30, 2012.

(2)

Expense related to common stock warrants issued to Walgreens and Alliance Boots in connection with the previously announced transaction.

(3)

Includes $1.6 million of restructuring costs and $18.1 million of deal-related transaction costs, primarily related to professional fees with respect to the Walgreens / Alliance Boots transaction, in the three months ended June 30, 2013. Includes $4.1 million of deal-related transaction costs in the three months ended June 30, 2012.

(4)

Includes the dilutive effect of stock options, restricted stock, and restricted stock units. The Warrants were anti-dilutive 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 %
2013 Revenue 2012 Revenue Change
 
Revenue $63,490,127 100.00 % $59,016,363 100.00 % 7.6 %
 
Cost of goods sold 61,549,860   57,095,494   7.8 %
 
Gross profit (1) 1,940,267 3.06 % 1,920,869 3.25 % 1.0 %
 
Operating expenses:
Distribution, selling and administrative 975,409 1.54 % 823,418 1.40 % 18.5 %
Depreciation and amortization 119,690 0.19 % 95,881 0.16 % 24.8 %
Warrants (2) 39,576 0.06 % - - %
Employee severance, litigation and other (3) 21,383   0.03 % 16,721   0.03 %
Total operating expenses 1,156,058 1.82 % 936,020 1.59 % 23.5 %
 
Operating income 784,209 1.24 % 984,849 1.67 % -20.4 %
 
Other loss (income) 1,251 - % (4,917 ) -0.01 %
 
Interest expense, net 55,225   0.09 % 69,432   0.12 % -20.5 %

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