AmerisourceBergen reports increased revenues of 9%

AmerisourceBergen CorporationNov 3 2009

AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2009 fourth quarter ended September 30, 2009, diluted earnings per share were $0.44, a 22 percent increase, and revenue increased 9 percent to a record $18.7 billion. Earnings per share and other share-related data reflect the Company’s June 2009 two-for-one stock split.

Fiscal Fourth Quarter Highlights

• Diluted earnings per share from continuing operations of $0.44, a 22 percent increase.
• Record revenue of $18.7 billion, up 9 percent.
• Operating income of $224.6 million, up 11 percent.
• Operating margin of 1.20 percent, up 2 basis points.
• Share repurchases of $176.5 million, above expectations.

Fiscal Year 2009 Highlights

• Record diluted earnings per share from continuing operations of $1.69, a 17 percent increase.
• Record revenue of $71.8 billion, up 2 percent.
• Record operating income of $883.7 million, up 7 percent.
• Operating margin of 1.23 percent, up 5 basis points.
• Cash flows from operations of $783.8 million, up 6 percent.
• Share repurchases of $450.4 million, above expectations.

“Our outstanding results in the September quarter were driven by strong revenue growth, including continued above-market sales growth in generic drugs; excellent performance by our higher-margin specialty distribution and services business; expense discipline that held our dollar expense below the previous year’s fourth quarter; and great working capital management,” said R. David Yost, AmerisourceBergen’s President and Chief Executive Officer. “For fiscal year 2009, we again delivered on our consistent formula: revenue growth; operating margin expansion through generics, the specialty business, and operational excellence; and strong cash generation. Our balance sheet remains strong, and we have good financial flexibility.”

“We have great positive momentum going into the new fiscal year,” he continued, “and in fiscal year 2010, we expect to achieve diluted earnings per share in the range of $1.82 to $1.92, an 8 percent to 14 percent increase over diluted earnings per share from continuing operations in fiscal 2009.”

Summary of Quarterly Results

• Revenue: In the fourth quarter of fiscal 2009, revenue was a record $18.7 billion, up 9 percent compared to the same quarter in the previous fiscal year, reflecting a 10 percent increase in AmerisourceBergen Drug Corporation revenue, which was driven by new business and improved market growth. AmerisourceBergen Specialty Group revenue in the fiscal 2009 fourth quarter increased 8 percent over the same period in the previous fiscal year.
• Gross Profit: Gross profit in the fiscal 2009 fourth quarter was $538.5 million, a 2 percent increase over the same period in the previous year driven by strong generic drug sales and an increased contribution from fee-for-service agreements with brand-name pharmaceutical manufacturers, offset in part by customer mix and the re-pricing of a major customer contract on July 1, 2009 as part of the long-term renewal of the contract. Gross profit in the fiscal 2009 fourth quarter also included a LIFO credit of $5.7 million compared with a $3.4 million charge in the previous year’s fourth quarter. The prior year’s fourth quarter benefited from a settlement of a contract dispute with a manufacturer and a significant price increase from a supplier.
• Operating Expenses: Despite a 9 percent revenue increase in the fourth quarter of fiscal 2009, operating expenses in the same period were $10.8 million lower than the prior fiscal year’s fourth quarter, reflecting scale efficiencies, continued cost discipline, and reductions in bad debt expense, asset impairments, and facility consolidations, employee severance and other. Operating expenses as a percentage of revenue in the fiscal 2009 fourth quarter were 1.68 percent compared with 1.89 percent in the same period in the previous fiscal year.
• Operating Income: In the fiscal 2009 fourth quarter, operating income increased 11 percent to $224.6 million, due primarily to the increase in gross profit and lower operating expenses. Operating income as a percentage of revenue increased 2 basis points to 1.20 percent in the fiscal 2009 fourth quarter compared with the previous year’s fourth quarter.
• Tax Rate: The effective tax rate for the fourth quarter of fiscal 2009 was 37.9 percent, down from 38.7 percent in the previous fiscal year’s fourth quarter. The Company continues to expect an on-going annualized effective tax rate of approximately 38.4 percent.
• Shares Outstanding: Diluted average shares outstanding for the fourth quarter of fiscal year 2009 were 295.7 million, down 7 percent from the previous fiscal year’s fourth quarter due primarily to share repurchases, net of option exercises.
• Earnings Per Share: Diluted earnings per share from continuing operations were up 22 percent to $0.44 in the fourth quarter of fiscal 2009 compared to $0.36 in the previous fiscal year’s fourth quarter, reflecting the 13 percent growth in income from continuing operations and the reduction in diluted average shares outstanding.

Summary of Fiscal Year 2009

• In fiscal year 2009, diluted earnings per share from continuing operations were a record $1.69, up 17 percent over the prior fiscal year. Record revenue in the period was $71.8 billion, a 2 percent increase over the same comparative period. Operating income rose 7 percent to a record $883.7 million in fiscal 2009, driven by gross margin expansion and a lower expense margin as operating expense dollars were less than the previous fiscal year. Operating income margin increased 5 basis points to 1.23 percent, compared to the prior fiscal year. Diluted average shares outstanding in fiscal 2009 were 302.8 million, down 7 percent from the year-ago same period. The Company completed a two-for-one stock split in June 2009 and increased the dividend twice in the 2009 fiscal year.

Fiscal Year 2010 Expectations

“Looking ahead, the Company expects diluted earnings per share for fiscal year 2010 to be in the range of $1.82 to $1.92, an increase of 8 percent to 14 percent over the $1.69 from continuing operations in fiscal year 2009,” said R. David Yost, AmerisourceBergen President and Chief Executive Officer. “Key assumptions supporting this diluted earnings per share range for fiscal year 2010 are: revenue growth of between 5 percent and 7 percent, with the first half of the year higher as we annualize the addition of major new business in March 2010; operating margin growth of flat to expansion in the low single-digit basis points range; and free cash flow in the range of $500 million to $575 million, which includes capital expenditures in the $140 million range. Subject to the approval of our Board of Directors and market conditions, we expect to spend approximately $350 million to repurchase our common shares in fiscal year 2010.”