AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2010 fourth quarter ended September 30, 2010, diluted earnings per share increased 13.6 percent to $0.50, and revenue increased 5.3 percent to a record $19.7 billion. The Company expects diluted earnings per share for fiscal year 2011 to be in the range of $2.31 to $2.41, a 7 percent to 12 percent increase over $2.16 per share, which represents the $2.22 diluted earnings per share achieved in fiscal year 2010 less litigation gains. All results are presented in accordance with U.S. generally accepted accounting principles (GAAP).
“We have solid positive momentum going into the new fiscal year”
Fiscal Fourth Quarter Highlights
- Record revenue of $19.7 billion, up 5.3 percent.
- Diluted earnings per share of $0.50, a 13.6 percent increase.
- Gross profit of $592.8 million, up 10.1 percent.
- Operating income of $248.2 million, up 10.5 percent.
- Operating margin of 1.26 percent, up 6 basis points.
- Share repurchases of $120.1 million.
Fiscal Year 2010 Highlights
- Record revenue of $78.0 billion, up 8.6 percent.
- Record diluted earnings per share from continuing operations of $2.22, which includes a net after tax benefit of $15.5 million from litigation gains, a 31.4 percent increase.
- Gross profit of $2.4 billion, up 12.2 percent.
- Operating expense ratio of 1.61 percent, down 8 basis points.
- Record operating income of $1.1 billion, up 24.9 percent.
- Operating margin of 1.42 percent, up 19 basis points.
- Cash flow from operations of $1.1 billion, up 41.4 percent.
- Share repurchases of $470.4 million, above expectations.
"Our outstanding results in both the September quarter and our fiscal year 2010 were driven by strong revenue growth, and excellent performance in the two key growth drivers for our business—generic pharmaceuticals and specialty distribution and services," said R. David Yost, AmerisourceBergen's President and Chief Executive Officer. "Even without generic introductions, our extraordinary results this year would have been solid, demonstrating the power of our business model. This is the fifth consecutive year we have expanded our pharmaceutical distribution operating margin, reflecting our operating leverage, cost control initiatives, and attractive customer and product mix. We continue to generate excellent cash flow, and our balance sheet remains strong. We have great financial flexibility."
"We have solid positive momentum going into the new fiscal year," he continued. "While we do not expect to achieve the same level of extraordinary earnings per share growth in fiscal year 2011 that we achieved in 2010, we do expect that contributions from generics, including new introductions; our strong offerings in specialty distribution and services; and our focus on efficiency and productivity will continue to drive solid results for years to come."
Summary of Quarterly Results
- Revenue: In the fourth quarter of fiscal 2010, revenue was a record $19.7 billion, up 5.3 percent compared to the same quarter in the previous fiscal year, reflecting a 6.0 percent increase in AmerisourceBergen Drug Corporation revenue, which was driven by the above market growth of certain of our largest customers and 4.2 percent growth in AmerisourceBergen Specialty Group.
- Gross Profit: Gross profit in the fiscal 2010 fourth quarter was $592.8 million, a 10.1 percent increase over the same period in the previous year driven by revenue growth, strong generic drug sales and solid performance under fee-for-service contracts with manufacturers. Gross profit in the fiscal 2010 fourth quarter also included a LIFO charge of $0.4 million compared with a $5.7 million credit in the previous year's fourth quarter.
- Operating Expenses: In the fourth quarter of fiscal 2010, operating expenses were $344.7 million, up 9.8 percent over the same period in the last fiscal year reflecting an expected increase in information technology expenses, increases in incentive compensation, and a write-off of capitalized software costs of approximately $7 million. Operating expenses as a percentage of revenue in the fiscal 2010 fourth quarter were 1.75 percent compared with 1.68 percent in the same period in the previous fiscal year.
- Operating Income: In the fiscal 2010 fourth quarter, operating income increased 10.5 percent to $248.2 million, due to the increase in gross profit. Operating income as a percentage of revenue increased 6 basis points to 1.26 percent in the fiscal 2010 fourth quarter compared with the previous year's fourth quarter.
- Tax Rate: The effective tax rate for the fourth quarter of fiscal 2010 was 38.0 percent, up slightly from 37.9 percent in the previous fiscal year's fourth quarter.
- Earnings Per Share: Diluted earnings per share were up 13.6 percent to $0.50 in the fourth quarter of fiscal 2010 compared to $0.44 in the previous fiscal year's fourth quarter, reflecting the 10.5 percent growth in operating income and the reduction in diluted average shares outstanding.
- Shares Outstanding: Diluted average shares outstanding for the fourth quarter of fiscal year 2010 were 283.8 million, down 4.0 percent from the previous fiscal year's fourth quarter due primarily to share repurchases, net of option exercises.
Summary of Fiscal Year 2010
- In fiscal year 2010, diluted earnings per share were a record $2.22, including $0.05 in litigation gains, up 31.4 percent over the prior fiscal year earnings per share from continuing operations. Record revenue of $78.0 billion increased 8.6 percent over the last fiscal year. Operating income rose 24.9 percent to a record $1.1 billion in fiscal 2010, driven by revenue growth, gross margin expansion and operating expense leverage. Operating income margin increased 19 basis points to 1.42 percent. Diluted average shares outstanding in fiscal 2010 were 287.2 million, down 5.1 percent from the year-ago same period.
Fiscal Year 2011 Expectations
"Looking ahead, the Company expects diluted earnings per share in fiscal year 2011 to be in the range of $2.31 to $2.41, a 7 percent to 12 percent increase over a base of $2.16, which represents the diluted earnings per share achieved in fiscal year 2010 less the contribution from litigation gains," said R. David Yost, AmerisourceBergen President and Chief Executive Officer. "Key assumptions supporting the increased diluted earnings per share range for fiscal year 2011 are: revenue growth of between 2 percent and 4 percent; operating margin growth in the low to mid single-digit basis points range; and free cash flow in the range of $625 million to $700 million, which includes capital expenditures in the $150 million range. Subject to market conditions, we expect to spend approximately $400 million to repurchase our common shares in fiscal year 2011."