AmerisourceBergen Reports Second Quarter Fiscal Year 2015 Results

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Apr. 30, 2015-- AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2015 second quarter ended March 31, 2015, adjusted diluted earnings per share from continuing operations increased 36.8 percent to $1.45. Revenue increased 14.8 percent to $32.7 billion in the quarter. On the basis of U.S. generally accepted accounting principles (GAAP), diluted loss per share from continuing operations was $2.33 for the March quarter of fiscal 2015. In the tables that follow, we present our GAAP results as well as GAAP to non-GAAP reconciliations.

The Company also announced that its Board of Directors has authorized a new special $1 billion share repurchase program as part of the Company's previously announced warrant hedging strategy. The special program will be used to mitigate the potentially dilutive effect on the ownership interests of the Company's then-existing stockholders that may result from the issuance of common stock upon the exercise of the warrants held by affiliates of Walgreens Boots Alliance.

Share repurchases under the special program are expected to take place over an extended period of time, subject to market conditions. As previously disclosed, the Company will exclude the impact of the share repurchases under the special programs from its presentation of adjusted diluted earnings per share from continuing operations until the warrants are exercised or expire. The exclusion of the special share repurchases prior to warrant exercise is consistent with the Company's exclusion of the accounting dilution resulting from the impact of the warrants in the calculation of the Company's adjusted diluted earnings per share.

"We have had excellent results in the first half of fiscal 2015, with tremendous financial performance and important progress made against our strategic objectives," said Steven H. Collis,AmerisourceBergen President and Chief Executive Officer. "During the March quarter, we completed the acquisition of MWI Veterinary Supply, and in April, we extended our contract with our large pharmacy benefit management customer for an additional year. The performance of our core businesses has driven outstanding cash generation, and the strength of our positions in key growing markets gives me great confidence that we will continue to take advantage of the many opportunities that lie ahead in the remainder of the fiscal year and beyond."

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

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

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 share repurchase programs. We previously issued $600 million of 1.15% senior notes due in May 2017 to fund our initial special share repurchase program. The interest expense incurred relating to this borrowing is also excluded from the non-GAAP presentation.

Summary of Adjusted Quarterly Results

  • Revenue: In the second quarter of fiscal 2015, revenue was $32.7 billion, up 14.8 percent compared to the same quarter in the previous fiscal year, reflecting a 13 percent increase inAmerisourceBergen Drug Corporation (ABDC) revenue, and a 25 percent increase in AmerisourceBergen Specialty Group (ABSG) revenue.
  • Gross Profit: Gross profit in the fiscal 2015 second quarter was $1.0 billion, a 25.3 percent increase over the same period in the previous year, driven by strong revenue growth in brand and generic pharmaceuticals in ABDC, strong revenue growth in ABSG, and the addition of approximately one month of results from MWI. Gross profit as a percentage of revenue increased 27 basis points to 3.19 percent.
  • Operating Expenses: In the second quarter of fiscal 2015, operating expenses were $488.9 million, up 17.8 percent over the same period in the last fiscal year. The increase in operating expenses in the quarter was driven by additional costs to support the increase in revenue growth and the addition of MWI. Operating expenses as a percentage of revenue in the fiscal 2015 second quarter were 1.50 percent compared with 1.46 percent for the same period in the previous fiscal year.
  • Operating Income: In the fiscal 2015 second quarter, operating income of $552.7 million was up 32.7 percent versus the prior year, as our gross profit growth exceeded our operating expense growth. Operating income as a percentage of revenue increased 23 basis points to 1.69 percent in the fiscal 2015 second quarter compared to the previous year's second quarter.
  • Tax Rate: The effective tax rate for the second quarter of fiscal 2015 was 35.7 percent, down from 38.2 percent in the previous fiscal year's second quarter, as growth in our international businesses, including our global manufacturer services business in Switzerland, has changed the mix of our domestic and foreign taxable income. We currently expect our annualized effective tax rate to be between 36 and 37 percent for the full year.
  • Earnings Per Share: Diluted earnings per share from continuing operations were up 36.8 percent to $1.45 in the second quarter of fiscal year 2015 compared to $1.06 in the previous fiscal year's second quarter, driven by the increase in operating income.
  • Shares Outstanding: Diluted weighted average shares outstanding for the second quarter of fiscal year 2015 were 230.4 million, a 1.7 percent decrease versus the prior year as share repurchases more than offset option exercises.

Segment Discussion

The Pharmaceutical Distribution segment includes both AmerisourceBergen Drug Corporation and AmerisourceBergen Specialty Group. Other includes AmerisourceBergen Consulting Services, World Courier, and MWI Veterinary Supply.

Pharmaceutical Distribution Segment

In the second fiscal quarter of 2015, Pharmaceutical Distribution revenues were $31.8 billion, an increase of 14 percent compared to the same quarter in the prior year. ABDC revenues increased 13 percent, due primarily to the onboarding of the new Walgreens generic pharmaceuticals business, strong sales of products that treat hepatitis C, and solid organic sales growth in our independent pharmacy, alternate site, and health systems customers. ABSG revenues increased 25 percent, which was driven by strong performance in our blood products, vaccine and physician office distribution businesses, the impact of manufacturer shifts of certain oncology products from full line distribution to specialty distribution, strong performance in our third party logistics business, and an increase in sales to community oncology practices. Intrasegment revenues between ABDC and ABSG have been eliminated in the presentation of total Pharmaceutical Distribution revenue. Total intrasegment revenues were $1.6 billion and $1.0 billion in the quarters ended March 31, 2015 and 2014, respectively.

Operating income of $488.6 million in the March quarter of fiscal 2015 increased 31 percent compared to the same period in the previous year driven by the strong revenue growth in both ABDC and ABSG.

Other

Revenues in Other were $986.1 million in the second quarter of fiscal 2015, an increase of 72 percent over the same period in the prior year due to the addition of approximately one month of revenues from MWI. Operating income increased 47 percent to $64.2 million in the second quarter of fiscal 2015, driven by the additional income from MWI.

Fiscal Year 2015 Expectations

Our updated expectations for financial performance in fiscal 2015, including the impact of the MWI transaction, are as follows:

  • Adjusted diluted earnings per share from continuing operations in the range of $4.85 to $4.95, a 22 percent to 25 percent increase over fiscal 2014, and an increase over prior guidance of $4.53 to $4.63;
  • Revenue growth in the range of 12 percent to 13 percent;
  • Adjusted operating income growth in the 19 percent to 21 percent range;
  • Adjusted operating margin increase of 8 to 10 basis points;
  • Free cash flow generation in the range of $2.0 billion to $2.3 billion;
  • Capital expenditures in the $250 million range;
  • Regular share repurchases of approximately $200 million; and
  • Special share repurchases of approximately $600 million.

Conference Call

The Company will host a conference call to discuss the results at 11:00 a.m. Eastern Time on April 30, 2015.

Participating in the conference call will be:

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

The dial-in number for the live call will be (612) 332-1210. 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 357616.

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 in human medicine and animal health. With over $120 billion in annual revenue,AmerisourceBergen is headquartered in Valley Forge, PA, and employs approximately 16,000 people. AmerisourceBergen is ranked #28 on the Fortune 500 list. For more information, go towww.amerisourcebergen.com.

AmerisourceBergen's 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: competition; industry consolidation of both customers and suppliers resulting in increasing pressure to reduce prices for our products and services; changes in pharmaceutical market growth rates; price inflation in branded and generic pharmaceuticals and price deflation in generics; declining economic conditions in the United States and abroad; financial market volatility and disruption; substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; the loss, bankruptcy or insolvency of a major supplier; changes to the customer or supplier mix; the retention of key customer or supplier relationships under less favorable economics or the adverse resolution of any contract or other dispute with customers or suppliers; interest rate and foreign currency exchange rate fluctuations; the disruption of AmerisourceBergen's cash flow and ability to return value to its stockholders in accordance with its past practices; risks associated with the strategic, long-term relationship between Walgreen Boots Alliance, Inc. and AmerisourceBergen, including with respect to the pharmaceutical distribution agreement and/or the global sourcing joint venture; risks associated with the potential impact on AmerisourceBergen's earnings per share resulting from the issuance of the warrants to subsidiaries of Walgreen Boots Alliance, Inc. (the "Warrants"); AmerisourceBergen's inability to implement its hedging strategy to mitigate the potentially dilutive effect of the issuance of its common stock in accordance with the Warrants under its special 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; changes in the United States healthcare and regulatory environment; increasing governmental regulations regarding the pharmaceutical supply channel; 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 our distribution of controlled substances; increased federal scrutiny and 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; material adverse resolution of pending legal proceedings; declining reimbursement rates for pharmaceuticals; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, including the integration of recently-acquired MWI or ability to capture all of the anticipated synergies related thereto; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws and economic sanctions and import laws and regulations; malfunction, failure or breach of the sophisticated information systems to operate as designed; risks generally associated with data privacy regulation and the international transfer of personal data; changes in tax laws or legislative initiatives that could adversely affectAmerisourceBergen's tax positions and/or AmerisourceBergen's tax liabilities or adverse resolution of challenges to AmerisourceBergen's tax positions; 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, 2014 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        
    March 31,   % of   March 31,   % of   %
    2015   Revenue   2014   Revenue   Change
                     
Revenue   $32,669,267     100.00 %   $28,455,903     100.00 %   14.8 %
                     
Cost of goods sold   31,757,291         27,726,310         14.5 %
                     
Gross profit (1)   911,976     2.79 %   729,593     2.56 %   25.0 %
                     
Operating expenses:                    
Distribution, selling and administrative   442,443     1.35 %   376,341     1.32 %   17.6 %
Depreciation and amortization   56,205     0.17 %   44,494     0.16 %   26.3 %
Warrants   752,706     2.30 %   5,663     0.02 %    
Employee severance, litigation and other   24,871     0.08 %   1,967     0.01 %    
Total operating expenses   1,276,225     3.91 %   428,465     1.51 %   197.9 %
                     
Operating (loss) income   (364,249 )   -1.11 %   301,128     1.06 %   -221.0 %
                     
Other loss (income) (2)   11,405     0.03 %   (3,783 )   -0.01 %    
                     
Interest expense, net   22,946     0.07 %   19,474     0.07 %   17.8 %
                     
(Loss) income before income taxes   (398,600 )   -1.22 %   285,437     1.00 %   -239.6 %
                     
Income taxes   114,790     0.35 %   105,360     0.37 %   9.0 %
                     
Net (loss) income   ($513,390 )   -1.57 %   $180,077     0.63 %    
                     
                     
Earnings per share:                    
Basic   ($2.33 )       $0.78         -398.7 %
Diluted   ($2.33 )       $0.76          
                     
Weighted average common shares outstanding:                    
Basic   220,243         229,409          
Diluted (3)   220,243         236,268         -6.8 %
     

(1)

 

Includes a $151.1 million LIFO expense charge and a $21.5 million gain from antitrust litigation settlements in the three months ended March 31, 2015. Includes a $102.8 million LIFO expense charge and a $0.8 million gain from antitrust litigation settlements in the three months ended March 31, 2014.

(2)

 

Includes a $7.8 million loss on the sale of a small technology business.

(3)

 

Stock options, restricted stock, restricted stock units and the Warrants issued to Walgreens Boots Alliance were anti-dilutive for the three months ended March 31, 2015. The dilutive effect of these items is included in the three months ended March 31, 2014.

                     
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
                     
                     
    Six       Six        
    Months Ended       Months Ended        
    March 31,   % of   March 31,   % of   %
    2015   Revenue   2014   Revenue   Change
                     
Revenue   $66,257,869     100.00 %   $57,632,265     100.00 %   15.0 %
                     
Cost of goods sold   64,593,594         56,214,447         14.9 %
                     
Gross profit (1)   1,664,275     2.51 %   1,417,818     2.46 %   17.4 %
                     
Operating expenses:                    
Distribution, selling and administrative   858,934     1.30 %   740,401     1.28 %   16.0 %
Depreciation and amortization   105,502     0.16 %   88,444     0.15 %   19.3 %
Warrants   1,124,111     1.70 %   121,960     0.21 %   821.7 %
Employee severance, litigation and other   28,374     0.04 %   6,269     0.01 %   352.6 %
Total operating expenses   2,116,921     3.19 %   957,074     1.66 %   121.2 %
                     
Operating (loss) income   (452,646 )   -0.68 %   460,744     0.80 %   -198.2 %
                     
Other loss (income) (2)   12,719     0.02 %   (4,380 )   -0.01 %    
                     
Interest expense, net   40,288     0.06 %   38,306     0.07 %   5.2 %
                     
(Loss) income before income taxes   (505,653 )   -0.76 %   426,818     0.74 %   -218.5 %
                     
Income taxes   207,684     0.31 %   197,810     0.34 %   5.0 %
                     
(Loss) income from continuing operations   (713,337 )   -1.08 %   229,008     0.40 %   -411.5 %
                     
Loss from discontinued operations, net of income taxes   -         (7,546 )        
                     
Net (loss) income   ($713,337 )   -1.08 %   $221,462     0.38 %    
                     
                     
Basic earnings per share:                    
Continuing operations   ($3.24 )       $1.00         -424.0 %
Discontinued operations   -         (0.03 )        
Rounding   -         (0.01 )        
Total   ($3.24 )       $0.96          
                     
Diluted earnings per share:                    
Continuing operations   ($3.24 )       $0.97         -434.0 %
Discontinued operations   -         (0.03 )        
Total   ($3.24 )       $0.94          
                     
Weighted average common shares outstanding:                    
Basic   219,854         229,852          
Diluted (3)   219,854         236,650         -7.1 %
                     

 

   
     

(1)

 

Includes a $295.2 million LIFO expense charge and a $21.5 million gain from antitrust litigation settlements in the six months ended March 31, 2015. Includes a $160.4 million LIFO expense charge and a $21.9 million gain from antitrust litigation settlements in the six months ended March 31, 2014.

(2)

 

Includes a $7.8 million loss on the sale of a small technology business.

(3)

 

Stock options, restricted stock, restricted stock units and the Warrants issued to Walgreens Boots Alliance were anti-dilutive for the six months ended March 31, 2015. The dilutive effect of these items is included in the six months ended March 31, 2014.

                               
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
(unaudited)
                                   
    Three Months Ended March 31, 2015  
    Gross Profit  

Operating
Expenses

 

Operating
(Loss)
Income

 

Interest
Expense, Net

 

(Loss) Income
Before Income
Taxes

 

Income
Taxes

 

Net (Loss)
Income

 

Diluted
Earnings Per
Share

 
                                   
GAAP   $911,976     $1,276,225     $(364,249 )   $22,946     $(398,600 )   $114,790     $(513,390 )   $(2.33 )  
                                   
Warrant expense (1)   -     (752,706 )   752,706     (2,160 )   754,866     7,157     747,709     3.35    
                                   
Gain on antitrust litigation settlements   (21,483 )   -     (21,483 )   -     (21,483 )   (8,328 )   (13,155 )   (0.06 )  
                                   
LIFO expense   151,144     -     151,144     -     151,144     58,930     92,214     0.40    
                                   
Acquisition related intangibles amortization   -     (9,736 )   9,736     -     10,008     3,892     6,116     0.03    
                                   
Employee severance, litigation and other   -     (24,871 )   24,871     -     24,871     9,568     15,303     0.07    
                                   
Adjusted Non-GAAP   $1,041,637     $488,912     $552,725     $20,786     $520,806     $186,009     $334,797     $1.45  

(2)

                                   
Adjusted Non-GAAP % changes vs. prior year quarter 25.3 %   17.8 %   32.7 %   6.7 %   29.9 %   21.5 %   35.1 %   36.8 %  
                                   
Percentages of Revenue:   GAAP  

Adjusted
Non-GAAP

                       
                                   
Gross profit   2.79 %   3.19 %                          
Operating expenses   3.91 %   1.50 %                          
Operating income   -1.11 %   1.69 %                          
 
(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. In connection with the fiscal 2014 special $650 million share repurchase program, 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.
 
(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
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
(unaudited)
                             
    Three Months Ended March 31, 2014
    Gross Profit  

Operating
Expenses

 

Operating
Income

 

Income Before
Income Taxes

 

Income
Taxes

  Net Income  

Diluted
Earnings Per
Share

                             
GAAP   $729,593     $428,465     $301,128     $285,437     $105,360     $180,077     $0.76
                             
Warrant expense (1)   -     (5,663 )   5,663     5,663     6,315     (652 )   -
                             
Gain on antitrust litigation settlements   (849 )   -     (849 )   (849 )   (361 )   (488 )   -
                             
LIFO expense   102,828     -     102,828     102,828     38,862     63,966     0.27
                             
Acquisition related intangibles amortization   -     (5,825 )   5,825     5,825     2,207     3,618     0.02
                             
Employee severance, litigation and other   -     (1,967 )   1,967     1,967     750     1,217     0.01
                             
Adjusted Non-GAAP   $831,572     $415,010     $416,562     $400,871     $153,133     $247,738     $1.06
                             
Percentages of Revenue:   GAAP  

Adjusted
Non-GAAP

                 
                             
Gross profit   2.56 %   2.92 %                    
Operating expenses   1.51 %   1.46 %                    
Operating income   1.06 %   1.46 %                    
 
(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.
 
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
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
(unaudited)
                                   
    Six Months Ended March 31, 2015  
    Gross Profit  

Operating
Expenses

 

Operating
(Loss)
Income

 

Interest
Expense, Net

 

(Loss) Income
Before Income
Taxes

 

Income
Taxes

 

(Loss)
Income From
Continuing
Operations

 

Diluted
Earnings Per
Share From
Continuing
Operations

 
                                   
GAAP   $1,664,275     $2,116,921     ($452,646 )   $40,288     ($505,653 )   $207,684     ($713,337 )   $(3.24 )  
                                   
Warrant expense (1)   -     (1,124,111 )   1,124,111     (4,300 )   1,128,411     14,297     1,114,114     4.99    
                                   
Gain on antitrust litigation settlements   (21,483 )   -     (21,483 )   -     (21,483 )   (8,328 )   (13,155 )   (0.06 )  
                                   
LIFO expense   295,168     -     295,168     -     295,168     114,426     180,742     0.79    
                                   
Acquisition related intangibles amortization   -     (14,768 )   14,768     -     15,338     5,946     9,392     0.04    
                                   
Employee severance, litigation and other   -     (28,374 )   28,374     -     28,374     10,918     17,456     0.08    
                                   
Adjusted Non-GAAP   $1,937,960     $949,668     $988,292     $35,988     $940,155     $344,943     $595,212     $2.59  

(2)

                                   
Adjusted Non-GAAP % changes vs. prior year period   24.5 %   16.2 %   33.7 %   -6.1 %   33.3 %   28.0 %   36.5 %   39.2 %  
                                   
Percentages of Revenue:   GAAP  

Adjusted
Non-GAAP

                       
                                   
Gross profit   2.51 %   2.92 %                          
Operating expenses   3.19 %   1.43 %                          
Operating income   -0.68 %   1.49 %                          
 
(1) The amount of Warrant expense deductible for income 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. In connection with the fiscal 2014 special $650 million share repurchase program, 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.
 
(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
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
(unaudited)
                             
    Six Months Ended March 31, 2014
   

Gross Profit

 

Operating
Expenses

 

Operating
Income

 

Income Before
Income Taxes

 

Income
Taxes

 

Income From
Continuing
Operations

 

Diluted
Earnings Per
Share From
Continuing
Operations

                             
GAAP   $1,417,818     $957,074     $460,744     $426,818     $197,810     $229,008     $0.97  
                             
Warrant expense (1)   -     (121,960 )   121,960     121,960     12,630     109,330     0.47  
                             
Gain on antitrust litigation settlements   (21,872 )   -     (21,872 )   (21,872 )   (8,243 )   (13,629 )   (0.06 )
                             
LIFO expense   160,410     -     160,410     160,410     60,450     99,960     0.43  
                             
Acquisition related intangibles amortization   -     (11,783 )   11,783     11,783     4,441     7,342     0.03  
                             
Employee severance, litigation and other   -     (6,269 )   6,269     6,269     2,363     3,906     0.02  
                             
Adjusted Non-GAAP   $1,556,356     $817,062     $739,294     $705,368     $269,451     $435,917     $1.86  
                             
Percentages of Revenue:   GAAP  

Adjusted
Non-GAAP

                 
                             
Gross profit   2.46 %   2.70 %                    
Operating expenses   1.66 %   1.42 %                    
Operating income   0.80 %   1.28 %                    
 
(1) The amount of Warrant expense deductible for income 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.
 
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 DILUTED SHARES OUTSTANDING (GAAP TO NON-GAAP)
(In thousands)
(unaudited)
                       
                       
                       
    Three Months Ended March 31,   Six Months Ended March 31,
    2015   2014   2015   2014
                       
Basic shares outstanding   220,243     229,409     219,854     229,852  
                       
Stock option, restricted stock, and restricted stock unit dilution   -     4,863     -     4,985  
                       
Warrant dilution   -     1,996     -     1,813  
                       
GAAP diluted shares outstanding   220,243     236,268     219,854     236,650  
                       
Warrant dilution (1)   -     (1,996 )   -     (1,813 )
                       
Shares repurchased under a special share repurchase program (1)   5,112     -     4,974     -  
                       
Stock option, restricted stock, and restricted stock unit dilution (2)   5,036    

-

    5,013    

-

 
                       
Non-GAAP diluted shares outstanding   230,391     234,272     229,841     234,837  
 
(1) For the non-GAAP presentation, diluted weighted average common shares outstanding have been adjusted to exclude the impact of the Warrants and the shares repurchased under a special $650 million share repurchase program, which was established to mitigate the potentially dilutive effect of the Warrants and supplements our previously executed hedging strategy.
 
(2) For the non-GAAP presentation, diluted weighted average common shares outstanding have been adjusted to include the impact of the stock options, restricted stock, and restricted stock units that were anti-dilutive for the GAAP presentation.
 
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
                         
                         
      Three Months Ended March 31,
Revenue     2015     2014     % Change
                         
Pharmaceutical Distribution     $31,762,523       $27,932,495       13.7 %
Other     986,069       572,503       72.2 %
Intersegment eliminations     (79,325 )     (49,095 )     61.6 %
                         
Revenue     $32,669,267       $28,455,903       14.8 %
                         
                         
                         
                         
      Three Months Ended March 31,
Operating (loss) income     2015     2014     % Change
                         
Pharmaceutical Distribution     $488,575       $372,929       31.0 %
Other     64,150       43,633       47.0 %
Total segment operating income     552,725       416,562          
Gains on antitrust litigation settlements     21,483       849          
LIFO expense     (151,144 )     (102,828 )        
Acquisition related intangibles amortization     (9,736 )     (5,825 )        
Warrant expense     (752,706 )     (5,663 )        
Employee severance, litigation and other     (24,871 )     (1,967 )        
                         
Operating (loss) income     ($364,249 )     $301,128       -221.0 %
                         
                         
                         
Percentages of revenue:                        
                         
Pharmaceutical Distribution                        
Gross profit     2.67 %     2.49 %        
Operating expenses     1.14 %     1.15 %        
Operating income     1.54 %     1.34 %        
                         
Other                        
Gross profit     19.52 %     23.82 %        
Operating expenses     13.02 %     16.20 %        
Operating income     6.51 %     7.62 %        
                         
AmerisourceBergen Corporation (GAAP)                        
Gross profit     2.79 %     2.56 %        
Operating expenses     3.91 %     1.51 %        
Operating income     -1.11 %     1.06 %        
                         
AmerisourceBergen Corporation (Non-GAAP)                        
Gross profit     3.19 %     2.92 %        
Operating expenses     1.50 %     1.46 %        
Operating income     1.69 %     1.46 %        
                         
                         
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
                         
                         
      Six Months Ended March 31,
Revenue     2015     2014     % Change
                         
Pharmaceutical Distribution     $64,745,247       $56,555,086       14.5 %
Other     1,682,070       1,176,635       43.0 %
Intersegment eliminations     (169,448 )     (99,456 )     70.4 %
                         
Revenue     $66,257,869       $57,632,265       15.0 %
                         
                         
                         
                         
      Six Months Ended March 31,
Operating (loss) income     2015     2014     % Change
                         
Pharmaceutical Distribution     $878,976       $659,711       33.2 %
Other     109,316       79,583       37.4 %
Total segment operating income     988,292       739,294       33.7 %
Gains on antitrust litigation settlements     21,483       21,872          
LIFO expense     (295,168 )     (160,410 )        
Acquisition related intangibles amortization     (14,768 )     (11,783 )        
Warrant expense     (1,124,111 )     (121,960 )        
Employee severance, litigation and other     (28,374 )     (6,269 )        
                         
Operating (loss) income     ($452,646 )     $460,744       -198.2 %
                         
                         
                         
Percentages of revenue:                        
                         
Pharmaceutical Distribution                        
Gross profit     2.47 %     2.28 %        
Operating expenses     1.12 %     1.11 %        
Operating income     1.36 %     1.17 %        
                         
Other                        
Gross profit     20.02 %     22.69 %        
Operating expenses     13.52 %     15.92 %        
Operating income     6.50 %     6.76 %        
                         
AmerisourceBergen Corporation (GAAP)                        
Gross profit     2.51 %     2.46 %        
Operating expenses     3.19 %     1.66 %        
Operating (loss) income     -0.68 %     0.80 %        
                         
AmerisourceBergen Corporation (Non-GAAP)                        
Gross profit     2.92 %     2.70 %        
Operating expenses     1.43 %     1.42 %        
Operating income     1.49 %     1.28 %        
                         
             
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
             
             
ASSETS            
      March 31,     September 30,
      2015     2014
Current assets:            
Cash and cash equivalents     $2,336,979     $1,808,513
Accounts receivable, net     7,560,122     6,312,883
Merchandise inventories     9,517,312     8,593,852
Prepaid expenses and other     142,410     84,957
Total current assets     19,556,823     16,800,205
             
Property and equipment, net     955,558     899,582
Other long-term assets     6,493,149     3,832,396
             
Total assets     $27,005,530     $21,532,183
             
             
LIABILITIES AND STOCKHOLDERS' EQUITY            
             
Current liabilities:            
Accounts payable     $18,395,154     $15,592,834
Short-term debt     64,205     -
Other current liabilities     1,766,547     1,657,326
Total current liabilities     20,225,906     17,250,160
             
Long-term debt     3,942,517     1,995,632
             
Other long-term liabilities     920,852     329,492
             
Stockholders' equity     1,916,255     1,956,899
             
Total liabilities and stockholders' equity     $27,005,530     $21,532,183
             
 
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
 
                 
      Six     Six
      Months Ended     Months Ended
      March 31,     March 31,
      2015     2014
                 
Operating Activities:                
Net (loss) income     ($713,337 )     $221,462  
Loss from discontinued operations     -       7,546  
(Loss) income from continuing operations     (713,337 )     229,008  

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

    1,263,253       231,572  
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures:                
Accounts receivable     (810,902 )     (495,495 )
Merchandise inventories (2)     (611,235 )     (1,486,055 )
Accounts payable, accrued expenses, and income taxes     2,566,923       1,612,833  
Other     (56,018 )     28,336  
Net cash provided by operating activities - continuing operations     1,638,684       120,199  
Net cash used in operating activities - discontinued operations     -       (7,546 )
Net cash provided by operating activities     1,638,684       112,653  
                 
Investing Activities:                
Capital expenditures     (105,201 )     (125,392 )
Cost of acquired companies, net of cash acquired     (2,603,918 )     (9,103 )
Other     19,666       6,360  
Net cash used in investing activities     (2,689,453 )     (128,135 )
                 
Financing Activities:                
Net borrowings     2,010,781       -  
Purchases of common stock (3)     (316,480 )     (251,961 )
Exercises of stock options     141,895       59,675  
Cash dividends on common stock     (128,119 )     (108,397 )
Purchases of capped call options     (100,000 )     (211,397 )
Other     (28,842 )     (6,714 )
Net cash provided by (used in) financing activities     1,579,235       (518,794 )
                 
Increase (decrease) in cash and cash equivalents     528,466       (534,276 )
                 
Cash and cash equivalents at beginning of period     1,808,513       1,231,006  
                 
Cash and cash equivalents at end of period     $2,336,979       $696,730  

 

               

(1) Adjustments include non-cash warrant expense of $1,124.1 million and $122.0 million for the six months ended March 31, 2015 and 2014, respectively.

 

(2) Merchandise inventories include LIFO expense of $295.2 million and $160.4 million for the six months ended March 31, 2015 and 2014, respectively.

 

(3) Includes purchases made under the special share repurchase program totaling $150.2 million in the six months ended March 31, 2015, which includes $18.0 million of fiscal 2014 purchases that cash settled in October 2014.

 

 

Source: AmerisourceBergen Corporation

AmerisourceBergen Corporation
Barbara Brungess
Vice President, Corporate & Investor Relations
610-727-7199
[email protected]

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