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AmerisourceBergen Releases First Quarter Fiscal Year 2014 Results

January 28, 2014

AmerisourceBergen Corp. reported that in its fiscal year 2014 first quarter ended December 31, 2013 , adjusted diluted earnings per share from continuing operations increased 9.6 percent to $0.80 . In a release on January 23 , the Company noted that revenue increased 38.5 percent to $29.2 billion in the quarter. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share from continuing operations were $0.21 for the December quarter of fiscal 2014. "In our December quarter, we delivered solid results as we onboarded substantial new business," said Steven H. Collis , AmerisourceBergen President and Chief Executive Officer. "We performed well operationally, made meaningful progress through a significant working capital transition, and positioned ourselves well to meet our objectives for the fiscal year." Comments below compare adjusted results from continuing operations, which exclude: -Gains from antitrust litigation settlements; -LIFO expense; -Acquisition related expenses and intangibles amortization; -Warrant expense; and -Special 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. Summary of Adjusted Quarterly Results -Revenue: In the first quarter of fiscal 2014, revenue was $29.2 billion , up 38.5 percent compared to the same quarter in the previous fiscal year, reflecting a 46 percent increase in AmerisourceBergen Drug Corp. (ABDC) revenue, and an 8 percent increase in AmerisourceBergen Specialty Group (ABSG) revenue. -Gross Profit: Gross profit in the fiscal 2014 first quarter was $724.8 million , an 11.6 percent increase over the same period in the previous year, driven by strong revenue growth and solid performance relating to generic pharmaceuticals in ABDC, offset by a substantial increase in lower margin brand business. Gross profit as a percentage of revenue decreased 60 basis points to 2.48 percent. -Operating Expenses: In the first quarter of fiscal 2014, operating expenses were $402.1 million , up 13.8 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 first quarter were 1.38 percent compared with 1.68 percent for the same period in the previous fiscal year. -Operating Income: In the fiscal 2014 first quarter, operating income of $322.7 million was up 8.9 percent versus the prior year, as the increase in gross profit was offset in part by the increase in operating expenses. Operating income as a percentage of revenue decreased 30 basis points to 1.11 percent in the fiscal 2014 first quarter compared to the previous year's first quarter. -Tax Rate: The effective tax rate for the first quarter of fiscal 2014 was 38.2 percent, up from 37.8 percent in the previous fiscal year's first quarter. Going forward, we expect our annualized effective tax rate to be in the low 38 percent range. -Earnings Per Share: Diluted earnings per share from continuing operations were up 9.6 percent to $0.80 in the first quarter of fiscal year 2014 compared to $0.73 in the previous fiscal year's first quarter, driven by the increase in operating income. -Shares Outstanding: Diluted weighted average shares outstanding for the first quarter of fiscal year 2014 were 235.4 million, a slight decrease versus the prior year as share repurchases offset option exercises. Segment Discussion The Pharmaceutical Distribution segment includes both AmerisourceBergen Drug Corp. and AmerisourceBergen Specialty Group . Other includes AmerisourceBergen Consulting Services (ABCS) and World Courier . Pharmaceutical Distribution Segment In the first fiscal quarter of 2014, Pharmaceutical Distribution revenues were $28.6 billion , an increase of 39 percent compared to the same quarter in the prior year. ABDC revenues increased 46 percent, due primarily to the onboarding of the new Walgreens branded pharmaceuticals business and increased sales to our large PBM customer, as well as other large customers. ABSG revenues increased 8 percent, which was 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 $976.8 million and $863.8 million in the quarters ended December 31, 2013 and 2012, respectively. Operating income of $286.8 million in the December quarter of fiscal 2014 increased 8 percent compared to the same period in the previous year due to the new Walgreens branded pharmaceuticals business in ABDC, strong contributions from generics, and solid performance in ABSG, as a decline in performance in our community oncology business was offset by strong performance in our physician office, vaccine and blood products distribution businesses. Other Revenues in Other were $604.1 million in the first quarter of fiscal 2014, an increase of 20 percent over the same period in the prior year. Operating income increased 21 percent to $36.0 million in the first quarter of fiscal 2014, driven by strong performance in World Courier . Fiscal Year 2014 Expectations AmerisourceBergen continues to expect adjusted diluted earnings per share from continuing operations in fiscal year 2014 to be in the range of $3.60 to $3.73 , a 12 percent to 16 percent increase over fiscal 2013. We have increased our revenue growth expectations to a range of 30 percent to 34 percent, and continue to expect adjusted operating income growth in the 12 percent to 16 percent range. We now expect adjusted operating margin to decline in the 20 to 23 basis points range due to the onboarding of significant new lower margin business and growth in brand pharmaceutical business with our large customers. We continue to expect to generate free cash flow in the range of $500 to $700 million , with capital expenditures in the $300 million range; and to spend approximately $500 million in share repurchases, subject to market conditions. More information: www.amerisourcebergen.com ((Comments on this story may be sent to newsdesk@closeupmedia.com ))


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