Feb 4 2011
AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2011 first quarter, ended December 31, 2010, diluted earnings per share were $0.57, a 10 percent increase. Revenue in the quarter was a record $19.9 billion, up 3 percent. The Company also reaffirmed its expectations for fiscal year 2011 diluted earnings per share in the range of $2.31 to $2.41. All the results are presented in accordance with U.S. generally accepted accounting principles (GAAP).
“In the December quarter, we delivered outstanding performance on top of exceptional performance last year. We had strong results in all of our business units, we benefited from successful generic drug launches, and we continued to demonstrate expense and working capital discipline”
Fiscal First Quarter Highlights
- Record Revenue of $19.9 billion, up 2.9 percent.
- Diluted earnings per share of $0.57, a 9.6 percent increase.
- Operating expense ratio of a record low 1.53 percent, down 3 basis points.
- Operating margin of 1.39 percent, up 3 basis points.
- Share repurchases of $185 million.
"In the December quarter, we delivered outstanding performance on top of exceptional performance last year. We had strong results in all of our business units, we benefited from successful generic drug launches, and we continued to demonstrate expense and working capital discipline," said R. David Yost, AmerisourceBergen Chief Executive Officer. "Our balance sheet remains strong, and we continue to have excellent financial flexibility. We are off to a solid start for the fiscal year, demonstrating the strength of our two growth drivers - generics and specialty pharmaceuticals."
Results Highlights
- Revenue: Revenue was a record $19.9 billion in the first quarter of fiscal 2011, a 2.9 percent increase over the same quarter in the previous fiscal year, driven by a 4.8 percent increase in AmerisourceBergen Drug Corporation (ABDC) revenue and offset by the expected decline in AmerisourceBergen Specialty Group (ABSG) revenue, which was down 3.8 percent. The above-market growth in ABDC revenue was driven by certain of our large customers, and the decline in ABSG revenue was primarily due to the previously disclosed September 2010 discontinuation of an $800 million annual revenue contract in its third party logistics business.
- Gross Profit: Gross profit in the fiscal 2011 first quarter was $580.2 million, a 3.0 percent increase over the year-ago same period, primarily due to increased revenue, including low double-digit growth in generic revenue, increased contributions from fee-for-service agreements with manufacturers, and a non-recurring $12 million benefit in connection with a customer being acquired by a third party. The benefits were offset in part by normal competitive pressures and an expected decline in specialty generics gross profit in the quarter following exceptionally strong performance in the prior year quarter. Gross profit as a percentage of revenue increased 1 basis point to 2.92 percent over the same period in the previous year. The LIFO charge in the fiscal 2011 first quarter was $9.9 million compared with a $7.8 million charge in the previous year's first quarter.
- Operating Expenses: For the first quarter of fiscal 2011, operating expenses were $303.5 million compared with $301.0 million in the prior fiscal year's first quarter, a 0.8 percent increase, which was well below the 2.9 percent revenue increase. The increase in operating expenses was due to the expected increase in information technology costs which were offset by a reduction in bad debt and incentive compensation costs. Operating expenses as a percentage of revenue in the fiscal first quarter of 2011 were a record low 1.53 percent, down 3 basis points from the same period in the previous fiscal year due to productivity gains.
- Operating Income: In the fiscal 2011 first quarter, operating income increased 5.5 percent to $276.8 million, due primarily to the increase in gross profit. Operating income as a percentage of revenue increased 3 basis points to 1.39 percent in the period compared with the previous year's first quarter.
- Tax Rate: The effective tax rate for the first quarter of fiscal 2011 was 38.1 percent, compared to 38.2 percent in the previous fiscal year's first quarter. We continue to expect our annualized effective tax rate to be approximately 38.4 percent.
- Earnings Per Share: Diluted earnings per share were up 9.6 percent to $0.57 in the first quarter of fiscal 2011 compared to $0.52 in the previous fiscal year's first quarter. Earnings per share growth exceeded the 6% growth in net income due to the 4% reduction in diluted average shares outstanding.
- Shares Outstanding: Diluted average shares outstanding for the first quarter of fiscal year 2011 were 280.7 million, down 10.6 million shares from the previous fiscal year's first quarter due primarily to share repurchases, net of option exercises over the last twelve months.
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," said R. David Yost, AmerisourceBergen Chief Executive Officer. "Key assumptions supporting the diluted earnings per share range for fiscal year 2011 are: revenue growth of between 2 percent and 4 percent; operating margin expansion 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."