01—Abstract
Summary
Summary of the 10-K filed November 23, 2010. Cited figures are marked; the original filing is the authoritative source.
Cencora, Inc. (formerly AmerisourceBergen) reported its fiscal year results ending September 30, 2010.
The company, a major pharmaceutical services provider, experienced robust revenue growth driven by its Pharmaceutical Distribution segment. This segment, comprising AmerisourceBergen Drug Corporation (ABDC), AmerisourceBergen Specialty Group (ABSG), and AmerisourceBergen Packaging Group (ABPG), saw a significant increase in revenue year-over-year. The company highlighted strong performance in its generic drug programs and increased contributions from fee-for-service agreements with pharmaceutical manufacturers, particularly benefiting from a new generic oncology drug launch.
Despite the positive revenue trend, Cencora highlighted several risk factors, including intense competition in the pharmaceutical distribution market, potential price deflation in generics, and the impact of economic conditions. The company also noted ongoing investments in its Business Transformation project, including a new enterprise resource planning (ERP) platform, which is expected to improve efficiency and lower costs in the long term, although it incurred significant expenses during the implementation phase. Cencora continued its commitment to shareholder returns through dividend increases and share repurchases.
02—Key points
Key Highlights
- Reported total revenue of $77.95 billion for the fiscal year ended September 30, 2010, an increase of 8.6% from the prior year.
- The Pharmaceutical Distribution segment, the company's sole reportable segment, demonstrated strong performance with revenue growth driven by both its core distribution business (ABDC) and specialty distribution services (ABSG).
- Generic programs were a key profit driver, with generic revenue increasing by 17% year-over-year, significantly contributing to gross profit margin improvement.
- The company is investing heavily in its Business Transformation project, including the implementation of a new ERP platform, aiming for long-term operational efficiencies, despite incurring significant implementation costs.
- Cencora actively returned capital to shareholders through increased quarterly dividends and share repurchases, demonstrating confidence in its financial stability and future prospects.
- The company faces significant competition from national players like Cardinal Health and McKesson, and acknowledges the pressure to maintain competitive pricing and service levels.
- Despite revenue growth, the company's results were impacted by increased bad debt expense, primarily related to physician customers within its specialty business.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Cencora, Inc. kept $0.01.
- Revenue$77.78B100.0%
- Cost of revenue−$75.45B97.0%
- Gross profit$2.33B3.0%
- Operating costs−$1.23B1.6%
- Operating income$1.09B1.4%
- Interest, other & tax−$455.2M0.6%
- Net income$636.7M0.8%
Where FY2010 revenue went
$77.78B- Cost of revenue: $75.45B, 97% of revenue
- Net income: $636.7M, 0.8% of revenue
- SG&A: $1.15B, 1.5% of revenue
- Interest, other & tax: $455.2M, 0.6% of revenue
Kept 0.8% as net incomeNet income $636.7M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed November 23, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $77.78B$71.76B | +8.4% |
| Cost of Revenue | $75.45B$69.66B | +8.3% |
| Gross Profit | $2.33B$2.10B | +10.7% |
| SG&A Expenses | $1.15B$1.12B | +2.7% |
| Operating Income | $1.09B$883.75M | +23.6% |
| Net Income | $636.75M$503.40M | +26.5% |
| EPS (Basic) | $2.26$1.67 | +35.3% |
| EPS (Diluted) | $2.22$1.66 | +33.7% |
| Shares Outstanding (Basic) | 282.26M300.57M | −6.1% |
| Shares Outstanding (Diluted) | 287.25M302.75M | −5.1% |
05—Questions
Frequently Asked Questions
What was Cencora's (AmerisourceBergen) primary business focus and performance in fiscal year 2010?
Cencora's primary business focus remained pharmaceutical distribution and related services, operating as a single reportable segment. The company reported strong revenue growth of 8.6% to $77.95 billion, driven by increases in both its core drug distribution (ABDC) and specialty distribution (ABSG) businesses. Key drivers for gross profit included the growth in generic programs and fee-for-service agreements, with a notable benefit from a generic oncology drug launch.
What are the key risks and challenges Cencora faced during this period?
Cencora identified several key risks, including intense competition from major players like Cardinal Health and McKesson, potential price deflation in generic pharmaceuticals, and the impact of broader economic conditions on healthcare spending. The company also noted increased bad debt expenses, particularly within its specialty physician segment, and ongoing costs associated with its significant investment in a new ERP system.
How was Cencora managing its capital and returning value to shareholders?
Cencora demonstrated a commitment to shareholder returns by increasing its quarterly dividend and actively repurchasing its common stock. The company had approximately $98.1 million remaining under its November 2009 share repurchase program and authorized an additional $500 million in September 2010. Future cash flows from operations and borrowings were expected to fund ongoing cash requirements, including capital expenditures, acquisitions, debt repayment, dividends, and share repurchases.
What significant investments were Cencora making for future growth?
Cencora was making significant investments in its Business Transformation project, primarily focused on implementing a new enterprise resource planning (ERP) platform. This initiative was expected to enhance business practices, lower operating costs, and improve overall efficiency. The company also continued to seek strategic acquisitions to complement its growth plans, having acquired Innomar Strategies Inc. in Canada in fiscal 2009.
06—Continue