10-KPeriod: FY2010

Cencora, Inc. Annual Report, Year Ended Sep 30, 2010

Filed November 23, 2010For Securities:COR

Summary

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.

Financial Highlights

55 data points
Beta

Revenue

$77.78B

3.0% Gross Margin

Net Income

$636.75M

0.8% Net Margin

EPS (Diluted)

$2.22

Total Assets

$14.43B

Cash & Equivalents

$1.66B

Free Cash Flow

$932.15M

Financial Statements
Beta
Revenue$77.78B
Cost of Revenue$75.45B
Gross Profit$2.33B
SG&A Expenses$1.15B
Operating Income$1.09B
Net Income$636.75M
EPS (Basic)$2.26
EPS (Diluted)$2.22
Shares Outstanding (Basic)282.26M
Shares Outstanding (Diluted)287.25M

Key Highlights

  • 1Reported total revenue of $77.95 billion for the fiscal year ended September 30, 2010, an increase of 8.6% from the prior year.
  • 2The 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).
  • 3Generic programs were a key profit driver, with generic revenue increasing by 17% year-over-year, significantly contributing to gross profit margin improvement.
  • 4The 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.
  • 5Cencora actively returned capital to shareholders through increased quarterly dividends and share repurchases, demonstrating confidence in its financial stability and future prospects.
  • 6The company faces significant competition from national players like Cardinal Health and McKesson, and acknowledges the pressure to maintain competitive pricing and service levels.
  • 7Despite revenue growth, the company's results were impacted by increased bad debt expense, primarily related to physician customers within its specialty business.

Frequently Asked Questions

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.

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.

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.

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.