10-QPeriod: Q2 FY2006

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2006

Filed May 8, 2006For Securities:COR

Summary

AmerisourceBergen Corporation (COR) reported solid financial results for the quarter ended March 31, 2006, with total revenue increasing 15% year-over-year to $15.2 billion. This growth was primarily driven by a 15% increase in the Pharmaceutical Distribution segment's operating revenue, which reached $13.9 billion. The company demonstrated strong operational execution, with net income rising 30% to $129 million, and diluted earnings per share increasing 36% to $0.61. The company also made significant progress in its strategic initiatives, including acquisitions in Canada and the UK, and continued efforts to transition its distribution model to a fee-for-service basis, which is expected to improve earnings predictability. Key financial developments include a substantial increase in cash and cash equivalents to over $1 billion, reflecting strong operating cash flows. The company also repurchased a significant amount of its common stock under its share repurchase program. While the Pharmaceutical Distribution segment showed robust growth, the PharMerica segment experienced a decline in operating income due to changes in Medicare Part D reimbursement. Management remains optimistic about future growth, projecting a revenue increase of 10-12% for fiscal year 2006.

Key Highlights

  • 1Total revenue increased by 15% to $15.2 billion for the quarter ended March 31, 2006.
  • 2Net income grew by 30% to $129 million, with diluted EPS rising 36% to $0.61.
  • 3Pharmaceutical Distribution segment revenue increased 15% to $13.9 billion, driven by growth in both institutional and retail customer sales.
  • 4The company acquired four businesses in Canada and the UK during the six months ended March 31, 2006, expanding its international presence.
  • 5Cash and cash equivalents increased significantly to $1.05 billion at quarter-end.
  • 6The company continued its share repurchase program, buying back 1.0 million shares for $43.3 million during the quarter.

Frequently Asked Questions

The primary growth driver was the Pharmaceutical Distribution segment, which saw a 15% increase in operating revenue, fueled by growth in both institutional and retail customer sales, as well as contributions from acquisitions.

The company completed several acquisitions in Canada and the UK, including Trent Drugs, Network for Medical Communications & Research, Brecon Pharmaceuticals, and Asenda Pharmaceutical Supplies. These acquisitions contributed to revenue growth and expanded the company's international footprint and service offerings.

The company expects its annual revenue growth rate for fiscal 2006 to be between 10% and 12%, an increase from its prior estimate of 7% to 9%, driven by continued strong performance in the Pharmaceutical Distribution segment.

The PharMerica segment is experiencing a decline in operating income due to changes in Medicare Part D reimbursement rates, which are resulting in lower total compensation for servicing patients compared to previous periods. Additionally, the segment faces industry competitive pressures and potential impacts from manufacturer rebate policies.