10-QPeriod: Q2 FY2007

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2007

Filed May 8, 2007For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) reported strong top-line growth in its first quarter of fiscal year 2007, with total revenue increasing by 9% to $16.5 billion compared to the prior year. The company saw robust performance in its Pharmaceutical Distribution segment, which experienced a 9% revenue increase driven by growth in its ABDC and ABSG operating segments. The PharMerica segment also showed growth, with revenue up 5%. Net income remained relatively flat year-over-year at $129.5 million, though diluted earnings per share saw an 11% increase to $0.68, benefiting from a reduced share count due to ongoing share repurchase programs. Key financial developments include increased operating income for the Pharmaceutical Distribution segment, a positive sign for core business profitability. However, the company is navigating some headwinds, including a slight decrease in operating income for the PharMerica segment and a decrease in antitrust litigation settlement gains compared to the prior year. Management is actively pursuing strategic acquisitions, with a significant deal for Bellco Health pending, which could further bolster growth. The company also continues its facility consolidation and integration initiatives. Investors should monitor the impact of ongoing regulatory changes and potential impacts from the DEA's suspension of a subsidiary's license for controlled substances.

Key Highlights

  • 1Total revenue increased by 9% to $16.51 billion for the three months ended March 31, 2007, compared to the prior year's $15.22 billion.
  • 2The Pharmaceutical Distribution segment, the company's largest, saw revenue grow by 9% to $15.08 billion.
  • 3Net income was $129.5 million, largely in line with the prior year's $129.0 million. Diluted earnings per share increased by 11% to $0.68, benefiting from share repurchases.
  • 4Operating income increased by 12% to $220.9 million, primarily driven by the Pharmaceutical Distribution segment's improved performance.
  • 5The company completed several acquisitions in late 2006 and is pursuing a significant acquisition of Bellco Health, demonstrating a focus on strategic growth.
  • 6Cash provided by operating activities was $710.8 million for the six months ended March 31, 2007, indicating solid operational cash generation.
  • 7The company is navigating regulatory scrutiny, including a DEA investigation into a subsidiary's distribution of controlled substances, which could impact operations.

Frequently Asked Questions

Cencora reported a 9% increase in total revenue to $16.51 billion for the three months ended March 31, 2007, compared to $15.22 billion in the same period last year. The Pharmaceutical Distribution segment was the primary driver of this growth.

Net income was relatively flat year-over-year at $129.5 million. However, diluted earnings per share increased by 11% to $0.68, primarily due to a reduction in outstanding shares from ongoing share repurchase programs. Operating income, a measure of operational profitability, saw a healthy 12% increase to $220.9 million.

The company completed several acquisitions in late 2006 and has a significant acquisition of Bellco Health pending, signaling a focus on growth through strategic M&A. Additionally, the company is actively managing facility consolidations and integration efforts, and is addressing potential impacts from regulatory changes and investigations, such as the DEA matter concerning controlled substances.

Cencora has a substantial amount of debt, including fixed-rate senior notes and variable-rate revolving credit facilities. The company's liquidity appears adequate, supported by operating cash flows and significant availability under its revolving credit facilities and receivables securitization facility, enabling it to fund working capital, acquisitions, and capital expenditures.