10-QPeriod: Q3 FY2009

Cencora, Inc. Quarterly Report for Q3 Ended Jun 30, 2009

Filed August 6, 2009For Securities:COR

Summary

Cencora, Inc. (COR) reported its second quarter fiscal year 2009 results, demonstrating resilience and growth in a challenging economic environment. Total revenue saw a modest 2% increase year-over-year, driven by new customer acquisitions and strong performance in its specialty group (ABSG), which more than offset the loss of a significant retail customer. Despite this revenue growth, the company faced headwinds from declining anemia drug sales and the anniversary impact of losing a large retail customer. Gross profit margins improved due to stronger generic programs and fee-for-service agreements, while operating income also saw a healthy increase, reflecting effective cost management and operational efficiencies. The company continued its strategic capital allocation, including share repurchases and dividend payments, supported by robust liquidity and access to credit facilities.

Financial Highlights

52 data points
Beta

Revenue

$18.39B

2.8% Gross Margin

Net Income

$118.81M

0.6% Net Margin

EPS (Diluted)

$0.40

Total Assets

$12.74B

Cash & Equivalents

$912.92M

Free Cash Flow

$364.41M

Financial Statements
Beta
Revenue$18.39B
Cost of Revenue$17.87B
Gross Profit$519.22M
SG&A Expenses$277.43M
Operating Income$212.99M
Net Income$118.81M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)298.48M
Shares Outstanding (Diluted)300.59M

Key Highlights

  • 1Total revenue increased by 2% to $18.4 billion for the quarter, primarily driven by new customer wins and growth in the specialty segment (ABSG), partially offset by the loss of a major retail customer.
  • 2Gross profit margin improved by 5 basis points to 2.82% of total revenue, attributed to stronger performance in generic programs and fee-for-service agreements.
  • 3Operating income rose by 8% to $213.0 million, reflecting improved gross profit and effective management of operating expenses, though future growth will be impacted by a large customer contract renewal.
  • 4The company completed the acquisition of Innomar Strategies Inc., a Canadian specialty pharmaceutical services company, for $13.4 million, expanding its Canadian operations.
  • 5Diluted earnings per share from continuing operations increased by 20% to $0.42, benefiting from operating income growth, lower interest expense, and a reduced effective tax rate.
  • 6Liquidity remains strong, with significant availability under revolving credit facilities and a receivables securitization facility, providing ample capital for working needs and strategic initiatives.
  • 7The company repurchased $273.7 million of its common stock during the first nine months of fiscal 2009 as part of its ongoing share repurchase program.

Frequently Asked Questions

Revenue growth in the quarter ended June 30, 2009, was primarily driven by the addition of two new large customers and above-market growth in the AmerisourceBergen Specialty Group (ABSG). These factors helped offset the impact of losing certain business with a national retail drug chain customer in the prior year.

Gross profit margin improved to 2.82% of total revenue from 2.77% in the prior year quarter. This improvement was mainly due to the strong growth and profitability of generic programs, increased contributions from fee-for-service agreements, and higher brand-name pharmaceutical price appreciation. Operating income also increased by 8%.

The company faces several headwinds, including declining sales of anemia-related products (particularly for cancer treatment) due to regulatory changes, stricter Medicare reimbursement policies, and updated clinical guidelines. Additionally, the renewal of a large customer contract starting July 1, 2009, is expected to reduce operating income growth by approximately 3% over the next twelve months. There is also ongoing concern about volatility in credit markets and potential impacts from provincial legislation in Canada affecting pharmaceutical pricing and service fees.

Cencora maintains strong liquidity through significant availability under its revolving credit facilities and receivables securitization facility, which are sufficient to fund working capital requirements. The company also generated positive cash flow from operations and continues its share repurchase program, demonstrating its commitment to returning capital to shareholders while funding strategic initiatives and operational needs.