10-QPeriod: Q2 FY2011

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2011

Filed May 6, 2011For Securities:COR

Summary

Cencora, Inc. (COR) reported solid financial performance for the quarter and six months ended March 31, 2011. Revenue saw modest growth driven by the AmerisourceBergen Drug Corporation (ABDC) segment, despite a decline in the AmerisourceBergen Specialty Group (ABSG) due to the discontinuation of a contract. Notably, gross profit and operating income showed significant increases, outperforming revenue growth, largely attributed to the successful launch and profitability of specialty generic products, particularly in oncology. The company is actively managing its capital resources, demonstrating strong cash flow from operations and maintaining substantial availability under its credit facilities. Cencora is also returning value to shareholders through share repurchases and consistent dividend payments. While facing some headwinds, such as the upcoming loss of a large retail customer and the ongoing investment in its ERP system implementation, the company projects continued revenue growth and expresses confidence in its liquidity and ability to meet its financial obligations.

Financial Highlights

56 data points
Beta

Revenue

$19.71B

3.4% Gross Margin

Net Income

$214.38M

1.1% Net Margin

EPS (Diluted)

$0.77

Total Assets

$14.68B

Cash & Equivalents

$1.91B

Free Cash Flow

$632.72M

Financial Statements
Beta
Revenue$19.71B
Cost of Revenue$19.03B
Gross Profit$677.92M
SG&A Expenses$291.04M
Operating Income$361.63M
Net Income$214.38M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Basic)274.32M
Shares Outstanding (Diluted)279.77M

Key Highlights

  • 1Revenue increased by 2.4% to $19.8 billion for the quarter and 2.6% to $39.6 billion for the six months ended March 31, 2011.
  • 2Gross profit rose significantly by 12.3% for the quarter and 7.8% for the six months, with gross profit margin improving due to specialty generic launches and fee-for-service agreements.
  • 3Operating income demonstrated strong growth, up 17.4% for the quarter and 11.9% for the six months, indicating improved operational efficiency despite higher operating expenses.
  • 4Net income and diluted EPS showed robust year-over-year increases, with net income growing 18% for the quarter and 13% for the six months, and EPS up 22% and 17% respectively.
  • 5The company maintained strong liquidity with significant availability under its revolving credit facilities and receivables securitization facility, totaling over $1.3 billion.
  • 6Cencora actively repurchased shares, with $254.9 million in buybacks during the first six months of the fiscal year, and expects to complete its current $500 million repurchase program by year-end.
  • 7The company is investing in its future with ongoing implementation of a new ERP system, which is contributing to increased operating expenses but is expected to enhance long-term efficiency.

Frequently Asked Questions

Revenue growth in the quarter was primarily driven by a 4% increase from AmerisourceBergen Drug Corporation (ABDC), benefiting from overall pharmaceutical market growth and strong performance from key customers. This was partially offset by a 2% revenue decline in the AmerisourceBergen Specialty Group (ABSG) due to the discontinuation of a contract with a third-party logistics customer.

The increase in gross profit was largely attributable to the successful introduction and profitability of specialty generic products, especially in oncology (e.g., Oxaliplatin, Gemcitabine, Docetaxel). Increased contributions from fee-for-service agreements with pharmaceutical manufacturers and the continued strong growth of non-specialty generic programs also played a key role.

Operating expenses increased due to the incremental costs associated with maintaining dual information technology platforms during the ongoing Enterprise Resource Planning (ERP) system implementation, a rise in bad debt expense, and higher compensation costs under the annual incentive plan. The ERP implementation is expected to continue impacting expenses through calendar 2012.

Cencora has a strong liquidity position, supported by significant cash balances and substantial availability under its revolving credit facilities and receivables securitization facility, totaling over $1.3 billion. The company also generates strong cash flow from operations, which it uses to fund working capital, capital expenditures, debt repayment, dividends, and share repurchases.