10-QPeriod: Q3 FY2011

Cencora, Inc. Quarterly Report for Q3 Ended Jun 30, 2011

Filed August 8, 2011For Securities:COR

Summary

Cencora, Inc. (COR) reported a solid quarter ending June 30, 2011, with revenue increasing by 2.9% year-over-year to $20.2 billion. This growth was primarily driven by the AmerisourceBergen Drug Corporation (ABDC) segment, which saw a 4% revenue increase, partly offset by a 2% decline in the AmerisourceBergen Specialty Group (ABSG) segment. The company demonstrated improved profitability, with gross profit rising 11.1% and operating income growing 12.5%. This was attributed to the successful launch of specialty generic oncology drugs, strong performance in non-specialty generic programs, and increased contributions from fee-for-service agreements with manufacturers. Despite increased operating expenses related to IT system upgrades and other initiatives, Cencora managed to improve its operating margin by 13 basis points. Net income increased by 13.0%, leading to a 15.8% rise in diluted earnings per share to $0.66.

Financial Highlights

56 data points
Beta

Revenue

$20.10B

3.2% Gross Margin

Net Income

$184.42M

0.9% Net Margin

EPS (Diluted)

$0.66

Total Assets

$14.86B

Cash & Equivalents

$2.00B

Free Cash Flow

$196.94M

Financial Statements
Beta
Revenue$20.10B
Cost of Revenue$19.46B
Gross Profit$643.25M
SG&A Expenses$304.17M
Operating Income$312.21M
Net Income$184.42M
EPS (Basic)$0.67
EPS (Diluted)$0.66
Shares Outstanding (Basic)273.49M
Shares Outstanding (Diluted)279.01M

Key Highlights

  • 1Revenue for the quarter increased 2.9% to $20.2 billion, driven by strong performance in the ABDC segment.
  • 2Gross profit saw an 11.1% increase to $653.6 million, aided by specialty generic product launches and fee-for-service agreements.
  • 3Operating income grew by 12.5% to $317.2 million, showcasing improved operational efficiency.
  • 4Net income rose 13.0% to $184.4 million, translating to diluted EPS of $0.66, a 15.8% increase.
  • 5The company continues to actively repurchase shares, having spent $400.0 million in the nine-month period under its $500 million program.
  • 6Cencora has substantial liquidity with $1.37 billion available under revolving credit facilities and a receivables securitization facility.
  • 7Significant investments are being made in a new ERP platform, impacting operating expenses but expected to yield long-term benefits.

Frequently Asked Questions

Revenue growth was primarily driven by a 4% increase in sales within the AmerisourceBergen Drug Corporation (ABDC) segment, fueled by growth in alternate site and independent customers. This was partly offset by a 2% revenue decline in the AmerisourceBergen Specialty Group (ABSG) segment, largely due to the discontinuance of a third-party logistics contract and reduced sales to dialysis providers.

Profitability improved significantly due to an 11.1% increase in gross profit, attributed to the successful launch of specialty generic oncology drugs (Oxaliplatin, Gemcitabine, Docetaxel), strong performance in non-specialty generic programs, and increased contributions from fee-for-service agreements with pharmaceutical manufacturers. The company also managed to improve its operating income margin despite higher operating expenses related to IT system upgrades.

Key risks include potential loss of major customers (such as the impending merger of Medco Health Solutions with Express Scripts), changes in pharmaceutical pricing and distribution policies, increased competition, generic drug pricing deflation, and the ongoing costs and successful implementation of the new ERP system. The company also notes potential impacts from changes in medical guidelines and Medicare reimbursement rates, particularly for oncology drugs.

Cencora maintains strong liquidity, with $1.37 billion in availability under its revolving credit facilities and receivables securitization facility. The company also has significant cash balances and generates substantial cash flow from operations, which is expected to be sufficient to fund working capital, debt payments, dividends, share repurchases, and capital expenditures.