10-QPeriod: Q2 FY2013

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2013

Filed May 9, 2013For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) reported its first quarter results for fiscal year 2013, showing a modest increase in revenue of 4.1% to $20.5 billion for the quarter and 4.8% to $41.6 billion for the first six months. This growth was driven by both the Pharmaceutical Distribution segment and the 'Other' segment, which includes World Courier acquired in April 2012. However, net income significantly decreased due to losses from discontinued operations, particularly related to the planned divestitures of AndersonBrecon and AmerisourceBergen Canada Corporation, which included substantial goodwill impairment and loss on sale charges. The company also announced a significant strategic partnership with Walgreen Co. and Alliance Boots GmbH, including a ten-year pharmaceutical distribution agreement and the issuance of warrants to Walgreens and Alliance Boots for a minority equity stake in Cencora. While this partnership is expected to drive future revenue growth, particularly starting in fiscal year 2014 with the integration of Walgreens' generic drug distribution, it also introduces potential dilution and operational complexities. The company's balance sheet remains strong with significant cash on hand and available credit facilities, though increased inventory and accounts receivable were noted for the period.

Financial Highlights

55 data points
Beta

Revenue

$20.52B

3.5% Gross Margin

Net Income

$45.63M

0.2% Net Margin

EPS (Diluted)

$0.19

Total Assets

$16.11B

Cash & Equivalents

$1.35B

Free Cash Flow

$953.27M

Financial Statements
Beta
Revenue$20.52B
Cost of Revenue$19.81B
Gross Profit$716.99M
SG&A Expenses$323.54M
Operating Income$350.12M
Net Income$45.63M
EPS (Basic)$0.20
EPS (Diluted)$0.19
Shares Outstanding (Basic)230.42M
Shares Outstanding (Diluted)234.59M

Key Highlights

  • 1Revenue increased by 4.1% year-over-year for the quarter to $20.5 billion, driven by growth in both Pharmaceutical Distribution and Other segments.
  • 2Net income significantly declined by 78.7% for the quarter to $45.6 million, primarily due to a $164.5 million loss from discontinued operations, including goodwill impairment and sale losses.
  • 3A major strategic partnership was announced with Walgreen Co. and Alliance Boots GmbH, involving a 10-year distribution agreement and warrants for a minority equity stake, expected to boost future revenue.
  • 4The company is undergoing divestitures of its packaging and clinical trials services business (AndersonBrecon) and Canadian distribution business (AmerisourceBergen Canada Corporation), classifying them as discontinued operations.
  • 5Operating expenses increased by 21.2% for the quarter, largely due to the inclusion of World Courier's operating costs acquired in the prior year.
  • 6Cash provided by operating activities increased by 11.0% to $743.7 million for the six-month period, but working capital management showed increased days sales outstanding and inventory on hand.
  • 7The company repurchased $284.7 million of its common stock during the first six months of the fiscal year and has $562.4 million remaining under its current share repurchase program.

Frequently Asked Questions

The discontinued operations, primarily related to the planned divestitures of AndersonBrecon and AmerisourceBergen Canada Corporation, significantly impacted profitability. For the three months ended March 31, 2013, there was a loss of $158.5 million from discontinued operations, including a goodwill impairment charge and an estimated loss on the sale of AmerisourceBergen Canada Corporation. This heavily contributed to the overall decrease in net income for the period.

The partnership includes a ten-year pharmaceutical distribution agreement where Cencora will distribute branded and generic drugs for Walgreens, starting September 1, 2013, and expanding into generic distribution in 2014. Additionally, Walgreens and Alliance Boots have the right, but not the obligation, to purchase a minority equity stake in Cencora through warrants, which were valued at $314.1 million as of March 31, 2013, and are expensed over their vesting periods as an operating expense.

Cencora maintains strong liquidity with $1.35 billion in cash and cash equivalents as of March 31, 2013. The company has substantial availability under its multi-currency revolving credit facility ($681.5 million) and receivables securitization facility ($700 million). Total long-term debt remained stable at approximately $1.4 billion. The company continues to fund its operations, capital expenditures, dividends, and share repurchases through operating cash flow and existing credit facilities.

Management expects revenue growth to accelerate in the second half of fiscal year 2013, with a full-year revenue increase projected between 11% and 13%. This is supported by the new contract with Express Scripts and the anticipated revenue from the Walgreens distribution agreement, as well as a full year of operating results from World Courier.