8-KOther Events

Cencora, Inc. 8-K Report, Corporate Update (Jun 8, 2006)

Filed June 8, 2006For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation), through its PharMerica reporting segment, disclosed a significant legal dispute with Beverly Enterprises, Inc. (Beverly) and its affiliates. The core of the issue revolves around a contract for Cencora's Long-Term Care business with Beverly, which accounted for approximately 11% of PharMerica's operating revenue in fiscal year 2005. Following Beverly's acquisition by Fillmore Capital Partners in March 2006, Beverly is asserting that a majority of its facilities will no longer be covered by the existing contract after its current term ends on June 30, 2006. In response, Cencora has filed a lawsuit seeking a judicial declaration that Beverly and its facilities remain bound by the contract, including its automatic five-year renewal with an annual price adjustment. The company acknowledges that a loss of this business, or a continuation on less favorable terms, would negatively impact PharMerica's operating revenue and results. Investors should monitor the outcome of this litigation as it presents a material risk to Cencora's financial performance.

Key Highlights

  • 1Cencora's PharMerica segment faces a contract dispute with Beverly Enterprises following Beverly's acquisition.
  • 2The disputed contract contributed approximately 11% of PharMerica's operating revenue in FY2005.
  • 3Beverly claims most of its long-term care facilities will be excluded from the contract after June 30, 2006.
  • 4Cencora has filed a lawsuit seeking to enforce the existing contract and its automatic renewal.
  • 5The contract includes an automatic five-year renewal and an annual price adjustment provision.
  • 6Failure to retain the Beverly contract on favorable terms could materially harm PharMerica's revenue and results.

Frequently Asked Questions

Cencora is reporting a legal dispute with Beverly Enterprises, Inc. (Beverly) concerning a significant contract for its Long-Term Care business. Beverly claims that most of its facilities will no longer be covered by the contract when its current term ends on June 30, 2006.

The contract with Beverly accounted for approximately 11% of the operating revenue for Cencora's PharMerica reporting segment in the fiscal year ended September 30, 2005. Therefore, it represents a material portion of PharMerica's business.

Cencora has filed a lawsuit in the Delaware Court of Chancery on behalf of its Long-Term Care business against Beverly and its affiliates. The lawsuit seeks a court order declaring that Beverly's facilities are bound by the existing contract and requiring them to continue adhering to its terms.

If Cencora loses all or a substantial portion of this contract with Beverly, or if it continues on significantly less favorable terms, it would adversely affect PharMerica's operating revenue and overall results of operations.