8-KEarnings & ResultsRegulation FDOther Events+1

Cencora, Inc. 8-K Report, Financial Results (Apr 26, 2012)

Filed April 26, 2012For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) filed an 8-K on April 26, 2012, to report on its financial results for the fiscal quarter ended March 31, 2012, and to provide updated guidance and disclose significant business developments. The filing primarily focuses on reiterating full-year 2012 earnings per share expectations and revising upward guidance for free cash flow and share repurchases. A key event disclosed is the amendment of a contract with Medco Health Solutions following its merger with Express Scripts, which will result in the contract's termination upon the award of new agreements for the combined entity, with a new contract expected to commence by October 1, 2012. Cencora intends to participate in the competitive bidding process for these new contracts. Investors should note the company's confidence in its full-year earnings outlook, supported by improved free cash flow generation and a commitment to returning capital to shareholders through increased share repurchases. However, the potential loss of the Medco contract, contingent on the outcome of a competitive RFP process, represents a significant event that could impact future revenue and profitability. The company's active participation in the RFP process indicates its strategic intent to retain a portion of the business.

Key Highlights

  • 1AmerisourceBergen (Cencora) reiterated its fiscal year 2012 diluted earnings per share (EPS) guidance in the range of $2.74 to $2.84.
  • 2The company increased its free cash flow expectations for fiscal year 2012 to a range of $800 million to $900 million, including approximately $200 million in capital expenditures.
  • 3Expectations for share repurchases in fiscal year 2012 were increased, with approximately $500 million now anticipated for buying back common stock, subject to market conditions.
  • 4Revenue growth for fiscal year 2012 is still expected to be flat to modest.
  • 5Operating margin growth is now projected in the high single-digit basis point range, an improvement from previous expectations.
  • 6Following the merger of Express Scripts and Medco, Cencora's agreement with Medco will terminate upon the award of new contracts for the combined business.
  • 7New distribution agreements for the combined Express Scripts/Medco entity are anticipated to begin on October 1, 2012, and Cencora will participate in the competitive RFP process for these contracts.

Frequently Asked Questions

Cencora reiterated its diluted EPS guidance of $2.74 to $2.84. It increased its free cash flow expectations to $800 million - $900 million and plans to spend approximately $500 million on share repurchases. The company still anticipates flat to modest revenue growth but now expects operating margin growth in the high single-digit basis point range.

The merger of Express Scripts and Medco has led to an amendment of Cencora's existing agreement with Medco. This agreement will now end upon the implementation of new distribution contracts for the combined company. A Request for Proposal (RFP) process is underway, with new contracts expected to start by October 1, 2012.

Cencora intends to fully participate in the competitive RFP process initiated by Express Scripts for the combined business. While the outcome is uncertain, the company's active participation suggests a strategic effort to secure new contracts and retain a portion of the business.

Cencora continues to expect flat to modest revenue growth for fiscal year 2012. However, it has improved its outlook for operating margin growth to the high single-digit basis point range.