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AmerisourceBergen Corp. Reports Operating Results (10-Q)

February 07, 2012 | About:
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10qk

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AmerisourceBergen Corp. (ABC) filed Quarterly Report for the period ended 2011-12-31.

Amerisourcebergen Corp. has a market cap of $10.07 billion; its shares were traded at around $38.98 with a P/E ratio of 15 and P/S ratio of 0.1. The dividend yield of Amerisourcebergen Corp. stocks is 1.3%. Amerisourcebergen Corp. had an annual average earning growth of 10.9% over the past 10 years. GuruFocus rated Amerisourcebergen Corp. the business predictability rank of 4.5-star.

Highlight of Business Operations:

Interest expense increased from the prior year quarter due to an increase of $279.0 million in average borrowings, primarily due to the November 2011 issuance of our new $500 million 3 1/2% senior notes due 2021, as described further within Liquidity and Capital Resources. In addition, interest costs capitalized relating to our Business Transformation project of $0.3 million and $1.0 million in the quarters ended December 31, 2011 and 2010, respectively, had the effect of reducing interest expense for those periods. Our average invested cash was $1.7 billion and $1.0 billion during the quarters ended December 31, 2011 and 2010, respectively. Despite the increase in our average invested cash, interest income was lower in the current year quarter due to a decrease in the weighted average interest rate and an increase in the amount of cash held in non-interest bearing cash accounts. We expect our interest expense to be significantly higher in fiscal 2012 than fiscal 2011 due to the issuance of the above mentioned notes.

Our primary ongoing cash requirements will be to finance working capital, fund the repayment of debt, fund the payment of interest on debt, fund repurchases of our common stock, fund the payment of dividends, finance acquisitions, and fund capital expenditures (including our Business Transformation project, which involves the implementation of our new ERP system) and routine growth and expansion through new business opportunities. In August 2011, our board of directors approved a new program allowing us to purchase up to $750 million of our outstanding shares of common stock, subject to market conditions. During the three months ended December 31, 2011, we purchased $119.9 million of our common stock under the $750 million share repurchase program. Additionally, we paid $8.0 million in October 2011 to settle purchases of our common stock made on September 29, 2011. As of December 31, 2011, we had $380.1 million of availability remaining on the $750 million share repurchase program. We currently expect to purchase approximately $400 million of our common stock in fiscal 2012, subject to market conditions. Future cash flows from operations and borrowings are expected to be sufficient to fund our ongoing cash requirements.

During the quarter ended December 31, 2011, our operating activities provided $431.7 million of cash in comparison to cash used of $99.2 million in the prior year quarter. Cash provided by operations during the quarter ended December 31, 2011 was principally the result of net income of $162.1 million, an increase in accounts payable, accrued expenses and income taxes of $248.0 million, a decrease in accounts receivable of $243.4 million, and non-cash items of $57.2 million, offset, in part, by an increase in merchandise inventories of $326.7 million. Non-cash items included the provision for deferred income taxes of $6.6 million, which represents a $13.7 million decline from the prior year quarter. Deferred income taxes were significantly higher in the prior year quarter due to the larger income tax deductions associated with merchandise inventories and tax bonus depreciation resulting from our Business Transformation capital expenditures. The increase in accounts payable, accrued expenses and income taxes was primarily driven by the timing of inventory purchases made and the related payments to our suppliers. The average number of days payable outstanding in the quarter ended December 31, 2011 increased over 2 days from the prior year quarter. Accounts receivable declined from September 30, 2011, reflecting timing of customer purchases and payments as of December 31, 2011. The average number of days sales outstanding in the quarter ended December 31, 2011 increased slightly to 17.7 days from 17.4 days in the prior year quarter. Consistent with prior years, we increased our merchandise inventories at December 31, 2011 due to seasonal needs, yet the average number of inventory days on hand in the quarter ended December 31, 2011 remained consistent to the prior year quarter. Our cash flow from operating activities can vary significantly from period to period based on fluctuations in our period end working capital. Currently, we expect cash from operating activities in fiscal 2012 to be between $850 million and $950 million. Operating cash uses during the quarter ended December 31, 2011 included $10.8 million of interest payments and $1.8 million of income tax payments, net of refunds.

During the quarter ended December 31, 2010, our operating activities used $99.2 million of cash. Cash used in operations during the quarter ended December 31, 2010 was principally the result of a decrease in accounts payable, accrued expenses and income taxes of $399.7 million and an increase in merchandise inventories of $227.7 million, offset, in part, by a decrease in accounts receivable of $275.8 million, net income of $160.5 million, and non-cash items of $61.0 million. The decrease in accounts payable, accrued expenses and income taxes was primarily driven by the timing of inventory purchases made and the related payments to our suppliers, particularly at ABSG, where significant inventory purchases made in fiscal 2010 were paid for in the December 2010 quarter. ABSGs accounts payable declined by approximately $300 million from September 30, 2010 to December 31, 2010. The average number of days payable outstanding in the quarter ended December 31, 2010 decreased by 1 day from the prior year quarter. Merchandise inventories increased primarily due to our revenue growth and, consistent with prior years, we increased our inventory due to seasonal needs, yet the average number of inventory days on hand in the quarter ended December 31, 2010 decreased by 1 day from the prior year quarter. Despite the increase in revenue in the quarter ended December 31, 2010, accounts receivable declined from September 30, 2010, reflecting customer mix and timing of cash receipts, while the average number of days sales outstanding during the current quarter was relatively consistent to the prior year quarter. Operating cash uses during the quarter ended December 31, 2010 included $10.6 million in interest payments and $9.2 million of income tax payments, net of refunds.

In November 2010, our board of directors increased the quarterly cash dividend by 25% from $0.08 per share to $0.10 per share. In May 2011, our board of directors increased the quarterly cash dividend by 15% from $0.10 per share to $0.115 per share. In November 2011, our board of directors increased the quarterly cash dividend again by 13% from $0.115 per share to $0.13 per share. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remains within the discretion of our board of directors and will depend upon our future earnings, financial condition, capital requirements, and other factors.

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