AmerisourceBergen Reports Diluted Earnings Per Share from Continuing Operations of $0.63 for the September Quarter and $2.63 for Fiscal Year 2007

Business Wire, Nov 1, 2007

Company Expects Diluted Earnings Per Share for Fiscal Year 2008 to Range from $2.77 to $2.95

VALLEY FORGE, Pa. -- AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal fourth quarter ended September 30, 2007, diluted earnings per share from continuing operations were $0.63, which was negatively impacted by a $0.10 write-down to market value of tetanus-diphtheria vaccine inventory and positively impacted by a net $0.03 benefit from special items.

The PharMerica Long-Term Care business, which the Company spun-off on July 31, 2007, is included in the fourth quarter and fiscal year 2007 results from continuing operations, representing $0.01 and $0.08 of diluted earnings per share, respectively.

Fiscal Fourth Quarter Highlights

* Operating revenue of $15.3 billion, up 4.5 percent.

* Diluted earnings per share from continuing operations of $0.63, a 3 percent increase.

* $0.10 per diluted share write-down to market value of tetanus-diphtheria vaccine inventory.

* Net $0.03 per diluted share benefit from special items.

* Cash flow from operations of $128 million.

* $546 million of share repurchases.

Fiscal Year 2007 Highlights

* Record operating revenue of $61.7 billion, up 9 percent.

* Diluted earnings per share from continuing operations of $2.63, up 16 percent.

* Net $0.09 per diluted share benefit from special items.

* Pharmaceutical Distribution Segment operating income increase of 14 percent; operating margin of 1.20 percent, up 5 basis points.

* Cash flow from operations of $1.2 billion, above expectations.

* $1.4 billion of share repurchases, above expectations.

* Merchandise inventories were down 7 percent with a 9 percent operating revenue increase.

"We delivered outstanding performance for the 2007 fiscal year, exceeding the diluted earnings per share expectations we originally announced for the fiscal year last November, despite the impact from the write-down of tetanus-diphtheria vaccine inventory within the specialty business in the fourth fiscal quarter," said R. David Yost, AmerisourceBergen's President and Chief Executive Officer. "In the fourth quarter and the fiscal year, performance of our traditional drug distribution business was outstanding, driven by our ability to leverage our contracts with branded manufacturers, drive generic sales, and lower our expense ratios through our newly completed distribution network. Although our specialty distribution business faced some tough head winds in the anemia drug market and with the tetanus-diphtheria vaccine write-down late in the fiscal year, its market leading position and robust service offerings in the distribution of specialty drugs to physicians delivered a 23 percent increase in operating revenue and contributed to the overall success of fiscal 2007. In addition, we generated more than double the cash we originally forecasted for fiscal 2007 through our strong working capital management, and we used our cash to make acquisitions and repurchase $1.4 billion of our stock in the fiscal year. Our balance sheet continues to be strong and our financial flexibility remains significant."

"We expect those same attributes to allow us to continue to grow in line with our long-term goals in fiscal 2008," he continued. "Our annual long-term goal continues to be to grow diluted earnings per share in the 15 percent range by growing operating revenue in line with pharmaceutical market growth, expanding operating margins in the Pharmaceutical Distribution Segment by single digit basis points, and generating free cash flows approximating net income."

Consolidated Results

* Consolidated operating income in the fiscal 2007 fourth quarter decreased 7 percent to $181.0 million, due to a $28 million write-down to market value of tetanus-diphtheria vaccine inventory in the Pharmaceutical Distribution Segment, poor performance in the Other Segment, and higher than normal bad debt expense. These negative impacts were partially offset by the net positive impact of $7.6 million from "facility consolidations, employee severance and other," which included a gain of $10.4 million from a favorable decision by an appeals court in an employment-related dispute with a former Bergen Brunswig chief executive officer whose employment was terminated long before the creation of AmerisourceBergen and charges of $2.8 million primarily associated with the spin-off of the Company's PharMerica Long-Term Care business. In the prior year's fiscal fourth quarter, consolidated operating income was negatively impacted by $7.8 million of "facility consolidations, employee severance and other," offset by an $8.9 million gain from the settlement of pharmaceutical manufacturer antitrust litigation cases. Consolidated operating income for fiscal year 2007 was $820.3 million, up 10 percent over the previous fiscal year.

* The effective tax rate for the fourth quarter of fiscal 2007 was 35.6 percent, down from 37.6 percent in the previous fiscal year's fourth quarter primarily due to the favorable resolution of certain tax matters. The effective tax rate for fiscal year 2007 was 37.1 percent. Going forward, the Company expects the effective tax rate to be between 37 percent and 38 percent.