-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NOF7RhZSnhrXh2PQpSJKfx8Q2iMR78abRKzxHK58bCMFsGtFVbIbvfyoh7aYBSqc dtkKOo8ZyVKz4Mi4Ou6i7w== 0000950109-96-005250.txt : 19960816 0000950109-96-005250.hdr.sgml : 19960816 ACCESSION NUMBER: 0000950109-96-005250 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERISOURCE DISTRIBUTION CORP CENTRAL INDEX KEY: 0000855042 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 232546940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20485 FILM NUMBER: 96611616 BUSINESS ADDRESS: STREET 1: PO BOX 959 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 2152964480 MAIL ADDRESS: STREET 1: P.O. BOX 959 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: ALCO HEALTH DISTRIBUTION CORP /DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AHSC HOLDINGS CORP DATE OF NAME CHANGE: 19920325 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED JUNE 30, 1996
COMMISSION REGISTRANT, STATE OF INCORPORATION IRS EMPLOYER FILE NUMBER ADDRESS AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ---------------------------------- ------------------ 33-27835-01 AmeriSource Health Corporation 23-2546940 (a Delaware Corporation) (formerly AmeriSource Distribution Corporation) P.O. Box 959, Valley Forge, Pennsylvania 19482 (610) 296-4480
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] The number of shares of common stock of AmeriSource Health Corporation outstanding as of June 30, 1996 was: Class A--16,809,216, Class B--6,596,041, Class C--267,429. INDEX AMERISOURCE HEALTH CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated balance sheets--June 30, 1996 and September 30, 1995 Consolidated statements of operations--Three months ended June 30, 1996 and June 30, 1995 Consolidated statements of operations--Nine months ended June 30, 1996 and June 30, 1995 Consolidated statements of cash flows--Nine months ended June 30, 1996 and June 30, 1995 Management's Discussion and Analysis of Financial Condition and Item 2. Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 6. Exhibits and Reports on Form 8-K
2 PART 1. FINANCIAL INFORMATION ITEM 1. AMERISOURCE HEALTH CORPORATION FINANCIAL STATEMENTS (UNAUDITED) AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
(UNAUDITED) JUNE 30, SEPTEMBER 30, 1996 1995 ----------- ------------- ASSETS Current Assets: Cash and cash equivalents........................... $ 59,568 $ 32,171 Restricted cash..................................... 6,091 14,638 Accounts receivable less allowance for doubtful accounts: 6/96--$14,394, 9/95--$12,941............. 332,026 318,652 Merchandise inventories............................. 616,104 404,522 Prepaid expenses and other.......................... 4,267 3,221 ---------- -------- Total current assets.............................. 1,018,056 773,204 Property and Equipment, at cost....................... 87,976 76,826 Less accumulated depreciation....................... 37,519 31,582 ---------- -------- 50,457 45,244 Other assets.......................................... 23,439 20,225 ---------- -------- $1,091,952 $838,673 ========== ========
See notes to consolidated financial statements. 3 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
(UNAUDITED) JUNE 30, SEPTEMBER 30, 1996 1995 ----------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable................................... $ 593,388 $ 462,804 Accrued expenses and other......................... 25,643 27,720 Accrued income taxes............................... 16,169 13,596 Deferred income taxes.............................. 32,508 25,892 ---------- --------- Total current liabilities........................ 667,708 530,012 Long-Term Debt: Revolving credit facility.......................... 260,000 150,000 Receivables securitization financing............... 209,869 209,842 Senior debentures.................................. -- 74,293 Other debt......................................... 1,773 1,629 ---------- --------- 471,642 435,764 Other Liabilities.................................... 7,020 8,621 Stockholders' Equity Common Stock, $.01 par value: Class A (Voting and convertible): 50,000,000 shares authorized; issued 6/96--17,160,298 shares; 9/95--12,062,560 shares.......................... 172 121 Class B (Non-voting and convertible): 15,000,000 shares authorized; issued 6/96--9,546,041 shares; 9/95--12,969,050 shares.......................... 95 130 Class C (Non-voting and convertible): 2,000,000 shares authorized; issued 6/96--267,429 shares; 9/95--440,158 shares............................. 3 4 Capital in excess of par value..................... 224,222 165,044 Retained earnings (deficit)........................ (272,690) (294,803) Cost of common stock in treasury................... (6,220) (6,220) ---------- --------- (54,418) (135,724) ---------- --------- $1,091,952 $ 838,673 ========== =========
See notes to consolidated financial statements. 4 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED) THREE MONTHS ENDED JUNE 30, ---------------------- 1996 1995 ---------- ---------- Revenues.............................................. $1,420,006 $1,158,113 Cost of goods sold.................................... 1,339,475 1,092,604 ---------- ---------- Gross Profit.......................................... 80,531 65,509 Selling and administrative expenses................... 51,378 40,014 Depreciation.......................................... 2,429 1,811 ---------- ---------- Operating income.................................... 26,724 23,684 Interest expense...................................... 9,088 10,581 ---------- ---------- Income before taxes and extraordinary item............ 17,636 13,103 Taxes on income....................................... 7,231 3,223 ---------- ---------- Income before extraordinary item...................... 10,405 9,880 Extraordinary charge-early retirement of debt, net of income tax benefit................................... (7,242) (6,162) ---------- ---------- Net income.......................................... $ 3,163 $ 3,718 ========== ========== Earnings per share (fully diluted): Income before extraordinary item.................... $ .45 $ .46 Extraordinary item.................................. (.31) (.29) ---------- ---------- Net income........................................ $ .14 $ .17 ========== ==========
See notes to consolidated financial statements. 5 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED) NINE MONTHS ENDED JUNE 30, ---------------------- 1996 1995 ---------- ---------- Revenues.............................................. $4,064,575 $3,465,244 Cost of goods sold.................................... 3,836,161 3,270,860 ---------- ---------- Gross Profit.......................................... 228,414 194,384 Selling and administrative expenses................... 143,623 118,148 Depreciation.......................................... 6,393 5,247 ---------- ---------- Operating income.................................... 78,398 70,989 Interest expense...................................... 28,090 42,570 ---------- ---------- Income before taxes and extraordinary item............ 50,308 28,419 Taxes on income....................................... 20,953 10,980 ---------- ---------- Income before extraordinary item...................... 29,355 17,439 Extraordinary charge-early retirement of debt, net of income tax benefit................................... (7,242) (18,037) ---------- ---------- Net income (loss)................................... $ 22,113 $ (598) ========== ========== Earnings (loss) per share (fully diluted): Income before extraordinary item.................... $ 1.29 $ 1.02 Extraordinary item.................................. (.32) (1.06) ---------- ---------- Net income (loss)................................. $ .97 $ (.04) ========== ==========
See notes to consolidated financial statements. 6 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
(UNAUDITED) NINE MONTHS ENDED JUNE 30, ------------------------ 1996 1995 ----------- ----------- OPERATING ACTIVITIES Net income (loss)................................... $ 22,113 $ (598) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation....................................... 6,393 5,247 Amortization....................................... 2,041 1,967 Provision for losses on accounts receivable........ 1,140 4,098 Gain on disposal of property and equipment......... (16) (61) Deferred income taxes.............................. 8,815 (1,009) Loss on early retirement of debt................... 11,142 25,190 Changes in operating assets and liabilities: Restricted cash................................... 8,547 (35,118) Accounts receivable............................... 7,094 (7,858) Merchandise inventories........................... (179,122) (86,947) Prepaid expenses.................................. (657) (2,051) Accounts payable, accrued expenses and income tax- es............................................... 102,166 61,643 Debentures issued in lieu of payment of interest.. -- 4,572 Miscellaneous...................................... 2,059 (1,973) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES............ (8,285) (32,898) INVESTING ACTIVITIES Capital expenditures................................ (12,008) (9,064) Proceeds from sales of property and equipment....... 527 1,806 Cost of companies acquired.......................... (28,725) (500) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES............ (40,206) (7,758) FINANCING ACTIVITIES Long-term debt borrowings........................... 1,324,712 1,511,354 Long-term debt repayments........................... (1,298,166) (1,605,474) Net proceeds from public offerings.................. 49,300 148,194 Deferred financing costs............................ -- (10,040) Exercise of stock option............................ 42 549 Purchase of treasury stock.......................... -- (5,225) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES........ 75,888 39,328 ----------- ----------- Increase (decrease) in cash and cash equivalents..... 27,397 (1,328) Cash and cash equivalents at beginning of period..... 32,171 25,311 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD........... $ 59,568 $ 23,983 =========== ===========
See notes to consolidated financial statements. 7 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1--BASIS OF PRESENTATION The accompanying financial statements present the consolidated financial position, results of operations and cash flows of AmeriSource Health Corporation, formerly AmeriSource Distribution Corporation, and its wholly- owned subsidiaries (the "Company") as of the dates and for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to present fairly the financial position as of June 30, 1996, the results of operations for the three and nine months ended June 30, 1996 and 1995 and the cash flows for the nine months ended June 30, 1996 and 1995 have been included. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles, but which are not required for interim reporting purposes, have been omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1995. The Company's income (loss) per share and share data in the financial statements have been retroactively restated to reflect the effect of the 2.95- for-1 stock split declared in connection with the public offering by the Company of its Common Stock in April 1995. NOTE 2--LEGAL MATTERS AND CONTINGENCIES In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings and governmental investigations, including antitrust, environmental, product liability and regulatory agency and other matters. In some of these proceedings, plaintiffs may seek to recover large and sometimes unspecified amounts and the matters may remain unresolved for several years. On the basis of information furnished by counsel and others, the Company does not believe that these matters, individually or in the aggregate, will have a material adverse effect on its business or financial condition. The Company is subject to contingencies pursuant to environmental laws and regulations at one of its former distribution centers that may require the Company to take remediation efforts. In fiscal 1994, the Company accrued $4.1 million to cover future consulting, legal, and remediation and ongoing monitoring costs. The accrued liability, which is reflected in other long-term liabilities on the accompanying consolidated balance sheet ($3.9 million at June 30, 1996), is based on an engineering analysis prepared by outside consultants and represents an estimate of the extent of contamination and choice of remedy, existing technology and presently enacted laws and regulations. However, changes in remediation standards, improvements in cleanup technology and discovery of additional information concerning the site could affect the estimated liability in the future. The Company is investigating the possibility of asserting claims against responsible parties for recovery of these costs. Whether or not any recovery may be forthcoming is unknown at this time, although the Company intends to vigorously enforce its rights and remedies. The Company has received notices from the Internal Revenue Service asserting deficiencies in federal corporate income taxes for the Company's taxable years 1987 through 1991. The proposed adjustments indicate a net increase to taxable income for these years of approximately $24 million and relate principally to the deductibility of costs incurred with respect to the leveraged buyout transaction which occurred in 1988. The Company has analyzed these matters with tax counsel and believes it has meritorious defenses to the deficiencies asserted by the Internal Revenue Service. The Company will contest the asserted deficiencies through the administrative appeals process and, if necessary, litigation. 8 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) In November 1993, the Company, along with six other wholesale distributors and twenty-four pharmaceutical manufacturers, was named as a defendant in the United States District Court in the Southern District of New York, in a series of purported class action antitrust lawsuits alleging violations of various antitrust laws associated with the chargeback pricing system. In addition, the Company is a party to a parallel suit filed in state court in Minnesota. Plaintiffs seek injunctive relief, treble damages, attorneys' fees, and costs. In October 1994, the Company entered into a Judgement Sharing Agreement with other wholesaler and pharmaceutical manufacturer defendants. Under the Judgement Sharing Agreement (a) the manufacturer defendants agreed to reimburse the wholesaler defendants for litigation costs incurred, up to an aggregate of $9 million; and (b) if a judgement is entered into against both manufacturers and wholesalers, the total exposure for joint and several liability of the Company is limited to the lesser of 1% of such judgement or $1 million. Pursuant to the Judgement Sharing Agreement, the Company has released any claims that it might have had against the manufacturers for the claims presented by the plaintiffs in these lawsuits. The Judgement Sharing Agreement covers the federal court litigation as well as cases which have been or may be filed in state courts. On April 4, 1996, the federal court granted the wholesalers' motion for summary judgment. The plaintiffs are appealing the grant of summary judgement in favor of the wholesalers to the United States Court of Appeals for the Seventh Circuit. NOTE 3--EARNINGS PER SHARE Earnings (loss) per share is computed on the basis of the weighted average number of shares outstanding during the periods presented (22,733,126 and 21,437,282 for the three months ended June 30, 1996 and June 30, 1995, respectively; and 22,358,166 and 16,989,062 for the nine months ended June 30, 1996 and June 30, 1995, respectively) plus the dilutive effect of stock options (401,142 and 73,197 for the three months ended June 30, 1996 and June 30, 1995, respectively; and 355,737 and 24,399 for the nine months ended June 30, 1996 and June 30, 1995, respectively, on a fully diluted basis). Share and per share amounts prior to April 1995 have been adjusted for the 2.95-for-1 stock split effected in conjunction with the Company's public offering. NOTE 4--ACQUISITION In February 1996, the Company acquired all of the stock of Gulf Distribution Inc. in a cash transaction. Gulf Distribution Inc. is a Miami, Florida based wholesale pharmaceutical distributor with annualized revenues of approximately $180 million. The cost was $28.7 million and the transaction was accounted for by the purchase method. The excess of the purchase price over net assets acquired has been allocated to goodwill. Changes in purchase accounting estimates may result in a reallocation of the purchase price within one year of the acquisition. NOTE 5--COMMON STOCK OFFERING In May 1996, the Company completed a public offering of 4,800,000 shares of Class A common stock at a price of $35 per share. Of the 4,800,000 shares sold, 1,500,000 shares were sold by the Company and 3,300,000 shares were sold by certain stockholders of the Company (the "Selling Stockholders"). The Company did not receive any of the proceeds from the shares sold by the Selling Stockholders. The net proceeds of $49.3 million from the 1,500,000 shares sold by the Company were used to repay long-term debt. (See Note 6). On a pro forma basis, assuming historical data is adjusted to reflect the public offering and related pay-down of long-term debt as if they occurred on October 1, 1995, earnings per share before extraordinary items for the three and nine month periods ended June 30, 1996 would not be materially different from reported earnings per share. 9 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED) NOTE 6--LONG-TERM DEBT In April 1996, the Company purchased and retired $26.7 million of its 11 1/4% senior debentures through open market purchases for 111.25% of the principal amount (including fees) plus accrued interest. In June 1996, the Company redeemed the remaining $47.6 million of its senior debentures via a tender offer and related consent solicitation for 110.75% of the principal amount (including fees) plus accrued interest and a consent amount equal to 2.0% of the principal amount. These transactions resulted in an extraordinary charge, net of tax benefits, of $7.2 million relating to the open market purchase and tender offer premiums, transaction fees and the write-off of related unamortized financing costs. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenues for the three months ended June 30, 1996 increased 23% to $1.4 billion from $1.2 billion in fiscal 1995. For the nine months ended June 30, 1996, revenues were $4.1 billion, an increase of $599 million or 17% compared to the prior year. The year-to-year revenue gains reflect increases across all customer groups and the impact of the Company's expansion into new geographic markets, especially in the western and northeastern United States, and price increases. Revenues of the Company's western region increased by 46% in the first nine months of fiscal 1996. The acquisitions of Newbro Drug Company in July 1995 and Gulf Distribution Inc. in February 1996 accounted for 3% of the 17% increase in revenues for the first nine months of fiscal 1996. During the nine months ended June 30, 1996, sales to hospitals increased 7%, sales to independent drug store customers increased 27%, and sales to the chain drug store customer group increased 26%, as compared with the prior fiscal year. During the nine months ended June 30, 1996 sales to hospitals accounted for 43% of total revenues, while sales to independent drug stores accounted for 37% and sales to chain drug stores for 20% of the total. Gross profit of $80.5 million in the third quarter of fiscal 1996 increased by 23% over 1995 due to the increase in revenues. As a percentage of revenues, the gross profit margin in the third fiscal quarter of fiscal 1996 was 5.67% as compared to 5.66% in the prior year. For the nine months ended June 30, 1996, the gross profit margin percentage of 5.62% was slightly higher than the prior year margin of 5.61%. The small increase in gross profit margin percentage from the prior year third quarter was due to increased sales of higher margin generic drugs, the continued introduction of new marketing programs with manufacturers, the growth of higher margin specialty businesses such as pharmaceutical repackaging, and an increase in inventory investment buying activity, offset by a decline in selling margin percentage due to continuing price competition throughout the industry. Operating expenses increased by $12.0 million or 29%, in the third quarter of fiscal 1996 compared with the prior year, and as a percentage of revenues, were 3.79% in 1996 and 3.61% in 1995. For the first nine months of fiscal 1996, operating expenses increased 22% compared to the prior year and represented 3.69% of revenues versus 3.56% of revenues in the prior year. The increase as a percentage of revenues is primarily due to the cost of opening new distribution facilities in Orlando, Florida, and Phoenix, Arizona, in fiscal 1996 and Sacramento, California in June 1995, integration costs related to Newbro Drug Company and Gulf Distribution Inc., above average growth of the higher cost to service independent drug store segment, and the cost of developing new value added marketing programs. These costs have been offset in part by continued economies of scale at the Company's established locations. Operating income of $26.7 million in the third quarter of fiscal 1996 increased by 13% over the prior year. For the nine months ended June 30, 1996 operating income increased by 10% compared to the prior year. As a percentage of revenues, the Company's operating margin declined to 1.93% in fiscal 1996 from 2.05% in fiscal 1995 due to the increase in expenses discussed above. The Company is evaluating its distribution network to identify opportunities for increased efficiencies and cost reduction necessary to maintain and grow its operating margin. Interest expense of $9.1 million in the third quarter of fiscal 1996 represents a decrease of 14% compared to the prior year quarter. For the nine- month period ended June 30, 1996 interest expense declined by $14.5 million or 34% versus the prior year period. The decrease was due to the redemption in January 1995 of the $166.1 million of 14 1/2% senior subordinated notes, the redemption in May 1995 of $74.3 million of 11 1/4% senior debentures, the repurchase in April 1996 and the redemption in June 1996 of the remaining $74.3 million of 11 1/4% senior debentures, lower average borrowing rates due to the implementation of the receivables securitization financing in December 1994, and reductions in the borrowing rates of the Company's revolving credit facility which was amended in December 1994. Average borrowings during the quarter ended June 30, 1996 were $489 million as compared to average borrowings of $471 million in the prior year third quarter. For the nine months ended June 30, 1996, average borrowings were $487 million versus average borrowings of $572 million in the prior year. 11 The income tax provisions for the three and nine months ended June 30, 1996 were computed based on an estimate of the full year effective tax rate. The extraordinary charge in fiscal 1996 of $7.2 million (net of a tax benefit of $3.9 million) relates to the purchase and redemption premiums and consequent write-off of unamortized deferred financing costs due to the purchase and redemption of the remaining $74.3 million of 11 1/4% senior debentures. The extraordinary charge in fiscal 1995 of $18.0 million (net of a tax benefit of $7.2 million) relates to the amendment of the revolving credit facility, the redemption of the 14 1/2% senior subordinated notes, the redemption of $74.3 million of 11 1/4% senior debentures and the consequent write-off of unamortized deferred financing costs in the prior year. LIQUIDITY AND CAPITAL RESOURCES During the nine-month period ended June 30, 1996, the Company's operating activities used $8.3 million in cash due to the increase of $179.1 million in merchandise inventories which was offset in part by the $102.2 million increase in accounts payable, accrued expenses and income taxes and the reduction in restricted cash and accounts receivable balances, and reflects the Company's growth as well as increased inventory purchases in anticipation of manufacturer price increases and other deal buying opportunities. A portion of the increase in inventories during the nine month period was also due to the opening of the Phoenix, Arizona and Orlando, Florida distribution facilities. Operating cash uses during the nine month period ended June 30, 1996 included $28.6 million in interest payments and $5.7 million in income tax payments. Capital expenditures for the nine months ended June 30, 1996 were $12.0 million and are primarily equipment purchases related to the expansion of the Company's pharmaceutical repackaging operation, the opening of the Orlando, Florida and Phoenix, Arizona distribution centers, and additional investments in information technology. Investments in information technology and warehouse improvements are expected to continue throughout the year, and total capital expenditures are expected to be $16 million for the fiscal year. In February 1996, the Company purchased all of the stock of Gulf Distribution Inc. in a cash transaction. The transaction was funded by borrowings under the revolving credit facility. Gulf Distribution Inc. is a Miami, Florida-based wholesaler with annualized revenues of approximately $180 million. The cost of the acquisition was $28.7 million. In May 1996, the Company completed a public offering of 4.8 million shares of its common stock. Of the 4.8 million shares sold, 1.5 million shares were sold by the Company and 3.3 million shares were sold by certain stockholders of the Company (the "Selling Stockholders"). The Company did not receive any of the proceeds from the shares sold by the Selling Stockholders. The $49.3 million net proceeds from the 1.5 million shares sold by the Company were used along with borrowings under its revolving credit facility to redeem its remaining 11 1/4% senior debentures. In April 1996, the Company purchased and retired $26.7 million of its 11 1/4% senior debentures through open market purchases for 111.25% of the principal amount (including fees) plus accrued interest through the date of purchase. In June 1996, the Company redeemed the remaining $47.6 million of its senior debentures through a tender offer for 110.75% of the principal amount (including fees) plus accrued interest through the date of redemption and a consent amount equal to 2.0% of the principal amount. These transactions resulted in an extraordinary charge, net of tax benefits, of $7.2 million relating to the open market purchases and tender offer premiums, plus fees and the write-off of related unamortized deferred financing costs. The redemptions were funded by borrowings under the Company's revolving credit facility and proceeds from the public offering. Cash provided by financing activities during the first nine months of fiscal 1996 represents borrowings under the Company's revolving credit facility and its receivable securitization financing primarily to fund its working capital requirements. As a result of the Company's initial public offering in April 1995 and its financial results, the borrowing rate alternatives under the revolving credit facility were reduced by 1.0% to LIBOR plus 1.25% and the prime rate plus zero beginning in October 1995. At June 30, 1996, borrowings under the Company's $380 million revolving credit facility were $260 million (at an average interest rate of 7.0%) and borrowings under the $285 million Receivables Program were $210 million (at an average interest rate of 6.0%). 12 An increase in interest rates would adversely affect the Company's operating results and the cash flow available after debt service to fund operations and expansion and, if permitted to do so under its revolving credit facility, to pay dividends on its capital stock. The Company's operating results have generated sufficient cash flow which, together with borrowings under its debt agreements and credit terms from suppliers, have provided sufficient capital resources to finance working capital and cash operating requirements, fund capital expenditures, and interest currently payable on outstanding debt. The Company's primary ongoing cash requirements will be to fund payment of interest on indebtedness, finance working capital, and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund the Company's ongoing cash requirements. The Company is subject to certain contingencies pursuant to environmental laws and regulations at one of its former distribution centers that may require remediation efforts. In fiscal 1994, the Company accrued a liability of $4.1 million to cover future consulting, legal and remediation, and ongoing monitoring costs. The accrued liability, which is reflected in other long-term liabilities on the accompanying consolidated balance sheet, is based on an estimate of the extent of contamination and choice or remedy, existing technology, and presently enacted laws and regulation, however, changes in remediation standards, improvements in cleanup technology, and discovery of additional information concerning the site could affect the estimated liability in the future. The Company is investigating the possibility of asserting claims against responsible parties for recovery of these costs. Whether or not any recovery may be forthcoming is unknown at this time. Certain information in this report contains forward-looking statements as such term is defined in Section 27A of the Securities Act and Section 21E of the Exchange Act. Certain factors as discussed in this Management's Discussion could cause actual results to differ materially from those in the forward- looking statements. 13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In October 1995, a proceeding was instituted before the Massachusetts Board of Registration in Pharmacy (the "Massachusetts Board") against the Company. The Massachusetts Board alleged that the Company's application for the licensure of its facility in Springfield, Massachusetts submitted in September 1994 was inaccurate and insufficient. On June 21, 1996, the Company entered into a Consent Agreement with the Massachusetts Board pursuant to which it agreed to certain restrictions and penalties and to enhanced regulatory oversight for the next four years. The Company does not believe that the agreement will have a material adverse effect on its business or financial condition. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit Number 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended June 30, 1996. SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. Amerisource Health Corporation /s/ Kurt J. Hilzinger ------------------------------------- KURT J. HILZINGER VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) Date: August 13, 1996 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 65,659 0 332,026 14,394 616,104 1,018,056 87,976 37,519 1,091,952 667,708 0 0 0 270 (54,688) 1,091,952 4,064,575 4,064,575 3,836,161 3,836,161 0 1,140 28,090 50,308 20,953 29,355 0 (7,242) 0 22,113 .97 .97
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