-----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, QDpei8S5ejGYZuWcUdOJuWFubWIQ6Agwr4I8gDs90TACpbxa3iJJ3h2BzTzW0is0 1wNr5OvxTYlgMjtaihf9Mg== /in/edgar/work/20000809/0001036050-00-001436/0001036050-00-001436.txt : 20000921 0001036050-00-001436.hdr.sgml : 20000921 ACCESSION NUMBER: 0001036050-00-001436 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERISOURCE HEALTH CORP/DE CENTRAL INDEX KEY: 0000855042 STANDARD INDUSTRIAL CLASSIFICATION: [5122 ] IRS NUMBER: 232546940 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-20485 FILM NUMBER: 690089 BUSINESS ADDRESS: STREET 1: 300 CHESTER FIELD PWKY CITY: MALVERN STATE: PA ZIP: 19355 BUSINESS PHONE: 6102964480 MAIL ADDRESS: STREET 1: 300 CHESTER FIELD PKWY CITY: MALVERN STATE: PA ZIP: 19355 FORMER COMPANY: FORMER CONFORMED NAME: AMERISOURCE DISTRIBUTION CORP DATE OF NAME CHANGE: 19940811 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/A 1 0001.txt AMERISOURCE HEALTH CORPORATION FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER ENDED MARCH 31, 2000
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 March 31, 2000 was: Class A--51,203,024, Class B--8,446; Class C--165,346. INDEX AMERISOURCE HEALTH CORPORATION PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Consolidated balance sheets--March 31, 2000 and September 30, 1999 Consolidated statements of operations--Three months ended March 31, 2000 and March 31, 1999 Consolidated statements of operations--Six months ended March 31, 2000 and March 31, 1999 Consolidated statements of cash flows--Six months ended March 31, 2000 and March 31, 1999 Management's Discussion and Analysis of Financial Condition and Item 2. Results of Operations Item 3. Quantitative and qualitative disclosures about market risk PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 2 PART I. FINANCIAL INFORMATION Item 1. AmeriSource Health Corporation Financial Statements (Unaudited) AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands)
March 31, September 30, 2000 1999 ----------- ------------- (unaudited) ASSETS Current assets: Cash and cash equivalents........................... $ 49,240 $ 59,497 Accounts receivable less allowance for doubtful accounts: 3/00--$28,981, 9/99--$27,583............. 642,485 612,520 Merchandise inventories............................. 1,272,795 1,243,153 Prepaid expenses and other.......................... 4,550 4,836 ---------- ---------- Total current assets.............................. 1,969,070 1,920,006 Property and equipment, at cost: Land................................................ 3,987 4,125 Buildings and improvements.......................... 38,603 38,855 Machinery, equipment and other...................... 91,633 91,760 ---------- ---------- 134,223 134,740 Less accumulated depreciation....................... 70,823 70,356 ---------- ---------- 63,400 64,384 ---------- ---------- Other assets, less accumulated amortization: 3/00--$10,098; 9/99--$8,967.......................... 69,226 76,209 ---------- ---------- $2,101,696 $2,060,599 ========== ==========
See notes to consolidated financial statements. 3 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share data)
March 31, September 30, 2000 1999 ----------- ------------- (unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable................................... $1,254,829 $1,175,619 Accrued expenses and other......................... 46,247 50,329 Accrued income taxes............................... 13,923 10,854 Deferred income taxes.............................. 94,527 90,481 ---------- ---------- Total current liabilities........................ 1,409,526 1,327,283 Long-term debt: Revolving credit facility.......................... 136,046 225,227 Receivables securitization financing............... 325,000 325,000 Other debt......................................... 8,352 8,478 ---------- ---------- 469,398 558,705 Other liabilities.................................... 8,980 8,334 Stockholders' equity Common stock, $.01 par value: Class A (voting and convertible): 100,000,000 shares authorized; issued 3/00--51,905,191 shares; 9/99--51,737,893 shares.......................... 519 517 Class B (non-voting and convertible): 15,000,000 shares authorized; issued 3/00--5,908,445 shares; 9/99--5,908,445 shares........................... 59 59 Class C (non-voting and convertible): 2,000,000 shares authorized; issued 3/00--165,346 shares; 9/99--165,936 shares............................. 2 2 Capital in excess of par value..................... 268,166 266,737 Accumulated deficit................................ (48,734) (94,632) Cost of common stock in treasury................... (6,220) (6,220) Note receivable from ESOP.......................... -- (186) ---------- ---------- 213,792 166,277 ---------- ---------- $2,101,696 $2,060,599 ========== ==========
See notes to consolidated financial statements. 4 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data)
Three Months Ended March 31, --------------------- (unaudited) 2000 1999 ---------- ---------- Operating revenue ..................................................... $2,832,041 $2,372,872 Bulk deliveries to customer warehouses ................................ 10,162 12,299 --------- --------- Total revenue ......................................................... 2,842,203 2,385,171 Operating cost of goods sold .......................................... 2,700,635 2,249,886 Cost of goods sold--bulk deliveries ................................... 10,162 12,299 --------- --------- Total cost of goods sold .............................................. 2,710,797 2,262,185 --------- --------- Gross profit .......................................................... 131,406 122,986 Selling and administrative expenses ................................... 76,323 72,238 Depreciation .......................................................... 3,577 3,778 Amortization .......................................................... 392 490 --------- --------- Operating income ...................................................... 51,114 46,480 Interest expense ...................................................... 11,922 11,582 Interest expense--adjustment of common stock put warrant to fair value -- 1,223 --------- --------- Income before taxes ................................................... 39,192 33,675 Taxes on income ....................................................... 14,893 13,456 --------- --------- Net income ............................................................ $ 24,299 $ 20,219 ========= ========= Net income per share .................................................. $ .47 $ .40 ========= ========= Net income per share--assuming dilution ............................... $ .47 $ .39 ========= =========
See notes to consolidated financial statements 5 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share data)
Six months ended March 31, --------------------- (unaudited) 2000 1999 ---------- ---------- Operating revenue ..................................................... $5,660,795 $4,735,520 Bulk deliveries to customer warehouses ................................ 20,790 24,386 --------- --------- Total revenue ......................................................... 5,681,585 4,759,906 Operating cost of goods sold .......................................... 5,409,462 4,501,408 Cost of goods sold--bulk deliveries ................................... 20,790 24,386 --------- --------- Total cost of goods sold .............................................. 5,430,252 4,525,794 --------- --------- Gross profit .......................................................... 251,333 234,112 Selling and administrative expenses ................................... 146,568 139,411 Depreciation .......................................................... 6,976 7,575 Amortization .......................................................... 940 982 --------- --------- Operating income ...................................................... 96,849 86,144 Interest expense ...................................................... 22,820 21,666 Interest expense--adjustment of common stock put warrant to fair value -- 1,833 --------- --------- Income before taxes ................................................... 74,029 62,645 Taxes on income ....................................................... 28,131 24,531 --------- --------- Net income ............................................................ $ 45,898 $ 38,114 ========= ========= Net income per share .................................................. $ .89 $ .76 ========= ========= Net income per share--assuming dilution ............................... $ .89 $ .74 ========= =========
See notes to consolidated financial statements 6 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands)
Six months ended March 31, -------------------- (unaudited) 2000 1999 -------- ---------- OPERATING ACTIVITIES Net income.............................................. $ 45,898 $ 38,114 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation........................................... 6,976 7,575 Amortization, including deferred financing costs....... 1,807 2,533 Adjustment of common stock put warrant to fair value... -- 1,833 Provision for losses on accounts receivable............ 2,615 2,630 Loss on disposal of property and equipment............. 71 33 Deferred income taxes.................................. 10,938 9,701 Changes in operating assets and liabilities: Restricted cash....................................... -- 1,436 Accounts receivable................................... (31,421) (32,062) Merchandise inventories............................... (29,642) (69,690) Prepaid expenses and other............................ (537) (779) Accounts payable, accrued expenses and income taxes... 78,970 47,671 Miscellaneous.......................................... (788) 576 -------- ---------- NET CASH PROVIDED BY OPERATING ACTIVITIES............. 84,887 9,571 INVESTING ACTIVITIES Capital expenditures.................................... (7,685) (7,444) Purchase of equity interest in a business............... -- (3,570) Collections on ESOP note receivable..................... 186 73 Proceeds from sales of property and equipment........... 1,256 103 -------- ---------- NET CASH USED IN INVESTING ACTIVITIES................. (6,243) (10,838) FINANCING ACTIVITIES Long-term debt borrowings............................... 714,167 1,153,846 Long-term debt repayments............................... (803,457) (1,089,506) Deferred financing costs and other...................... (115) -- Purchase of treasury stock.............................. -- (72) Exercise of stock options............................... 504 7,683 -------- ---------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES... (88,901) 71,951 -------- ---------- (Decrease) increase in cash and cash equivalents......... (10,257) 70,684 Cash and cash equivalents at beginning of period......... 59,497 48,511 -------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD............... $ 49,240 $ 119,195 ======== ==========
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 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 March 31, 2000, the results of operations for the three and six months ended March 31, 2000 and 1999 and the cash flows for the six months ended March 31, 2000 and 1999 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, 1999. In July 1999, the Company acquired C.D. Smith Healthcare, Inc. The business combination was accounted for as a pooling-of-interests and, accordingly, prior year results have been restated to reflect this accounting treatment. 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, 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. In 1998 the Company sued a former customer which refused to pay invoices, net of credit memos, totaling approximately $21 million for goods sold and delivered. The former customer filed counterclaims alleging it suffered damages as a result of certain performance problems affecting the Company. In January 2000, the Company settled all claims with the former customer. Under the terms of the confidential settlement agreement, which is not expected to have a material adverse effect on the Company's financial position or results of operations, the Company is to receive periodic payments through July 2000. 8 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(CONTINUED) Note 2 - Legal Matters and Contingencies - continued In November 1993, the Company was named a defendant, along with six other wholesale distributors and twenty-four pharmaceutical manufacturers, in a series of purported class action antitrust lawsuits brought by retail pharmacies alleging violations of various antitrust laws stemming from the use of chargeback agreements. In addition, the Company and four other wholesale distributors were added as defendants in a series of related antitrust lawsuits brought by independent pharmacies and chain drug stores, both of which opted out of the class cases. The Company also was named a defendant in parallel suits filed in state courts in Minnesota, Alabama, Tennessee and Mississippi. The federal class actions were originally filed in the United States District Court for the Southern District of New York, but were transferred along with the individual and chain drug store cases to the United States District Court for the Northern District of Illinois. Plaintiffs seek injunctive relief, treble damages, attorneys' fees and costs. In October 1994, the Company entered into a Judgment Sharing Agreement with the other wholesaler and pharmaceutical manufacturer defendants. Under the Judgment 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 judgment is entered 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 judgment or $1 million. In addition, the Company has released any claims which it might have had against the manufacturers for the claims presented by the plaintiffs in these lawsuits. Subsequent amendments to the Judgment Sharing Agreement have provided additional protection to the Company from litigation expenses in exchange for updated releases. The Judgment Sharing Agreement covers the federal court litigation as well as the cases which have been filed in various state courts. On April 4, 1996, the District Court granted the Company's motion for summary judgment in the class case. Plaintiffs subsequently appealed the Company's grant of summary judgment to the United States Seventh Circuit Court of Appeals. On August 15, 1997, the Court of Appeals reversed the District Court's order granting summary judgment in favor of the Company and the other wholesalers. The Court of Appeals also denied the Company's petition for rehearing. The Company and the other wholesalers filed a petition for a writ of certiorari to the United States Supreme Court; the petition was denied. Trial in the class case commenced in the United States District Court for the Northern District of Illinois on September 23, 1998. After a ten-week trial, the Court granted all of the defendants motions for a directed verdict and dismissed the claims the class plaintiffs had asserted against the Company and the other defendants. Plaintiffs in the class case then appealed the District Court's judgment to the Seventh Circuit Court of Appeals. On June 9, 1999, the Seventh Circuit affirmed the judgment the District Court entered in favor of the Company in the class case. Plaintiffs have filed a petition for a writ of certiorari to the United States Supreme Court and that petition was denied. The state cases are proceeding. The Minnesota case settled without any payment or admission of liability by the Company. On November 29, 1999, the trial court in Alabama dismissed all of the claims asserted against the Company and the other wholesaler and manufacturer defendants in accordance with a ruling from the Alabama Supreme Court. The Mississippi and Tennessee cases remain pending, though there has been very little activity in either forum. On or about October 2, 1997, a group of retail chain drug stores and individual pharmacies, both of which had opted out of the class cases, filed a motion with the United States District Court for the Northern District of Illinois seeking to add the Company and the other wholesale distributors as defendants in their cases against the manufacturer defendants, which cases are consolidated before the same judge who presides over the class case. This motion was granted and the Company and the other wholesale distributors have been added as defendants in those cases as well. As a result, the Company has been served with approximately 120 additional complaints on behalf of approximately 4,000 pharmacies and chain retailers. Discovery and motion practice is presently underway in all of these opt-out cases. The Company believes it has meritorious defenses to the claims asserted in these lawsuits and intends to defend itself vigorously in all of these cases. 9 AMERISOURCE HEALTH CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)-(Continued) Note 2 - Legal Matters and Contingencies - continued Environmental laws and regulations may require the Company to take remediation efforts at the site of a former distribution center. 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 liabilities in the accompanying consolidated balance sheet ($3.8 million at March 31, 2000), is based on an engineering analysis prepared by outside consultants and represents an estimate of the extent of contamination and choice of remedy based on 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. Note 3--Earnings Per Share Earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented (51,370,441 and 50,554,523 for the three months ended March 31, 2000 and 1999, respectively; and 51,328,764 and 50,443,944 for the six months ended March 31, 2000 and 1999, respectively). Earnings per share--assuming dilution is computed on the basis of the weighted average number of shares of common stock outstanding during the period plus the dilutive effect of stock options and the warrant (361,533 and 1,019,122 for the three months ended March 31, 2000 and 1999, respectively; and 283,177 and 850,668 for the six months ended March 31, 2000 and 1999, respectively). All shares held by the ESOP are considered outstanding for the purposes of computing earnings per share. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General All results for the prior year have been restated to reflect the acquisition of C.D.Smith Healthcare, Inc. ("C.D. Smith") in July 1999, accounted for as a pooling-of-interests. Results of Operations Operating revenue for the three months ended March 31, 2000 increased 19% from the prior year quarter to $2.8 billion. For the six months ended March 31, 2000, operating revenue was $5.7 billion, an increase of 20% from the prior year period. During the three and six months ended March 31, 2000, respectively, sales to hospitals and managed care facilities increased 31% and 29%, sales to independent drug store customers increased 9% and 12%, and sales to the chain drug store customer group increased 13% and 7% compared to the respective prior year period. The increase in hospital and managed care revenue was primarily due to 48% revenue growth with the Veterans Administration, which accounted for 18% of total operating revenue in the six-month period ended March 31, 2000. The increase in independent and chain revenue was consistent with overall industry growth. During the six months ended March 31, 2000, sales to hospitals and managed care facilities accounted for 50% of total operating revenue, while sales to independent drug stores accounted for 38% and sales to chain drug stores accounted for 12% of the total. Gross profit of $131.4 million in the second quarter of fiscal 2000 increased by 7% as compared to the prior year quarter due to the increase in operating revenue. As a percentage of operating revenue, the gross profit in the second quarter of fiscal 2000 was 4.64% as compared to 5.18% in the prior year quarter. For the six months ended March 31, 2000, the gross profit percentage was 4.44% as compared to 4.94% in the prior year period. The decline in gross profit percentage in the quarter and for the six-month period was primarily due to changes in the customer mix which included more lower margin hospital and government hospital business than in the prior year. Gross profit may continue to be impacted by price competition, changes in customer and product mix, and manufacturer pricing policies. Selling and administrative expenses and depreciation increased by $3.9 million or 5% in the second quarter of fiscal 2000 compared with the prior year period, and as a percentage of operating revenue, were 2.82% in fiscal 2000 and 3.20% in fiscal 1999. For the first six months of fiscal 2000, selling and administrative expenses and depreciation as a percentage of operating revenue were 2.71% as compared to 3.10% in the prior year period. The increase in operating expense during the quarter was due the increase in operating revenue. The decrease in expenses as a percentage of operating revenue in the quarter and six months was due to the increased sales to the hospital and managed care facilities described above, increased warehouse efficiencies, and cost reductions related to the Company's fiscal 1998 restructuring efforts. In connection with its acquisition of C.D. Smith in July 1999, the Company began the consolidation of C.D. Smith's Chicago, Illinois pharmaceutical distribution facility into an existing AmeriSource distribution facility and the consolidation of C.D. Smith's pharmaceutical packaging business into AmeriSource's packaging operation. In addition, the Company began to incorporate the remaining two C.D. Smith facilities into the centralization process started in the fourth quarter of fiscal 1998. The Chicago facility was closed in January 2000, and the St. Joseph, Missouri and Boston, Massachusetts pharmaceutical distribution facilities were converted to the centralized system at the end of March 2000 and April 2000, respectively. A charge of $12.8 million was recognized in the fourth quarter of fiscal 1999 related to this effort, and included a $7.2 million write-down of goodwill and fixed assets related to the Chicago facility, $3.5 million of contract and lease cancellations and other costs primarily relating to the expected termination of a noncancelable supply contract, and $2.1 million of severance for approximately 90 warehouse and administrative personnel to be terminated as a result of the facility consolidation and centralization. As of March 31, 2000, 64 of those employees have been terminated. 11 In the fourth quarter of fiscal 1998, the Company began to centralize its data processing, accounting, contract administration and purchasing functions, reorganize its pharmaceutical distribution facilities into five regions, and consolidate one pharmaceutical distribution facility into another facility. A charge of $8.3 million was recognized in the fourth quarter of fiscal 1998 related to this effort and included severance of $3.3 million for approximately 350 administrative and warehouse personnel and asset write-downs and lease cancellation costs of $5.0 million. As of March 31, 2000, 18 of the original 19 targeted distribution facilities have been converted to the centralized system. The remaining facility is scheduled to be converted in June 2000. As of March 31, 2000, approximately 30 of the 350 targeted employees have not yet been terminated. Operating income of $51.1 million in the quarter ended March 31, 2000 increased by 10% from the prior year period. The Company's operating margin for the quarter decreased to 1.80% in fiscal 2000 from 1.96% in fiscal 1999. For the six months ended March 31, 2000, the operating margin was 1.71% compared to 1.82% in the prior year period. The decrease is due to the reduction in gross margin described above offset in part by the decrease in selling and administrative expenses and depreciation as a percentage of operating revenue. Interest expense of $11.9 million in the second quarter of fiscal 2000 represents an increase of 3% compared to the prior year quarter. The increase from the prior year was primarily due to an increase in market interest rates of approximately 90 basis points offset in part by a decline in average borrowings of 5% and the extinguishment of higher cost debt facilities in July 1999 assumed in the acquisition of C.D. Smith. Average borrowings during the quarter ended March 31, 2000 were $706 million as compared to average borrowings of $747 million in the prior fiscal year. The decrease in average borrowings during the quarter from the prior year was due to a reduction in inventory turns as a result of the Company's centralization of purchasing as well as an increase in days payable outstanding due to extended terms received by certain manufacturers during the period as well as the timing of purchases. For the six-month period ended March 31, 2000, interest expense increased 5% compared to the prior year primarily due to increases in market interest rates as average borrowings for the six-month period ended March 31, 2000, increased 1% to $679 million as additional inventory maintained for Year 2000 concerns was offset by the increased efficiencies. Interest expense-adjustment of common stock put warrant to fair value of $1.2 million in the prior year quarter did not recur in the current fiscal year due to the conversion of the underlying warrant to common stock in the fourth quarter of fiscal 1999. The income tax provision for the three and six months ended March 31, 2000, was computed based on an estimate of the full year effective tax rate. Net income in the second quarter of fiscal 2000 increased 20% over the prior year quarter to $24.3 million from $20.2 million in the prior year and net income per share -- assuming dilution increased 21% from the prior year quarter to $0.47 per share as compared to $0.39 per share in the prior year. Net income of $45.9 million for the six months ended March 31, 2000 represents a 20% increase as compared to the prior year period. 12 Liquidity and Capital Resources During the six-month period ended March 31, 2000, the Company's operating activities generated $84.9 million of cash as in increase in accounts payable, accrued expenses and income taxes of $79.0 million offset increases in merchandise inventories of $29.6 million and accounts receivable of $31.4 million to supplement net income of $45.9 million. Timing of vendor payments and certain extended terms from various manufacturer promotions accounted for the 8% increase in days payables outstanding during the period. Accounts receivable increased 5% during the six-month period ended March 31, 2000, which is less than the comparable 20% increase in operating revenue due to quicker payment terms from the fast growing hospital customer class during the period. Merchandise inventories increased 2% during the six-month period ending March 31,2000 as safety inventory held for Year 2000 concerns was liquidated and replenishment inventory turns increased compared to the prior year as a result of the Company's centralization efforts. During the six-month period ended March 31, 1999, the Company generated cash from operations of $9.6 million as net income of $38.1 million and increases in accounts payable, accrued expenses and income taxes of $47.7 million were offset in part by increases in merchandise inventories of $69.7 million. Operating cash uses during the six- months ended March 31, 2000, included $22.4 million in interest payments and $14.4 million in income tax payments. Additionally, the Company paid $2.4 million of severance and lease cancellation costs and other during the six month period ended March 31, 2000 related to its fiscal 1999, 1998, and 1997 cost reduction plans. Severance accruals of $1.6 million and remaining contract and lease obligations of $3.3 million at March 31, 2000 related to the cost reduction plans are included in accrued expenses and other. Capital expenditures for the six months ended March 31, 2000 were $7.7 million and relate principally to investments in information technology and warehouse automation equipment. Similar expenditures of approximately $10 million to $12 million are expected to occur in the next six months of fiscal 2000. In April 2000, the Company and four other healthcare distributors announced that they have agreed in principle to form an Internet-based company that would be an independent, commercially neutral healthcare product information exchange focused on streamlining the processes involved in identifying, purchasing and distributing healthcare products and services. The companies expect to complete a definitive joint venture agreement by the end of July and to begin implementation of the exchange by the end of the year. The Company's ownership interest and capital requirements have not yet been determined. Cash provided by financing activities during fiscal 2000 represents borrowings under the Company's revolving credit facility and its receivable securitization facility primarily to fund working capital requirements. At March 31, 2000, borrowings under the Company's $500 million revolving credit facility were $136.0 million and borrowings under the $325 million receivables program were $325.0 million. The revolving credit facility expires in January 2002 and provides for interest rates ranging from LIBOR plus 25 basis points to LIBOR plus 125 basis points based upon certain financial ratios. The receivables securitization facility was entered into in May 1999 and has a term of three years and interest is at a rate at which funds are obtained by the financial institution to fund the receivables (short-term commercial paper rates) plus a program fee of 38.5 basis points. The receivables securitization facility represents a financing vehicle utilized by the Company because of the availability of attractive interest rates relative to other financing sources. The Company securitizes its trade account and note receivables, which are generally non-interest bearing, in transactions that do not qualify as sales transactions under SFAS No. 125. The Company is currently in the process of expanding the receivables securitization facility to provide an additional $75 million of borrowing capacity and expects to close this transaction by the end of its third fiscal quarter. The Company's primary exposure to market risk consists of changes in interest rates on borrowings. 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 enters into interest rate protection agreements from time to time to hedge the exposure to increasing interest rates with respect to its long-term debt agreements. The Company provides protection to meet actual exposures and does not speculate in derivatives. For every $100 million of unhedged variable rate debt, a 75 basis point increase in interest rates would increase the Company's annual interest expense by $0.75 million. 13 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 pay 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. Environmental laws and regulations may require the Company to take remediation efforts at the site of a former distribution center. 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 ($3.8 million at March 31, 2000), 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 of 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. Year 2000 Issue The Company has not experienced any significant internal or external problems to date related to its information systems or other assets as a result of the Year 2000 Issue. However, certain problems may have occurred with customers or suppliers that the Company is not yet aware of that could have an adverse effect on the Company. Certain information in this Management's Discussion and Analysis of Financial Condition and Results of Operations 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 such as changes in interest rates, market technology, competitive pressures, customer and product mix, supplier pricing practices, inventory investment buying opportunities, regulatory changes, the Year 2000 Issue and capital markets could cause actual results to differ materially from those in forward-looking statements. Item 3. Quantitative and qualitative disclosures about market risk. See discussion in Item 2. above. 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27.1 -- March 31, 2000 27.2 -- March 31, 1999 (restated) (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter ended March 31, 2000. 15 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/ George L. James III ------------------------------------------------- George L. James III Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Michael D. DiCandilo ------------------------------------------------- Michael D. DiCandilo Vice President, Controller (Principal Accounting Officer) Date: August 9, 2000 16 EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE MARCH 31, 2000
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 3/21/00 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 6-MOS SEP-30-2000 SEP-30-2000 JAN-01-2000 OCT-01-1999 MAR-31-2000 MAR-31-2000 49,240 0 0 0 642,485 0 28,981 0 1,272,795 0 1,969,070 0 134,223 0 70,823 0 2,101,696 0 1,409,526 0 469,398 0 0 0 0 0 580 0 213,212 0 2,101,696 0 2,842,203 5,681,585 2,842,203 5,681,585 2,710,797 5,430,252 2,710,797 5,430,252 80,292 154,484 1,912 2,615 11,922 22,820 39,192 74,029 14,893 28,131 24,299 45,898 0 0 0 0 0 0 24,299 45,898 .47 .89 .47 .89
EX-27.2 3 0003.txt FINANCIAL DATA SCHEDULE MARCH 31, 1999 (RESTATED)
5 3-MOS 6-MOS SEP-30-1999 SEP-30-1999 JAN-01-1999 OCT-01-1998 MAR-31-1999 MAR-31-1999 119,195 0 0 0 536,236 0 27,025 0 1,023,700 0 1,724,072 0 131,517 0 63,884 0 1,895,513 0 1,147,795 0 602,229 0 0 0 0 0 587 0 123,432 0 1,895,513 0 2,385,171 4,759,906 2,385,171 4,759,906 2,262,185 4,525,794 2,262,185 4,525,794 76,506 147,968 1,853 2,630 12,805 23,449 33,675 62,645 13,456 24,531 20,219 38,114 0 0 0 0 0 0 20,219 38,114 .40 .76 .39 .74
-----END PRIVACY-ENHANCED MESSAGE-----