PharMerica Reports Third Quarter 2017 Results
PharMerica Stockholders Approve Merger at Special Meeting; Transaction On-Track to Close by Early 2018
Third Quarter 2017 Results
The results for the third quarter of 2017 are set forth below:
- Key Comparisons of Third Quarters Ended
September 30, 2017 and 2016:- Revenues for the third quarter of 2017 were
$595.1 million compared with$512.6 million for the third quarter of 2016; an increase of 16.1%. The increase in revenues of$82.5 million was driven by the 2016 and 2017 acquisitions, organic growth in the Company’s diversified businesses, partially offset by the loss of volume in the long-term care pharmacy business. - Gross profit for the third quarter of 2017 was
$89.3 million compared with$78.5 million in the third quarter of 2016; an increase of 13.8%. The increase in gross profit was due to improved purchasing strategies along with higher gross profit associated with the Company’s diversified businesses due to organic growth and recent acquisitions, partially offset by lower prescription volume in the long-term care pharmacy business. - Selling, general and administrative expenses were
$62.2 million or 10.5% of revenues for the three months endedSeptember 30, 2017 compared to$53.1 million or 10.4% of revenues for the three months endedSeptember 30, 2016 . - Net income for the third quarter of 2017 was
$3.2 million , or$0.10 diluted earnings per share, compared to$7.3 million , or$0.23 diluted earnings per share, for the same period in 2016. Adjusted diluted earnings per share was$0.46 in the third quarter of 2017 compared to$0.44 in the third quarter of 2016. - Adjusted EBITDA for the third quarter of 2017 was
$33.7 million compared with$31.5 million in the third quarter of 2016; an increase of 7.0%. - Cash flows provided by operating activities for the third quarter of 2017 were
$18 .0 million compared with cash flows provided by operating activities of$39.1 million in the third quarter of 2016. The decrease in cash from operating activities was due primarily to inventory level fluctuations and the timing of accounts payable disbursements. - During the third quarter of 2017 the Company made two acquisitions of long-term care pharmacies as well as an acquisition of a home infusion business for an aggregate purchase price of approximately
$42.8 million .
- Revenues for the third quarter of 2017 were
- Key Comparisons of the Nine Months Ended
September 30, 2017 and 2016:- Revenues for the nine months ended
September 30, 2017 were$1,753.9 million compared with$1,556.7 million for the nine months endedSeptember 30, 2016 ; an increase of 12.7%. The increase was driven by the 2016 and 2017 acquisitions, as well as organic growth in the Company’s diversified businesses and branded drug inflation, partially offset by a reduction in prescription volume in the long-term care pharmacy business. - Gross profit for the nine months ended
September 30, 2017 was$266.7 million compared with$242.3 million for the nine months endedSeptember 30, 2016 ; an increase of 10.1%. The increase in gross profit was due to improved purchasing strategies along with higher gross profit associated with the Company’s diversified businesses as a result of organic growth and recent acquisitions, partially offset by lower prescription volume in the long-term care pharmacy business. - Selling, general and administrative expenses were
$187.4 million or 10.7% of revenues for the nine months endedSeptember 30, 2017 , compared to$165.8 million or 10.7% of revenues for the nine months endedSeptember 30, 2016 . - Net income for the nine months ended
September 30, 2017 was$11.4 million , or$0.36 diluted earnings per share, compared to$13.9 million , or$0.44 diluted earnings per share, for the same period in 2016. Adjusted diluted earnings per share was$1.35 for the nine months endedSeptember 30, 2017 compared to$1.36 for the nine months endedSeptember 30, 2016 . - Adjusted EBITDA for the nine months ended
September 30, 2017 was$99.6 million compared with$93.6 million for the nine months endedSeptember 30, 2016 ; an increase of 6.4%. - Cash flows provided by operating activities for the nine months ended
September 30, 2017 were$132 .7 million compared with$80.3 million for the nine months endedSeptember 30, 2016 . The increase in cash from operating activities was due primarily to greater inventory reductions in 2017 compared to the same period in 2016.
- Revenues for the nine months ended
Acquisition by
As previously announced on
At a special meeting of PharMerica Corporation’s stockholders held earlier today, stockholders voted upon and approved the adoption of the Merger Agreement. The transaction is expected to be completed by early 2018, at which time PharMerica will become a private company.
In light of the agreement with KKR and Walgreens Boots Alliance, Inc., PharMerica does not intend to hold earnings conference calls during the pendency of the transaction.
About
Forward-looking Statements
This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which reflect the Company’s current estimates, expectations and projections about its future results, performance, prospects and opportunities. Forward-looking statements include, among other matters, the information concerning the Company’s expectation that the merger will be completed by early 2018. Forward-looking statements include statements that are not historical facts and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “plan,” “may,” “should,” “will,” “would,” “project” and similar expressions.
These forward-looking statements are based upon information currently available to us and are subject to a number of risks, uncertainties and other factors that could cause the Company’s actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Important factors that could cause the Company’s actual results to differ materially from the results referred to in the forward-looking statements we make in this press release include our ability to timely consummate the merger, if at all, and those included in the Risk Factors section set forth in the Company’s Annual Report on Form 10-K filed with the
You are cautioned not to place undue reliance on any forward-looking statements, all of which speak only as of the date of this press release. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on the Company’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this press release and in the Risk Factors section set forth in the Company’s Annual Report on Form 10-K filed with the
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UNAUDITED CONDENSED CONSOLIDATED INCOME STATEMENTS |
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(In millions, except share and per share amounts) |
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Three Months Ended |
Nine Months Ended |
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2016 | 2017 | 2016 | 2017 | |||||||||||||||||||||||||||||
Amount |
% of |
Amount |
% of |
Amount |
% of |
Amount |
% of |
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Revenues | $ | 512.6 | 100.0 | % | $ | 595.1 | 100.0 | % | $ | 1,556.7 | 100.0 | % | $ | 1,753.9 | 100.0 | % | ||||||||||||||||
Cost of goods sold | 434.1 | 84.7 | 505.8 | 85.0 | 1,314.4 | 84.4 | 1,487.2 | 84.8 | ||||||||||||||||||||||||
Gross profit | 78.5 | 15.3 | 89.3 | 15.0 | 242.3 | 15.6 | 266.7 | 15.2 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 53.1 | 10.4 | 62.2 | 10.5 | 165.8 | 10.7 | 187.4 | 10.7 | ||||||||||||||||||||||||
Amortization expense | 8.3 | 1.6 | 10.0 | 1.7 | 24.7 | 1.6 | 29.0 | 1.7 | ||||||||||||||||||||||||
Merger, acquisition, integration costs and other charges | 5.3 | 1.0 | 5.6 | 0.9 | 14.1 | 0.9 | 12.7 | 0.7 | ||||||||||||||||||||||||
Settlement, litigation and other related charges | (0.8) | (0.2) | 1.2 | 0.2 | 7.2 | 0.5 | 6.5 | 0.4 | ||||||||||||||||||||||||
Restructuring and impairment charges | 0.6 | 0.2 | 0.1 | - | 3.1 | 0.2 | 0.1 | - | ||||||||||||||||||||||||
Operating income | 12.0 | 2.3 | 10.2 | 1.7 | 27.4 | 1.7 | 31.0 | 1.7 | ||||||||||||||||||||||||
Interest expense, net | 3.0 | 0.6 | 4.1 | 0.7 | 9.3 | 0.6 | 11.9 | 0.7 | ||||||||||||||||||||||||
Income before income taxes | 9.0 | 1.7 | 6.1 | 1.0 | 18.1 | 1.1 | 19.1 | 1.0 | ||||||||||||||||||||||||
Provision for income taxes | 1.7 | 0.3 | 2.9 | 0.5 | 4.2 | 0.2 | 7.7 | 0.4 | ||||||||||||||||||||||||
Net income | $ | 7.3 | 1.4 | % | $ | 3.2 | 0.5 | % | $ | 13.9 | 0.9 | % | $ | 11.4 | 0.6 | % | ||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||
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2016 | 2017 | 2016 | 2017 | ||||||||||
Earnings per common share: | |||||||||||||
Basic | $ | 0.24 | $ | 0.10 | $ | 0.45 | $ | 0.37 | |||||
Diluted | $ | 0.23 | $ | 0.10 | $ | 0.44 | $ | 0.36 | |||||
Shares used in computing earnings per common share: | |||||||||||||
Basic | 30,754,253 | 31,118,756 | 30,670,487 | 31,019,184 | |||||||||
Diluted | 31,071,290 | 31,401,624 | 31,040,849 | 31,355,196 | |||||||||
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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
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(In millions, except share and per share amounts) |
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2016 | 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5.4 | $ | 7.8 | |||
Accounts receivable, net | 235.4 | 249.2 | |||||
Inventory | 214.7 | 139.2 | |||||
Income taxes receivable | 4.7 | 5.1 | |||||
Prepaids and other assets | 56.5 | 54.0 | |||||
516.7 | 455.3 | ||||||
Equipment and leasehold improvements | 250.9 | 273.4 | |||||
Accumulated depreciation | (165.1) | (184.1) | |||||
85.8 | 89.3 | ||||||
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392.3 | 449.3 | |||||
Intangible assets, net | 187.6 | 193.4 | |||||
Deferred tax assets, net | 9.2 | 1.8 | |||||
Other long-term assets | 81.4 | 79.3 | |||||
$ | 1,273.0 | $ | 1,268.4 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 107.1 | $ | 97.1 | |||
Salaries, wages and other compensation | 32.5 | 34.8 | |||||
Current portion of long-term debt | 15.6 | 15.4 | |||||
Other accrued liabilities | 27.1 | 29.0 | |||||
182.3 | 176.3 | ||||||
Long-term debt | 457.8 | 444.8 | |||||
Other long-term liabilities | 88.7 | 85.7 | |||||
Commitments and contingencies | |||||||
Stockholders' equity: | |||||||
Preferred stock, |
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shares issued, |
- | - | |||||
Common stock, |
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33,698,269 and 34,130,736 shares issued as of |
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and |
0.3 | 0.3 | |||||
Capital in excess of par value | 411.1 | 419.3 | |||||
Retained earnings | 173.7 | 185.1 | |||||
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and |
(40.9) | (43.1) | |||||
544.2 | 561.6 | ||||||
$ | 1,273.0 | $ | 1,268.4 | ||||
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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(In millions) |
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Three Months Ended | Nine Months Ended | ||||||||||||
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2016 | 2017 | 2016 | 2017 | ||||||||||
Cash flows provided by (used in) operating activities: | |||||||||||||
Net income | $ | 7.3 | $ | 3.2 | $ | 13.9 | $ | 11.4 | |||||
Adjustments to reconcile net income to net cash | |||||||||||||
provided by (used in) operating activities: | |||||||||||||
Depreciation | 6.2 | 6.6 | 17.2 | 20.3 | |||||||||
Amortization | 8.3 | 10.0 | 24.7 | 29.0 | |||||||||
Stock-based compensation and deferred compensation | 2.2 | 2.2 | 6.3 | 7.2 | |||||||||
Amortization of deferred financing fees | 0.1 | 0.2 | 0.4 | 0.6 | |||||||||
Deferred income taxes | 0.2 | 1.3 | 8.0 | 8.5 | |||||||||
Other | 0.1 | 0.1 | 0.2 | - | |||||||||
Change in operating assets and liabilities: | |||||||||||||
Accounts receivable, net | (7.4) | (2.6) | (14.4) | (6.7) | |||||||||
Inventory | 43.9 | 3.5 | 36.5 | 81.0 | |||||||||
Prepaids and other assets | (0.2) | (3.9) | (0.7) | 4.6 | |||||||||
Accounts payable | (24.5) | (7.4) | 2.3 | (15.8) | |||||||||
Salaries, wages and other compensation | 0.2 | 3.2 | (2.5) | 2.1 | |||||||||
Other accrued and long-term liabilities | (4.1) | - | (13.4) | (9.0) | |||||||||
Change in income taxes payable (receivable) | 6.9 | 1.6 | 3.1 | (0.4) | |||||||||
Excess tax benefit from stock-based compensation | (0.1) | - | (1.3) | (0.1) | |||||||||
Net cash provided by operating activities | 39.1 | 18.0 | 80.3 | 132.7 | |||||||||
Cash flows provided by (used in) investing activities: | |||||||||||||
Purchase of equipment and leasehold improvements | (13.0) | (7.5) | (26.3) | (23.4) | |||||||||
Acquisitions, net of cash acquired | (24.4) | (43.3) | (31.3) | (94.0) | |||||||||
Cash proceeds from sale of assets | 0.1 | - | 0.1 | - | |||||||||
Net cash used in investing activities | (37.3) | (50.8) | (57.5) | (117.4) | |||||||||
Cash flows provided by (used in) financing activities: | |||||||||||||
Repayments of long-term debt | (2.8) | (3.8) | (8.4) | (11.3) | |||||||||
Net activity of long-term revolving credit facility | (19.5) | 31.1 | (27.5) | (1.9) | |||||||||
Payment of debt issuance stock | - | (0.1) | - | (0.1) | |||||||||
Issuance of common stock | 0.1 | - | 0.2 | 3.0 | |||||||||
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(0.3) | - | (3.3) | (2.2) | |||||||||
Repayments of capital lease obligations | (0.2) | (0.1) | (0.4) | (0.4) | |||||||||
Net cash (used in) provided by financing activities | (22.7) | 27.1 | (39.4) | (12.9) | |||||||||
Change in cash and cash equivalents | (20.9) | (5.7) | (16.6) | 2.4 | |||||||||
Cash and cash equivalents at beginning of period | 27.4 | 13.5 | 23.1 | 5.4 | |||||||||
Cash and cash equivalents at end of period | $ | 6.5 | $ | 7.8 | $ | 6.5 | $ | 7.8 | |||||
Supplemental information: | |||||||||||||
Cash paid for interest | $ | 2.7 | $ | 3.9 | $ | 7.9 | $ | 11.3 | |||||
Cash (received) paid for taxes | $ | (5.0) | $ | 0.4 | $ | (4.8) | $ | 0.2 | |||||
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SUPPLEMENTAL INFORMATION |
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Three Months Ended | Nine Months Ended | |||||||||||||
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2016 | 2017 | 2016 | 2017 | |||||||||||
Pharmacy data: | ||||||||||||||
Prescriptions dispensed (in thousands) |
7,520 | 7,497 | 23,683 | 22,959 | ||||||||||
Revenue per prescription dispensed | $ | 68.16 | $ | 79.38 | $ | 65.73 | $ | 76.39 | ||||||
Gross profit per prescription dispensed | $ | 10.44 | $ | 11.91 | $ | 10.23 | $ | 11.62 | ||||||
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA |
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Three Months Ended | Nine Months Ended | ||||||||||||||
(In millions) | |
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2016 | 2017 | 2016 | 2017 | ||||||||||||
Net income | $ | 7.3 | $ | 3.2 | $ | 13.9 | $ | 11.4 | |||||||
Add: | |||||||||||||||
Interest expense, net | 3.0 | 4.1 | 9.3 | 11.9 | |||||||||||
Provision for income taxes | 1.7 | 2.9 | 4.2 | 7.7 | |||||||||||
Depreciation and amortization expense | 14.4 | 16.6 | 41.8 | 49.3 | |||||||||||
EBITDA | 26.4 | 26.8 | 69.2 | 80.3 | |||||||||||
Merger, acquisition, integration costs and other charges | 5.3 | 5.6 | 14.1 | 12.7 | |||||||||||
Settlement, litigation and other related charges | (0.8) | 1.2 | 7.2 | 6.5 | |||||||||||
Restructuring and impairment charges | 0.6 | 0.1 | 3.1 | 0.1 | |||||||||||
Adjusted EBITDA | $ | 31.5 | $ | 33.7 | $ | 93.6 | $ | 99.6 | |||||||
Adjusted EBITDA margin | 6.1% | 5.7% | 6.0% | 5.7% | |||||||||||
UNAUDITED RECONCILIATION OF DILUTED EARNINGS PER SHARE |
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TO ADJUSTED DILUTED EARNINGS PER SHARE |
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Three Months Ended | Nine Months Ended | |||||||||||||||
(In whole numbers) | |
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2016 | 2017 | 2016 | 2017 | |||||||||||||
Diluted earnings per share | $ | 0.23 | $ | 0.10 | $ | 0.44 | $ | 0.36 | ||||||||
Add: | ||||||||||||||||
Diluted earnings per share impact of: | ||||||||||||||||
Merger, acquisition, integration costs and | ||||||||||||||||
other charges | 0.11 | 0.11 | 0.29 | 0.25 | ||||||||||||
Settlement, litigation and other related charges | (0.02) | 0.03 | 0.14 | 0.13 | ||||||||||||
Restructuring and impairment charges | 0.01 | - | 0.06 | - | ||||||||||||
Amortization of intangible assets | 0.17 | 0.20 | 0.51 | 0.58 | ||||||||||||
Tax impact of the above adjustments | ||||||||||||||||
on tax provision | (0.06) | 0.02 | (0.08) | 0.03 | ||||||||||||
Adjusted diluted earnings per share | $ | 0.44 | $ | 0.46 | $ | 1.36 | $ | 1.35 | ||||||||
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SUPPLEMENTAL INFORMATION (Continued) |
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UNAUDITED RECONCILIATION OF ADJUSTED EBITDA |
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TO NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES |
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Three Months Ended | Nine Months Ended | |||||||||||||||
(In millions) | |
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2016 | 2017 | 2016 | 2017 | |||||||||||||
Adjusted EBITDA | $ | 31.5 | $ | 33.7 | $ | 93.6 | $ | 99.6 | ||||||||
Interest expense, net | (3.0) | (4.1) | (9.3) | (11.9) | ||||||||||||
Merger, acquisition, integration costs and other charges | (5.3) | (6.9) | (24.6) | (19.3) | ||||||||||||
Provision for bad debt | 0.1 | 3.0 | 4.0 | 9.6 | ||||||||||||
Amortization of deferred financing fees | 0.1 | 0.2 | 0.4 | 0.6 | ||||||||||||
Provision (benefit) for income taxes | (1.7) | (2.9) | (4.2) | (7.7) | ||||||||||||
Deferred income taxes | 0.2 | 1.3 | 8.0 | 8.5 | ||||||||||||
Changes in federal and state income tax payable (receivable) | 6.9 | 1.6 | 3.1 | (0.4) | ||||||||||||
Stock-based compensation and deferred compensation | 2.2 | 2.2 | 6.3 | 7.2 | ||||||||||||
Excess tax benefit from stock-based compensation | (0.1) | - | (1.3) | (0.1) | ||||||||||||
Changes in assets and liabilities | 8.1 | (10.2) | 4.1 | 46.6 | ||||||||||||
Other | 0.1 | 0.1 | 0.2 | - | ||||||||||||
Net cash flows provided by operating activities | $ | 39.1 | $ | 18.0 | $ | 80.3 | $ | 132.7 | ||||||||
Use of Non-GAAP Measures
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