AmerisourceBergen attributes growth to specialty biz
VALLEY FORGE, Pa. — AmerisourceBergen on Thursday reported revenue of $20.1 billion, up 1.6%, for its second quarter ended March 31.
"I am pleased to report very solid results for our second fiscal quarter and for the first half of our fiscal year," stated Steven Collis, AmerisourceBergen president and CEO. "We overcame a challenging comparison with the prior year, we continued to demonstrate tremendous expense and working capital discipline, and our balance sheet remains strong, giving us outstanding financial flexibility," he said. "The integration of our recent acquisitions is progressing well, and we are on track to meet our objectives for the year. We expect to complete our $520 million acquisition of World Courier Group by the end of April."
Collis attributed ABC’s revenue growth to a 6% increase in AmerisourceBergen Specialty Group revenue. While strong performance in third-party logistics and the wholesaler’s vaccine and physician office distribution business and solid performance in the institutional segment was offset by the loss of Medco as a customer to its merger with Express Scripts.
Following the closing of the merger between Express Scripts and Medco Health Solutions, AmerisourceBergen amended its existing Medco agreement to provide for the contract to end upon the award and implementation of one or more new pharmaceutical distribution agreements for the newly combined business. Express Scripts has issued a request for proposal for the combined business, and anticipates that the new contract or contracts will begin on Oct. 1, 2012. "We will participate fully in the competitive RFP process, and it is our intent to pursue the opportunity to retain or grow the business under a new contract," Collis stated.
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Safeway CEO to analysts: Grocer is not bracing for a buyout
PLEASANTON, Calif. — Recent events, which have driven Wall Street analysts to speculate that Safeway is a buyout target, are not interrelated, Safeway chairman and CEO Steve Burd assured analysts Thursday morning during the grocer’s first-quarter conference call.
Analysts pointed to the recent promotion of Robert Edwards to president of the company, an uptick in Safeway’s stock buyback activity, the releasing of sales, earning details for Safeway’s Blackhawk Network (a gift card distribution network) and the implementation of a "double-trigger" option, where top executives would be required to stay with the company through a buyout to qualify for fully vested payouts — suggesting that each instance were like bread crumbs all leading to the only logical conclusion that Safeway is gearing for a corporate buyout.
"Everything that you described — even though you pieced them together and tried to do some sort of connection of dots — is happening [as part of a] normal course," Burd said.
During first quarter 2012, Safeway purchased 46 million shares of its common stock at an average cost of $21.70 per share and a total cost of $1 billion (including commissions). "We really believe in our ability to grow top-line sales," Burd said. "It just made so much sense to get aggressive on that stock buyback."
Regarding the double-trigger mechanism, Burd said, "no one should interpret that we did that because we expect a change in control. It’s really just a migration toward increasing better governance conditions."
Burd suggested Edwards’ promotion to president could be interpreted as a sound succession strategy. "Let’s also consider the fact that I’m 62 [years old] and while I’m not planning to go anywhere soon, it does make sense to create some logical succession opportunities," Burd said.
And Burd said shareholders have been requesting details on Blackhawk operations for years. "One way to give people some insight into its independent value was to provide a lot more information so we elected for the first time to show the EBITDA performance of Blackhawk. As you know, it’s a great story," he said.
"None of this is preparation for some other event. We think that all of this is pretty natural behavior," Burd concluded.
Safeway’s identical-store sales (excluding fuel) were flat for the quarter, while total sales increased 2.4% to $10 billion in the first quarter of 2012, primarily due to higher fuel sales, higher revenue from Blackhawk and additional sales from new stores. "We have been effective in passing along inflation and we’ve gotten adequate support from the vendor community," Burd told analysts Thursday morning. "The first quarter looks very much like how we expect the year to be."
"Strong cost controls helped us meet earnings expectations despite a shift in the New Year’s holiday, weather patterns and high gasoline prices which dampened sales," Burd said. "In addition, operating profit in the quarter would have been essentially the same as last year without the holiday shift. In the last eight weeks, identical-store sales have been running at 1%, and we continue to believe sales will grow as our new marketing initiatives take hold."
Meanwhile, Safeway expects to complete its divestiture of Genuardi’s stores in the second quarter. In January, Safeway announced the planned sale or closure of 27 Genuardi’s stores, including the sale of 16 Genuardi’s stores to Giant Food Stores. Safeway closed three of the Genuardi’s stores and expects to complete the disposition of the remaining 24 Genuardi’s stores in 2012.
Safeway’s guidance for 2012 remains at $1.90 to $2.10 per diluted share, nonfuel indentical sales growth of 1% to 2%, operating profit margin change, excluding fuel, of negative 5 basis points to 5 basis points, and free cash flow of $850 million to $950 million.
From personally knowing people that work in Safeway stores, they recently had hours cut from their weekly allotted work hours for approx 4 weeks to make the figures look better for the shareholders and to improve the companies profitability. From the conversations that I have had with Safeway employees, they were already strapped for the proper time to get the job done before the conference call that said all departments were to have hours cut. From one conversation, 60 hours was to be cut from just he registers alone. How can the stores truly be profitable if they do not have the man hours to run the store properly to meet the customers needs? From my conversations with employee's, the stores are so unorganized and behind in their work load, that it seems unlikely that the company is really profiting except on paper, at the expense of the employee's.
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NACDS expresses support of ‘chairman’s mark’ of Senate bill to reauthorize PDUFA
ALEXANDRIA, Va. — The National Association of Chain Drug Stores expressed its support for the legislative package that will serve as a starting point for the reauthorization of the Prescription Drug User Fee Act in a letter to the bipartisan leadership of the Senate Committee on Health, Education, Labor and Pensions.
NACDS wrote to committee chairman Tom Harkin, D-Iowa, and ranking member Mike Enzi, R-Wyo., saying “We applaud your leadership in drafting legislative proposals that will ensure that Americans’ prescription medications and medical devices continue to be safe and effective. Nothing is more important than the health and safety of the patients we serve.”
The “chairman’s mark” of the bill will provide the baseline for the committee’s debate and consideration of amendments. The bill includes provisions to further enhance the safety and integrity of the prescription drug manufacturing process, to deter prescription drug counterfeiting, to address drug shortages and to assist the blind and visually impaired in accessing prescription label information.
Regarding prescription drug manufacturing provisions, NACDS wrote, “these important enhancements include increased oversight, inspections and audit of both domestic and foreign facilities involved with drug manufacturing, as well as those facilities that prepare active and inactive ingredients used in drug products. Also importantly, [the Food and Drug Administration] will have long-sought authority to destroy any drug refused admission into the U.S. if the drug has a reasonable probability of causing serious adverse health consequences or death. We believe this authority is critical to support FDA’s mission.”
The bill’s counterfeiting provisions would increase penalties for the “reprehensible acts” of adulterating a prescription drug or dealing in counterfeit prescription drugs. Provisions related to drug shortages would provide the FDA with advance notice from manufacturers so that the FDA may better respond, prevent and mitigate drug shortages. The bill also would create a working group to develop best practices for assisting the blind and visually impaired with accessing prescription label information.
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