PharMerica Corporation (NYSE:PMC), a national provider of institutional, specialty home infusion, hospital and oncology pharmacy services, today reported its financial results for the first quarter ended March 31, 2014.
First Quarter 2014 Highlights (Comparisons to First Quarter 2013)
- Revenues of $452.2 million, an increase of 3%
- Adjusted EBITDA of $29.7 million, a decrease of 14%
- Adjusted diluted earnings per share of $0.37, a decrease of 20%
- Net organic sales growth in the institutional pharmacy business continues, excluding previously disclosed bed losses
- Strategic investment in Onco360 driving revenue growth
- Generic drug dispensing rate increased to industry-leading 84.5%
Greg Weishar, PharMerica Corporation’s Chief Executive Officer, said, “We are positioning PharMerica to drive long-term growth and value creation, and we are encouraged that first quarter results demonstrate solid progress toward those objectives. During the quarter we achieved year-over-year and sequential revenue growth that exceeded expectations. Revenue growth was primarily driven by specialty operations. Consequently, we achieved another quarter of sequential sales growth while at the same time improving our industry-leading generic dispensing rate.”
Mr. Weishar added, “Under the previously announced strategic purchasing initiative, we are advantageously deploying cash flow from operating activities to enhance gross margins. Through the balance of 2014, we will prudently invest in inventory levels that maximize buy side margin. At the same time, we continue to focus on both organic and external growth opportunities. With a solid quarter behind us, we are confident that 2014 will be a successful year of transition and that PharMerica is poised to deliver improving financial results in 2015 and beyond.”
Full Year 2014 Financial Guidance
PharMerica today updated its full year 2014 guidance metrics. For the full year 2014, the Company now expects:
- Revenue in the range of $1.70 billion to $1.75 billion from $1.67 billion to $1.72 billion
- Adjusted diluted earnings per share in the range of $1.40 to $1.50 from $1.35 to $1.50
- Adjusted EBITDA in the range of $117.5 million to $123.0 million from $115.0 million to $123.0 million
The Company notes that its 2014 guidance does not include the effect of any potential 2014 acquisitions. PharMerica is targeting acquisitions that generate at least $100 million of annualized sales, in the aggregate, in each of 2014 and 2015.
The results for the first quarter 2014 are set forth below:
- Key Comparisons of First Quarters Ended March 31, 2014 and 2013:
- Revenues for the first quarter of 2014 were $452.2 million compared with $439.8 million for the first quarter of 2013. The increase in revenue was primarily the result of the fourth quarter 2013 acquisitions and branded drug price inflation, and was partially offset by previously disclosed bed losses as of December 31, 2013.
- Gross profit for the first quarter of 2014 was $80.0 million compared with $84.3 million in the first quarter of 2013. Gross profit was impacted by previously disclosed bed losses as of December 31, 2013. The decrease in gross profit was partially offset by a reduction in costs associated with the Company’s restructuring program and an improvement in the Company’s drug procurement initiatives.
- Selling, general and administrative expenses were $57.2 million or 12.6% of revenues for the three months ended March 31, 2014 compared to $56.7 million or 12.9% of revenues for the three months ended March 31, 2013. Selling, general and administrative expenses increased as a result of the Onco360 acquisition, without which selling, general and administrative expenses would have decreased.
- Adjusted EBITDA for the first quarter of 2014 was $29.7 million compared with $34.6 million in the first quarter of 2013.
- Net income for the first quarter of 2014 was $4.8 million, or $0.16 diluted earnings per share, compared with $10.5 million, or $0.35 diluted earnings per share, for the same period in 2013. Adjusted diluted earnings per share was $0.37 in 2014 compared with $0.46 in 2013, a decrease of 19.6%.
- Cash flows provided by operating activities for the first quarter of 2014 were $4.4 million compared with cash flows provided by operating activities of $47.5 million in the first quarter of 2013. The decrease in cash provided by operating activities is due to a reduction in net income, a planned change in the Company’s inventory purchasing strategies and a decrease in liabilities partially offset by a decrease in accounts receivable.
Conference Call
Management will hold an online webcast of its first quarter 2014 earnings conference call on Thursday, May 1, 2014 at 10:00 a.m. Eastern Time. A 30-day online replay will be available approximately one hour following the conclusion of the live broadcast. A link to these events can be found under the Investor Relations section of the Company’s website, www.pharmerica.com.
About PharMerica
PharMerica Corporation is a leading institutional pharmacy services company that services healthcare facilities in the United States, provides pharmacy management services to hospitals, specialty infusion services to patients outside a hospital setting, and offers the only national oncology pharmacy and care management platform in the United States. PharMerica operates 95 institutional pharmacies, 12 specialty infusion centers and 5 specialty oncology pharmacies in 45 states. PharMerica’s customers are institutional healthcare providers, such as skilled nursing facilities, nursing centers, assisted living facilities, hospitals, individuals receiving in-home care and other long-term alternative care providers.
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 “guidance” and possible future results of operations, future potential acquisitions, the strength of the Company’s financial and operational performance during 2014 and beyond, the expected revenues from the specialty infusion and oncology businesses, the Company's plan to improve and refine its inventory management strategy, the Company’s ability to identify and consummate future acquisitions, the Company’s ability to deliver outstanding value to its shareholders, the Company’s continued pursuit of its strategic initiatives including those focused on client retention and operating margins, the Company’s expectation to deliver improved financial results in 2015 and beyond, and the Company’s ability to achieve organic growth and topline revenue growth.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 the adequacy of our litigation-related reserves and those included in the Risk Factors section set forth in the Company’s Annual Report on Form 10-K filed with the SEC and in other reports, including Quarterly Reports on Form 10-Q filed with the SEC by the Company.
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 SEC and in other reports filed with the SEC by the Company.
PHARMERICA CORPORATION | |||||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||
| 2013 | 2014 | ||||||||||||||||||
| Amount | % of | Amount | % of | ||||||||||||||||
| Revenues | $ | 439.8 | 100.0 | % | $ | 452.2 | 100.0 | % | |||||||||||
| Cost of goods sold | 355.5 | 80.8 | 372.2 | 82.3 | |||||||||||||||
| Gross profit | 84.3 | 19.2 | 80.0 | 17.7 | |||||||||||||||
| Selling, general and administrative expenses | 56.7 | 12.9 | 57.2 | 12.6 | |||||||||||||||
| Amortization expense | 4.1 | 1.0 | 4.4 | 1.0 | |||||||||||||||
| Merger, acquisition, integration costs and other charges | 2.8 | 0.6 | 5.0 | 1.1 | |||||||||||||||
| Settlement, litigation and other related charges | 0.1 | - | 1.2 | 0.3 | |||||||||||||||
| Restructuring and impairment charges | - | - | 1.9 | 0.4 | |||||||||||||||
| Hurricane Sandy disaster costs | 0.6 | 0.1 | - | - | |||||||||||||||
| Operating income | 20.0 | 4.6 | 10.3 | 2.3 | |||||||||||||||
| Interest expense, net | 2.6 | 0.6 | 2.5 | 0.6 | |||||||||||||||
| Income before income taxes | 17.4 | 4.0 | 7.8 | 1.7 | |||||||||||||||
| Provision for income taxes | 6.9 | 1.6 | 3.0 | 0.6 | |||||||||||||||
| Net income | $ | 10.5 | 2.4 | % | $ | 4.8 | 1.1 | % | |||||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2013 | 2014 | |||||||
| Earnings per common share: | ||||||||
| Basic | $ | 0.36 | $ | 0.16 | ||||
| Diluted | $ | 0.35 | $ | 0.16 | ||||
| Shares used in computing earnings per common share: | ||||||||
| Basic | 29,566,959 | 29,753,024 | ||||||
| Diluted | 30,063,737 | 30,354,067 | ||||||
PHARMERICA CORPORATION | ||||||||
| (As Adjusted) | ||||||||
| Dec. 31, | Mar. 31, | |||||||
| 2013 | 2014 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 24.2 | $ | 12.7 | ||||
| Accounts receivable, net | 199.9 | 186.2 | ||||||
| Inventory | 110.2 | 107.4 | ||||||
| Deferred tax assets, net | 36.9 | 32.9 | ||||||
| Income taxes receivable | 1.9 | 5.8 | ||||||
| Prepaids and other assets | 38.6 | 41.4 | ||||||
| 411.7 | 386.4 | |||||||
| Equipment and leasehold improvements | 179.4 | 177.2 | ||||||
| Accumulated depreciation | (117.6) | (114.3) | ||||||
| 61.8 | 62.9 | |||||||
| Goodwill | 282.2 | 282.5 | ||||||
| Intangible assets, net | 136.3 | 131.9 | ||||||
| Other | 9.3 | 5.7 | ||||||
| $ | 901.3 | $ | 869.4 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 83.7 | $ | 61.5 | ||||
| Salaries, wages and other compensation | 34.5 | 29.8 | ||||||
| Current portion of long-term debt | 12.5 | 12.5 | ||||||
| Other accrued liabilities | 20.7 | 9.2 | ||||||
| 151.4 | 113.0 | |||||||
| Long-term debt | 218.8 | 218.4 | ||||||
| Other long-term liabilities | 49.9 | 49.3 | ||||||
| Deferred tax liabilities | 18.7 | 18.7 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, $0.01 par value per share; 1,000,000 shares authorized and no | ||||||||
| shares issued, December 31, 2013 and March 31, 2014 | - | - | ||||||
| Common stock, $0.01 par value per share; 175,000,000 shares authorized; | ||||||||
| 31,954,264 and 32,581,547 shares issued as of | ||||||||
| December 31, 2013 and March 31, 2014, respectively | 0.3 | 0.3 | ||||||
| Capital in excess of par value | 380.2 | 387.4 | ||||||
| Retained earnings | 110.2 | 115.0 | ||||||
| Treasury stock at cost, 2,416,971 and 2,594,281 shares at December 31, 2013 | ||||||||
| and March 31, 2014, respectively | (28.2) | (32.7) | ||||||
| 462.5 | 470.0 | |||||||
| $ | 901.3 | $ | 869.4 | |||||
PHARMERICA CORPORATION | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2013 | 2014 | |||||||
| Cash flows provided by (used in) operating activities: | ||||||||
| Net income | $ | 10.5 | $ | 4.8 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by (used in) operating activities: | ||||||||
| Depreciation | 4.8 | 4.8 | ||||||
| Amortization | 4.1 | 4.4 | ||||||
| Merger, acquisition, integration costs and other charges | - | 2.5 | ||||||
| Hurricane Sandy disaster costs | (0.6) | - | ||||||
| Stock-based compensation and deferred compensation | 2.2 | 2.1 | ||||||
| Amortization of deferred financing fees | 0.3 | 0.7 | ||||||
| Deferred income taxes | 3.6 | 4.0 | ||||||
| Gain on disposition of equipment | - | (0.1) | ||||||
| Gain on acquisition | - | (0.3) | ||||||
| Other | 0.1 | 0.1 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (1.2) | 13.1 | ||||||
| Inventory | 35.5 | 2.8 | ||||||
| Prepaids and other assets | 3.4 | (2.1) | ||||||
| Accounts payable | (12.6) | (21.8) | ||||||
| Salaries, wages and other compensation | (4.8) | (4.7) | ||||||
| Other accrued liabilities | (0.5) | (1.9) | ||||||
| Change in income taxes payable (receivable) | 2.9 | (1.3) | ||||||
| Excess tax benefit from stock-based compensation | (0.2) | (2.7) | ||||||
| Net cash provided by operating activities | 47.5 | 4.4 | ||||||
| Cash flows provided by (used in) investing activities: | ||||||||
| Purchase of equipment and leasehold improvements | (6.7) | (6.0) | ||||||
| Acquisitions, net of cash acquired | (0.5) | (10.7) | ||||||
| Cash proceeds from dispositions | - | 0.4 | ||||||
| Net cash used in investing activities | (7.2) | (16.3) | ||||||
| Repayments of long-term debt | (3.1) | (3.1) | ||||||
| Net activity of long-term revolving credit facility | (40.5) | 2.8 | ||||||
| Issuance of common stock | 0.1 | 2.5 | ||||||
| Treasury stock at cost | (1.8) | (4.5) | ||||||
| Excess tax benefit from stock-based compensation | 0.2 | 2.7 | ||||||
| Other | 0.3 | - | ||||||
| Net cash used in financing activities | (44.8) | 0.4 | ||||||
| Change in cash and cash equivalents | (4.5) | (11.5) | ||||||
| Cash and cash equivalents at beginning of period | 12.3 | 24.2 | ||||||
| Cash and cash equivalents at end of period | $ | 7.8 | $ | 12.7 | ||||
| Supplemental information: | ||||||||
| Cash paid for interest | $ | 2.3 | $ | 1.8 | ||||
| Cash paid for taxes | $ | 1.3 | $ | 0.4 | ||||
PHARMERICA CORPORATION | ||||||||
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2013 | 2014 | |||||||
| Pharmacy data: | ||||||||
| Prescriptions dispensed (in thousands) | 9,711 | 8,608 | ||||||
| Revenue per prescription dispensed | $ | 45.29 | $ | 52.53 | ||||
| Gross profit per prescription dispensed | $ | 8.68 | $ | 9.29 | ||||
UNAUDITED RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA | ||||||||
| Three Months Ended | ||||||||
| (In millions) | March 31, | |||||||
| 2013 | 2014 | |||||||
| Net income | $ | 10.5 | $ | 4.8 | ||||
| Add: | ||||||||
| Interest expense, net | 2.6 | 2.5 | ||||||
| Merger, acquisition, integration costs and other charges | 2.8 | 5.0 | ||||||
| Settlement, litigation and other related charges | 0.1 | 1.2 | ||||||
| Restructuring and impairment charges | - | 1.9 | ||||||
| Hurricane Sandy disaster costs | 0.6 | - | ||||||
| Stock-based compensation and deferred compensation | 2.2 | 2.1 | ||||||
| Provision for income taxes | 6.9 | 3.0 | ||||||
| Depreciation and amortization expense | 8.9 | 9.2 | ||||||
| Adjusted EBITDA | $ | 34.6 | $ | 29.7 | ||||
| Adjusted EBITDA margin | 7.9% | 6.6% | ||||||
UNAUDITED RECONCILIATION OF DILUTED EARNINGS PER SHARE | ||||||||
| Three Months Ended | ||||||||
| (In whole numbers) | March 31, | |||||||
| 2013 | 2014 | |||||||
| Diluted earnings per share | $ | 0.35 | $ | 0.16 | ||||
| Add: | ||||||||
| Diluted earnings per share impact of: | ||||||||
| Merger, acquisition, integration costs and | ||||||||
| other charges | 0.06 | 0.10 | ||||||
| Settlement, litigation and other related charges | - | 0.03 | ||||||
| Restructuring and impairment charges | - | 0.04 | ||||||
| Hurricane Sandy disaster costs | 0.01 | - | ||||||
| Stock-based compensation and | ||||||||
| deferred compensation | 0.04 | 0.04 | ||||||
| Adjusted diluted earnings per share | $ | 0.46 | $ | 0.37 | ||||
| PHARMERICA CORPORATION | ||||||||
| SUPPLEMENTAL INFORMATION (Continued) | ||||||||
| UNAUDITED RECONCILIATION OF ADJUSTED EBITDA | ||||||||
| TO NET CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Three Months Ended | ||||||||
| (In millions) | March 31, | |||||||
| 2013 | 2014 | |||||||
| Adjusted EBITDA | $ | 34.6 | $ | 29.7 | ||||
| Interest expense, net | (2.6) | (2.5) | ||||||
| Merger, acquisition, integration costs and other charges | (2.9) | (2.5) | ||||||
| Provision for bad debt | 5.3 | 5.6 | ||||||
| Amortization of deferred financing fees | 0.3 | 0.7 | ||||||
| Loss (gain) on disposition of equipment | - | (0.1) | ||||||
| Gain on acquisition | - | (0.3) | ||||||
| Provision for income taxes | (6.9) | (3.0) | ||||||
| Deferred income taxes | 3.6 | 4.0 | ||||||
| Changes in federal and state income tax payable (receivable) | 2.9 | (1.3) | ||||||
| Excess tax benefit from stock-based compensation | (0.2) | (2.7) | ||||||
| Changes in assets and liabilities | 13.3 | (23.3) | ||||||
| Other | 0.1 | 0.1 | ||||||
| Net cash flows provided by operating activities | $ | 47.5 | $ | 4.4 | ||||
Use of Non-GAAP Measures
PharMerica calculates Adjusted EBITDA as provided in the reconciliation above and calculates Adjusted EBITDA Margin by taking Adjusted EBITDA and dividing it by revenues. PharMerica calculates and uses Adjusted EBITDA as an indicator of its ability to generate cash from reported operating results. The measurement is used in concert with net income and cash flows from operations, which measure actual cash generated in the period. In addition, PharMerica believes that Adjusted EBITDA and Adjusted EBITDA Margin are supplemental measurement tools used by analysts and investors to help evaluate overall operating performance and the ability to incur and service debt and make capital expenditures. In addition, Adjusted EBITDA, as defined in the Credit Agreement, is used in conjunction with the Corporation’s debt leverage ratio and this calculation sets the applicable margin for the quarterly interest charge. Adjusted EBITDA, as defined in the Credit Agreement, is not the same calculation as these unaudited reconciliation tables. Adjusted EBITDA does not represent funds available for PharMerica’s discretionary use and is not intended to represent or to be used as a substitute for net income or cash flows from operations data as measured under U.S. generally accepted accounting principles (“GAAP”). The items excluded from Adjusted EBITDA but included in the calculation of PharMerica’s reported net income and cash flows from operations are significant components of the accompanying consolidated income statements and cash flows and must be considered in performing a comprehensive assessment of overall financial performance. PharMerica’s calculation of Adjusted EBITDA may not be consistent with calculations of EBITDA used by other companies.
PharMerica calculates and uses adjusted diluted earnings per share, exclusive of the impact of merger, acquisition, integration costs and other charges, settlement, litigation and other related charges, restructuring and impairment charges, Hurricane Sandy disaster costs and stock-based and deferred compensation as an indicator of its core operating results. The measurement is used in concert with net income and diluted earnings per share, which measure actual earnings per share generated in the period. PharMerica believes the exclusion of these charges in expressing adjusted diluted earnings per share provides management with a useful measure to assess period to period comparability and is useful to investors in evaluating PharMerica’s operating results from period to period. Adjusted diluted earnings per share, exclusive of the impact of merger, acquisition, integration costs and other charges, settlement, litigation and other related charges, restructuring and impairment charges, Hurricane Sandy disaster costs, and stock-based and deferred compensation do not represent the amount that effectively accrues directly to stockholders (i.e., such costs are a reduction in earnings and stockholders’ equity) and is not intended to represent or to be used as a substitute for diluted earnings per share as measured under GAAP. The impact of merger, acquisition, integration costs and other charges, settlement, litigation and other related charges, restructuring and impairment charges, Hurricane Sandy disaster costs and stock-based and deferred compensation excluded from the diluted earnings per share are significant components of the accompanying unaudited condensed consolidated statements of operations and must be considered in performing a comprehensive assessment of overall financial performance.
Contacts:
David W. Froesel, Jr., 502-627-7950
Executive
Vice President,
Chief Financial Officer and Treasurer
