PharMerica Stockholders Approve Merger at
Special Meeting; Transaction On-Track to Close by Early
2018
PharMerica Corporation (NYSE: PMC), a national provider of
institutional, specialty home infusion, hospital and oncology
pharmacy services, today reported its financial results for the
third quarter ended September 30, 2017.
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 ended September 30, 2017 compared to $53.1 million or 10.4%
of revenues for the three months ended September 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.
- 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 ended September 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 ended September 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 ended September 30, 2017, compared to $165.8 million or
10.7% of revenues for the nine months ended September 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 ended September 30, 2017
compared to $1.36 for the nine months ended September 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 ended September 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
ended September 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.
Acquisition by KKR and Walgreens Boots
Alliance, Inc.
As previously announced on August 2, 2017, PharMerica has
entered into a definitive merger agreement pursuant to which a
newly formed company controlled by Kohlberg Kravis Roberts &
Co. L.P. (“KKR”), with Walgreens Boots Alliance, Inc. as
a minority investor, will acquire PharMerica. The all-cash
transaction is valued at approximately $1.4
billion including the assumption or repayment of debt.
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. PharMerica cannot predict with certainty when,
or if, the transaction will be completed because its completion is
subject to conditions beyond the control of the 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 PharMerica
PharMerica Corporation is a leading provider of pharmacy
services. PharMerica serves the long-term care, hospital pharmacy
management services, specialty home infusion and oncology pharmacy
markets.
PharMerica operates 99 institutional pharmacies, 20 specialty
home infusion pharmacies and 5 specialty oncology pharmacies in 45
states. PharMerica’s customers are institutional healthcare
providers, such as skilled nursing facilities, assisted living
facilities, hospitals, individuals receiving in-home care and
patients with cancer.
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 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
UNAUDITED CONDENSED CONSOLIDATED INCOME
STATEMENTS
(In millions, except share and per
share amounts)
Three Months Ended September 30, Nine Months Ended
September 30, 2016 2017 2016
2017 Amount
% ofRevenues
Amount
% ofRevenues
Amount
% ofRevenues
Amount
% ofRevenues
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 September 30,
September 30, 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
PHARMERICA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS
(In millions, except share and per
share amounts)
Dec. 31, Sept. 30, 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
Goodwill 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, $0.01 par
value per share; 1,000,000 shares authorized and no shares issued,
December 31, 2016 and September 30, 2017 - - Common stock, $0.01
par value per share; 175,000,000 shares authorized; 33,698,269 and
34,130,736 shares issued as of December 31, 2016 and September 30,
2017, respectively 0.3 0.3 Capital in excess of par value 411.1
419.3 Retained earnings 173.7 185.1 Treasury stock at cost,
2,916,906 and 3,011,789 shares at December 31, 2016 and September
30, 2017, respectively (40.9) (43.1) 544.2
561.6 $ 1,273.0 $ 1,268.4
PHARMERICA CORPORATION
UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In millions)
Three Months Ended Nine Months Ended
September 30, September 30, 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 Treasury stock, for
employee taxes on stock awards (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
PHARMERICA CORPORATION
SUPPLEMENTAL INFORMATION
Three Months Ended Nine Months Ended
September 30, September 30, 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
Three Months Ended Nine Months Ended (In
millions) September 30, September 30, 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
TO ADJUSTED DILUTED EARNINGS PER
SHARE
Three Months Ended Nine Months Ended (In
whole numbers) September 30, September 30,
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
PHARMERICA CORPORATION
SUPPLEMENTAL INFORMATION
(Continued)
UNAUDITED RECONCILIATION OF ADJUSTED
EBITDA
TO NET CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES
Three Months Ended Nine Months Ended (In
millions) September 30, September 30, 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
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 a performance measure. 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, amortization of
intangible assets, and the tax impact of the adjustments on the tax
provision 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 believe 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, amortization of
intangible assets, and the tax impact of the adjustments on the tax
provision 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, amortization of
intangible assets, and the tax impact of the adjustments on the tax
provision excluded from the diluted earnings per share are
significant components of the accompanying consolidated income
statements and must be considered in performing a comprehensive
assessment of overall financial performance.
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version on businesswire.com: http://www.businesswire.com/news/home/20171109006447/en/
PharMerica CorporationRobert E. Dries, 502-627-7140Executive
Vice President and Chief Financial Officer
Pharmerica Corp. (delisted) (NYSE:PMC)
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