Boom in Drug, Hospital Supplies Sends Bergen Brunswig Operating Profit Up
Citing a boom in its pharmaceutical and hospital supply business, Orange-based Bergen Brunswig reported a 41% increase in operating profit for fiscal 1987 on a 10% sales gain.
Bergen said, however, that its partially owned Commtron subsidiary, which went public last year, performed poorly because of a slump in the prerecorded videocassette business and the loss of two important contracts for the distribution of consumer electronics products.
The $15.9-million profit reported by Bergen, one of Orange County’s largest publicly held companies, was down 23% from the $20.7 million earned in fiscal 1986, while revenues rose to $3.4 billion from $3.1 billion.
Gain on Stock Sale
However, the company’s year-earlier net income included a gain of $9.4 million resulting from the initial public offering of stock in Commtron, the company’s consumer electronics subsidiary.
“So while it looks like the numbers are down, on an operating basis they’re really up,” said Gary Fishman, a company spokesman. The $9.4-million gain was a one-time event not related to the company’s operations, which include the distribution of medical and surgical supplies, consumer electronics products and videocassettes.
For the fiscal fourth quarter ended Aug. 31, Bergen reported earnings of $3.8 million, down 34% from $5.8 million reported in the same period in 1986. However, company officials noted that the $9.4 million Commtron gain effectively masked a net operating loss of $3.6 million.
Revenues for the fiscal fourth quarter rose 6% to $845.6 million, from $795.9 million posted in the same period of the previous year.
“We are particularly pleased with the performance of our drug and health-care business during this period of consolidation and expense reduction,” said Emil Martini Jr., Bergen’s chairman and chief executive.
Commtron Fared Worst
Of the company’s three divisions, its drug manufacturing subsidiary performed the best in fiscal 1987, with earnings rising 39% to $55.6 million, contrasted with $39.9 in the previous year. Revenues for the drugs division rose to $2.7 billion, up 13% from the previous year’s $2.4 billion.
The Commtron subsidiary fared worst. In the last year and a half, its customer profile has changed from “mom-and-pop” video stores to chain-owned mass merchandisers, said George E. Reinhardt Jr., Bergen vice president.
In addition, major studios have slowed the release of video “blockbusters” considerably, Reinhardt said.
“And a couple of the consumer electronics firms--Sanyo and Commodore--have changed their distribution philosophy. As a result, Commtron no longer has distribution contracts for Sanyo or Commodore products, like the Commodore PC Computer or the whole line of Sanyo products including small TVs, radios and what have you.”
Commtron’s operating income fell 60%, to $5.4 million, for fiscal 1987, from $13.4 million. Sales for the fiscal year rose to $442 million, from $440 million for 1986, he said.
