After warning shareholders two weeks ago that its profits would be hammered in the first quarter, Bergen Brunswig Corp. Tuesday announced a 48% earnings drop.
Earnings for the fiscal quarter ended Nov. 30 dropped to $8.9 million, equal to 22 cents per share, compared to a profit of $17 million, or 37 cents a share, for the first quarter a year ago. Revenue, however, increased by 10% to $1.3 billion from the year-ago quarter.
Bergen Brunswig is one of the nation's largest distributors of prescription pharmaceuticals and other health-care products. It is also the nation's largest distributor of movies on cassette.
The company blamed its lowered earnings on a probable $8-million loss, which is owed by a drugstore chain that is having trouble paying its bills. Bergen Brunswig, which declined to identify its delinquent customer, said it is trying to collect the money.
On Tuesday, the company's stock fell 25 cents to a 52-week low of $16.25.
Contributing to the lower earnings is a general squeeze in profits for pharmaceutical wholesalers, said Donald Spindel, an industry analyst with A.G. Edwards & Sons, a St. Louis investment firm. The government recently ordered drug suppliers to stop increasing prices for Medicaid prescriptions beyond what hospitals and other institutions pay.
"It's just a matter of time before Bergen recovers from its current profit-margin squeeze, which the whole industry is suffering from," Spindel said.
Also, he added, wholesalers are subject to the recent volatility of a competitive drug retail business. "Other drug wholesalers have taken write-offs for bad debts or credit problems," Spindel said. "It's a function not so much of the economy as of competition among the drugstore retailers. As in any competitive environment, you're going to have marginal operators."
Commtron Corp., Bergen Brunswig's 81%-owned home entertainment distribution subsidiary, reported revenue of $151.7 million for the quarter, down slightly from $152.4 million for the first quarter last year. Commtron's earnings decreased to $3.9 million from $4.1 million a year earlier.
The mix of home video revenue changed from last year's first quarter, the company said. Rental sales increased, but sales to video collectors declined.