Bergen Brunswig Profits Take 45% Dive
Bergen Brunswig Corp., the third-largest U.S. drug wholesaler, said Wednesday that its profit fell 45% in the fiscal third quarter, mostly because of higher interest costs.
Profit from continuing operations fell to $19.7 million, or 15 cents a share, from $36 million, or 28 cents a share, a year earlier. Sales, excluding bulk shipments to customers’ warehouses, rose 16% to $4.8 billion. The Orange-based company was expected to earn 14 cents a share, according to a survey of analysts by First Call/Thomson Financial.
Bergen in the last month has said it is selling two poorly performing units and will use some the proceeds to pay down debt, cutting its interest costs. The company assumed $580 million in debt when it bought its PharMerica business, a supplier of pharmacy services to nursing homes, for $1.1 billion last year.
The company said net interest expense in the third quarter rose 79% to $32 million from $17.9 million.
Bergen reiterated that earnings also were hurt by lower-than-expected results at its pharmacy services unit, Stadtlander Operating Co., weak industry trends affecting PharMerica and tough competition at its drug-supply business. Nursing homes have been hurt by cuts in federal Medicare reimbursements and have been admitting patients who need fewer drugs to avoid cash-flow problems.
Revenue from Bergen’s pharmaceutical distribution business, which sells drugs to retail pharmacies and hospitals, rose 15% to $4.6 billion.
Results excluded Bergen Brunswig Medical Corp. and Stadtlander Operating Co. units, which the company expects to sell this quarter.
Cash proceeds from these sales, combined with tax benefits and the anticipated sale of the Stadtlander’s corrections division, are expected to net the company about $440 million over this and the next fiscal years.
The company recorded a loss of $251 million from the disposition of the Bergen Medical and Stadtlander operations, producing a third-quarter net loss of $239.4 million, or $1.78 a share, versus net income of $32.8 million, or 26 cents a share, a year ago.
Bergen earlier this month agreed to sell its specialty-medicine Stadtlander unit to pharmacy chain CVS Corp. for $124 million. Specialty drugs include expensive and rarely prescribed medicines to treat people with HIV and AIDS, organ transplants, cancer and other illnesses.
In June, Bergen agreed to sell its medical-supply distribution unit, Bergen Brunswig Medical, to rival Cardinal Health Inc. for $181 million.
Bergen’s stock edged up 6 cents a share to $9 on the New York Stock Exchange.
