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Weak Unit Drags Bergen Down to $545-Million Loss

Pharmaceuticals: The results mostly reflect a charge on the company's PharMerica subsidiary.

November 04, 2000|From Times Wire Services

Bergen Brunswig Corp., which has been focusing on shedding poorly performing assets and concentrating on its core drug-distribution business, posted a fourth-quarter loss of $545.3 million Friday after writing down the value of an acquisition and taking other one-time charges.

The Orange-based company took a $505-million charge related to its PharMerica Inc. unit, a supplier of pharmacy services to nursing homes.

The business, which Bergen bought for $1.1 billion, was hurt by a new payment plan for Medicare, the government health insurance program for the elderly, that cut funding to nursing homes.

Bergen decided to take the charge after realizing that PharMerica's current gross profit margins of 35% wouldn't return to historical levels of 40% and higher, the company said.

"We said last year that we intended to clear the decks--and we've done just that, taking the hard steps necessary to position Bergen to capitalize on the underlying strength of our business," Chief Executive Robert E. Martini said.

"We've sold under-performing assets, paid down debt, streamlined operations and returned our focus to our core competencies," he said.

Excluding special items, Bergen Brunswig said it would have earned $16 million, or 12 cents a share, in the quarter ended Sept. 30, compared with $11.6 million, or 9 cents a share, a year earlier. Analysts surveyed by First Call/Thomson Financial were expecting earnings of 14 cents a share.

Bergen, which supplies pharmaceuticals to hospitals, drugstores and other customers, said revenue rose 9.4% to $5.95 billion.

Martini said Bergen Brunswig sees an overall trend of double-digit annual growth in pharmaceuticals volume, increasing revenue and significant cost savings.

The company also has reduced its debt, he said. Bergen had $1.09 billion in debt in the fourth quarter, down 29% from a year earlier.

Bergen made a couple of bad deals last year that left it with earnings shortfalls and a lot of debt. In an attempt to enter higher-margin businesses, Bergen acquired specialty pharmaceutical distributor Stadtlander Operating Co. in January 1999 and PharMerica in April 1999.

But Stadtlander was bloated with bad receivables, and its margins deteriorated.

This summer, the company sold most of Stadtlander to CVS Corp. for $124 million--well below the roughly $400 million Bergen paid for it. It also sold its medical-supply distribution business, Bergen Brunswig Medical Corp., to Cardinal Health Inc. for $180 million.

Bergen's stock rose 9.1%, or 94 cents a share, to $11.25 on the New York Stock Exchange. The shares have lost 35% of their value this year.

Dow Jones Newswires and Bloomberg News were used in compiling this report.

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