SECURITIES AND EXCHANGE COMMISSION TOTAL NUMBER OF
Washington, D. C. 20549 PAGES INCLUDED IN
THIS QUARTERLY
FORM 10-Q REPORT IF 22.
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934(NO FEE REQUIRED)
For the fiscal quarter ended March 31, 1995
----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from_________________ to _______________
Commission file number 1-5110
--------
BERGEN BRUNSWIG CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-1444512
- --------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4000 Metropolitan Drive, Orange, California 92668-3510
- --------------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 385-4000
---------------------
No Change
- --------------------------------------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
<TABLE>
<CAPTION>
Title of each class of Number of Shares Outstanding
Common Stock April 30, 1995*
--------------------------- -----------------------------
<S> <C>
Class A Common Stock -
par value $1.50 per share 39,764,462
<FN>
* Reflects 5% stock dividend declared January 26, 1995 and paid March 1,
1995.
</TABLE>
INDEX TO EXHIBITS FOUND ON PAGE 20
1
<PAGE>
BERGEN BRUNSWIG CORPORATION
INDEX
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, March
31, 1995 and September 30, 1994 3
Statements of Consolidated Earnings
for the second quarter and six
months ended March 31, 1995 and 1994 4
Statements of Consolidated Cash
Flows for the six months ended
March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II. Other Information
Item 1. Legal Proceedings 13
Item 4. Submission of Matters to a Vote of
Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
Index to Exhibits 20
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BERGEN BRUNSWIG CORPORATION
---------------------------
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND SEPTEMBER 30, 1994
(dollars in thousands)
(Unaudited)
<CAPTION>
==================================================================================================================================
March 31, September 30, LIABILITIES AND March 31, September 30,
- - ASSETS - - 1995 1994 - - SHAREOWNERS' EQUITY - - 1995 1994
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents............ $ 40,042 $ 5,264 Accounts payable.................... $ 991,583 $ 995,030
Accounts and notes receivable, Accrued liabilities................. 84,678 111,043
less allowance for doubtful Customer credit balances............ 75,348 82,787
receivables: $20,611 at March 31, Deferred income taxes............... 864 945
1995 and $18,423 at September 30, Current portion of long-term
1994............................... 532,770 523,202 obligations....................... 1,220 1,307
Inventories.......................... 951,941 904,809 ---------- ----------
Income taxes receivable.............. 1,601 1,788 Total current liabilities......... 1,153,693 1,191,112
Prepaid expenses..................... 8,482 10,305 ---------- ----------
---------- ----------
Total current assets............... 1,534,836 1,445,368 LONG-TERM OBLIGATIONS:
---------- ---------- 7 3/8% senior notes................. 149,133 149,078
5 5/8% senior notes................. 99,954 99,926
Revolving bank loan payable......... 145,000 40,000
7% convertible subordinated
PROPERTY - At cost: debentures........................ 20,914 20,934
Land................................. 12,170 10,923 6 7/8% exchangeable subordinated
Building and leasehold improvements.. 84,019 77,107 debentures........................ 10,575 10,575
Equipment and fixtures............... 144,278 127,037 Deferred income taxes............... 3,787 3,903
---------- ---------- Other............................... 16,491 17,678
Total property..................... 240,467 215,067 ---------- ----------
Less accumulated depreciation and Total long-term obligations....... 445,854 342,094
amortization....................... 86,279 78,725 ---------- ----------
---------- ----------
Property - net..................... 154,188 136,342 SHAREOWNERS' EQUITY:
---------- ---------- Capital Stock:
Preferred - authorized 3,000,000
shares, issued: none............ - -
Class A Common - authorized
100,000,000 shares; issued:
OTHER ASSETS: 44,126,376 shares at March 31,
Excess of cost over net assets of 1995 and 44,058,659 shares at
acquired companies................. 321,333 322,374 September 30, 1994.............. 66,190 66,088
Investments......,................... 19,143 22,063 Paid-in capital..................... 162,145 155,079
Noncurrent receivables............... 9,139 9,384 Net unrealized loss on investments.. (247) -
Deferred charges and other assets.... 56,212 59,526 Retained earnings................... 355,276 378,867
---------- ---------- ---------- ----------
Total other assets................. 405,827 413,347 Total............................. 583,364 600,034
---------- ---------- Less Treasury shares, at cost:
4,361,914 shares at March 31,
1995 and 6,844,057 shares at
September 30, 1994................ 88,060 138,183
---------- ----------
Total shareowners' equity....... 495,304 461,851
TOTAL LIABILITIES AND
TOTAL ASSETS........................... $2,094,851 $1,995,057 SHAREOWNERS' EQUITY................... $2,094,851 $1,995,057
========== ========== ========== ==========
<FN>
See accompanying Notes to Consolidated Financial Statements.
Page 3
</TABLE>
<PAGE>
<TABLE>
BERGEN BRUNSWIG CORPORATION
---------------------------
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
MARCH 31, 1995 AND 1994
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------------- -------------------------
1995 1994 1995 1994
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales and other revenues $2,084,216 $1,845,449 $4,068,079 $3,680,385
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 1,956,668 1,731,865 3,824,588 3,462,382
Distribution, selling, general and
administrative expenses 89,144 81,481 174,936 162,824
---------- ---------- ---------- ----------
Total costs and expenses 2,045,812 1,813,346 3,999,524 3,625,206
---------- ---------- ---------- ----------
Operating earnings 38,404 32,103 68,555 55,179
Net interest expense 7,603 6,502 14,394 11,373
---------- ---------- ---------- ----------
Earnings before taxes on income 30,801 25,601 54,161 43,806
Taxes on income 12,937 11,072 22,748 18,946
---------- ---------- ---------- ----------
Net earnings $ 17,864 $ 14,529 $ 31,413 $ 24,860
========== ========== ========== ==========
Earnings per common and
common equivalent share $ .45 $ .38 $ .79 $ .65
========== ========== ========== ==========
Cash dividends per share:
Class A Common Stock $ .120 $ .114 $ .234 $ .210
========== ========== ========== ==========
Class B Common Stock $ - $ 1.089 $ - $ 1.996
========== ========== ========== ==========
<FN>
See accompanying Notes to Consolidated Financial Statements.
4
</TABLE>
<PAGE>
<TABLE>
BERGEN BRUNSWIG CORPORATION
---------------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED
MARCH 31, 1995 AND 1994
(in thousands)
<CAPTION>
-----------------------
1995 1994
-----------------------
<S> <C> <C>
(Unaudited)
OPERATING ACTIVITIES
- --------------------
Net earnings $ 31,413 $ 24,860
Adjustments to reconcile net earnings to net cash flows
from operating activities:
Provision for doubtful accounts 2,998 1,943
Depreciation and amortization of property 9,584 9,532
Deferred compensation 973 606
Amortization of customer lists 874 874
Amortization of excess of cost over net assets of acquired companies 4,425 4,319
Deferred income taxes (40) 315
Amortization of original issue discount on senior notes 83 84
Amortization of deferred financing costs 445 458
Loss (gain) on dispositions of property (351) 30
Effects of changes on:
Receivables (5,977) 6,103
Inventories (42,022) (211,920)
Prepaid expenses and other assets 3,150 (6,330)
Accounts payable (5,912) (24,673)
Accrued liabilities (27,970) (10,252)
Customer credit balances (7,439) 11,693
Income taxes receivable 187 21
--------- ---------
Net cash flows from operating activities (35,579) (192,337)
--------- ---------
INVESTING ACTIVITIES
- --------------------
Investments 2,516 (213)
Property acquisitions (27,039) (11,890)
Proceeds from dispositions of property 414 1,423
--------- ---------
Net cash flows from investing activities (24,109) (10,680)
--------- ---------
FINANCING ACTIVITIES
- --------------------
Proceeds from revolving bank loan 105,000 145,000
Repayment of other obligations (2,148) (3,430)
Redemption of convertible subordinated debentures (20) (410)
Shareowners' equity transactions:
Exercise of stock options 877 99
Cash dividends on Common Stock (9,243) (8,021)
--------- ---------
Net cash flows from financing activities 94,466 133,238
--------- ---------
Net increase (decrease) in cash and cash equivalents 34,778 (69,779)
Cash and cash equivalents at beginning of period 5,264 85,762
--------- ---------
Cash and cash equivalents at end of period $ 40,042 $ 15,983
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period for:
Interest $ 14,549 $ 11,778
Income taxes 22,602 18,754
<FN>
See accompanying Notes to Consolidated Financial Statements.
5
</TABLE>
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. The consolidated financial statements include the accounts of Bergen
Brunswig Corporation and its subsidiaries (the "Company"), after
elimination of the effect of intercompany transactions and balances.
The Company records revenues when product is delivered to its customers.
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Investments include primarily debt instruments, primarily variable rate
demand notes having maturities of more than one year.
The excess of cost over net assets of acquired companies is amortized on a
straight-line basis principally over 40 years. Customer lists, included in
deferred charges and other assets, are amortized on a straight-line basis
over 15 years. At each balance sheet date management reviews intangible
assets for possible impairment based on several criteria, including, but
not limited to sales trends, undiscounted operating cash flows and other
operating factors.
On October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Accordingly, the Company has classified its investments as
"available for sale" securities and has reported such investments at fair
value, with unrealized gains and losses excluded from earnings, and
reported as a separate component of shareowners' equity. Such unrealized
losses at March 31, 1995 were $287,000, net of deferred income taxes of
$183,000. Unrealized gains at March 31, 1995 were $40,000, net of deferred
income taxes of $25,000. Realized gains and losses on investments are
determined by the specific identification method and are included in
earnings; such amounts are not material for the six months ended March 31,
1995.
These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and related notes of the
Company contained in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
Certain reclassifications have been made in the consolidated financial
statements and notes to conform to fiscal 1995 presentations.
6
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
B. On September 15, 1992, the Company entered into a credit agreement (the
"Credit Agreement") with a group of banks providing the Company with a
three-year $300 million unsecured revolving line of credit to be used to
fund the fiscal 1993 acquisition of Durr-Fillauer Medical, Inc. ("Durr")
and to be used for general working capital purposes of the Company. On
October 7, 1994, the Credit Agreement was amended to, among other things,
increase the maximum borrowing to $350 million and to extend the maturity
date to September 15, 1997. Borrowings outstanding under the Credit
Agreement were $145.0 million at March 31, 1995. The maximum outstanding
borrowings under the Credit Agreement during the quarter ended March 31,
1995 were $280.0 million.
C. On February 24, 1994 (the "Conversion Date"), in accordance with the
provisions of the Recapitalization Plan approved by the Company's
shareowners on January 31, 1989, all of the 100,492 then outstanding shares
of the Company's Class B Stock were automatically converted into shares of
the Company's Class A Common Stock at the stated conversion rate of 9.5285
shares of Class A Common Stock for each share of Class B Common Stock. All
Class B Common Stock was subsequently cancelled.
On January 26, 1995, the Company declared a 5% stock dividend on the
Company's Class A Common Stock which was paid on March 1, 1995 to
shareowners of record on February 6, 1995. The dividend was charged to
retained earnings in the approximate amount of $44,207,000, which was based
on the closing price of $23.375 per share of Class A Common Stock on the
declaration date. Average shares outstanding and all per share amounts
included in the accompanying consolidated financial statements and notes
are based on the increased numbers of shares giving retroactive effect to
the stock dividend.
D. Earnings per common and common equivalent share are based on the weighted
average number of shares of Class A Common Stock outstanding during each
period, the assumed conversion of the weighted average number of shares of
Class B Common Stock outstanding through the Conversion Date (See Note C)
and the assumed exercise of dilutive employees' stock options (less the
number of Treasury shares assumed to be purchased from the proceeds using
the average market price of the Company's Class A Common Stock), after
giving effect each period to the 5% stock dividend declared January 26,
1995. Earnings per share are based upon 39,969,328 shares and 38,370,362
shares for the second quarter ended March 31, 1995 and 1994, respectively,
and 39,568,272 shares and 38,353,604 shares for the respective six-month
year-to-date periods.
7
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
E. On January 10, 1995, the Company completed the acquisition of Biddle &
Crowther Company ("B&C"), a privately-held medical-surgical supply
distributor headquartered in Seattle, Washington for 636,248 shares,
previously held as Treasury shares, of the Company's Class A Common Stock
valued at approximately $10.7 million, subject to adjustments after
completion of the acquisition audit. This acquisition has been accounted
for as a purchase and, accordingly, the accompanying consolidated financial
statements include B&C's results of operations and assets after January 10,
1995.
F. During the fourth quarter of fiscal 1993, the Company approved a
restructuring plan for its pharmaceutical distribution business which
resulted in a pre-tax charge of $33.0 million in fiscal 1993. The
restructuring plan consists of an accelerated consolidation of
pharmaceutical distribution facilities into larger, more efficient regional
distribution centers, the merging of duplicate operating systems, the
reduction of administrative support in areas not affecting valued services
to customers, and the discontinuance of services and programs that do not
meet the Company's strategic and economic return objectives. The
restructuring charge represents the costs associated with restructure,
primarily abandonment and severance. For those activities or assets where
the disposal is expected to result in a gain, no gain will be recognized
until realized.
During fiscal 1994 and through March 31, 1995, 9 distribution facilities
were closed and workforce reductions were made. Charges to the
restructuring reserve have consisted primarily of asset write-offs, moving
and severance costs, facility abandonments and lease settlements which,
through March 31, 1995, have totaled approximately $18.0 million, including
approximately $3.3 million of non-cash charges. Management anticipates
that the remaining cash outflow should be completed by the end of fiscal
1995.
G. During the quarter ended March 31, 1994, the Company recorded a pre-tax
charge of $1.4 million ($0.8 million after tax) for the uninsured portion
of an earthquake loss sustained by the Company's Valencia, California
division on January 17, 1994.
H. In the opinion of management of the Company, the foregoing consolidated
financial statements reflect all adjustments necessary for a fair statement
of the results of the Company and its subsidiaries for the periods shown
and such adjustments are of a normal recurring nature. Results of
operations for the second quarter and first six months of fiscal 1995 are
not necessarily indicative of results to be expected for the full year.
8
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
- ---------------------
For the quarter ended March 31, 1995, net sales and other revenues increased
13%, while operating earnings and pre-tax earnings both increased 20% from the
quarter ended March 31, 1994. For the six months ended March 31, 1995, net
sales and other revenues increased 11%, while operating earnings and pre-tax
earnings both increased 24% compared to the six-month period ended March 31,
1994. Operating earnings and pre-tax earnings for the second quarter and first
six months of fiscal 1994 were impacted by a pre-tax charge of $1.4 million for
the uninsured portion of an earthquake loss. See Note G of Notes to
Consolidated Financial Statements.
Of the 13% increase in net sales and other revenues for the quarter,
approximately 2% is attributable to the acquisition of Southeastern Hospital
Supply Corporation ("Southeastern") in April 1994 and Biddle & Crowther Company
("B&C") in January 1995. Approximately 11% of the net sales and other revenues
increase reflects internal growth within the Company's existing pharmaceutical
business. Of the 11% increase in net sales and other revenues for the six-month
period, approximately 2% in the aggregate is attributable to the acquisitions of
Southeastern and B&C. Approximately 9% of the net sales and other revenues
increase reflects internal growth within the Company's existing pharmaceutical
business.
Earnings per share for the second quarter and first six months of fiscal 1995
increased 18% and 22%, respectively, on increases of 4% and 3%, respectively, in
the average number of common and common equivalent shares outstanding. The
earthquake-related charge in fiscal 1994 referred to above was equivalent to
$.02 per share.
Cost of sales increased 13% and 10% from the second quarter and six-month period
of fiscal 1994, respectively, due mainly to the Company's increased sales
levels. The overall gross profit as a percent of net sales and other revenues
for the second quarter decreased due to accelerated price competition in the
Company's pharmaceutical distribution business, partially offset by a higher mix
of sales from the Company's higher gross margin medical-surgical supply
distribution business. The overall gross profit as a percent of net sales and
other revenues for the first six months of fiscal 1995 increased as a result of
an increase in gross margins due to a higher mix of sales from the Company's
higher gross margin medical-surgical supply distribution business and increased
opportunities for investment buying, partially offset by accelerated price
competition in the Company's pharmaceutical distribution business. In the
9
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
pharmaceutical distribution industry, it has been customary to pass on to
customers price increases from manufacturers. Investment buying enables
distributors such as the Company to benefit from these anticipated price
increases. The rate or frequency of future price increases by manufacturers, or
the lack thereof, does influence the profitability of the Company.
Management of the Company anticipates further downward pressure on gross margins
in the Company's pharmaceutical distribution business during the fiscal year
ending September 30, 1995 because of continued price competition influenced by
large buying groups. The Company expects that this pressure on margins may be
offset to some extent by increased sales of more profitable products, such as
generic drugs and medical-surgical supplies, and continued reduction of
distribution, selling, general and administrative expenses as a percentage of
net sales and other revenues through improved operating efficiencies.
Distribution, selling, general and administrative expenses, including the
earthquake-related charge in fiscal 1994, increased 9% and 7% over the prior
year quarter and six-month period, respectively, while net sales and other
revenues increased 13% and 11% over the prior year quarter and six-month period,
respectively. These expenses decreased as a percent of net sales and other
revenues from 4.4% in the second quarter of fiscal 1994 to 4.3% in the second
quarter of fiscal 1995 and were 4.3% and 4.4% of net sales and other revenues in
the current and prior year six-month periods, respectively. Had the Company not
recorded the above mentioned $1.4 million pre-tax earthquake-related charge in
the second quarter of fiscal 1994, distribution, selling, general and
administrative expenses would have been 4.3% of net sales and other revenues for
the prior year second quarter. The decreased distribution, selling, general and
administrative expenses as a percentage of net sales and other revenues in the
current year also reflect operating efficiencies resulting from the positive
effects of the Company's restructuring plan adopted for its pharmaceutical
distribution business in the fourth quarter of fiscal 1993 and the continuing
consolidation of distribution branches into larger regional distribution
centers.
Net interest expense increased from $6.5 million to $7.6 million for the second
quarter and increased from $11.4 million to $14.4 million for the six-month
period, primarily due to increased borrowings and higher interest rates under
the Credit Agreement.
Effective October 1, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," which requires the Company to change its accounting and reporting
10
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
of investments. See Note A of Notes to Consolidated Financial Statements
included in Part I - Financial Information, Item 1 - Financial Statements of
this Quarterly Report.
Financial Condition
- -------------------
At March 31, 1995, capitalization consisted of 46% debt and 54% equity, as
compared to 41% and 59%, respectively, at September 30, 1994. The increased
debt percentage primarily reflects additional borrowings under the Credit
Agreement, due primarily to increased investment in inventory. On October 7,
1994, the Credit Agreement was amended to, among other things, increase the
maximum borrowing to $350 million and to extend the maturity date to September
15, 1997. Borrowings under the Credit Agreement were $145.0 million and $40.0
million at March 31, 1995 and September 30, 1994, respectively. Cash and cash
equivalents of $40.0 million at March 31, 1995 increased from $5.3 million at
September 30, 1994, principally reflecting additional borrowings under the
Credit Agreement, partially offset by inventory purchases, property acquisitions
and other factors.
On January 10, 1995, the Company completed the acquisition of Biddle & Crowther
Company, a privately-held medical-surgical supply distributor headquartered in
Seattle, Washington for 636,248 shares, previously held as Treasury shares, of
the Company's Class A Common Stock valued at approximately $10.7 million,
subject to adjustments after completion of the acquisition audit.
On January 26, 1995, the Corporation declared a 5% stock dividend on the
Corporation's Class A Common Stock payable on March 1, 1995 to shareowners of
record on February 6, 1995. The dividend was charged to retained earnings in
the approximate amount of $44,207,000, which was based on the closing price of
$23.375 per share of Class A Common Stock on the declaration date.
Cash dividends on Class A Common Stock amounted to $9.2 million for the six
months ended March 31, 1995 and $8.0 million for the same period in the prior
year, reflecting primarily a 20% increase in the quarterly dividend rate during
the second quarter of fiscal 1994. Cash dividends on Class B Common Stock
amounted to $.2 million for the six months ended March 31, 1994.
On February 24, 1994, in accordance with the provisions of the Recapitalization
Plan approved by the Company's shareowners on January 31, 1989, all of the
100,492 then outstanding shares of the Company's Class B Stock were
automatically converted into shares of the Company's Class A Common Stock at the
stated conversion rate of 9.5285 shares of Class A Common Stock for each share
of Class B Common Stock.
11
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Capital expenditures for the six months ended March 31, 1995 were $27.0 million
and relate principally to the expansion of the Company into new locations and
additional investment in existing locations, the acquisition of automated
warehouse equipment, and additional investment in data processing equipment.
During the fourth quarter of fiscal 1993, the Company approved a restructuring
plan for its pharmaceutical distribution business which resulted in a pre-tax
charge of $33.0 million in fiscal 1993. The restructuring plan consists of an
accelerated consolidation of pharmaceutical distribution facilities into larger,
more efficient regional distribution centers, the merging of duplicate operating
systems, the reduction of administrative support in areas not affecting valued
services to customers, and the discontinuance of services and programs that do
not meet the Company's strategic and economic return objectives. The
restructuring charge represents the costs associated with restructure, primarily
abandonment and severance. For those activities or assets where the disposal is
expected to result in a gain, no gain will be recognized until realized.
During fiscal 1994 and through March 31, 1995, 9 distribution facilities were
closed and workforce reductions were made. Charges to the restructuring reserve
have consisted primarily of asset write-offs, moving and severance costs,
facility abandonments and lease settlements which, through March 31, 1995, have
totaled approximately $18.0 million, including approximately $3.3 million of
non-cash charges. Management anticipates that the remaining cash outflow should
be completed by the end of the fourth quarter of fiscal 1995.
The Company believes that internally generated funds, funds available under the
existing Credit Agreement and funds available under the existing shelf
registration will be sufficient to meet its anticipated cash and capital needs.
12
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 7, 1992, two putative class action complaints were filed in the Delaware
Court of Chancery against Durr and its directors: Steiner v. Adair, et al., C.A.
No. 12634 and Goldwurm v. Adair, et al., C.A. No. 12635. These actions were
consolidated on July 15, 1992. On July 17, 1992, another putative class action
complaint was filed in the Delaware Court of Chancery against Durr and its
directors: Trief v. Adair, et al., C.A. No. 12648. This action was consolidated
with C.A. Nos. 12634 and 12635 on August 7, 1992. The named plaintiffs in the
three complaints (the "Class Action Complaints") allegedly owned an undisclosed
number of shares of Durr common stock. The plaintiffs sought certification of a
class consisting of all public stockholders of Durr who held Durr stock at the
time of the filing of the Class Action Complaints and who were not affiliated
with any of the defendants. The Class Action Complaints alleged, among other
things, that Durr's directors breached their fiduciary duties in entering into a
June 2, 1992, Agreement and Plan of Reorganization which contemplated the merger
of Durr's wholesale drug business with Cardinal Distribution, Inc. ("Cardinal")
and the spin-off of Durr's remaining businesses into a newly formed entity (the
"Cardinal Acquisition").
The Class Action Complaints sought a variety of relief, including: an injunction
requiring the Durr directors to consider competing offers, damages, attorneys
fees and costs.
In connection with the acquisition of Durr, and for the purpose of settling the
expressed concern of the Attorneys General of the States of Alabama, Florida and
Louisiana (collectively, the "Attorneys General") over the alleged potential
lessening of competition in the wholesale distribution of pharmaceutical
products, the Company and Durr entered into an agreement dated September 18,
1992, with the Attorneys General wherein the Company agreed that (1) subject to
certain exceptions, no then existing customer of either the Company or Durr in
Alabama, Florida and Louisiana (the "Customers") will suffer a diminution of
service levels until April 30, 1997, (2) except for price increases resulting
from taxes, fees or governmental charges, neither the Company nor Durr will
increase the markup percentage for the Customers in Alabama, Florida and
Louisiana for a period of two years and from September 1994 through April 1997
will not increase such percentage in excess of the percentage increase in the
Consumer Price Index; (3) Durr retain its distribution facilities in Montgomery
and Mobile, Alabama; Lakeland, Florida; and Shreveport, Louisiana for a period
of at least two years; (4) Durr maintain and enhance its AccuNetR system for a
period of at least two years; and (5) the Company reimburse the States of
Alabama, Florida and Louisiana for their legal fees, costs and expenses incurred
in the investigation of the acquisition of Durr by the Company.
13
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
Drug Barn, Inc. ("Drug Barn"), a former retail pharmacy chain in the San
Francisco Bay Area, currently with two operating stores, owed the Company
approximately $6.2 million in principal obligations as of March 31, 1995, of
which approximately $1.2 million represents trade receivables and $5.0 million
represents a note which matured on March 25, 1993 and has not been paid to date.
The Company has a security interest in virtually all of Drug Barn's assets, as
well as personal guaranties, which collateralize the note and trade receivables.
In May 1992, Drug Barn requested additional financing which the Company denied
to extend. In December 1992, Drug Barn commenced an action against the Company
in the Santa Clara Superior Court (State of California) alleging breach of
contract, misrepresentation and violations of certain California antitrust and
unfair practices laws. Drug Barn seeks a variety of damage claims including
compensatory, treble and punitive damages, an injunction against collection on
the note, and declaratory judgment as to Drug Barn's rights under the alleged
oral joint venture agreement with the Company.
On April 20, 1993, the Company filed a complaint in the Orange County Superior
Court (State of California), Case No. 709136 against Drug Barn and Milton Sloban
and Barbara Sloban, as guarantors on the defaulted note and open trade
receivables, alleging breach of contract and guaranty, and requesting judicial
foreclosure of and the possession of collateral.
Drug Barn commenced a Chapter 11 case in U.S. Bankruptcy Court for the Northern
District of California, Case No. 93-3-3437 TC, by filing a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code on July 29,
1993 and remains in possession pursuant to 11 U.S.C. Section 1107. The effect
of this filing is that the Company's action against Drug Barn has been
automatically stayed.
In April 1994, this matter was transferred to the San Francisco Superior Court
with the California state actions referenced in the next paragraph. A trial date
on principally the contract-related actions is anticipated during late calender
1995.
Between August 3, 1993 and February 14, 1994, the Company, along with various
other pharmaceutical industry-related companies, was named as a defendant in
eight separate state antitrust actions in three courts in California. These
lawsuits are more fully detailed in "Item 3 - Legal Proceedings" of Part I of
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
as filed with the Securities and Exchange Commission and is incorporated herein
by reference. In April 1994, these California state actions were all
14
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
coordinated as Pharmaceutical Cases I, II, and III, and assigned to a single
judge in San Francisco Superior Court. On August 22, 1994, a Consolidated
Amended Complaint ("California Complaint"), which supersedes and amends the
eight prior complaints, was filed in these actions.
The California Complaint alleges that the Company and 35 other pharmaceutical
industry-related companies violated California's Cartwright Act, Unfair
Practices Act, and the Business and Professions Code unfair competition statute.
The California Complaint alleges that defendants jointly and separately engaged
in secret rebating, price fixing and price discrimination between plaintiffs and
plaintiffs' alleged competitors who sell pharmaceuticals to patients or retail
customers. Plaintiffs seek, on behalf of themselves and a class of similarly
situated California pharmacies, injunctive relief and treble damages in an
amount to be determined at trial. The judge struck the class allegations from
the Unfair Practices Act claims.
Between August 12, 1993 and November 29, 1993, the Company was also named in 11
separate Federal antitrust actions. All 11 actions were consolidated into one
multidistrict action in the Northern District of Illinois entitled, In Re
Brand-Name Prescription Drugs Antitrust Litigation, No. 94 C. 897 (MDL 997). On
March 7, 1994, plaintiffs in these 11 actions filed a consolidated amended class
action complaint ("Federal Complaint") which amended and superseded all
previously filed Federal complaints against the Company. The Federal Complaint
names the Company and 30 other pharmaceutical industry-related companies. The
Federal Complaint alleges, on behalf of a nationwide class of retail pharmacies,
that the Company conspired with other wholesalers and manufacturers to
discriminatorily fix prices in violation of Section 1 of the Sherman Act. The
Federal Complaint seeks injunctive relief and treble damages. On November 15,
1994, the Federal court certified the class defined in the Federal Complaint for
the time period October 15, 1989 to the present. These lawsuits are more fully
detailed in "Item 3 - Legal Proceedings" of Part I of the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994 as filed with the
Securities and Exchange Commission and is incorporated herein by reference. On
January 13, 1995, the Company was named along with 30 other pharmaceutical
industry-related companies in a separate complaint filed in the U.S. District
Court, Northern District of Illinois entitled Publix Supermarkets v. Abbot
Laboratories, et al., Case No. 94C0246, alleging similar claims as in the
Federal Complaint. The Company was dropped as a defendant in this matter on
February 23, 1995.
On March 9, 1995, the Company was named along with 30 other pharmaceutical
industry-related companies in a separate complaint filed in the U.S. District
15
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
Court, Eastern District of Arkansas entitled Lawrence Adams d/b/a Mc Spadden
Drug Store, et al. v. Abbott Laboratories, et al., Case No. LR-C-95-153,
alleging similar claims as in the Federal complaint. The Company believes that
this action will be consolidated into the Federal multidistrict action.
On May 2, 1994, the Company and Durr Drug Company were named as defendants,
along with 25 other pharmaceutical related-industry companies, in a state
antitrust class action in the Circuit Court of Greene County, Alabama entitled
Durrett v. UpJohn Company, et al., No. 94-029 ("Alabama Complaint"). The
Alabama Complaint alleges on behalf of a class of Alabama retail pharmacies and
a class of Alabama consumers that the defendants conspired to discriminatorily
fix prices to plaintiffs at artificially high levels. The Alabama complaint
seeks injunctive relief and treble damages.
On October 21, 1994, the Company entered into a sharing agreement with five
other wholesalers and 26 pharmaceutical manufacturers. Among other things, the
agreement provides that: (a) if a judgment is entered into against both the
manufacturer and wholesaler defendants, the total exposure for joint and several
liability of the Company is limited to $1,000,000; (b) if a settlement is
entered into by, between, and among the manufacturer and wholesaler defendants,
the Company has no monetary exposure for such settlement amount; (c) the six
wholesaler defendants will be reimbursed by the 26 pharmaceutical defendants for
related legal fees and expenses up to $9,000,000 total (of which the Company
will receive a proportionate share) and (d) the Company is to release certain
claims which it might have had against the manufacturer defendants for the
claims presented by the plaintiffs in these cases. The agreement covers the
Federal court litigation as well as the cases which have been filed in various
state courts. In December 1994, plaintiffs in the Federal action moved to set
aside the agreement, but plaintiffs motion was denied on April 25, 1995. After
discussions with counsel, management of the Company believes that the
allegations of liability set forth in these lawsuits are without merit as to the
wholesaler defendants and that any attendant liability of the Company, although
unlikely, would not have a material adverse effect on the Company's financial
condition.
The Company is involved in various additional items of litigation. Although the
amount of liability at March 31, 1995 with respect to these items of litigation
cannot be ascertained, in the opinion of management, any resulting future
liability will not have a material adverse effect on its consolidated financial
position or results of operations.
16
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareowners of the Company was held on January 26, 1995 in
Orange, California and the following matters, as listed in the Proxy Statement
dated December 22, 1994, were voted upon:
(a) All of management's nominees for the Company's Board of Directors were
elected (for a term ending in the year so indicated) with the
following vote:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Jose E. Blanco, Sr.(1996) 29,155,760 2,904,161
Rodney H. Brady(1997) 29,165,313 2,894,608
John Calasibetta(1998) 29,071,714 3,088,207
George R. Liddle(1996) 29,160,683 2,899,238
Robert E. Martini(1998) 29,121,682 2,938,239
James R. Mellor(1997) 29,160,083 2,899,838
George E. Reinhardt, Jr.(1996) 28,888,476 3,171,445
Dwight A. Steffensen(1998) 29,116,604 2,943,317
</TABLE>
Directors whose term of office continued after the Annual Meeting
were: Charles J. Lee, Charles C. Edwards, M.D. and Francis G. Rodgers.
(b) Amendments to the 1989 Company's Stock Incentive Plan were approved
with the following vote:
<TABLE>
<CAPTION>
For Against Abstained Broker Non-Votes
--- ------- --------- ----------------
<S> <C> <C> <C>
18,364,793 8,848,294 361,096 4,485,738
</TABLE>
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--------
11 Computation of earnings per share for the second quarter and six
months ended March 31, 1995 and 1994.
27 Financial Data Schedule for the six months ended March 31, 1995.
(b) REPORTS ON FORM 8-K:
-------------------
(1) On March 6, 1995, a Current Report on Form 8-K, dated March 3, 1995,
was filed reporting under Items 5 and 7 the Company's adoption,
effective as of March 3, 1995, of its Amended and Restated By-Laws.
(2) On April 25, 1995, a Current Report on Form 8-K, dated April 24, 1995,
was filed reporting under Items 5 and 7, additional financial
information relative to the Company's 1994 fiscal year.
18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BERGEN BRUNSWIG CORPORATION
By /s/ Robert E. Martini
--------------------------------------
Robert E. Martini
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By /s/ Neil F. Dimick
--------------------------------------
Neil F. Dimick
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer)
May 12, 1995
19
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
11 Computation of earnings per share for the second 21
quarter and six months ended March 31, 1995 and 1994.
27 Financial Data Schedule for the six months 22
ended March 31, 1995.
20
<TABLE>
EXHIBIT 11
BERGEN BRUNSWIG CORPORATION
---------------------------
COMPUTATION OF EARNINGS PER SHARE
FOR THE SECOND QUARTER AND SIX MONTHS ENDED
MARCH 31, 1995 AND 1994
(in thousands except share and per share amounts)
(Unaudited)
<CAPTION>
SECOND QUARTER SIX MONTHS
------------------------- -------------------------
1995 1994 1995 1994
------------------------- -------------------------
<S> <C> <C> <C> <C>
DATA AS TO EARNINGS - Net Earnings $ 17,864 $ 14,529 $ 31,413 $ 24,860
=========== =========== =========== ===========
DATA AS TO NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES:
Weighted average number of shares outstanding:
Class A Common Stock 39,673,555 37,671,334 39,374,894 37,484,013
Class B Common Stock - 62,209 - 81,351
Shares of Class A Common Stock to be issued from
assumed conversion of remainder of Class B Stock - 530,553 - 693,799
Common equivalent shares assuming issuance of shares
represented by outstanding employees' stock options:
Additional shares assumed to be issued 1,524,559 714,891 1,208,158 623,095
Reduction of such additional shares assuming
proceeds invested in treasury stock (at average
market prices during each period (1,228,786) (608,625) (1,014,780) (528,654)
----------- ----------- ----------- -----------
Average number of common and common
equivalent shares outstanding 39,969,328 38,370,362 39,568,272 38,353,604
=========== =========== =========== ===========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE OUTSTANDING: $ .45 $ .38 $ .79 $ .65
=========== =========== =========== ===========
<FN>
Reference is made to Notes C and D in the accompanying Notes to Consolidated Financial Statements.
21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 40,042
<SECURITIES> 0
<RECEIVABLES> 532,770
<ALLOWANCES> 20,611
<INVENTORY> 951,941
<CURRENT-ASSETS> 1,534,836
<PP&E> 240,467
<DEPRECIATION> 86,279
<TOTAL-ASSETS> 2,094,851
<CURRENT-LIABILITIES> 1,153,693
<BONDS> 445,854
<COMMON> 66,190
0
0
<OTHER-SE> 429,114
<TOTAL-LIABILITY-AND-EQUITY> 2,094,851
<SALES> 0
<TOTAL-REVENUES> 4,068,079
<CGS> 3,824,588
<TOTAL-COSTS> 3,999,524
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,998
<INTEREST-EXPENSE> 14,394
<INCOME-PRETAX> 54,161
<INCOME-TAX> 22,748
<INCOME-CONTINUING> 31,413
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,413
<EPS-PRIMARY> .79
<EPS-DILUTED> .79
</TABLE>
