SECURITIES AND EXCHANGE COMMISSION TOTAL NUMBER OF
Washington, D. C. 20549 PAGES INCLUDED IN
THIS QUARTERLY
FORM 10-Q REPORT IS 25.
[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 December 31, 1994
-----------------
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:
Title of each class of Number of Shares Outstanding
Common Stock January 31, 1995
---------------------------- ----------------------------
Class A Common Stock -
par value $1.50 per share 39,723,252*
* Reflects 5% stock dividend declared January 26, 1995 and payable
March 1, 1995.
INDEX TO EXHIBITS FOUND ON PAGE 21
1
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, December
31, 1994 and September 30, 1994 3
Statements of Consolidated Earnings
for the three months ended
December 31, 1994 and 1993 4
Statements of Consolidated Cash Flows
for the three months ended
December 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 11
Part II. Other Information
Item 1. Legal Proceedings 14
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 20
Index to Exhibits 21
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BERGEN BRUNSWIG CORPORATION
---------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND SEPTEMBER 30, 1994
(dollars in thousands)
(Unaudited)
<CAPTION>
====================================================================================================================================
December 31, September 30, LIABILITIES AND December 31, September 30,
- - ASSETS - - 1994 1994 - - SHAREOWNERS' EQUITY - - 1994 1994
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents............ $ 61,174 $ 5,264 Accounts payable.................... $ 899,605 $ 995,030
Accounts and notes receivable, Accrued liabilities................. 92,621 111,043
less allowance for doubtful Customer credit balances............ 101,167 82,787
receivables: $20,048 at Income taxes payable................ 7,632 -
December 31, 1994 and $18,423 Deferred income taxes............... 724 945
at September 30, 1994.............. 509,801 523,202 Current portion of long-term
Inventories.......................... 914,283 904,809 obligations....................... 1,263 1,307
Income taxes receivable.............. - 1,788 ---------- ----------
Prepaid expenses..................... 9,115 10,305 Total current liabilities......... 1,103,012 1,191,112
---------- ---------- ---------- ----------
Total current assets............... 1,494,373 1,445,368
---------- ---------- LONG-TERM OBLIGATIONS:
7 3/8% senior notes................. 149,106 149,078
5 5/8% senior notes................. 99,940 99,926
Revolving bank loan payable......... 175,000 40,000
7% convertible subordinated
PROPERTY - At cost: debentures........................ 20,914 20,934
Land................................. 10,923 10,923 6 7/8% exchangeable subordinated
Building and leasehold improvements.. 77,655 77,107 debentures........................ 10,575 10,575
Equipment and fixtures............... 139,347 127,037 Deferred income taxes............... 3,613 3,903
---------- ---------- Other............................... 18,049 17,678
Total property..................... 227,925 215,067 ---------- ----------
Less accumulated depreciation Total long-term obligations....... 477,197 342,094
and amortization................... 83,430 78,725 ---------- ----------
---------- ----------
Property - net..................... 144,495 136,342 SHAREOWNERS' EQUITY:
---------- ---------- Capital Stock:
Preferred - authorized 3,000,000
shares, issued, none............ - -
Class A Common - authorized
100,000,000 shares; issued:
OTHER ASSETS: 44,076,930 share at December
Excess of cost over net assets of 31, 1994 and 44,058,659 shares
acquired companies................. 320,202 322,374 at September 30, 1994........... 66,115 66,088
Investments.......................... 25,429 22,063 Paid-in capital..................... 155,511 155,079
Noncurrent receivables............... 10,020 9,384 Net unrealized loss on
Deferred charges and other assets.... 56,292 59,526 investments....................... (488) -
---------- ---------- Retained earnings................... 387,941 378,867
Total other assets................. 411,943 413,347 ---------- ----------
---------- ---------- Total............................. 609,079 600,034
Less Treasury shares, at cost:
6,859,057 shares at December 31,
1994 and 6,844,057 shares
at September 30, 1994............. 138,477 138,183
---------- ----------
Total shareowners' equity....... 470,602 461,851
---------- ----------
TOTAL LIABILITIES AND
TOTAL ASSETS........................... $2,050,811 $1,995,057 SHAREOWNERS' EQUITY.................. $2,050,811 $1,995,057
========== ========== ========== ==========
<FN>
See accompanying Notes to Consolidated Financial Statements.
3
</TABLE>
<PAGE>
<TABLE>
BERGEN BRUNSWIG CORPORATION
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1994 AND 1993
(in thousands except per share amounts)
<CAPTION>
--------------------------------
1994 1993
--------------------------------
(Unaudited)
<S> <C> <C>
Net sales and other revenues $ 1,983,863 $ 1,834,936
------------ ------------
Costs and expenses:
Cost of sales 1,867,920 1,730,517
Distribution, selling, general and administrative expenses 85,792 81,343
------------ ------------
Total costs and expenses 1,953,712 1,811,860
------------ ------------
Operating earnings 30,151 23,076
Net interest expense 6,791 4,871
------------ ------------
Earnings before taxes on income 23,360 18,205
Taxes on income 9,811 7,874
------------ ------------
Net earnings $ 13,549 $ 10,331
============ ============
Earnings per common and common equivalent share $ .35 $ .27
============ ============
Cash dividends per share:
Class A Common Stock $ .114 $ .095
============ ============
Class B Common Stock $ - $ .908
============ ============
<FN>
See accompanying Notes to Consolidated Financial Statements.
4
</TABLE>
<PAGE>
<TABLE>
BERGEN BRUNSWIG CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1994 AND 1993
(in thousands)
<CAPTION>
-----------------------
1994 1993
-----------------------
(Unaudited)
<S> <C> <C>
Operating Activities
- --------------------
Net earnings $ 13,549 $ 10,331
Adjustments to reconcile net earnings to net cash flows from operating activities:
Provision for doubtful accounts 1,880 961
Depreciation and amortization of property 4,741 4,710
Deferred compensation 577 312
Amortization of customer lists 437 437
Amortization of excess of cost over net assets of acquired companies 2,212 2,234
Deferred income taxes (201) (833)
Amortization of original issue discount on senior notes 42 38
Amortization of deferred financing costs 226 219
Loss (gain) on dispositions of property (390) 28
Effects of changes on:
Receivables 10,885 (65,117)
Inventories (9,474) (243,601)
Prepaid expenses and other assets 3,672 (5,864)
Accounts payable (95,425) 165,157
Accrued liabilities (18,422) (1,475)
Customer credit balances 18,380 26,704
Income taxes payable 9,420 8,257
-------- --------
Net cash flows from operating activities (57,891) (97,502)
-------- --------
Investing Activities
- --------------------
Purchase of investments (4,164) -
Property acquisitions (12,918) (5,536)
Proceeds from dispositions of property 414 1,423
-------- --------
Net cash flows from investing activities (16,668) (4,113)
-------- --------
Financing Activities
- --------------------
Proceeds from revolving bank loan 135,000 45,000
Repayment of other obligations (201) (2,501)
Redemption of convertible subordinated debentures (20) (410)
Shareowners' equity transactions:
Exercise of stock options 165 25
Cash dividends on Common Stock (4,475) (3,645)
-------- --------
Net cash flows from financing activities 130,469 38,469
-------- --------
Net increase (decrease) in cash and cash equivalents 55,910 (63,146)
Cash and cash equivalents at beginning of period 5,264 85,762
-------- --------
Cash and cash equivalents at end of period $ 61,174 $ 22,616
======== ========
Supplemental Cash Flows Disclosures
- -----------------------------------
Cash paid during the period for:
Interest $ 1,646 $ 708
Income taxes 1,035 588
<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 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.
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 December 31, 1994 were $488,000, net of deferred income taxes of
$310,000. Realized gains and losses on investments are determined by the
specific identification method and are included in earnings and such
amounts are not material for the three months ended December 31, 1994.
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.
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. and
subsidiaries ("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 $175.0 million at December 31, 1994. The
maximum outstanding borrowing under the Credit Agreement during the quarter
ended December 31, 1994 was $305.0 million.
6
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
On January 14, 1993, the Company publicly sold $100 million aggregate
principal amount of 5 5/8% Senior Notes due January 15, 1996 and $150
million aggregate principal amount of 7 3/8% Senior Notes due January 15,
2003, collectively the "Senior Notes". The Senior Notes were issued
pursuant to the $400 million shelf registration filed by the Company in
December 1992. Interest on the Senior Notes is payable semi-annually on
January 15 and July 15 of each year, beginning July 15, 1993.
In connection with the Durr acquisition, the Company assumed $69.0 million
of Durr's 7% Convertible Subordinated Debentures due March 1, 2006 (the "7%
Debentures"). The acquisition of Durr by the Company resulted in each
holder receiving the right, at such holder's option, to require Durr to
redeem on November 23, 1992 all or any portion of such holder's 7%
Debentures for cash equal to the principal amount plus accrued interest to
that date. As a result, the Company redeemed $45.6 million aggregate
principal amount on November 23, 1992. Since that date, and through
December 31, 1994, an additional $2.5 million aggregate principal amount
has been redeemed. The remaining outstanding 7% Debentures receive
interest on March 1 and September 1 of each year.
C. The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common, par value $1.50 per share (the "Common Stock") and
3,000,000 shares of Preferred Stock without nominal or par value (the
"Preferred Stock").
The Board of Directors (the "Board") is authorized to divide the Preferred
Stock into one or more series, to determine the relative rights,
preferences and limitations of the shares of any class or of any such
series. In addition, the Board may give the Preferred Stock (or any
series), special, limited, multiple or no voting rights.
Subject to the preferences and other rights of the Preferred Stock, the
Common Stock may receive stock or cash dividends as declared by the Board
and each share of Common Stock is entitled to one vote per share at every
meeting of shareowners. In the event of any liquidation, dissolution or
winding up of the affairs of the Company, after payment to the owners of
the Preferred Stock of the full amounts to which they have a liquidation
preference, the owners of Common Stock shall be entitled to receive a
distribution of all assets then remaining.
No owner of stock of any class of the Company shall have any preemptive
right to purchase or subscribe for, or to receive rights or warrants to
7
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
purchase or subscribe for, any shares of the Company, whenever authorized,
which the Company may issue or sell or any obligations which the Company
may issue or sell that shall be convertible into or exchanged for any
shares of any class of stock of the Company.
The Company shall not be obligated to issue any fractional shares of Common
Stock and if any interest in a fractional share would otherwise be
deliverable, the Company shall make adjustment for that fractional share
interest by payment of an amount in cash equal to the same fraction of the
market value of a full share of Common Stock.
On February 9, 1994, the Board adopted a Shareowner Rights Plan pursuant to
which a dividend of one Preferred Share Purchase Right (the "Rights") was
declared for each share of Common Stock outstanding at the close of
business on February 18, 1994 as well as for each share of Common Stock
issued between such record date and the Distribution Date (as defined
below). The Rights, unless earlier redeemed, will expire on February 18,
2004. Prior to such expiration date, the Rights are redeemable by the
Company for $0.01 per Right at any time prior to 10 days after the Stock
Acquisition Date (as defined below). The Rights are not exercisable until
10 days after the first date (the "Stock Acquisition Date") of public
announcement by the Company or an Acquiring Person (as defined below) that
a person or group has become the beneficial owner of 15% or more of the
Common Stock without the prior approval of the Company's Board of Directors
(an "Acquiring Person") or (unless the Board postpones the Distribution
Date) 10 days after any person or group announces a tender offer as a
result of which, if consummated, there would be an Acquiring Person (a
"Distribution Date"). Upon a Distribution Date, the Rights would separate
from the underlying Common Stock and entitle all holders (except for any
Acquiring Person and its associates, affiliates and transferees) to
purchase, for an initial exercise price (subject to possible future
adjustment) of $80.00 (the "Exercise Price"), either 1/100th of a share of
a new series of the Company's Series A Junior Preferred Stock or, if the
Distribution Date occurs as a result of the occurrence of a Stock
Acquisition Date, Common Stock having twice the aggregate market value of
the Exercise Price. All holders of Rights, other than the Acquiring Person
and its affiliates, associates and transferees, would also be entitled to
purchase Common Stock having twice the aggregate market value of the
Exercise Price if the Company was the surviving corporation in a merger
with an Acquiring Person and its Common Stock was not changed, an Acquiring
Person engaged in one or more "self-dealing" transactions or, during such
8
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
time as there was an Acquiring Person, an event occurred which increased
such Acquiring Person's ownership by more than 1%.
If, at any time after there was an Acquiring Person, the Company was
acquired in a business combination in which it was not the surviving
corporation or 50% or more of its assets or earning power was transferred,
all holders of Rights, other than any Acquiring Person and its affiliates,
associates and transferees, would be entitled to purchase, for the Exercise
Price, Common Stock of the acquiring company having twice the aggregate
market value of the Exercise Price.
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 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 will be charged to retained
earnings in the approximate amount of $44,216,000, which is 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 and the assumed conversion of the weighted average number of shares
of Class B Common Stock outstanding through the Conversion Date 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 39,167,216 shares and 38,336,845 shares for the
first quarter ended December 31, 1994 and 1993, respectively.
E. On January 10, 1995, the Company completed the acquisition of Biddle &
Crowther Company, a privately-held medical-surgical supply distributor
9
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
headquartered in Seattle, Washington for 605,950 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.
F. 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 first quarter of fiscal 1995 are not necessarily
indicative of results to be expected for the full year.
10
<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 December 31, 1994, net sales and other revenues increased
8%, while operating earnings and pre-tax earnings increased 31% and 28%
respectively, from the same quarter in 1993.
Of the 8% increase in net sales and other revenues for the quarter,
approximately 1% is attributable to the acquisition of Southeastern Hospital
Supply Corporation in April 1994. Approximately 7% of the net sales and other
revenues increase reflects internal growth within the Company's existing
pharmaceutical business.
Earnings per share for the first quarter of fiscal 1995 increased 30% compared
to the first quarter of the prior year, on an increase of 2% in the average
number of common and common equivalent shares outstanding.
Cost of sales increased 8% from the first quarter a year ago, due mainly to the
Company's increased sales levels. The overall gross profit as a percent of net
sales and other revenues for the first quarter 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
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 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 continued reduction of distribution, selling, general and
administrative expenses as a percentage of net sales and other revenues through
improved operating efficiencies.
11
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Distribution, selling, general and administrative expenses increased 5% over the
prior year quarter, while net sales and other revenues increased 8% over the
prior year period. These expenses decreased as a percent of net sales and other
revenues from 4.4% in the first quarter of fiscal 1994 to 4.3% in the first
quarter of fiscal 1995. The decreased distribution, selling, general and
administrative expenses as a percentage of net sales and other revenues in the
current year 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 $4.9 million to $6.8 million for the first
quarter of fiscal 1995 primarily due to increased borrowings and higher interest
rates under the Credit Agreement, and a lower cash investment base.
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
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 December 31, 1994, capitalization consisted of 49% debt and 51% 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 $175.0 million and $40.0
million at December 31, 1994 and September 30, 1994, respectively. Cash and
cash equivalents of $61.2 million at December 31, 1994 increased from $5.3
million at September 30, 1994.
Capital expenditures for the three months ended December 31, 1994 were $12.9
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 investments in data processing
equipment.
12
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
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.
Cash dividends on Class A Common Stock amounted to $4.5 million for the three
months ended December 31, 1994 and $3.5 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 $.1 million for the three months ended December 31, 1993.
On January 26, 1995, the Corporation declared a 5% stock dividend on the
Corporation's Class Common Stock payable on March 1, 1995 to shareowners of
record on February 6, 1995. The dividend will be charged to retained earnings
in the approximate amount of $44,216,000, which is based on the closing price of
$23.375 per share of Class A Common Stock on the declaration date.
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 anticipated cash and capital needs.
13
<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 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 will maintain its distribution facilities in
Montgomery and Mobile, Alabama; Lakeland, Florida; and Shreveport, Louisiana for
a period of at least two years; (4) Durr will maintain and enhance its AccuNetR
system for a period of at least two years; and (5) the Company will 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.
14
<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 December 31, 1994, 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 and the trial
date was vacated.
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
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
15
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
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 recently 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 believes that this action will be consolidated
into the Federal multidistrict action.
On April 29, 1994, Durr Drug Company (a subsidiary of the Company) was named as
a defendant, along with 17 other parties, in a class action in the Circuit Court
of Bullock County, Alabama entitled Main Drug Company v. The Upjohn Company, et
al., No. CV-94-37. This case was voluntarily dismissed on October 31, 1994.
16
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (Continued)
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 have moved to
set aside the agreement. The Company believes the agreement is enforceable and
intends to vigorously oppose this motion. 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 December 31, 1994 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.
ITEM 5. OTHER INFORMATION
Note C of Notes to Consolidated Financial Statements included in Part I -
Financial Information, Item 1 - Financial Statements of this Quarterly Report
regarding a 5% stock dividend on the Company's Class A Common Stock is
incorporated herein by reference.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--------
*4(a) The Senior Indenture for $400,000,000 of Debt Securities
dated as of December 1, 1992 between the Company and Chemical
Trust Company of California as Trustee is set forth as Exhibit 4.1
to the Company's Registration Statement on Form S-3 dated December
1, 1992 (file no. 33-55136).
The Company agrees to furnish to the Commission, upon request, a
copy of each instrument with respect to other issues of long-term
debt of the Company, the authorized principal amount of which does
not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis.
*4(b) Rights Agreement, dated as of February 8, 1994, between
Bergen Brunswig Corporation and Chemical Trust Company of
California, as Rights Agent, including all exhibits thereto, is
incorporated herein by reference to Exhibit 1 to the Company's
Registration Statement on Form 8-A dated February 14, 1994.
*10(a) Agreement dated as of September 18, 1992 by and among Bergen
Brunswig Corporation, Durr-Fillauer Medical, Inc. and the
Attorneys General of the States of Alabama, Florida and Louisiana
is set forth as Exhibit 10(p) in the Company's Annual Report on
Form 10-K for the fiscal year ended August 31, 1992.
*10(b) Employment Agreement and Schedule are set forth as Exhibit 10(q)
in the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1994.
*10(c) Severance Agreement and Schedule are set forth as Exhibit 10(r) in
the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
11 Computation of earnings per share for the first quarter ended
December 31, 1994 and 1993.
27 Financial Data Schedule for the first quarter ended December 31,
1994.
*99(a) Credit Agreement dated as of September 15, 1992 by and among
Bergen Brunswig Drug Company, Bergen Brunswig Corporation and
Continental Bank N.A. ("Credit Agreement") is set forth as Exhibit
(b)(4) to the Final Amendment to Bergen Brunswig Corporation's and
BBC Acquisition Corp.'s Tender Offer Statement pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934.
18
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS (Continued)
--------
*99(b) First Amendment to Credit Agreement dated as of December 23, 1992
is set forth as Exhibit 28(b) in the Company's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1993.
*99(c) Second Amendment to Credit Agreement dated as of May 18, 1993 is
set forth as Exhibit 28(c) in the Company's Quarterly Report on
Form 10-Q for the quarter ended May 31, 1993.
*99(d) Third Amendment to Credit Agreement dated as of August 27, 1993 is
set forth as Exhibit 99(f) in the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 1993.
*99(e) Fourth Amendment to Credit Agreement dated as of September 1, 1993
is set forth as Exhibit 99(e) in the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1993.
*99(f) Amended and Restated Credit Agreement dated as of September 30,
1994 among Bergen Brunswig Drug Company, Bergen Brunswig
Corporation and Bank of America National Trust and Savings
Association is set forth as Exhibit 99(h) in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1994.
*99(g) Agreement and Plan of Merger dated as of September 4, 1992 by and
among Bergen Brunswig Corporation, BBC Acquisition Corp. and
Durr-Fillauer Medical, Inc. is set forth as Exhibit (c)(1) to
Amendment No. 16 to Bergen Brunswig Corporation's and BBC
Acquisition Corp.'s Tender Offer Statement Pursuant to Section
14(d)(1) of the Securities Exchange Act of 1934.
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
(b) REPORTS ON FORM 8-K:
-------------------
There were no reports filed on Form 8-K during the three months ended
December 31, 1994.
19
<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)
February 10, 1995
20
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX TO EXHIBITS
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
*4(a) The Senior Indenture for $400,000,000 of Debt Securities
dated as of December 1, 1992 between the Company and
Chemical Trust Company of California as Trustee is set forth
as Exhibit 4.1 to the Company's Registration Statement on
Form S-3 dated December 1, 1992 (file no. 33-55136).
The Company agrees to furnish to the Commission, upon
request, a copy of each instrument with respect to other
issues of long-term debt of the Company, the authorized
principal amount of which does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis.
*4(b) Rights Agreement, dated as of February 8, 1994, between
Bergen Brunswig Corporation and Chemical Trust Company of
California, as Rights Agent, including all exhibits thereto,
is incorporated herein by reference to Exhibit 1 to
Company's Registration Statement on Form 8-A dated February
14, 1994.
*10(a) Agreement dated as of September 18, 1992 by and among Bergen
Brunswig Corporation, Durr-Fillauer Medical, Inc. and the
Attorneys General of the States of Alabama, Florida and
Louisiana is set forth as Exhibit 10(p) in the Company's
Annual Report on Form 10-K for the fiscal year ended August
31, 1992.
*10(b) Employment Agreement and Schedule are set forth as Exhibit
10(q) in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
*10(c) Severance Agreement and Schedule are set forth as Exhibit
10(r) in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1994.
11 Computation of earnings per share for the first 24
quarter ended December 31, 1994 and 1993.
21
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX TO EXHIBITS(Continued)
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
27 Financial Data Schedule for the first quarter 25
ended December 31, 1994.
*99(a) Credit Agreement dated as of September 15, 1992 by and among
Bergen Brunswig Drug Company, Bergen Brunswig Corporation
and Continental Bank N.A. is set forth as Exhibit (b)(4) to
the Final Amendment to Bergen Brunswig Corporation's and BBC
Acquisition Corp.'s Tender Offer Statement pursuant to
Section 14(d)(1) of the Securities Exchange Act of 1934.
*99(b) First Amendment to Credit Agreement dated as of December 23,
1992 is set forth as Exhibit 28(b) in the Company's
Quarterly Report on Form 10-Q for the quarter ended February
28, 1993.
*99(c) Second Amendment to Credit Agreement dated as of May 18,
1993 is set forth as Exhibit 28(c) in the Company's
Quarterly Report on Form 10-Q for the quarter ended May 31,
1993.
*99(d) Third Amendment to Credit Agreement dated as of August 27,
1993 is set forth as Exhibit 99(f) in the Company's Annual
Report on Form 10-K for the fiscal year ended August 31,
1993.
*99(e) Fourth Amendment to Credit Agreement dated as of September
1, 1993 is set forth as Exhibit 99(e) in the Company's
Quarterly Report on Form 10-Q for the quarter ended December
31, 1993.
*99(f) Amended and Restated Credit Agreement dated as of September
30, 1994 among Bergen Brunswig Drug Company, Bergen Brunswig
Corporation and Bank of America National Trust and Savings
Association is set forth as Exhibit 99(h) in the Company's
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
22
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX TO EXHIBITS(Continued)
-----------------
EXHIBIT NO. PAGE NO.
- ----------- --------
*99(g) Agreement and Plan of Merger dated as of September 4, 1992
by and among Bergen Brunswig Corporation, BBC Acquisition
Corp. and Durr-Fillauer Medical, Inc. is set forth as
Exhibit (c)(1) to Amendment No. 16 to Bergen Brunswig
Corporation's and BBC Acquisition Corp.'s Tender Offer
Statement Pursuant to Section 14(d)(1) of the Securities
Exchange Act of 1934.
* Document has heretofore been filed with the Securities and Exchange
Commission and is incorporated herein by reference and made a part hereof.
23
<TABLE>
BERGEN BRUNSWIG CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1994 AND 1993
(in thousands except share and per share amounts)
<CAPTION>
------------------------------
1994 1993
------------------------------
(Unaudited)
<S> <C> <C>
DATA AS TO EARNINGS - Net Earnings $ 13,549 $ 10,331
=========== ===========
DATA AS TO NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES:
Weighted average number of shares oustanding:
Class A Common Stock 39,076,232 37,248,815
Class B Common Stock - 100,492
Shares of Class A Common Stock to be issued from
assumed conversion of remainder of Class B Stock - 904,923
Common equivalent shares assuming issuance of shares
represented by outstanding employees' stock options:
Additional shares assumed to be issued 891,758 531,299
Reduction of such additional shares assuming proceeds invested
in treasury stock (at average market prices during each period) (800,774) (448,684)
----------- -----------
Average number of common and common
equivalent shares outstanding 39,167,216 38,336,845
=========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING $ .35 $ .27
=========== ===========
<FN>
Reference is made to Notes C and D in the accompanying Notes to Consolidated Financial Statements.
23
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 61,174
<SECURITIES> 0
<RECEIVABLES> 509,801
<ALLOWANCES> 20,048
<INVENTORY> 914,283
<CURRENT-ASSETS> 1,494,373
<PP&E> 227,925
<DEPRECIATION> 83,430
<TOTAL-ASSETS> 2,050,811
<CURRENT-LIABILITIES> 1,103,012
<BONDS> 477,197
<COMMON> 66,115
0
0
<OTHER-SE> 404,487
<TOTAL-LIABILITY-AND-EQUITY> 2,050,811
<SALES> 0
<TOTAL-REVENUES> 1,983,863
<CGS> 1,867,920
<TOTAL-COSTS> 1,953,712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,791
<INCOME-PRETAX> 23,360
<INCOME-TAX> 9,811
<INCOME-CONTINUING> 13,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,549
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
