================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended December 31, 1998
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 92868-3510
- --------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 385-4000
----------------------
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 January 31, 1999
---------------------- ----------------------------
<S> <C>
Class A Common Stock -
par value $1.50 per share 109,251,882
</TABLE>
================================================================================
1
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX
-----
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets, December 31,
1998 and September 30, 1998 3
Statements of Consolidated Earnings
for the three months ended
December 31, 1998 and 1997 4
Statements of Consolidated Cash Flows
for the three months ended
December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 20
Part II. Other Information
Item 1. Legal Proceedings 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Index to Exhibits 24
2
<PAGE>
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
BERGEN BRUNSWIG CORPORATION
---------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
(dollars in thousands)
(Unaudited)
<CAPTION>
====================================================================================================================================
December 31, September 30, LIABILITIES AND December 31, September 30,
- - ASSETS - - 1998 1998 - - SHAREOWNERS' EQUITY - - 1998 1998
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents........... $ 68,344 $ 79,004 Accounts payable....................... $1,937,606 $1,579,332
Accounts and notes receivable, Accrued liabilities.................... 99,800 113,331
less allowance for doubtful Customer credit balances............... 160,278 137,832
receivables: $32,965 at December Deferred income taxes.................. 76,647 72,846
31, 1998 and $30,363 at Current portion of
September 30, 1998................ 1,047,285 920,247 long-term obligations................ 1,913 6,029
Inventories........................ 1,966,727 1,458,290 ---------- ----------
Income taxes receivable............ 23,264 38,371 Total current liabilities..... 2,276,244 1,909,370
Prepaid expenses................... 9,184 4,876 ---------- ----------
---------- ----------
Total current assets...... 3,114,804 2,500,788 LONG-TERM OBLIGATIONS:
---------- ---------- 7 3/8% senior notes.................... 149,550 149,522
7 1/4% senior notes.................... 99,775 99,767
Revolving bank loan payable............ 390,000 170,000
7% convertible subordinated debentures. 20,609 20,609
6 7/8% exchangeable
subordinated debentures.............. 8,425 8,425
PROPERTY - at cost: Other.................................. 15,719 16,455
Land................................ 11,891 12,427 ---------- ----------
Buildings and leasehold improvements 89,144 88,055 Total long-term obligations... 684,078 464,778
Equipment and fixtures.............. 191,206 186,077 ---------- ----------
---------- ---------- SHAREOWNERS' EQUITY:
Total property............ 292,241 286,559 Capital stock:
Less accumulated depreciation Preferred - authorized 3,000,000
and amortization.................. 145,290 141,745 shares; issued: none............... - -
---------- ---------- Class A Common - authorized
Property - net............ 146,951 144,814 200,000,000 shares; issued:
---------- ---------- 112,310,016 shares at December 31,
1998 and 111,835,142 shares at
September 30, 1998................. 168,465 167,753
Paid-in capital........................ 88,103 80,231
Net unrealized gain (loss) on
investments,net of income taxes.... 185 (132)
Retained earnings...................... 481,537 453,654
OTHER ASSETS: ---------- ----------
Goodwill - net..................... 257,679 253,568 Total.............................. 738,290 701,506
Investments........................ 8,460 8,851 Less Treasury shares at cost:
Noncurrent receivables............. 20,946 19,176 8,742,910 shares at December 31,
Deferred income taxes.............. 7,647 7,352 1998 and 8,952,812 shares at
Deferred charges and other assets.. 71,380 68,663 September 30, 1998................... 70,745 72,442
---------- ---------- ---------- ----------
Total shareowners' equity..... 667,545 629,064
Total other assets........ 366,112 357,610 ---------- ----------
---------- ----------
TOTAL ASSETS.......................... $3,627,867 $3,003,212 TOTAL LIABILITIES AND SHAREOWNERS' EQUITY $3,627,867 $3,003,212
========== ========== ========== ==========
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
3
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CONSOLIDATED EARNINGS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
(in thousands except per share amounts)
(Unaudited)
<CAPTION>
=============================
1998 1997
=============================
<S> <C> <C>
Consolidated Earnings:
Net sales and other revenues:
Excluding bulk shipments to customers' warehouses $3,960,106 $3,168,431
Bulk shipments to customers' warehouses 1,060,212 727,744
------------- -------------
Total net sales and other revenues 5,020,318 3,896,175
------------- -------------
Costs and expenses:
Cost of sales 4,821,690 3,725,504
Distribution, selling, general and
administrative expenses 143,048 125,379
------------- -------------
Total costs and expenses 4,964,738 3,850,883
------------- -------------
Operating earnings 55,580 45,292
Net interest expense 8,718 9,128
------------- -------------
Earnings before taxes on income 46,862 36,164
Taxes on income 18,979 14,827
------------- -------------
Net earnings $ 27,883 $ 21,337
============= =============
Basic And Diluted Earnings Per Share $ 0.27 $ 0.21
============= =============
Weighted Average Number Of Shares Outstanding:
Basic 103,170 100,850
============= =============
Diluted 104,968 102,326
============= =============
Cash Dividends Declared Per Share Of
Class A Common Stock $ - $ 0.06
============= =============
<FN>
========================================================================================
See accompanying Notes to Consolidated Financial Statements.
</FN>
4
</TABLE>
<PAGE>
<TABLE>
BERGEN BRUNSWIG CORPORATION
---------------------------
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1997
(in thousands)
(Unaudited)
<CAPTION>
==============================
1998 1997
==============================
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 27,883 $ 21,337
Adjustments to reconcile net earnings to net cash
flows from operating activities:
Provision for doubtful receivables 3,361 3,157
Depreciation and amortization of property 5,557 6,862
Loss on dispositions of property 442 18
Amortization of intangible assets 2,680 3,463
Deferred compensation 1,029 858
Deferred income taxes (64) 412
Effects of changes on:
Receivables (131,659) (77,885)
Inventories (507,959) (317,881)
Income taxes receivable 18,475 16,044
Prepaid expenses and other assets (7,704) (6,043)
Accounts payable 357,557 126,502
Accrued liabilities (5,817) (11,091)
Customer credit balances 22,446 (17,046)
---------- -----------
Net cash flows from operating activities (213,773) (251,293)
---------- -----------
INVESTING ACTIVITIES
Property acquisitions (8,030) (4,213)
Other 807 575
---------- -----------
Net cash flows from investing activities (7,223) (3,638)
---------- -----------
FINANCING ACTIVITIES
Net revolving bank loan activity 220,000 228,000
Repayment of other obligations (5,909) (399)
Shareowners' equity transactions:
Exercise of stock options 3,961 78
Cash dividends paid on Common Stock (7,716) (6,051)
---------- -----------
Net cash flows from financing activities 210,336 221,628
---------- -----------
Net decrease in cash and cash equivalents (10,660) (33,303)
Cash and cash equivalents at beginning of period 79,004 54,494
---------- -----------
Cash and cash equivalents at end of period $ 68,344 $ 21,191
========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid (received) during the period for:
Interest $ 5,882 $ 7,354
Income taxes - net of refunds 566 (1,670)
<FN>
========================================================================================
See accompanying Notes to Consolidated Financial Statements.
5
</FN>
</TABLE>
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis Of Presentation
Bergen Brunswig Corporation, a New Jersey corporation formed
in 1956, and its subsidiaries (collectively, the "Company") are a diversified
drug and health care distribution organization and, as such, the nation's
largest supplier of pharmaceuticals to the health systems market and the second
largest wholesaler to the retail pharmacy market. The Company is one of the
largest pharmaceutical distributors to provide both pharmaceuticals and
medical-surgical supplies on a national basis.
The consolidated financial statements include the accounts of
the Company, after elimination of the effect of intercompany transactions and
balances.
The accompanying unaudited interim consolidated financial
statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC") for reporting on Form 10-Q and do not
include all of the information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles. The accompanying unaudited interim consolidated financial statements
should be read in conjunction with the audited Consolidated Financial Statements
and Notes to Consolidated Financial Statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1998. Certain
reclassifications have been made in the consolidated financial statements and
notes to conform to fiscal 1999 presentations.
The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the balance sheet dates and the reported amounts of
revenue and expense during the reporting periods. Actual results could differ
from these estimates and assumptions.
2. Accounting Pronouncements
Effective October 1, 1998, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which
establishes standards for the reporting and display of comprehensive income and
its components in financial statements. This statement defines comprehensive
income as "all changes in equity during the period with the exception of stock
issuances and dividends." The Company's comprehensive income consists of net
earnings and net unrealized gains and losses on investments. For the three
months ended December 31, 1998, total comprehensive income
6
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
was $28.1 million, comprised of $27.9 million of net earnings and $0.2 million
of net unrealized gain on investments. Total comprehensive income for the three
months ended December 31, 1997 was $21.2 million, comprised of $21.3 million of
net earnings offset by $0.1 million of net realized loss on investments.
Effective October 1, 1998, the Company adopted the American
Institute of Certified Public Accountants' Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). This statement provides guidance for the
capitalization and amortization of costs incurred in connection with software to
be used internally by the Company. Adoption of the statement has not had
significant impact on the Company's financial position, results of operations or
cash flows.
3. Revenue Recognition
Along with other companies in its industry, the Company now
reports as revenues the gross dollar amount of bulk shipments to customers'
warehouses and the related costs in cost of sales. Bulk shipment transactions
are arranged by the Company with its suppliers at the express direction of the
customer, and involve either shipments from the supplier directly to customers'
warehouse sites or shipments from the supplier to Company warehouses for
immediate shipment to customers' warehouse sites. All periods presented have
been reclassified to reflect the new presentation. Previously, only the gross
profit related to these bulk shipments was reported in revenues. This gross
profit was not material in any period presented.
4. Borrowing Arrangements
The Company's credit agreement (the "Credit Agreement") allows
borrowings of up to $400 million and also allows borrowings under discretionary
credit lines ("discretionary lines") outside of the Credit Agreement.
Outstanding borrowings under the Credit Agreement and discretionary lines were
$390 million and $170 million at December 31, 1998 and September 30, 1998,
respectively. The Credit Agreement has loan covenants which require the Company
to maintain certain financial statement ratios. The Company is in compliance
with all required ratios at December 31, 1998. The weighted average interest
rate was 5.77% for borrowings outstanding at December 31, 1998.
The Company filed a shelf registration statement with the SEC
which became effective on March 27, 1996. The registration statement allows the
Company to sell senior and subordinated debt or equity securities to the public
from time to time up to an aggregate maximum principal amount of $400 million.
The Company intends to use the net proceeds from the sale of such securities for
7
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
general corporate purposes, which may include, without limitation, the repayment
of indebtedness of the Company or of any of its subsidiaries, possible
acquisitions, capital expenditures and working capital needs. Pending such
application, the net proceeds may be temporarily invested in short-term
securities. No offering has occurred since the effective date of the
registration statement. Any offering of such securities shall be made only by
means of a prospectus.
5. Earnings Per Share
Basic earnings per share ("Basic") is computed by dividing net
earnings (the numerator) by the weighted average number of shares of Class A
Common Stock outstanding during each period (the denominator). Diluted earnings
per share is similar to the computation for Basic, except that the denominator
is increased by the dilutive effect of employees' stock options outstanding,
computed using the treasury stock method.
6. Dividends
On September 24, 1998, the Company declared a 2-for-1 stock
split on the Company's Class A Common Stock ("Common Stock") which was paid on
December 1, 1998 to shareowners of record on November 2, 1998. Share and per
share amounts included in the accompanying consolidated financial statements and
notes are based on the increased number of shares giving retroactive effect to
the stock split.
On September 24, 1998, the Company declared a $0.075 per share
quarterly cash dividend on the Company's Common Stock that was paid on December
1, 1998 to shareowners of record as of November 2, 1998. This $0.075 payment
constituted the Company's dividend for the first quarter ended December 31,
1998. Ordinarily the dividend for that quarter is not declared until November.
However, in order to make its dividend announcement at the same time that the
Company announced the 2-for-1 stock split, the Company declared this cash
dividend early. For accounting purposes, this cash dividend was recorded in the
fourth fiscal quarter ended September 30, 1998, resulting in a larger than usual
dividend in that quarter and no dividend during the quarter ended December 31,
1998. In addition, on February 8, 1999, the Company declared a regular cash
dividend of $0.075 per share on the Company's Common Stock, payable March 1,
1999 to shareowners of record on February 22, 1999.
8
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
7. Acquisitions
On February 10, 1999, the Company completed the acquisition of
100% of the capital stock of J.M. Blanco, Inc. ("J.M. Blanco"), Puerto Rico's
largest pharmaceutical distributor, headquartered in Guaynabo, Puerto Rico. The
Company paid approximately $29.7 million in cash and assumed approximately $22.2
million in debt.
On January 21, 1999, the Company completed the acquisition of
Stadtlander Drug Co. ("Stadtlander"), a national leader in disease-specific
pharmaceutical care delivery for transplant, HIV, infertility and serious mental
illness patient populations and a leading provider of pharmaceutical care to the
privatized corrections market, headquartered in Pittsburgh, Pennsylvania. The
Company paid approximately $197.3 million in cash and issued approximately 5.7
million shares of Common Stock, previously held as Treasury shares, valued at
approximately $140.8 million, and assumed indebtedness of approximately $100.9
million.
On December 31, 1998, the Company completed the acquisition of
substantially all of the business, assets and property, subject to certain
liabilities, of Medical Initiatives, Inc. ("MII"), a pre-filler of
pharmaceuticals for oncology centers, located in Tampa, Florida. The Company
issued approximately 210,000 shares of Common Stock, previously held as Treasury
shares, valued at approximately $6.3 million, acquired assets at fair value of
approximately $1.2 million, assumed liabilities of approximately $0.7 million
and incurred costs of $0.2 million. The Company recorded goodwill of
approximately $6.0 million in the transaction.
The purchase prices of the J.M. Blanco, Stadtlander and MII
acquisitions, to be accounted for as purchases for financial reporting purposes,
are subject to adjustments after the completion of acquisition audits. The J.M.
Blanco acquisition and the cash portion of the Stadtlander acquisition were
financed from borrowings under the Credit Agreement and other bank borrowings.
8. Pending Business Combination
On January 11, 1999, the Company signed a definitive merger
agreement with PharMerica Inc. ("PharMerica"), one of the nation's largest
providers of pharmaceutical products and pharmacy management services to
long-term care and alternate site settings, headquartered in Tampa, Florida. The
merger agreement, which has been approved by the Boards of Directors of the
Company and PharMerica, calls for PharMerica to become a wholly-owned subsidiary
of the Company. Under the terms of the proposed merger, stockholders of
PharMerica would receive 0.275 of a share of the Company's Common Stock in
exchange for each outstanding share of PharMerica's Common Stock. The Company
would issue approximately 26 million shares of Common Stock in the transaction
and would assume PharMerica's long-term debt which was approximately $593.6
9
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
million at December 31, 1998. The merger of the two companies has been
structured as a tax-tree transaction and will be accounted for as a purchase for
financial reporting purposes. On January 29, 1999, the Federal Trade Commission
granted early termination of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act with respect to the proposed merger. The merger is
currently expected to be completed in the third quarter of fiscal 1999, subject
to the satisfaction of certain conditions, including approvals of the Company's
shareowners and PharMerica's stockholders.
9. Content of Interim Consolidated Financial Statements
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 three months of fiscal 1999 are not necessarily
indicative of results to be expected for the full fiscal year or any other
fiscal period.
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Portions of management's discussion and analysis presented below, consisting of
those statements which are not historical in nature (including, without
limitation, the Company's expectations regarding its margins and the Company's
Year 2000 disclosures), constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks, uncertainties and other factors
which could cause actual results to materially differ from those projected or
implied. The most significant of such risks, uncertainties and other factors are
described in Exhibit 99(a) to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1998 and are incorporated herein by reference.
The Company disclaims any obligation to update any forward-looking statement.
Results of Operations
- ---------------------
The Company reported significant increases in both revenues
and earnings during the quarter ended December 31, 1998 (the first quarter of
fiscal year 1999) compared to the quarter ended December 31, 1997 (the first
quarter of fiscal year 1998). Net sales and other revenues, including bulk
shipments to warehouses, increased 29% while pre-tax earnings and net earnings
increased 30% and 31%, respectively.
Diluted earnings per share for the first quarter of fiscal
1999 increased 29% over the corresponding prior-year quarter. Due primarily to
the issuance of shares of Common Stock in connection with business acquisitions
and the exercise of employees' stock options, there was a 3% increase in the
weighted average number of shares outstanding for the diluted earnings per share
computation in the first quarter of fiscal 1999 compared to the corresponding
prior-year quarter.
The following table summarizes the components of the Company's
operating earnings for the first quarter of the current and prior fiscal year
and should be read in connection with the discussion below.
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------- %
Dollars in millions 1998 1997 Change
==========================================================================================
<S> <C> <C> <C>
Revenues excluding bulk shipments $ 3,960.1 $ 3,168.4 25%
Bulk shipments 1,060.2 727.8 46
-------------------------------------
Total net sales and other revenues 5,020.3 3,896.2 29
Cost of sales 4,821.7 3,725.5 29
-------------------------------------
Gross profit 198.6 170.7 16
Distribution, selling, general &
administrative expenses (DSG&A) 143.0 125.4 14
-------------------------------------
Operating earnings $ 55.6 $ 45.3 23%
=======================================
Percentage of revenues excluding bulk shipments:
Gross profit 5.01% 5.39%
DSG&A expenses 3.61% 3.96%
Operating earnings 1.40% 1.43%
</TABLE>
11
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Revenues
Along with other companies in its industry, the Company now
reports bulk shipments of pharmaceuticals in revenues and cost of sales.
Previously, only the gross profit on such bulk shipments was reported in
revenues. Fiscal year 1998 amounts presented herein have been reclassified to
conform with the new reporting method. Bulk shipment transactions are arranged
by the Company with its suppliers at the express direction of the customer, and
involve either (a) shipments from the supplier directly to the customer's
warehouse or (b) shipments from the supplier to Company warehouses for immediate
shipment to the customer's warehouse. Bulk sales of pharmaceuticals do not
impact the Company's inventory since the Company simply processes the orders
that it receives from its suppliers directly to the customers' warehouses. The
Company serves as an intermediary by paying the supplier and billing the
customer for the goods. Due to the insignificant margins generated through bulk
shipments, fluctuations in such revenues have an immaterial impact on the
Company's pre-tax earnings.
Revenues excluding bulk shipments increased 25% in the current
quarter over the corresponding prior-year quarter. Substantially all of the
increase reflects internal growth within the Company's existing pharmaceutical,
medical-surgical supply and specialty products distribution businesses, with
only a small portion of the increase attributable to acquired entities.
All three of the aforementioned businesses contributed to the
revenue growth in the first quarter. Revenues from the pharmaceutical business
grew 22%, with double-digit percentage increases across all major customer
categories and geographic regions. Such increases were volume-related,
reflecting growth from increased shipments to existing customers as well as from
shipments to new customers. Revenues from the medical-surgical supply business
increased 13%, primarily attributable to (a) the acquisition of Pacific
Criticare, Inc. in May 1998 and Ransdell Surgical, Inc. in September 1998, which
enabled this business to serve additional geographic areas and (b) shipments to
new primary acute care customers. Revenues from the specialty products business
increased 134%, primarily reflecting growth from existing and new customers; a
small portion of this growth was attributable to the acquisition of Besse
Medical Services, Inc. in January 1998, which expanded this business' sales to
the physician market.
Gross Margins
Gross profit as a percentage of revenues excluding bulk
shipments ("gross margin") was 5.01% and 5.39% for the first fiscal quarter of
1999 and 1998, respectively. The decrease primarily reflects lower gross margins
in the pharmaceutical and medical-surgical supply businesses. Pharmaceutical
gross margins decreased principally due to a change in the sales mix, with a
greater portion of revenues coming from health systems and large retail chain
customers. Partially offsetting this mix effect were higher inventory investment
buying gains in the current year quarter. Medical-surgical supply gross margins
declined slightly due to a higher sales mix of lower-margin shipments to the
12
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
acute care market. Specialty products gross margins were approximately the same
as in the prior year quarter.
In all of the Company's businesses, it is customary to pass on
manufacturers' price increases to customers. Investment buying enables
distributors such as the Company to benefit by purchasing goods in advance of
anticipated manufacturers' price increases. Consequently, the rate or frequency
of future price increases by manufacturers, or the lack thereof, influences the
profitability of the Company.
Management anticipates further downward pressure on gross
margins in fiscal 1999 because of continued price competition influenced by
health systems and large retail chain customers. Management expects that these
pressures may be offset to some extent by an increased sales mix of more
profitable products and services, the Company's acquisition of Stadtlander and
pending acquisition of PharMerica and continued reduction of distribution,
selling, general and administrative expenses as a percentage of revenues, as
described below.
Distribution, Selling, General &
Administrative Expenses ("DSG&A")
DSG&A as a percentage of revenues excluding bulk shipments was
3.61% and 3.96% in the first quarter of fiscal 1999 and 1998, respectively. This
decrease was primarily attributable to continued operating efficiencies and the
spreading of fixed costs over a larger revenue base. Through such measures as
consolidation of distribution centers, installation of automated warehouse
equipment, and investments in information technology, the Company's
infrastructure has been able to process increasing volume without a
proportionate increase in DSG&A. Also, the aforementioned shift in the
pharmaceutical mix towards health systems and large retail chains reduced the
DSG&A percentage because these customers, which buy in large quantities, are
less costly to service. In addition, the DSG&A percentage for the
medical-surgical supply business was lower in the current year quarter largely
due to the benefits of the restructuring program initiated in September 1998.
Other Income Statement Line Items
Net interest expense decreased by $0.4 million, or 4%,
compared to the prior year quarter. The decrease resulted principally from lower
average borrowings under the Credit Agreement and discretionary lines, as well
as from lower interest rates on such borrowings.
Taxes on income were 40.5% and 41.0% of pre-tax earnings in
the first quarter of fiscal 1999 and 1998, respectively. The lower tax rate in
the current year primarily reflects a reduction in the amount of nondeductible
goodwill amortization.
13
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
Liquidity And Capital Resources
- -------------------------------
Following is a summary of the Company's capitalization at the
end of the most recent quarter and fiscal year. Except that debt is net of cash
herein, these percentages are calculated in accordance with the covenants set
forth in the Company's Credit Agreement, in which certain non-cash charges are
excluded from the calculation:
<TABLE>
<CAPTION>
December 31, September 30,
1998 1998
========================================================
<S> <C> <C>
Debt, net of cash 44% 34%
Equity 56% 66%
</TABLE>
The increase in the debt percentage is mainly due to an
increase in borrowings under the Credit Agreement and discretionary lines to
$390 million at December 31, 1998 from $170 million at September 30, 1998. Such
an increase in borrowings is a normal seasonal fluctuation reflecting the nature
of the Company's business, which involves carrying higher inventory levels of
certain pharmaceuticals during the winter months as well as making larger
inventory investment buys near the end of the calendar year.
The Company's Credit Agreement with a group of domestic and
foreign banks is effective through March 2001 and provides for maximum
borrowings of up to $400 million plus additional borrowings under discretionary
lines outside of the Credit Agreement. See Note 4 of the accompanying Notes to
Consolidated Financial Statements for further information.
The Company filed a shelf registration statement with the
Securities and Exchange Commission ("SEC") which became effective on March 27,
1996. The registration statement allows the Company to sell senior and
subordinated debt or equity securities to the public from time to time up to an
aggregate maximum principal amount of $400 million. The Company intends to use
the net proceeds from the sale of any such securities for general corporate
purposes, which may include, without limitation, the repayment of indebtedness
of the Company or any of its subsidiaries, possible acquisitions, capital
expenditures and working capital requirements. See Note 4 of the accompanying
Notes to Consolidated Financial Statements for further information. To date, the
Company has not sold any securities pursuant to this shelf registration
statement.
On September 24, 1998, the Company declared a 2-for-1 stock
split on the Company's Common Stock , which was paid on December 1, 1998 to
shareowners of record on November 2, 1998. All per share amounts presented
herein have been restated to reflect the effect of this stock split.
Cash dividends per share paid on Common Stock amounted to
$.075 and $.06 in the first quarter of fiscal 1999 and 1998, respectively. The
fiscal 1999 first quarter dividend was actually declared on September 24, 1998
(in the fourth quarter of fiscal year 1998) but was not paid until December 1,
14
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
1998 to shareowners of record on November 2, 1998. The declaration was made
earlier than usual in order to coincide with the announcement of the
aforementioned 2-for-1 stock split. On February 8, 1999, the Company declared a
regular cash dividend of $.075 per share of Common Stock, payable on March 1,
1999 to shareowners of record on February 22, 1999.
The Company's cash flows during the first quarters of fiscal
1999 and 1998 are summarized in the following table:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
-------------------------
(in millions) 1998 1997
----------------------------------------------------------------------------------
<S> <C> <C>
Net earnings after non-cash charges $ 40.9 $ 36.1
Increases in non-cash assets and liabilities (254.7) (287.4)
-------------------------
Cash flows from operations (213.8) (251.3)
Capital expenditures (8.0) (4.2)
Net proceeds from debt 214.1 227.6
Cash dividends paid (7.7) (6.1)
Other - net 4.7 0.7
-------------------------
Net decrease in cash and cash equivalents $ (10.7) $ (33.3)
=========================
</TABLE>
During the periods presented, cash flows from operations and
borrowings under the Credit Agreement and discretionary lines has been adequate
to fund working capital increases, capital expenditures, business acquisitions
and dividend payments. The Company believes that internally-generated cash
flows, funds available under the Credit Agreement and discretionary lines, and
funds potentially available in the private and public capital markets will be
sufficient to meet anticipated cash and capital requirements. However, actual
results could differ materially from this forward-looking statement as a result
of unanticipated capital requirements or an inability to access the capital
markets on acceptable terms when, and if, necessary.
Working capital increased to $838.6 million at December 31,
1998 from $591.4 million at September 30, 1998, primarily as a result of higher
receivables and inventory balances supporting revenue growth and seasonal
inventory requirements. The current ratio increased slightly to 1.37 at December
31, 1998 from 1.31 at September 30, 1998.
Capital expenditures for fiscal 1999 and 1998 related
principally to additional investments in existing locations, as well as to
purchases of warehousing equipment and data processing hardware and software.
Subsequent to December 31, 1998, the Company financed the
acquisitions of Stadtlander and J.M. Blanco through additional borrowings on the
discretionary lines under its Credit Agreement. The Company also assumed debt in
connection with those acquisitions and will assume additional debt when the
PharMerica acquisition is consummated in the third quarter of fiscal 1999. The
Company is exploring various alternatives for the long-term financing of such
15
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
acquisitions and possible refinancing of the assumed debt, including an increase
in the maximum borrowings under its Credit Agreement, other borrowings, or
possible debt or equity offerings.
Mergers and Acquisitions
- ------------------------
On February 10, 1999, the Company completed the acquisition of
100% of the capital stock of J.M. Blanco, Puerto Rico's largest pharmaceutical
distributor, headquartered in Guaynabo, Puerto Rico. The Company paid
approximately $29.7 million in cash and assumed approximately $22.2 million in
debt.
On January 21, 1999, the Company completed the acquisition of
all of the outstanding capital stock of Stadtlander, a national leader in
disease-specific pharmaceutical care delivery for transplant, HIV, infertility
and serious mental illness patient populations and a leading provider of
pharmaceutical care to the privatized corrections market, headquartered in
Pittsburgh, Pennsylvania. The Company paid approximately $197.3 million in cash
and issued approximately 5.7 million shares of Common Stock, previously held as
Treasury shares, valued at approximately $140.8 million, and assumed
indebtedness of approximately $100.9 million.
On December 31, 1998, the Company completed the acquisition of
substantially all of the business, assets and property, subject to certain
liabilities, of MII, a pre-filler of pharmaceuticals for oncology centers,
located in Tampa, Florida. The Company issued approximately 210,000 shares of
Common Stock, previously held as Treasury shares, valued at approximately $6.3
million, acquired assets at fair value of approximately $1.2 million, assumed
liabilities of approximately $0.7 million and incurred costs of $0.2 million.
The Company recorded goodwill of approximately $6.0 million in the transaction.
The purchase prices of the J.M. Blanco, Stadtlander and MII
acquisitions, to be accounted for as purchases for financial reporting purposes,
are subject to adjustments after the completion of acquisition audits. The J.M.
Blanco acquisition and the cash portion of the Stadtlander acquisition were
financed from borrowings under the Credit Agreement and other bank borrowings.
On January 11, 1999, the Company signed a definitive merger
agreement with PharMerica, one of the nation's largest providers of
pharmaceutical products and pharmacy management services to long-term care and
alternate site settings, headquartered in Tampa, Florida. The merger agreement,
which has been approved by the Boards of Directors of the Company and
PharMerica, calls for PharMerica to become a wholly-owned subsidiary of the
Company. Under the terms of the proposed merger, stockholders of PharMerica
would receive 0.275 of a share of the Company's Common Stock in exchange for
each outstanding share of PharMerica's Common Stock. The Company would issue
approximately 26 million shares of Common Stock in the transaction and would
assume PharMerica's long-term debt which was approximately $593.6 million at
December 31, 1998. The merger of the two companies has been structured as a
16
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
tax-tree transaction and will be accounted for as a purchase for financial
reporting purposes. On January 29, 1999, the Federal Trade Commission granted
early termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act with respect to the proposed merger. The merger is currently
expected to be completed in the third quarter of fiscal 1999, subject to the
satisfaction of certain conditions, including approvals of the Company's
shareowners and PharMerica's stockholders.
Year 2000 Readiness Disclosure
- ------------------------------
The Year 2000 problem results from computer programs and
devices which do not differentiate between the year 1900 and the year 2000
because they were written using two digits rather than four to define the
applicable year; accordingly, computer systems that have date-sensitive
calculations may not properly recognize the year 2000. This situation may cause
systems to process critical financial and operational information incorrectly or
not at all, which would result in significant disruptions of the Company's
business activities.
Since the Company relies heavily on computer technology
throughout its businesses to effectively carry out its day-to-day operations, it
has made resolution of the Year 2000 problem a major corporate initiative. In
October 1996, the Company established a central office to direct its companywide
Year 2000 efforts for all of its business, including Bergen Brunswig Drug
Company ("BBDC"), Bergen Brunswig Medical Corporation ("BBMC") and Bergen
Brunswig Specialty Company "(BBSC"). A steering committee comprised of several
executive officers provides top-level oversight for the program. Both internal
and external resources are being used to identify, correct and test the
Company's systems for Year 2000 compliance.
The Company's Year 2000 program addresses both information
technology ("IT") and non-IT systems. The Company's business applications reside
on mainframe, midrange and desktop computer systems. The Company's IT
infrastructure is comprised of hardware, internally-developed software, and
software purchased from external vendors. The Company's non-IT systems include
equipment which uses date-sensitive embedded technology. Principal non-IT
systems include telecommunications equipment, automated warehouse equipment, and
hand-held order entry devices which the Company has provided to its customers.
The Company has divided its Year 2000 program by business unit
and functional area into numerous individual projects in order to provide
detailed management for each at-risk system. The Company's approach is to
address each Year 2000 project in the following phases: inventory, assessment,
planning, renovation, testing and certification. For BBDC, renovation of all
critical systems and the majority of other systems was completed by December 31,
1998. Certain systems have already been tested and certified as Year 2000
compliant, and the Company expects testing and certification of substantially
all remaining systems to be completed by June 30, 1999. By that date, the
Company also plans to complete a comprehensive enterprise integration testing
program. During the latter half of calendar 1999, the Company expects there to
17
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
be a relatively limited amount of effort required to complete the renovation and
testing of certain non-IT systems.
BBMC and BBSC are comprised of a number of entities acquired
during the last several years. Although some of the computer systems within
these entities are Year 2000 complaint, certain significant computer systems are
not Year 2000 compliant. Certain of the non-compliant systems will be remediated
for Year 2000 compliance while the remainder will be replaced with Year 2000
compliant systems. It is expected that all of BBMC's and BBSC's systems will be
Year 2000 compliant by October 1999, including testing and certification.
The Company has not yet had an opportunity to perform a
complete review of the Year 2000 compliance status of Stadtlander, J.M. Blanco
and PharMerica (the three entities which the Company acquired, or proposes to
acquire, subsequent to December 31, 1998). However, based on the Company's
review performed so far, it is expected, although no assurances can be given,
that the systems will be Year 2000 compliant by September 30, 1999.
The Company also recognizes that it would be at risk if its
suppliers, customers, banks, utilities, transportation companies and other
business partners fail to properly remediate their Year 2000 systems and
software. Accordingly, during calendar 1998 the Company began the process of
communicating with such entities through questionnaires and other means in order
to assess the status of their remediation efforts. The Company is now in the
process of meeting with major business partners to discuss progress and
contingencies, conduct on-site assessments, and test critical electronic
interfaces. Although the Company is not aware of any significant Year 2000
problems with any of these third parties, there can be no assurances that their
systems or software will be remediated in a timely manner, or that a remediation
failure would not have a material adverse effect on the Company's financial
position, results of operations, or cash flows.
The Company is also subject to risk should government or
private payors and insurers fail to become Year 2000 compliant and therefore be
unable to make full or timely reimbursement to the Company's customers and/or
the Company. Such a situation could have a material adverse affect on the
Company's cash flows by reducing the ability of customers to pay for products
purchased from the Company and by delaying direct payments to the Company.
The Company is charging the cost of its Year 2000 program to
expense as incurred, except for purchases of computer hardware and other
equipment, which are capitalized as property and depreciated over the
equipment's estimated useful lives in accordance with the Company's normal
accounting policies. Through December 31, 1998, total Year 2000 costs have
amounted to approximately $8.5 million, of which $2.0 million and $0.9 million
were incurred in the first quarters of fiscal 1999 and 1998, respectively.
Remaining expenditures are expected to be approximately $11.5 million (including
$5.5 million of hardware and other equipment), of which $10.0 million is planned
for the last three quarters of fiscal 1999 and $1.5 million is planned for
fiscal 2000. The aforementioned amounts exclude (1) the costs associated with
18
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
new BBMC and BBSC systems which are being installed primarily to integrate
operations and achieve additional information technology functionality and (2)
the costs associated with the remediation efforts for Stadtlander, J.M. Blanco
and PharMerica. The Year 2000 remediation effort has not had a material impact
on the Company's daily operations or the development of its information
technology systems. Although the aforementioned cost estimates reflect
management's best judgment using current information and assumptions about the
future, actual costs could vary significantly from the Company's estimates due
to technological difficulties, the noncompliance of IT vendors or other third
parties, the Year 2000 readiness of companies acquired by the Company subsequent
to December 31, 1998 and by entities that communicate with such acquired
companies, and other factors.
While the Company is not presently aware of any significant
exposure that its systems and software will not be properly remediated on a
timely basis, there can be no assurances that all Year 2000 remediation
processes will be completed and tested before January 1, 2000 or that the
contingency plans described below will sufficiently mitigate the risk of a Year
2000 compliance problem. If Year 2000 remediation efforts by the Company or
third parties are unsuccessful, there could be a significant disruption of the
Company's business operations, which could have a material adverse effect on the
Company's financial position, results of operations, or cash flows.
The Company is in the process of identifying the major
potential failure points and the related adverse consequences associated with
them, including "a reasonably worst-case scenario". Once these risks are
identified, the Company will develop contingency plans for conducting its
business until the problems can be corrected. For example, such plans will
include alternative electronic or manual means of receiving, processing and
shipping customer orders, purchasing inventory from suppliers, and sending and
receiving cash payments. It is anticipated that contingency plans will be
substantially completed by May 1999, although there will be continuing follow-up
activity later in calendar 1999 as January 1, 2000 approaches.
The foregoing discussion concerning the Year 2000 problem
contains forward-looking statements that involve risks and uncertainties
(referred to above and in Exhibit 99(a) to the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 1998) that could cause actual
results to differ materially from such statements. Although the Company believes
that minimal business disruption will occur as a result of Year 2000 issues,
there is no assurance that all Year 2000 problems will be remediated in a timely
manner by the Company or third parties and that any such failures will not have
a material adverse impact on the Company's financial position, results of
operations or cash flows.
19
<PAGE>
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
The Company believes there has been no material change in its
exposure to market risk from that discussed in Item 7a in the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1998.
20
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no new material developments in the legal
proceedings as previously reported in Part I, Item 3 of the Company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1998 filed with the
Securities and Exchange Commission on December 29, 1998, except as otherwise
might be set forth below.
A United States federal investigation of Stadtlander with
respect to possible violations of the Medicare provisions of the Social Security
Act is being conducted. The activities under investigation predated the
ownership of Stadtlander by Counsel Corporation ("Counsel"), the entity that
sold Stadtlander to the Company. The Company has been advised that while owned
by Counsel, Stadtlander cooperated fully with the authorities investigating this
matter. Stadtlander has also been named as a defendant in legal proceedings
commenced in the U.S. District Court, Northern District of Texas, Dallas
Division, asserting, among other things, that by entering into a transaction
with a third-party, Stadtlander interfered with the plaintiff's relationship
with that third-party. This proceeding is in a preliminary stage: discovery has
not yet commenced. The potential outcome of legal proceedings cannot be
predicted with certainty. Counsel has agreed to provide certain indemnification
to the Company with respect to these proceedings.
The Company is also involved in various additional items of
litigation. Although the amount of liability at December 31, 1998 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 the Company's consolidated financial position, or results of
operations or cash flows.
21
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27(a) Financial Data Schedule for the three months ended December
31, 1998.
27(b) Restated Financial Data Schedules for the fiscal years ended
September 30, 1996, 1997 and 1998, and the period ended
December 31, 1997.
27(c) Restated Financial Data Schedules for the periods ended March
31, 1998 and June 30, 1998.
99* Statement Regarding Forward-Looking Information is set forth
as Exhibit 99(a) in the Company's Annual Report on Form 10-K
for the fiscal year ended September 30, 1998.
* Document has heretofore been filed with the Securities and
Exchange Commission and is incorporated herein by reference
and made a part thereof.
(b) REPORTS ON FORM 8-K:
On January 26, 1999, a Current Report on Form 8-K, dated January 22,
1999, was filed, reporting under Item 5, that the Company had completed
the previously announced acquisition of the business of Stadtlander, an
indirect wholly-owned subsidiary of Counsel Corporation.
On January 13, 1999, a Current Report on Form 8-K, dated January 11,
1999, was filed, reporting under Items 5 and 7, the execution of a
definitive merger agreement with PharMerica.
On November 12, 1998, a Current Report on Form 8-K, dated November 9,
1998, was filed, reporting under Item 5, that the Company entered into
an agreement to purchase Stadtlander.
22
<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/ Donald R. Roden
-------------------------------------------
Donald R. Roden
President 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 11, 1999
23
<PAGE>
BERGEN BRUNSWIG CORPORATION
---------------------------
INDEX TO EXHIBITS
EXHIBIT PAGE
NUMBER NUMBER
------ ------
27(a) Financial Data Schedule for the three months
ended December 31, 1998. 25
27(b) Restated Financial Data Schedules for the fiscal
years ended September 30, 1996, 1997 and 1998,
and the period ended December 31, 1997. 26
27(c) Restated Financial Data Schedules for the periods
ended March 31, 1998 and June 30, 1998. 27
99* Statement Regarding Forward-Looking Information
is set forth as Exhibit 99(a) in the Company's
Annual Report on Form 10-K for the fiscal year
ended September 30, 1998.
* Document has heretofore been filed with the Securities and
Exchange Commission and is incorporated herein by reference and
made a part thereof.
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BERGEN BRUNSWIG CORPORATION FOR THE THREE
MONTH PERIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 68,344
<SECURITIES> 0
<RECEIVABLES> 1,080,250
<ALLOWANCES> 32,965
<INVENTORY> 1,966,727
<CURRENT-ASSETS> 3,114,804
<PP&E> 292,241
<DEPRECIATION> 145,290
<TOTAL-ASSETS> 3,627,867
<CURRENT-LIABILITIES> 2,276,244
<BONDS> 684,078
<COMMON> 168,465
0
0
<OTHER-SE> 499,080
<TOTAL-LIABILITY-AND-EQUITY> 3,627,867
<SALES> 0
<TOTAL-REVENUES> 5,020,318
<CGS> 4,821,690
<TOTAL-COSTS> 4,964,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,361
<INTEREST-EXPENSE> 8,718
<INCOME-PRETAX> 46,862
<INCOME-TAX> 18,979
<INCOME-CONTINUING> 27,883
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,883
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.27
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BERGEN BRUNSWIG CORPORATION FOR THE FISCAL
YEARS ENDED SEPTEMBER 30, 1996, 1997 AND 1998 AND FOR THE PERIOD ENDED DECEMBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS. INFORMATION FOR TOTAL REVENUES, COST OF GOODS SOLD AND TOTAL COSTS
HAS BEEN RESTATED TO REFLECT THE RECLASSIFICATION OF BULK SHIPMENT TRANSACTIONS.
ALSO, EARNINGS PER SHARE AND SHAREOWNERS' EQUITY INFORMATION HAS BEEN RESTATED,
WHERE APPLICABLE, TO GIVE EFFECT TO THE 2-FOR-1 STOCK SPLIT DECLARED ON
SEPTEMBER 24, 1998 AND PAID ON DECEMBER 1, 1998. FINANCIAL DATA SCHEDULES FOR
YEARS PRIOR TO SEPTEMBER 30, 1996 AND FOR INTERIM PERIODS PRIOR TO THE THREE
MONTHS ENDED DECEMBER 31, 1997 HAVE NOT BEEN RESTATED FOR THE STOCK SPLIT.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1997 SEP-30-1998 SEP-30-1998
<PERIOD-END> SEP-30-1996 SEP-30-1997 SEP-30-1998 DEC-31-1997
<EXCHANGE-RATE> 1 1 1 1
<CASH> 21,408 54,494 79,044 21,191
<SECURITIES> 0 2,786 0 0
<RECEIVABLES> 690,714 801,364 950,610 876,534
<ALLOWANCES> 23,459 29,022 30,363 30,703
<INVENTORY> 1,220,975 1,309,359 1,458,290 1,627,240
<CURRENT-ASSETS> 1,932,209 2,155,475 2,500,788 2,509,777
<PP&E> 255,327 270,306 286,559 274,108
<DEPRECIATION> 112,600 131,944 141,745 138,413
<TOTAL-ASSETS> 2,489,826 2,707,123 3,003,212 3,058,600
<CURRENT-LIABILITIES> 1,491,585 1,624,306 1,909,370 1,732,836
<BONDS> 419,275 437,956 464,778 665,912
<COMMON> 166,564 167,611 167,753 167,643
0 0 0 0
0 0 0 0
<OTHER-SE> 412,402 477,250 461,311 492,209
<TOTAL-LIABILITY-AND-EQUITY> 2,489,826 2,707,123 3,003,212 3,058,600
<SALES> 0 0 0 0
<TOTAL-REVENUES> 12,417,743 14,496,773 17,121,668 3,896,175
<CGS> 11,843,939 13,842,342 16,371,403 3,725,504
<TOTAL-COSTS> 12,262,303 14,327,541 17,015,769 3,850,883
<OTHER-EXPENSES> 0 0 0 0
<LOSS-PROVISION> 0 0 11,934 0
<INTEREST-EXPENSE> 30,170 30,793 39,996 9,128
<INCOME-PRETAX> 125,270 138,439 65,903 36,164
<INCOME-TAX> 51,737 56,760 62,801 14,827
<INCOME-CONTINUING> 73,533 81,679 3,102 21,337
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 73,533 81,679 3,102 21,337
<EPS-PRIMARY> 0.74 0.81 0.03 0.21
<EPS-DILUTED> 0.73 0.81 0.03 0.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BERGEN BRUNSWIG CORPORATION FOR THE PERIODS
ENDED MARCH 31, 1998 AND JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS. INFORMATION FOR TOTAL REVENUES, COST OF
GOODS SOLD AND TOTAL COSTS HAS BEEN RESTATED TO REFLECT THE RECLASSIFICATION OF
BULK SHIPMENT TRANSACTIONS. ALSO, EARNINGS PER SHARE AND SHAREOWNERS' EQUITY
INFORMATION HAS BEEN RESTATED, WHERE APPLICABLE, TO GIVE EFFECT TO THE 2-FOR-1
STOCK SPLIT DECLARED ON SEPTEMBER 24, 1998 AND PAID ON DECEMBER 1, 1998.
FINANCIAL DATA SCHEDULES FOR YEARS PRIOR TO SEPTEMBER 30, 1996 AND FOR INTERIM
PERIODS PRIOR TO THE THREE MONTHS ENDED DECEMBER 31, 1997 HAVE NOT BEEN RESTATED
FOR THE STOCK SPLIT.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1998 SEP-30-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998
<EXCHANGE-RATE> 1 1
<CASH> 0 50,654
<SECURITIES> 0 2,259
<RECEIVABLES> 887,955 919,395
<ALLOWANCES> 33,579 34,671
<INVENTORY> 1,598,034 1,578,429
<CURRENT-ASSETS> 2,463,096 2,525,032
<PP&E> 266,343 273,280
<DEPRECIATION> 129,767 135,177
<TOTAL-ASSETS> 3,026,397 3,095,028
<CURRENT-LIABILITIES> 1,728,391 1,880,100
<BONDS> 624,653 519,245
<COMMON> 167,643 167,643
0 0
0 0
<OTHER-SE> 505,710 528,040
<TOTAL-LIABILITY-AND-EQUITY> 3,026,397 3,095,028
<SALES> 0 0
<TOTAL-REVENUES> 8,017,358 12,476,962
<CGS> 7,655,887 11,926,508
<TOTAL-COSTS> 7,921,817 12,325,702
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 20,689 30,339
<INCOME-PRETAX> 74,852 120,921
<INCOME-TAX> 34,707 53,596
<INCOME-CONTINUING> 40,145 67,325
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 40,145 67,325
<EPS-PRIMARY> 0.40 0.67
<EPS-DILUTED> 0.39 0.65
</TABLE>
