UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-----------------
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: 0-11355
BINDLEY WESTERN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 84-0601662
------------------------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8909 Purdue Road
Indianapolis, Indiana 46268
(Address of principal executive offices)
(Zip Code)
(317) 704-4000
(Registrant's telephone number,
including area code)
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 _________
---------
The number of shares of Common Stock outstanding as of June 30, 2000 was
34,706,380
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(000's omitted except share data)
(unaudited)
Six-month period ended Three-month period ended
June 30, June 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
Revenues:
Net sales from stock $ 3,232,908 $ 2,443,406 $ 1,585,415 $ 1,216,626
Net brokerage sales 1,688,613 1,597,600 857,996 839,215
----------------------------------------------------------------
Total net sales 4,921,521 4,041,006 2,443,411 2,055,841
Other income 983 899 440 416
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4,922,504 4,041,905 2,443,851 2,056,257
----------------------------------------------------------------
Cost and expenses:
Cost of products sold 4,788,499 3,935,541 2,376,220 2,002,117
Selling, general and administrative 71,772 58,616 36,723 30,191
Depreciation and amortization 6,333 4,707 3,275 2,560
Interest 16,153 10,645 7,851 5,095
Unusual item 26,300
----------------------------------------------------------------
4,909,057 4,009,509 2,424,069 2,039,963
----------------------------------------------------------------
Earnings before income taxes and minority interest 13,447 32,396 19,782 16,294
----------------------------------------------------------------
Provision for income taxes 15,174 12,879 7,802 6,483
----------------------------------------------------------------
Net earnings (loss) $ (1,727) $ 19,517 $ 11,980 $ 9,811
================================================================
Earnings (loss) per share:
Basic $ (0.05) $ 0.59 $ 0.35 $ 0.29
Diluted $ (0.05) $ 0.53 $ 0.33 $ 0.27
Average shares outstanding:
Basic 34,284,576 33,237,351 34,460,951 33,406,619
Diluted 34,284,576 36,484,825 36,754,482 36,781,537
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
<TABLE>
<CAPTION>
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(000's omitted except share data)
(unaudited)
June 30, December 31,
---------------------------------------
2000 1999
---------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 82,571 $ 34,910
Accounts receivable, less allowance for doubtful
accounts of $9,547 for 2000 and 1999 628,921 721,830
Finished goods inventory 801,643 803,021
Deferred income taxes 14,368 13,168
Other current assets 9,719 9,926
---------------------------------------
1,537,222 1,582,855
---------------------------------------
Other assets 15 18
---------------------------------------
Fixed assets, at cost 132,657 129,140
Less: accumulated depreciation (33,650) (27,773)
---------------------------------------
99,007 101,367
---------------------------------------
Intangibles 22,043 18,582
---------------------------------------
Total assets $ 1,658,287 $ 1,702,822
=======================================
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ - $ 45,000
Securitized borrowings 280,000 349,963
Accounts payable 900,219 864,271
Other current liabilities 58,418 25,472
---------------------------------------
1,238,637 1,284,706
---------------------------------------
Long-term debt 38,444 38,698
---------------------------------------
Deferred income taxes 4,728 4,703
---------------------------------------
Shareholders' equity:
Common stock, $.01 par value authorized 53,333,333 shares;
issued 35,899,245 and 35,213,201 shares, respectively 3,422 3,415
Special shares, $.01 par value-authorized 1,000,000 shares
Additional paid in capital 229,964 225,459
Note receivable from officer (3,336) (3,228)
Retained earnings 163,618 166,550
---------------------------------------
393,668 392,196
Less: shares in treasury-at cost
1,192,865 and 1,212,232 shares, respectively (17,190) (17,481)
---------------------------------------
Total shareholders' equity 376,478 374,715
---------------------------------------
Commitments and contingencies
---------------------------------------
Total liabilities and shareholders' equity $ 1,658,287 $ 1,702,822
=======================================
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
<TABLE>
<CAPTION>
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted except share data)
(unaudited)
Six-month period ended
June 30,
-----------------------------------
2000 1999
-----------------------------------
<S> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (1,727) $ 19,517
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 6,333 4,707
Unusual item 26,300
Deferred income taxes (1,200) (1,200)
Gain on sale of fixed assets (135)
Change in assets and liabilities, net of acquisition:
Accounts receivable 93,640 (45,908)
Finished goods inventory 1,430 (150,451)
Accounts payable 35,354 94,151
Other current assets and liabilities 6,718 (2,637)
-----------------------------------
Net cash provided (used) by operating activities 166,713 (81,821)
-----------------------------------
Cash flow from investing activities:
Purchase of fixed assets and other assets (8,080) (10,983)
Proceeds from sale of fixed assets 4,961 20,906
Acquisition of business (2,523)
-----------------------------------
Net cash provided (used) by investing activities (5,642) 9,923
-----------------------------------
Cash flow from financing activities:
Proceeds from sale of stock 3,119 3,607
Addition (reduction) in long term debt (254) (151)
Related party note receivable (108) (108)
Payment on note payable Priority Healthcare Corporation (3,350)
Proceeds under line of credit agreement 646,500 596,000
Payments under line of credit agreement (691,500) (562,500)
Proceeds of securitized borrowings 13,800
Payments of securitized borrowings (69,963)
Purchase of common shares for treasury - (6,648)
Dividends (1,204) (507)
-----------------------------------
Net cash provided (used) by financing activities (113,410) 40,143
-----------------------------------
Net increase (decrease) in cash 47,661 (31,755)
Cash at beginning of period 34,910 42,982
-----------------------------------
Cash at end of period $ 82,571 $ 11,227
===================================
</TABLE>
(See accompanying notes to consolidated financial statements)
<PAGE>
BINDLEY WESTERN INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. All of our financial information includes the results of Bindley Western
Industries, Inc. ("BWI") and Central Pharmacy Services, Inc. ("CPSI") for
all periods presented giving retroactive effect to the merger on August 31,
1999. We have prepared the consolidated financial statements in this report
without audit. We condensed or omitted some information and footnote
disclosures, including significant accounting policies, that would normally
be included in financial statements prepared in accordance with generally
accepted accounting principles. We believe that the financial statements
for the three and six-month periods ended June 30, 2000 and 1999 include
all necessary adjustments which are of a normal recurring nature, for fair
presentation. These financial statements should be read in conjunction with
the financial statements and notes included in our latest annual report.
Results for any interim period may not be indicative of the results of the
entire year.
2. On March 27, 2000, the Company disclosed in its Form 10-K filing that it
was a potential defendant in an ongoing grand jury investigation being
conducted by the U. S. Attorney's Office in Las Vegas, NV. Then, on April
24, 2000, the Company announced in its first quarter 2000 earnings release
that it had entered into an agreement for the purpose of settling the
subject matter of the government's investigation, subject to court
approval. Full details of the tentative settlement cannot be disclosed
prior to court approval.
Under the tentative settlement, the Company has agreed to a one count plea
in which the Company accepts the responsibility for the unlawful acts of
two of its former employees based in San Dimas, CA and to pay a lump sum
fine not expected to exceed $25 million at the time of court approval. The
tentative settlement satisfies all government claims arising from the
conduct that was disclosed in the March 27 SEC filing and there are no
other claims. Additionally, there is no probation associated with the
tentative settlement.
In conformance with generally accepted accounting principles, the Company
recorded in the first quarter the amount of the tentative settlement plus
the estimated fees and expenses associated with its internal investigation
and recorded an unusual charge of $26.3 million ($25.8 million net of tax)
for the March 31, 2000 quarter. As of August 11, 2000, the tentative
settlement has neither been approved by the Court nor paid.
3. In a consolidated class action filed in the United States District Court
for the Northern District of Illinois in 1993, the Company, other
pharmaceutical wholesalers and pharmaceutical manufacturers were named as
defendants, In re Brand Name Prescription Drugs Litigation, MDL 997.
Plaintiffs alleged that pharmaceutical manufacturers and wholesalers
conspired to fix prices of brand-name prescription drugs sold to retail
pharmacies at artificially high levels in violation of the federal
antitrust laws. The plaintiffs sought injunctive relief, unspecified treble
damages, costs, interest and attorneys' fees. The Company denied the
complaint allegations.
Several of the manufacturer defendants and the class plaintiffs have
reached settlement agreements. Under these agreements, the settling
manufacturer defendants retain certain contingent liabilities under the
October 21, 1994 agreement discussed below. The trial against the remaining
defendants, including the Company, began on September 14, 1998. On November
30, 1998, the Court granted all remaining defendants' motions for judgments
as a matter of law, dismissing all In re Brand Name Prescription Drugs
class claims against the Company and other defendants. The class plaintiffs
appealed the Court's ruling and, on July 13, 1999, the appeals court
dismissed the wholesalers, including the Company, from the case. On
February 22, 2000, the United States Supreme Court denied the plaintiffs'
petition for certiorari, thus concluding the In re Brand Name Prescription
Drugs class action litigation.
At this time, the Company is a defendant in 115 additional cases brought by
plaintiffs who "opted out" of the federal class action described above. One
hundred eleven of these complaints contain allegations and claims for
relief that are substantially similar to those in the federal class action.
The four remaining complaints add allegations that the defendants' conduct
violated state law. The damages period in these cases begins in October
1993. The Company has denied the allegations in all of these complaints.
The wholesalers' motion for summary judgment is pending review by the court
and no trial dates have yet been scheduled.
<PAGE>
On November 20, 1997, two additional complaints were filed in the MDL 997
proceeding by Eckerd Corporation and American Drug Stores naming certain
pharmaceutical manufacturers and wholesalers, including the Company, as
defendants. These complaints contain allegations and claims for relief that
are substantially similar to those in the federal class action. The Company
has denied the allegations in these complaints. No trial date has been set
in these cases.
On July 1, 1996, the Company and several other wholesalers were joined as
the defendants in a seventh amended and restated complaint filed in the
Circuit Court of Greene County, Alabama, Durrett v. The Upjohn Company,
Civil Action No. 94-029. An order dismissing the action and taxing costs
against the plaintiffs was entered by the Circuit Court on November 29,
1999.
On June 16, 1998, a suit was filed in the Circuit Court for Cocke County,
Tennessee purportedly on behalf of consumers of prescription drugs in the
following states: Tennessee, Alabama, Arizona, Florida, Kansas, Maine,
Michigan, Minnesota, New Mexico, North Carolina, North Dakota, South
Dakota, West Virginia and Wisconsin. Graves et al. v. Abbott Laboratories
et al., Civil Action No. 25,109-II. The complaint charges that
pharmaceutical manufacturers and wholesalers, including the Company,
engaged in a price-fixing conspiracy in violation of Tennessee's Trade
Practices Act and Consumer Protection Act, and the unfair or deceptive
trade practices statutes of the other jurisdictions named therein. The
Company has denied the allegations of the complaint and all proceedings in
this suit have been stayed until further order of the Circuit Court.
On October 21, 1994, the Company entered into an agreement with the other
wholesalers and pharmaceutical manufacturers covering all of the cases
listed above. Among other things, the agreement provides that for all
judgments that might be entered against both the manufacturer and
wholesaler defendants, the Company's total exposure for joint and several
liability is limited to $1 million and the wholesaler defendants are
indemnified for $9 million in related legal fees and expenses. As a result
of the previously noted settlements, we have periodically received
reimbursement of our legal fees and expenses in excess of our proportionate
share of the $9 million, and we expect to receive reimbursement of
substantially all of such fees and expenses in the future.
The Company is unable to form a reasonably reliable conclusion regarding
the likelihood of a favorable or unfavorable outcome of these cases, each
of which is being defended vigorously. The Company believes the allegations
of liability are without merit with regard to the wholesaler defendants and
that the attendant liability of the Company, if any, would not have a
material adverse effect on the Company's financial condition or liquidity.
Adverse decisions, although not anticipated, could have a material adverse
effect on the Company's results of operations.
4. On June 25, 1999, a 4-for-3 stock split of our common stock was paid in the
form of a stock dividend to shareholders of record at the close of business
on June 11, 1999. We restated all historical weighted average shares and
per share amounts in this report to reflect these stock splits. Share
amounts in the Consolidated Balance Sheets reflect the actual share amounts
outstanding for each period presented.
5. Giving effect to the CPSI merger, we have two reportable segments. These
segments are BWI and Nuclear Pharmacy. These segments conduct substantially
all of their business within the United States. The BWI segment specializes
in the distribution of pharmaceuticals and related health care products to
chain drug companies which operate their own warehouses, individual drug
stores, supermarkets and mass retailers with their own pharmacies,
hospitals, clinics, HMOs, state and federal government agencies and other
health care providers. The Nuclear Pharmacy segment prepares and delivers
unit dose radiopharmaceuticals for use in nuclear imaging procedures in
hospitals and clinics. Our segments have separate management teams and
infrastructures to meet the specific needs of our customers and our
marketing strategies.
<PAGE>
Segment information for the three and six-month periods ended June 30, 1999
and 2000 was as follows:
Nuclear
(in thousands) BWI Pharmacy Total
------------- ------------ -------------
Six-months ended June 30, 1999
Revenues $ 4,020,173 $ 20,833 $ 4,041,006
Segment operating earnings 40,325 2,716 43,041
Interest Expense (10,645)
-------------
Earnings before income taxes 32,396
=============
Three-months ended June 30, 1999
Revenues $ 2,045,216 $ 10,625 $ 2,055,841
Segment operating earnings 19,974 1,415 21,389
Interest Expense (5,095)
-------------
Earnings before income taxes 16,294
=============
Six-months ended June 30, 2000
Revenues $ 4,891,084 $ 30,437 $ 4,921,521
Segment operating earnings 51,481 4,419 55,900
Interest Expense (16,153)
Unusual item (26,300)
-------------
Earnings before income taxes 13,447
=============
Three-months ended June 30, 2000
Revenues $2,427,269 $ 16,142 $ 2,443,411
Segment operating earnings 25,251 2,382 27,633
Interest Expense (7,851)
-------------
Earnings before income taxes 19,782
=============
Operating earnings, as opposed to net earnings, have been determined to be
a better indicator of a segment's operating profitability for management
purposes.
6. On April 19, 2000, CPSI purchased the stock of Premier Pharmacy Services
(PPS), a centralized nuclear pharmacy based in Indianapolis, Indiana, for
restricted shares of the Company's stock valued at $1,684,000 and
additional cash consideration. The acquisition was accounted for by the
purchase method and the financial statements include the results of
operations from the effective date of the acquisition.
7. The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations for the three and six
month periods ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
For the Six Month Period ended For the Three Month Period ended
June 30, June 30,
-------------------------------- --------------- ----------------- ---------------- -----------------
(in thousands, except share data) 2000 1999 2000 1999
-------------------------------- --------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Basic:
Net earnings (loss) ($ 1,727) $ 19,517 $ 11,980 $ 9,811
Weighted shares
outstanding 34,284,576 30,315,296 34,460,951 30,484,564
Shares issued in CPSI merger 2,922,055 2,922,055
Basic shares
outstanding 34,284,576 33,237,351 34,460,951 33,406,619
Per share amount ($ . 05) $ .59 $ .35 $ .29
Diluted:
Net earnings (loss) ($ 1,727) $ 19,517 $ 11,980 $ 9,705
Weighted shares
outstanding 34,284,576 30,315,296 34,460,951 30,484,564
Stock options 3,247,474 2,293,531 3,374,918
Shares issued in CPSI merger 2,922,055 2,922,055
Diluted Shares 34,284,576 36,484,825 36,754,482 36,781,537
Per share amount ($ .05) $ .53 $ .33 $ .27
</TABLE>
The diluted average shares outstanding for the six-month period ended June
30, 2000 do not include 2,623,171 potential common shares because they
would be anti-dilutive.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Overview
On August 31, 1999, Bindley Western Industries, Inc. ("BWI") completed
the merger with Central Pharmacy Services, Inc. ("CPSI") of Atlanta, Georgia for
approximately $55 million of BWI Common Stock. CPSI operates specialized
pharmacies that prepare and deliver unit dose radiopharmaceuticals for use in
nuclear imaging procedures in hospitals and clinics. The transaction was
accounted for as a pooling of interests and the financial statements for the
three and six months ended June 30, 1999 have been restated to give effect to
the combination. CPSI represents the Nuclear Pharmacy segment of our business.
On April 19, 2000, CPSI purchased the stock of Premier Pharmacy Services (PPS),
a centralized nuclear pharmacy based in Indianapolis, Indiana, for restricted
shares of the Company's stock valued at $1,684,000 and additional cash
consideration. The acquisition was accounted for by the purchase method and the
financial statements include the results of operations from the effective date
of the acquisition.
Results of Operations
Net sales of $4,922 million for the first six months of 2000
represented a 21.8% increase over the first six months of 1999. Net sales of
$2,443 million for the second quarter of 2000 represented a 18.9% increase over
the second quarter of 1999. Nuclear Pharmacy sales accounted for less than 1% of
sales in all periods presented. Brokerage type sales ("brokerage sales") in 2000
experienced an increase of 5.7% for the first six months when compared to the
same period in 1999, while brokerage sales for the second quarter of 2000
experienced a 2.2% increase when compared to the second quarter of 1999.
Although brokerage sales generate very little gross margin, they provide
increased working capital and support our programs to attract more direct store
delivery business from chain warehouse customers. Sales from inventory ("from
stock sales") increased 32.3% in the first six months of 2000 when compared to
the first six months of 1999 and 30.3% for the second quarter of 2000 when
compared to the second quarter of 1999. From stock sales include sales from
inventory to chain warehouse customers and direct store delivery sales. We
continued to expand our presence in the direct store delivery portion of the
business through increased sales to existing customers and the addition of new
customers. Direct store delivery sales increased by 33.8% for the first six
months of 2000 when compared to the first six months of 1999 and 32.0% for the
second quarter of 2000 when compared to the second quarter of 1999. As a
percentage of total sales, direct store delivery sales increased from 58.8% for
the first six months of 1999 to 64.6% for the first six months of 2000. In both
the first six months of 2000 and 1999, the increase related to price increases
was approximately equal to the increase in the Consumer Price Index.
Gross margin of $133.0 million for the first six months of 2000
represented an increase of 26.1% over the first six months of 1999. Gross margin
of $67.2 million in the second quarter of 2000 represented a 25.1% increase over
the second quarter of 1999. In all periods, the pressure on sell side margins
continued to be a significant factor and the purchasing gains associated with
pharmaceutical price inflation remained relatively constant. Gross margin as a
percentage of net sales increased to 2.70% for the first six months of 2000 from
2.61% for the first six months of 1999. For the second quarter, gross margin as
a percentage of net sales increased to 2.75% in 2000 from 2.61% in 1999. This
increase in gross margin was the result of the change in mix away from the lower
margin brokerage sales to the higher margin from stock sales and also the
increased sales of the higher margin Nuclear Pharmacy segment.
Other income is attributable primarily to finance charges on customers'
receivables and gains on the sale of fixed assets.
Selling, general and administrative ("SGA") expenses for the first six
months of 2000 increased 22.5% from $58.6 million in 1999 to $71.8 million in
2000. For the second quarter, SGA increased 21.6% from $30.2 million in 1999 to
$36.7 million in 2000. These increases are the result of expenses associated
with the new distribution centers opened in 1999 in Milwaukee, Wisconsin, Kansas
City, Missouri and Denver, Colorado, normal inflationary increases and increased
variable costs to support our growing direct store delivery programs. These
variable costs include, among others, delivery expenses, warehouse expense and
labor costs. SGA expenses will continue to increase as direct store delivery
sales increase. However, total SGA expenses as a percent of from stock sales for
the first six months decreased from 2.40% in 1999 to 2.22% in 2000. We remain
focused on controlling SGA through improved technology, better asset management
and opportunities to consolidate distribution centers.
Depreciation and amortization expense increased as a result of the
building of new facilities, expansion and automation of existing facilities and
investments in management information systems. Depreciation and amortization
expense increased from $4.7 million in the first six months of 1999 to $6.3
million in the first six months 2000. For the second quarter, depreciation and
amortization expense increased from $2.6 million in 1999 to $3.3 million in
2000.
<PAGE>
Interest expense for the six-month period increased from $10.6 million
in 1999 to $16.2 million in 2000. For the second quarter, interest expense
increased from $5.1 million in 1999 to $7.9 million in 2000. The average
short-term borrowings outstanding for the six-month period in 1999 were $324
million at an average short-term interest rate of 5.0%, as compared to $436
million at an average short-term interest rate of 6.3% in 2000. For the second
quarter of 1999, the average short-term borrowings outstanding were $312 million
in 1999 at an average short-term interest rate of 4.8%, as compared to $423
million at an average short-term interest rate of 6.5% in 2000. During the first
six months of 2000, CPSI has incurred $73,035 of interest on their line of
credit at an average interest rate of 8.6%
The unusual item represents the amount of the tentative settlement with
the government of $25 million plus the estimated fees and expenses associated
with its internal investigation of $1.3 million.
The provision for income taxes represented approximately 39.8% of
earnings before taxes for both the first six months and the second quarter of
1999. In 2000, the provision for income taxes represents 39.5% of earnings
before taxes and the effect of the nondeductible element of the unusual item for
both the first six months and the second quarter.
Liquidity-Capital Resources
For the six-month period ended June 30, 2000, our operations provided
$167 million in cash. The source of funds resulted primarily from a decrease in
accounts receivables, an increase in accounts payable and the unpaid tentative
settlement with the U.S. Government. The decrease in accounts receivable is
attributed to timing of brokerage sales while the increase in accounts payable
is attributed to the timing of payments of invoices related to inventory
purchases. We continue to closely monitor working capital in relation to
economic and competitive conditions. However, our emphasis on direct store
delivery business will continue to require both net working capital and cash. To
help finance the growth of CPSI, we are currently considering a partial initial
public offering of up to 20% of the common shares of CPSI.
On March 27, 2000, the Company disclosed in its Form 10-K filing that
it was a potential defendant in an ongoing grand jury investigation being
conducted by the U. S. Attorney's Office in Las Vegas, NV. Then, on April 24,
2000, the Company announced in its first quarter 2000 earnings release that it
had entered into an agreement for the purpose of settling the subject matter of
the government's investigation, subject to court approval. Full details of the
tentative settlement cannot be disclosed prior to court approval.
Under the tentative settlement, the Company has agreed to a one count
plea in which the Company accepts the responsibility for the unlawful acts of
two of its former employees based in San Dimas, CA and to pay a lump sum fine
not expected to exceed $25 million at the time of court approval. The tentative
settlement satisfies all government claims arising from the conduct that was
disclosed in the March 27 SEC filing and there are no other claims.
Additionally, there is no probation associated with the settlement.
In conformance with generally accepted accounting principles, the
Company recorded the amount of the tentative settlement plus the estimated fees
and expenses associated with its internal investigation and recorded an unusual
charge of $26.3 million ($25.8 million net of tax) for the March 31, 2000
quarter.
Capital expenditures were $8.1 million during the first six months of
2000. These were predominantly for distribution centers, the expansion and
automation of existing distribution centers and the investment in additional
management information systems.
Under our receivables securitization facility, we sell substantially
all of our receivables arising in connection with the sale of goods or the
rendering of services to Bindley Western Funding Corporation ("Funding Corp."),
a wholly owned special purpose corporation subsidiary. The receivables are sold
to Funding Corp. on a continuous basis. The cash generated by sales of interests
in the receivables and from collections on the receivables retained is used by
Funding Corp. to purchase additional receivables. The assets of Funding Corp.
are available first to satisfy any claims of Funding Corp. creditors.
Funding Corp. sells our receivables at specified discount rates to a
group of banks. At June 30, 2000, there were $280 million of receivables
interests outstanding that have been sold at an annual average discount rate of
6.6%. We account for the receivables facility as a financing transaction in our
consolidated financial statements.
Our bank credit facility allows us to borrow up to $150 million. The
net decrease in borrowings under our bank credit agreement was $45 million
during the six-month period.
We believe that our cash on hand, cash equivalents, line of credit and
working capital management efforts are sufficient to meet our future working
capital requirements.
<PAGE>
Our principal working capital needs are for inventory and accounts
receivables. We sell inventory to our chain warehouse and other customers on
various payment terms. This requires significant working capital to finance
inventory purchases and entails accounts receivables exposure in the event any
of our chain warehouse or other significant customers encounter financial
difficulties. Although we monitor closely the creditworthiness of our major
customers and, when feasible, obtain security interests in the inventory sold,
we cannot assure you that we will not incur the write off or write down of chain
warehouse customer or other significant accounts receivables in the future.
Forward-Looking Statements
We make forward-looking statements in this report which represent our
expectations or beliefs about future events and financial performance.
Forward-looking statements are subject to known and unknown risks and
uncertainties, including:
o changes in interest rates;
o competitive pressures;
o changes in customer mix;
o financial stability of major customers and key suppliers;
o investment procurement opportunities;
o asserted and unasserted claims; and
o changes in governmental regulations or the interpretation and
enforcement of these regulations.
In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur. In addition,
actual results could differ materially from those suggested by the
forward-looking statements, and therefore you should not place undue reliance on
the forward-looking statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.
Item 3. Qualitative and Quantitative Disclosures About Market Risks
There have been no material changes in our market risk exposure from the risks
described in our Annual Report on Form 10-K for the year ended December 31,
1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The information set forth in Notes 2 and 3 to the Notes to
Consolidated Financial Statements set forth elsewhere in this Report is
incorporated herein by reference.
Item 4. Submission of matters to a Vote of Security Holders
a) The annual meeting of the shareholders of Bindley Western
Industries, Inc. was held on May 18, 2000.
b) The following directors were elected at the meeting:
Votes for Votes against Abstentions
------------------------------------------------
William E. Bindley 30,893,529 0 101,952
Robert L. Koch, II 30,892,908 0 102,573
James K. Risk, III 30,892,862 0 102,619
K. Clay Smith 30,891,897 0 103,584
J. Timothy McGinley 30,893,271 0 102,210
Michael D. McCormick 30,893,236 0 102,245
William F. Bindley, II 30,887,638 0 107,843
Thomas J. Salentine 30,892,994 0 102,487
Keith W. Burks 30,893,536 0 101,945
Seth B. Harris 30,893,443 0 102,038
Carolyn Y. Woo 30,890,714 0 104,767
c) Other matters voted upon and the results of the voting
were as follows:
1) The shareholders voted 30,558,551 shares in the
affirmative, 226,449 votes in the negative and
210,481 abstentions to appoint Pricewaterhouse-
Coopers LLP as auditors of the Corporation.
2) The shareholders voted 16,584,645 shares in the
affirmative, 11,543,477 votes in the negative,
102,617 abstentions and 2,764,741 broker non-
votes to approve the Company's 2000 Stock Option
and Incentive Plan.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>
SIGNATURE
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.
August 14, 2000 BINDLEY WESTERN INDUSTRIES, INC.
BY /s/ Thomas J. Salentine
Thomas J. Salentine
Executive Vice President
(Principal Financial Officer)
