AmerisourceBergen 2005 Annual Report Download - page 37

AmerisourceBergen Corporation 2005
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Fiscal year ended September 30,
(in thousands, except per share data) 2005 2004 2003
Net income, as reported $264,645 $468,390 $441,229
Add: Stock-related compensation expense included in reported net income,
net of income taxes 461 880 770
Deduct: Stock-related compensation expense determined under the fair value method,
net of income taxes (5,021) (87,339) (19,728)
Pro forma net income $260,085 $381,931 $422,271
Earnings per share:
Basic, as reported $2.50 $ 4.20 $ 4.03
Basic, pro forma $2.46 $3.41 $ 3.86
Diluted, as reported $2.48 $ 4.06 $ 3.89
Diluted, pro forma $2.44 $3.32 $ 3.73
The SFAS No. 123 stock-related compensation expense in the
above table decreased in the fiscal year ended September 30, 2005
compared to the prior years. This decline was primarily due to the
Company, effective September 1, 2004, vesting all employee options
then outstanding with an exercise price in excess of $54.10 (the
closing stock price on August 31, 2004). The accelerated vesting was
approved by theCompensation andSuccession Planning Committee of
the Company’s board of directors for employee retention purposes and
in anticipation of the requirements of SFAS No. 123R. As a result of
theaccelerated vesting, thepro-formacompensation expense and the
corresponding reduction in diluted earnings per share in fiscal 2004
was significantly greater than the pro-forma compensation expense and
thecorresponding reduction in diluted earnings per share in fiscal
2005 and 2003.
The diluted earnings per share calculations consider the 5% con-
vertible subordinated notes as if converted and, therefore, the after-tax
effect of interest expense related to these notes is added back to net
income in determining income available to common stockholders.
Note 2. Acquisitions
In May 2004, the Company acquired Imedex, Inc. (“Imedex”),
an accredited provider of continuing medical education for physicians,
for approximately $16.6 million in cash. The acquisition of Imedex
continued the Company’s efforts to add incremental services that sup-
port manufacturers and healthcare providers along the pharmaceutical
supply channel. Thepurchase price has been allocated to the underly-
ing assets acquired and liabilities assumed based upon their estimated
fair values at the date of the acquisition. The purchase price exceeded
the fair value of the net tangible and identified intangible assets
acquired by $12.5 million, which has been allocated to goodwill.
In February 2004, the Company acquired MedSelect, Inc.
(“MedSelect”), a provider of automated medication and supply
dispensing cabinets, for approximately $13.7 million in cash,
including transaction costs. The acquisition of MedSelect enhances
theCompany’s ability to offer fully scalable andflexible technology
solutions to its customers. The purchase price was allocated to the
underlying assets acquired and liabilities assumed based upon their
estimated fair values at the date of the acquisition. The purchase price
exceeded the fair value of the net tangible and identified intangible
assets acquired by $9.8 million, which has been allocated to goodwill.
In fiscal 2002, the Company acquired a 20% equity interest in
International Physician Networks (“IPN”), a physician education and
management consulting company, for $5 million in cash, which was
subject to adjustmentcontingenton theentity achieving defined
earnings targets in calendar 2002. In fiscal 2003, the Company
satisfied the residual contingent obligation for the initial 20% equity
interest and acquired an additional 40% equity interest for an
aggregate $24.7 million in cash. In fiscal 2004, the Company paid
$39.0 million for the remaining 40% equity interest. The results of
operations of IPN, less minority interest, have been included in the
Company’s consolidated financial statements of operations for the
fiscal years ended September 30, 2005, 2004 and 2003.
In June 2003, the Company acquired Anderson Packaging Inc.
(“Anderson”), a leadingprovider ofphysician and retail contracted
packaging services to pharmaceutical manufacturers, to expand the
Company’s packaging capabilities. The purchase price was $100.1 mil-
lion, which included the repayment of Anderson debt of $13.8 million
and$0.8 million of transaction costs associated with the acquisition.
The Company paid part of the purchase price by issuing 814,145 shares
ofits common stock, as set forth in theacquisition agreement, with
an aggregate market value of $55.6 million, which was calculated
based on the Company’s closing stock price on the transaction meas-
urement date.TheCompanypaid the remaining purchase price, which
was approximately $44.5 million, in cash. In fiscal 2004, the Company
paid a final post-closing working capital adjustment of $0.3 million.
In January 2003, the Company acquired US Bioservices
Corporation (“US Bio”), a national pharmaceutical products and
services provider focused on the management of high-cost complex
therapies and reimbursement support, to expand the Company’s
manufacturer service offerings within the specialty pharmaceutical
business. The total base purchase price was $160.2 million, which
included the repayment of US Bio debt of $14.8 million and
$1.5 million oftransaction costs associated with the acquisition. The
Company paid part of the base purchase price by issuing 2,399,091
shares of its common stock, as set forth in the acquisition agreement,
with an aggregate market value of $131.0 million, which was
calculated based on an average of the Company’s closing stock price
on thetwo days before and the two days after the transaction
measurement date. The Company paid the remaining $29.2 million
of the base purchase price in cash. In fiscal 2003, a contingent
payment of $2.5 million was paid in cash by the Company.
In January 2003, theCompanyacquired Bridge Medical, Inc.
(“Bridge”), a leading provider of barcode-enabled point-of-care
software designed to reduce medication errors, to enhance the
Company’s offerings in the pharmaceutical supply channel. The total
base purchase price was $28.4 million, which included $0.7 million
oftransaction costs associated with the acquisition. The Company
paid part of the base purchase price by issuing 401,780 shares of its
common stock with an aggregate market value of $22.9 million, which