Pharmerica Corporation (PMC)

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PharMerica (PMC)

Q1 2013 Earnings Call

May 02, 2013 10:00 am ET


Dennis Humble

Gregory S. Weishar - Chief Executive Officer, President and Director

David W. Froesel - Interim Chief Financial Officer


Charles Rhyee - Cowen and Company, LLC, Research Division

Brendan Strong - Barclays Capital, Research Division

Steven Valiquette - UBS Investment Bank, Research Division

Robert M. Willoughby - BofA Merrill Lynch, Research Division

Michael John Petusky - Noble Financial Group, Inc., Research Division



Good day, ladies and gentlemen, and welcome to the First Quarter 2013 PharMerica Corporation's Earnings Conference Call. My name is Tahesha, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Dennis Humble, Vice President, Finance. Please proceed.

Dennis Humble

Thank you, Tahesha. Good morning, and thank you for joining us for the first quarter conference call. On the call with me today are Greg Weishar, Chief Executive Officer; David Froesel, interim Chief Financial Officer; and Berard Tomassetti, Senior Vice President and Chief Accounting Officer.

Before beginning our remarks regarding the first quarter results, I would like to make a cautionary statement. During the call today, we will make forward-looking statements about our business prospects and financial expectations. We want to remind you that there are many risks and uncertainties that could cause our actual results to differ materially from our current expectations.

In addition to the risks and uncertainties discussed in yesterday's press release and in the comments made during this conference call, more detailed information about additional risks and uncertainties may be found on our SEC filings, including our annual report on Form 10-K and quarterly report on Form 10-Q. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website. PharMerica assumes no obligation to update the matters discussed on this call.

During this call, we will be referring to non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in our press release and in our Form 10-Q. We have made available to you our press release and our 10-Q filed with the SEC. In addition, this webcast will be on our website, along with the transcript from this call.

And now at this time, I'd like to turn the presentation over to Greg.

Gregory S. Weishar

Thanks, Dennis. Thank you, all, for your attendance. We trust there were no big surprises as you reviewed last night's earnings release, and while we have challenges, the company is in better shape today than it's been in many years.

Before I get started, I'd like to introduce Dave Froesel, our Chief Financial Officer, interim Chief Financial Officer. Dave's been with us a couple of weeks now and we clearly are fortunate that he was available to help us through the transition. His industry experience makes him well-suited to step into this role, and Dave will lead the discussion on financial results later.

As you saw on last night's earnings release, we delivered solid results. The company achieved record quarterly pharmacy gross margin and adjusted EBITDA margin with a sequential improvement. This was primarily the result of better purchasing and growth in generics. Overall, EBITDA increased 29%, adjusted diluted earnings per share increased 39% over last year's first quarter. Cash flow during the quarter improved by $28 million versus last year, primarily due to improved earnings and lower working capital investment.

We continue to focus operations on executing core strategic initiatives to drive organic growth and operating margins. We are also pursuing pharmacy acquisitions and long-term care to drive market share. And now, with the acquisition of Amerita, we're looking in the home, specialty home infusion sector as well. From an organic growth perspective, we are seeing improved performance as we restructure the sales and account management group. I'm optimistic that the sales force under Mark Lindemoen's leadership will have the focus and discipline to be successful.

And to support sales and client retention, we continue to invest in new products and services as we differentiate PharMerica's service offerings. We recently introduced our RxSentry. RxSentry features on-site prescription dispensing and competes with automated pharmacy dispensing companies such as Advance Pharmacy Services, Talyst and also the AlixaRx startup by Golden Living.

We currently have several plans amounting to several hundred patients using this new technology. And over the next several months, we will monitor RxSentry's performance and market viability. As most of you know, these technologies have proven difficult to make work, but the need and demand for on-site dispensing is clearly there for our clients who are driving subacute business. Coupled with RxNow, our proprietary emergency and first dose medication dispensing system, we have the most complete prescription-dispensing product line in the industry. We provide the whole array of remote and on-site pharmacy solutions. And when you combine that with superior client and customer service, we are well-positioned to drive sales and productivity -- sales productivity and client retention.

On that note, we continue to see improvement in core services. Bed losses due to service fell 60% versus Q1 2012 and over 75% as compared to the last quarter 2012. The majority of the losses that we see today are clients moving their business in-house or to an affiliated entity. I'm confident we're doing all we can to drive towards the goal of organic growth.

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