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Q2 2014 Earnings Call
August 05, 2014 10:00 am ET
Berard E. Tomassetti - Chief Accounting Officer and Senior Vice President
Gregory S. Weishar - Chief Executive Officer, President and Director
David W. Froesel - Chief Financial Officer, Executive Vice President and Treasurer
Charles Rhyee - Cowen and Company, LLC, Research Division
Jeffrey Bailin - Crédit Suisse AG, Research Division
Jason Gurda - KeyBanc Capital Markets Inc., Research Division
Steven Valiquette - UBS Investment Bank, Research Division
Robert M. Willoughby - BofA Merrill Lynch, Research Division
Eric Percher - Barclays Capital, Research Division
Michael John Petusky - Noble Financial Group, Inc., Research Division
Previous Statements by PMC
» PharMerica (PMC) Q2 2014 Results - Earnings Call Webcast
» PharMerica's CEO Discusses Q1 2014 Results - Earnings Call Transcript
» PharMerica Management Discusses Q4 2013 Results - Earnings Call Transcript
Berard E. Tomassetti
Good morning, and thank you for joining us for the second quarter 2014 conference call. On the call with me today are Greg Weishar, Chief Executive Officer; and David Froesel, Executive Vice President, Chief Financial Officer and Treasurer.
Before beginning our remarks regarding the second quarter of 2014 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 this morning's press release and in the comments made during this conference call, more detailed information about additional risks and uncertainties may be found in our SEC filings, including our annual report on Form 10-K and quarterly report on Form 10-Q. Copies of our annual report on Form 10-K 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 quarterly report on Form 10-Q. We have made available to you our press release and our quarterly report on Form 10-Q filed with the SEC. In addition, this webcast will be on our website, along with a transcript from this call.
And now at this time, I would like to turn the presentation over to Greg.
Gregory S. Weishar
Thank you, Berard. Thank you for -- all of you for attending. As always, we appreciate your interest in PharMerica.
As you saw in this morning's earnings release, we reported another strong quarter of results. Revenue, adjusted EBITDA and adjusted diluted earnings per share all exceeded expectations for the second quarter. The results for the second quarter and first half of the year demonstrate the company has made good progress towards achieving 2014 financial and operational goals. We believe we are poised for a strong 2015 and long-term growth and value creation.
Let me summarize the highlights. Excluding Golden Living and Kindred, we posted another sequential quarter of organic growth in the institutional pharmacy business. In fact, the second quarter represented the company's best quarter for organic growth. This gives us confidence that we will achieve net organic growth for the year and highlights what we believe is PharMerica's growing market strength in the core institutional pharmacy business.
The company's investments in specialty oncology through Onco360 and specialty home infusion through Amerita continue to post strong double-digit revenue growth. These specialty pharmacy businesses are consistent with the company's strategic focus on pursuing diversified growth opportunities in closely related pharmacy markets. We continue to believe these businesses will generate revenues of approximately $400 million by 2016.
We also continue to drive client value through an industry-leading generic dispensing rate. The generic dispensing rate for the quarter was 85%, an improvement of 170 basis points year-over-year and 50 basis points sequentially. Looking towards the end of 2015 and 2016, the generic dispensing rate is forecasted to hit 88%, and this is primarily due to upcoming patent expirations on such drugs as Abilify, Namenda and NEXIUM.
Complementing organic growth initiatives, we have a stated goal to complete acquisitions yearly that generate at least $100 million of annualized sales. We are targeting companies in the institutional pharmacy and specialty home infusion pharmacy market. And so far this year, we have announced an acquisition in each segment: in the specialty home infusion market, Altius, which serves the Arizona market; and in the institutional pharmacy market most recently, Rx Advantage, which serves Southern Alabama and Western Florida.
We are currently in due diligence with a number of acquisition opportunities and are optimistic we will achieve the $100 million in annual revenue acquisition goal.
So with that, I'll turn it over to Dave, and he'll walk you through the financials.
David W. Froesel
Thank you, Greg, and good morning. I would like to spend the next several minutes discussing our results of operations for the second quarter of 2014.
Revenues reported for the second quarter of 2014 were $448.6 million, which represents an increase of $17.8 million or approximately 4% versus the second quarter of 2013. The increase in revenues on a year-over-year basis was primarily attributable to PharMerica's new investment in Onco360, strong branded drug inflation and growth in our specialty home infusion business, Amerita. More importantly, revenues associated with Onco360, specialty home infusion and branded drug inflation more than offset losses in revenue associated with Kindred and Golden Living.