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This article was originally published in The Tan Sheet

Executive Summary

BERGEN BRUNSWIG SALES GROWTH SLIPS TO 7% from internally generated gains in the fiscal year ended Aug. 31, compared with a rate more than double that in fiscal 1992. Exclusive of the added volume brought in by acquisitions, Bergen's sales climbed to approximately $ 5.4 bil. for the most recent fiscal year -- up from $ 5 bil. in 1992. Including acquired businesses -- Durr- Fillauer, Dr. T. C. Smith and Healthcare Distributors of America - - Bergen's sales jumped to $ 6.8 bil. in the recently completed fiscal year. In a preliminary statement on the fiscal year ended Aug. 31, the wholesaler attributed the decline in sales growth to "an industry trend, evidenced by the slower sales growth being reported by drug manufacturers." Bergen estimated its annual sales growth rate over the past five years at 13%. Through the first half of fiscal 1993, internal growth was running at 10%. That rate faltered in the second half to create the 7% rate for the full year. Bergen blamed some of the sales slowdown on the state of the economy in California, its home state. The firm said that trends in the first weeks of fiscal 1994 have been encouraging. Bergen claimed that it has not lost marketshare during the period of slowing growth. The wholesaler projected its share of the total pharmaceutical distribution business at about 20%. In a recently released fact book on the wholesale drug industry, the National Wholesale Druggists Association estimated Bergen's total sales volume in calendar 1992 at $ 7.6 bil. -- $ 1.3 bil. behind industry leader McKesson. NWDA noted that some companies do not include non-stock sales in their published totals. By NWDA's reckoning, Bergen controls about 18% of the wholesale drug market. Bergen operating earnings dropped sharply to between $ 49.8 mil. and $ 50.9 mil. for fiscal 1993, down from $ 83.5 mil. last year, and $ 89.6 mil. in 1991. Taking advantage of the depressed figures, Bergen booked two big after-tax charges in the final quarter of 1993: (1) a $ 20.8 mil. after-tax charge for restructuring and consolidating its business; and (2) a $ 1.5 mil. charge for costs associated with the aborted acquisition of the top European drug distributor, Office Commercial Pharmaceutique. The charges cut operating earnings almost in half to between $ 27.5 mil. and $ 28.6 mil. One facet of the consolidation will be the acceleration of the move to a distribution system based on large, automated warehouse facilities. Bergen has six such facilities up and running. Three are in California: Corona, Sacramento and Valencia. There is one each in the South, East and Midwest: Orlando; Pine Brook, N.J. and Williamston, Mich. A seventh regional center is expected to open in Richmond, Va. in late 1994 to consolidate some of the operations in the Mid-Atlantic region after the purchase of Owens & Minor. Bergen intends for each of these regional centers to be able to handle up to $ 1 bil. in sales volume eventually. The largest of the centers, in Corona, is expected to generate sales of $ 750 mil. during the current fiscal year. The wholesaler recently has folded its operating divisions in San Diego and Las Vegas into the Corona regional warehouse. The wholesaler also said that it intends to discontinue services and programs "that do not meet our strategic and economic return objectives."

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