Overall Score: 3
Chart: 1
Analyst Opinion: -1
| Strong Buy | 1 | |
| Buy | 1 | |
| Hold | 6 | |
| Underperform | 0 | |
| Strong Sell | 0 | |
Insider Trading: 1
Management Discussion and Analysis: 0
Omnicare withdrew from their hostile takeover offer at $15 share after FTC moved to block the takeover
Government and Regulation risk is high
Shift from Branded to Generic drugs is resulting in accelerating margin compression
Pharmacies are subject to federal and state laws regulating financial relationships with healthcare providers
Pharmacies are licensed and are regulated under the DEA and FDA
These laws and regulations may impact business practices (anti kickback,Stark laws)
Recent Healthcare legislation may impact reimbursement rates for drugs sold
Company is subject to HIPAA
Company might be subject to shareholder lawsuits relating to failed takeover by Omnicare
Reduction in manufacturer’s rebate will have a negative impact on margins
Continuing efforts to contain healthcare costs are likely to impact margins negatively
Kindred provides all of the Company’s Information services, potential for cost increases
Growth in 2011 sales was primarily due to acquisitions. Volume and pricing improved and was partially offset by increased generic sales and pricing concessions
Gross margins improved as a result of improved rebates under a new vendor agreement
Company guided to lower revenue at $1.9-1.95bn, with EBITDA at $93-102mm
Stock Performance Relative to Market: -1
Sector Outlook: 0
Healthcare sector is up 10%YTD, Overall stable outlook, it would seem that the regulation risk is low-minimal for now.
Free Cash Flow: 1
Cash flow is growing, and adjusted for one time payments aggregating $99.7mm, CFO in 2011 would have been $126.5mm
| 2009 | 2010 | 2011 | ||||||||
| Revenues | $1,841.2 | $1,847.3 | $2,081.1 | |||||||
| COGS | 1,565.7 | 1,607.0 | 1,787.8 | |||||||
| Gross Profit | 275.5 | 240.3 | 293.3 | |||||||
| Amortization | 9.0 | 9.3 | 11.0 | |||||||
| G&A | 190.8 | 180.6 | 214.9 | |||||||
| EBIT | 75.7 | 50.4 | 67.4 | |||||||
| D&A | 27.0 | 28.1 | 31.1 | |||||||
| EBITDA | 102.7 | 78.5 | 98.5 | |||||||
| Capex | (21.6) | (12.6) | (13.2) | One time cash flow items | 2011 | |||||
| Interest | (11.2) | (3.2) | (7.6) | AmeriBergen extra Friday payment | 29.6 | |||||
| Working Capital | (9.3) | 32.3 | (55.2) | Inventory increase to improve margins | 57.4 | |||||
| Taxes | (1.6) | (0.4) | (0.5) | ChemRx acquisition adjustment | 12.7 | |||||
| FCF | 59.0 | 94.6 | 22.0 | Total | 99.7 | |||||
| CFO | 85.0 | 98.2 | 26.8 | |||||||
| CFI | (76.1) | (133.2) | (64.0) | |||||||
| CFF | 1.0 | (5.4) | 43.8 | |||||||
| Net Income | 42.2 | 19.2 | 23.4 | |||||||
PEG Ratio: 1
| P/E | 15.32 | ||
| 2011 | 2012 | ||
| EPS | 0.79 | 1.19 | |
| PEG Ratio | 0.30x |
Valuation: 1
Adjusted FCF for 7 yrs from 10 yrs
Adjusted growth rate to 1%
10 yr treasury at 3%
Investment rate is adjusted higher to closer match depreciation rate
Equity risk premium assumed at 5%
Beta is taken from finance.yahoo
Catalyst: 0
Reversal on healthcare cost controls, increased manufacturer’s rebates