Revenues of $45.6 Billion for the Fourth
Quarter, a 5.4 Percent Increase Year-Over-Year
Fourth Quarter GAAP Diluted EPS of $0.63 and
Adjusted Diluted EPS of $1.61
Revenues of $179.6 Billion for Fiscal Year
2019, a 6.9 Percent Increase Year-Over-Year
Fiscal Year 2019 GAAP Diluted EPS of $4.04 and
Adjusted Diluted EPS of $7.09
AmerisourceBergen Corporation (NYSE:ABC) today reported that in
its fiscal year 2019 fourth quarter ended September 30, 2019,
revenue increased 5.4 percent to $45.6 billion. Revenue increased
6.9 percent to $179.6 billion for the fiscal year. On the basis of
U.S. generally accepted accounting principles (GAAP), diluted
earnings per share (EPS) was $0.63 for the September quarter of
fiscal 2019, compared to $1.07 in the prior year quarter. Adjusted
diluted EPS, which is a non-GAAP measure that excludes items
described below, increased 11.0 percent to $1.61 in the fiscal
fourth quarter. For fiscal year 2019, adjusted diluted EPS
increased 9.2 percent to $7.09.
“In fiscal 2019, AmerisourceBergen performed extremely well,
driven by execution across our Pharmaceutical Distribution and
Global Commercialization Services & Animal Health teams.
Working as a unified and connected organization, we created value
for our shareholders, partners, customers, and the patients they
serve,” said Steven H. Collis, Chairman, President and Chief
Executive Officer of AmerisourceBergen.
“As we enter fiscal 2020, we will continue to leverage our
differentiated strategy and partnerships to grow our business,” Mr.
Collis continued. “AmerisourceBergen is well positioned to deliver
long-term value for all of our stakeholders as we continue to focus
on innovation, execution, advancing our talent and culture, and
living our purpose of being united in our responsibility to create
healthier futures.”
Fourth Quarter Fiscal Year 2019 Summary
Results
GAAP
Adjusted (Non-GAAP)
Revenue
$45.6B
$45.6B
Gross Profit
$1.2B
$1.2B
Operating Expenses
$1,005M
$789M
Operating Income
$180M
$456M
Interest Expense, Net
$36M
$36M
Effective Tax Rate
8.5%
19.6%
Net Income Attributable to ABC
$133M
$338M
Diluted Earnings Per Share
$0.63
$1.61
Diluted Shares Outstanding
210M
210M
Below, AmerisourceBergen presents descriptive summaries of the
Company’s GAAP and adjusted (non-GAAP) quarterly and fiscal year
results. In the tables that follow, GAAP results and GAAP to
non-GAAP reconciliations are presented. For more information
related to non-GAAP financial measures, including adjustments made
in the periods presented, please refer to the Supplemental
Information Regarding non-GAAP Financial Measures following the
tables.
Fourth Quarter GAAP
Results
- Revenue: In the fourth quarter of
fiscal 2019, revenue was $45.6 billion, up 5.4 percent compared to
the same quarter in the previous fiscal year, reflecting a 5.1
percent increase in Pharmaceutical Distribution Services revenue
and a 12.6 percent increase in revenue within Other.
- Gross Profit: Gross profit in the
fiscal 2019 fourth quarter was $1.2 billion, a 14.7 percent
increase compared to the same period in the previous fiscal year.
Gross profit in the current fiscal quarter was favorably impacted
by the increases in gross profit for both Pharmaceutical
Distribution Services and Other. Gross profit was also favorably
impacted by a reduction in LIFO expense, lower PharMEDium
remediation costs, and a prior year estimated assessment related to
the New York State Opioid Stewardship Act that was subsequently
reversed in the first quarter of fiscal 2019. Gross profit as a
percentage of revenue was 2.60 percent, an increase of 21 basis
points from the prior year quarter.
- Operating Expenses: In the fourth
quarter of fiscal 2019, operating expenses were $1,004.9 million,
compared to $878.5 million in the same period last fiscal year. The
increase in operating expenses was primarily due to higher employee
severance, litigation and other expenses due to legal settlements.
Operating expenses as a percentage of revenue in the fiscal 2019
fourth quarter was 2.20 percent, compared to 2.03 percent for the
same period in the previous fiscal year.
- Operating Income: In the fiscal
2019 fourth quarter, operating income was $179.8 million versus
$154.1 million in the prior year quarter as the increase in gross
profit exceeded the increase in operating expenses. Operating
income as a percentage of revenue in the fiscal 2019 fourth quarter
was 0.39 percent compared to 0.36 percent for the same period in
the previous fiscal year.
- Interest Expense, Net: In the
fiscal 2019 fourth quarter, net interest expense of $36.4 million
was down 15.4 percent versus the prior year quarter due to an
increase in interest income as a result of an increase in our
invested cash balance and an increase in interest rates.
Additionally, interest expense was lower due to a decrease in
average borrowings.
- Effective Tax Rate: The effective
tax rate of 8.5 percent for the fourth quarter of fiscal 2019 was
primarily impacted by legal settlements, which changed the mix of
domestic and international income. The prior year's effective tax
rate of (73.4) percent was favorably impacted by the determination
that a portion of a significant fiscal 2017 legal settlement
accrual was deductible.
- Diluted Earnings Per Share:
Diluted earnings per share was $0.63 in the fourth quarter of
fiscal 2019 compared to $1.07 in the previous fiscal year fourth
quarter. This decrease was primarily due to an increase in income
tax expense, offset in part by an increase in income before income
taxes.
- Diluted Shares Outstanding:
Diluted weighted average shares outstanding for the fourth quarter
of fiscal 2019 were 209.7 million, a 3.6 percent decline versus the
prior fiscal year fourth quarter primarily due to share
repurchases.
Opioid Litigation
- On October 21, 2019, the Company announced an agreement in
principle with two Ohio counties, Cuyahoga and Summit, to settle
all claims brought by the two counties against the Company in the
first track of the multi-district opioid litigation. As a result,
the Company recorded an after-tax charge of $50.9 million in the
quarter ended September 30, 2019 within Employee Severance,
Litigation and Other in its Statement of Operations. While the
Company disputes the allegations made by the two counties, the
Company believes settling their claims is an important stepping
stone to achieving a global resolution of the related pending
multi-district litigation and delivering meaningful relief. The
Company expects settlement funds to be used by the counties in
support of initiatives to combat the opioid epidemic, including
treatment, rehabilitation, mental health and other important
efforts.
- Also, on October 21, 2019, the Attorneys General for North
Carolina, Pennsylvania, Tennessee, and Texas announced a potential
framework for a global resolution of the multi-district opioid
litigation and other related state court litigation, including
cases currently filed and that could be filed. The Company is
currently engaged in discussions that include the four attorneys
general, plaintiffs’ lawyers representing local governments, and
other parties regarding the terms of the potential framework. The
parties’ objective is to reach agreement in principle on terms for
the potential framework, which could be the foundation for a global
resolution. This framework would then be presented to the other
states and local governments that will need to accept the framework
in the coming days and weeks in order to achieve the finality that
the Company would require from a global resolution. Given the large
number of parties involved, the complexity and difficulty of the
underlying issues, and the resulting uncertainty of achieving a
potential global resolution, the Company continues to litigate and
prepare for trial in the cases pending in the multi-district opioid
litigation as well as in state courts where lawsuits have been
filed, and intends to continue to vigorously defend itself in all
such cases. Accordingly, the Company has not recognized a liability
related to the potential framework as of September 30, 2019. The
Company records a liability when it is probable that a loss has
been incurred and the amount is reasonably estimable. The Company
will continue to evaluate its accounting position based on the
facts and circumstances as they develop.
Fourth Quarter Adjusted (non-GAAP)
Results
- Revenue: No adjustments were made
to the GAAP presentation of revenue. In the fourth quarter of
fiscal 2019, revenue was $45.6 billion, up 5.4 percent compared to
the same quarter in the previous fiscal year, reflecting a 5.1
percent increase in Pharmaceutical Distribution Services revenue
and a 12.6 percent increase in revenue within Other.
- Adjusted Gross Profit: Adjusted
gross profit in the fiscal 2019 fourth quarter was $1.2 billion,
which was up 6.9 percent compared to the same period in the
previous year, due to the increases in gross profit within
Pharmaceutical Distribution Services and Other primarily resulting
from higher revenue. Adjusted gross profit as a percentage of
revenue was 2.73 percent in the fiscal 2019 fourth quarter, an
increase of 4 basis points from the prior year quarter.
- Adjusted Operating Expenses: In
the fourth quarter of fiscal 2019, adjusted operating expenses were
$789.4 million, an increase of 7.8 percent compared to the same
period in the previous fiscal year primarily due to an increase in
costs to support revenue growth. Adjusted operating expenses as a
percentage of revenue in the fiscal 2019 fourth quarter was 1.73
percent, compared to 1.69 percent for the same period in the
previous fiscal year.
- Adjusted Operating Income: In the
fiscal 2019 fourth quarter, adjusted operating income of $456.1
million increased 5.5 percent from the prior year period due to a
3.5 percent increase in operating income within Pharmaceutical
Distribution Services and a 14.9 percent increase in operating
income within Other. Adjusted operating income as a percentage of
revenue was 1.00 percent, which was flat compared to the prior year
quarter.
- Interest Expense, Net: No
adjustments were made to the GAAP presentation of net interest
expense. In the fiscal 2019 fourth quarter, net interest expense of
$36.4 million was down 15.4 percent versus the prior year quarter
due to an increase in interest income as a result of an increase in
our invested cash balance and an increase in interest rates.
Additionally, interest expense was lower due to a decrease in
average borrowings.
- Adjusted Effective Tax Rate: The
adjusted effective tax rate was 19.6 percent for the fourth quarter
of fiscal 2019, which was flat compared to the prior year
quarter.
- Adjusted Diluted Earnings Per
Share: Adjusted diluted earnings per share was up 11.0
percent to $1.61 in the fourth quarter of fiscal 2019 compared to
$1.45 in the previous fiscal year fourth quarter, driven by the
increase in adjusted operating income, a lower share count, and
lower net interest expense.
- Diluted Shares Outstanding: No
adjustments were made to the GAAP presentation of diluted shares
outstanding. Diluted weighted average shares outstanding for the
fourth quarter of fiscal 2019 were 209.7 million, a 3.6 percent
decline versus the prior fiscal year fourth quarter primarily due
to share repurchases.
Segment Discussion
The Company's operations are comprised of the Pharmaceutical
Distribution Services reportable segment and other operating
segments that are not significant enough to require separate
reportable segment disclosure and, therefore, have been included in
Other for the purpose of reportable segment presentation. Other
consists of operating segments that focus on global
commercialization services and animal health and includes
AmerisourceBergen Consulting Services (ABCS), World Courier and MWI
Animal Health (MWI).
Pharmaceutical Distribution Services
Segment
Pharmaceutical Distribution Services revenue was $43.9 billion,
an increase of 5.1 percent compared to the same quarter in the
prior fiscal year primarily due to continued strong specialty
product sales and increased volume associated with the growth of
some of its largest customers. Segment operating income of $369.3
million in the fourth quarter of fiscal 2019 was up 3.5 percent
compared to the same period in the previous fiscal year, primarily
due to the increase in gross profit, offset in part by an increase
in operating expenses.
Other
Revenue in Other was $1.8 billion in the fourth quarter of
fiscal 2019, an increase of 12.6 percent compared to the same
period in the prior fiscal year primarily due to growth at MWI and
ABCS's growth in its Canadian operations. Operating income in Other
increased 14.9 percent to $86.7 million in the fourth quarter of
fiscal 2019. This increase was due to the results of World Courier,
ABCS's Lash Consulting Services, and MWI.
Fiscal Year 2019 Summary
Results
GAAP
Adjusted (non-GAAP)
Revenue
$179.6B
$179.6B
Gross Profit
$5.1B
$5.0B
Operating Expenses
$4.0B
$2.9B
Operating Income
$1.1B
$2.1B
Interest Expense, Net
$158M
$158M
Tax Rate
11.7%
20.6%
Net Income Attributable to ABC
$855M
$1,502M
Diluted Earnings Per Share
$4.04
$7.09
Diluted Shares Outstanding
212M
212M
Summary Fiscal Year GAAP
Results
In fiscal year 2019, GAAP diluted EPS was $4.04, compared to
$7.53 in the prior year. Revenue of $179.6 billion was up 6.9
percent over the last fiscal year. Gross profit increased 11.4
percent to $5.1 billion primarily due to increases in gross profit
within Pharmaceutical Distribution Services and Other. Total gross
profit in fiscal year 2019 was also favorably impacted by increases
in gains from antitrust litigation settlements, a LIFO credit in
the current year period versus a LIFO expense in the prior year,
and the reversal of a previously estimated assessment related to
the New York State Opioid Stewardship Act. Operating expenses
increased 27.1 percent over the prior fiscal year primarily due to
a $570 million impairment of PharMEDium's long-lived assets, an
increase in employee severance, litigation, and other costs, and an
increase in distribution, selling and administrative expenses.
Operating income decreased 23.0 percent and operating income margin
decreased 24 basis points in the current fiscal year as the
increase in operating expenses exceeded the increase in gross
profit. Diluted weighted average shares outstanding in fiscal 2019
were 211.8 million, down 3.9 percent from the prior fiscal
year.
Summary Fiscal Year Adjusted (non-GAAP)
Results
In fiscal year 2019, adjusted diluted EPS was $7.09, an increase
of 9.2 percent over the prior fiscal year primarily due to an
increase in operating income, a decrease in net interest expense,
and a decrease in adjusted diluted weighted average shares
outstanding. Adjusted diluted weighted average shares outstanding
in fiscal 2019 were 211.8 million, down 3.9 percent from the prior
fiscal year. Revenue increased 6.9 percent from last fiscal year to
$179.6 billion. Adjusted gross profit increased by $269.7 million,
or 5.7 percent, from prior fiscal year to $5.0 billion primarily
due to the increases in gross profit within Pharmaceutical
Distribution Services and Other. Adjusted operating income
increased 3.5 percent as the increase in adjusted gross profit
exceeded the increase in adjusted operating expenses. Adjusted
operating income margin decreased 4 basis points from 1.18 percent
to 1.14 percent primarily due to a lower contribution from
PharMEDium.
Recent Company Highlights &
Milestones
- Good Neighbor Pharmacy, AmerisourceBergen’s national
independent pharmacy network, announced that it has been ranked
“Highest in Customer Satisfaction with Chain Drug Store Pharmacies”
in the 2019 J.D. Power U.S. Pharmacy Study. This marks the eighth
time that Good Neighbor Pharmacy has earned the achievement in the
last 10 years.
- AmerisourceBergen hosted its annual two-day manufacturer summit
ThinkLive 2019. The conference assembled nearly 400 leading
pharmaceutical manufacturers and AmerisourceBergen executives to
collaborate and share perspectives on embracing innovation, driving
patient access and supporting biosimilars and other novel
therapies.
- UPS announced its drone logistics partnership with
AmerisourceBergen. The collaboration will deploy the UPS Flight
Forward drone airline to transport certain pharmaceuticals,
supplies and records to qualifying medical campuses served by
AmerisourceBergen across the United States, and then expand its use
to other sites of care. The addition of drone transportation
provides an option for aerial delivery via UPS Flight Forward drone
services enabling the ability to avoid roadway delays, increase
medical distribution efficiency, lower costs and improve the
patient experience with potentially life-saving benefits.
- The AmerisourceBergen Foundation announced that it has
partnered with more than 20 organizations to help prevent and curb
the harmful effects of prescription drug misuse, especially among
youth. Through the Foundation’s Opioid Resource Grant Program,
several youth-based organizations will receive the necessary
funding to support their prevention initiatives focused on
education, youth advocacy, and community building. The
AmerisourceBergen Foundation also committed more than $75,000 to
support relief efforts in the communities affected by Hurricane
Dorian.
Dividend Declaration
The Company's Board of Directors declared a quarterly cash
dividend of $0.40 per common share, payable December 2, 2019, to
stockholders of record at the close of business on November 18,
2019.
Fiscal Year 2020
Expectations
The Company does not provide forward-looking guidance on a GAAP
basis as certain financial information, the probable significance
of which cannot be determined, is not available and cannot be
reasonably estimated. Please refer to the Supplemental Information
Regarding Non-GAAP Financial Measures following the tables for
additional information.
Fiscal Year 2020 Expectations on an
Adjusted (non-GAAP) Basis
AmerisourceBergen has introduced its fiscal year 2020 financial
guidance, which reflects growth in both Pharmaceutical Distribution
Services and businesses focused on Global Commercialization
Services & Animal Health. Notably, our revenue growth reflects
the onboarding of new volume through our second largest customer.
The Company expects:
- Revenue growth in the mid- to high-single digit percent range;
and
- Adjusted diluted earnings per share to be in the range of $7.30
to $7.60.
Additional expectations include:
- Adjusted operating expenses to increase in the mid-single digit
percent range;
- Adjusted operating income growth in the low- to mid-single
digit percent range;
- Pharmaceutical Distribution Services segment operating income
growth in the low- to mid-single digit percent range;
- Other, which is comprised of businesses focused on Global
Commercialization Services & Animal Health, operating income
growth in the high-single digit percent range;
- Adjusted effective tax rate between 21 percent and 22
percent;
- Adjusted free cash flow to be approximately $1.5 billion;
- Capital expenditures in the $400 million range; and
- Weighted average diluted shares are expected to be between 209
million to 210 million for the fiscal year.
Conference Call & Slide
Presentation
The Company will host a conference call to discuss the results
at 8:30 a.m. ET on November 7, 2019. A slide presentation for
investors has also been posted on the Company's website at
investor.amerisourcebergen.com. Participating in the conference
call will be:
- Steven H. Collis, Chairman, President & Chief Executive
Officer
- James F. Cleary, Executive Vice President & Chief Financial
Officer
The dial-in number for the live call will be (612) 288-0340. No
access code is required. The live call will also be webcast via the
Company’s website at investor.amerisourcebergen.com. Users are
encouraged to log on to the webcast approximately 10 minutes in
advance of the scheduled start time of the call.
Replays of the call will be made available via telephone and
webcast. A replay of the webcast will be posted on
investor.amerisourcebergen.com approximately two hours after the
completion of the call and will remain available for 30 days. The
telephone replay will also be available approximately two hours
after the completion of the call and will remain available for
seven days. To access the telephone replay from within the U.S.,
dial (800) 475-6701. From outside the U.S., dial (320) 365-3844.
The access code for the replay is 472893.
Upcoming Investor Events
AmerisourceBergen management will be attending the following
investor conference in the coming months:
- J.P. Morgan Healthcare Conference, January 13-16, San
Francisco.
Please check the website for updates regarding the timing of the
live presentation webcasts, if any, and for replay information.
About AmerisourceBergen
AmerisourceBergen provides pharmaceutical products,
value-driving services and business solutions that improve access
to care. Tens of thousands of healthcare providers, veterinary
practices and livestock producers trust us as their partner in the
pharmaceutical supply chain. Global manufacturers depend on us for
services that drive commercial success for their products. Through
our daily work—and powered by our 22,000 associates—we are united
in our responsibility to create healthier futures.
AmerisourceBergen is ranked #10 on the Fortune 500, with more than
$175 billion in annual revenue. The company is headquartered in
Valley Forge, Pa. and has a presence in 50+ countries. Learn more
at investor.amerisourcebergen.com.
AmerisourceBergen's Cautionary Note Regarding Forward-Looking
Statements
Certain of the statements contained in this press release are
"forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Words such as "expect," "likely," "outlook,"
"forecast," "would," "could," "should," "can," "project," "intend,"
"plan," "continue," "sustain," "synergy," "on track," "believe,"
"seek," "estimate," "anticipate," "may," "possible," "assume,"
variations of such words, and similar expressions are intended to
identify such forward-looking statements. These statements are
based on management's current expectations and are subject to
uncertainty and changes in circumstances and speak only as of the
date hereof. These statements are not guarantees of future
performance and are based on assumptions and estimates that could
prove incorrect or could cause actual results to vary materially
from those indicated. Among the factors that could cause actual
results to differ materially from those projected, anticipated, or
implied are the following: unfavorable trends in brand and generic
pharmaceutical pricing, including in rate or frequency of price
inflation or deflation; competition and industry consolidation of
both customers and suppliers resulting in increasing pressure to
reduce prices for our products and services; changes in the United
States healthcare and regulatory environment, including changes
that could impact prescription drug reimbursement under Medicare
and Medicaid; increasing governmental regulations regarding the
pharmaceutical supply channel and pharmaceutical compounding;
declining reimbursement rates for pharmaceuticals; continued
federal and state government enforcement initiatives to detect and
prevent suspicious orders of controlled substances and the
diversion of controlled substances; continued prosecution or suit
by federal, state and other governmental entities of alleged
violations of laws and regulations regarding controlled substances,
including opioid medications, and any related disputes, including
shareholder derivative lawsuits; increased federal scrutiny and
litigation, including qui tam litigation, for alleged violations of
laws and regulations governing the marketing, sale, purchase and/or
dispensing of pharmaceutical products or services, and associated
reserves and costs; failure to comply with the Corporate Integrity
Agreement; material adverse developments or resolution of pending
legal proceedings; the retention of key customer or supplier
relationships under less favorable economics or the adverse
resolution of any contract or other dispute with customers or
suppliers; changes to customer or supplier payment terms; risks
associated with the strategic, long-term relationship between
Walgreens Boots Alliance, Inc. and the Company, including
principally with respect to the pharmaceutical distribution
agreement and/or the global generic purchasing services
arrangement; changes in tax laws or legislative initiatives that
could adversely affect the Company's tax positions and/or the
Company's tax liabilities or adverse resolution of challenges to
the Company's tax positions; regulatory or enforcement action in
connection with the production, labeling or packaging of products
compounded by our compounded sterile preparations (CSP) business or
the related consent decree; suspension of production of CSPs,
including continued suspension at PharMEDium's Memphis facility;
managing foreign expansion, including non-compliance with the U.S.
Foreign Corrupt Practices Act, anti-bribery laws, economic
sanctions and import laws and regulations; financial market
volatility and disruption; the loss, bankruptcy or insolvency of a
major supplier; substantial defaults in payment, material reduction
in purchases by or the loss, bankruptcy or insolvency of a major
customer; changes to the customer or supplier mix; malfunction,
failure or breach of sophisticated information systems to operate
as designed; risks generally associated with data privacy
regulation and the international transfer of personal data; natural
disasters or other unexpected events that affect the Company’s
operations; the impairment of goodwill or other intangible assets
(including any additional impairments with respect to foreign
operations or PharMEDium), resulting in a charge to earnings; the
acquisition of businesses that do not perform as expected, or that
are difficult to integrate or control, including the integration of
PharMEDium, or the inability to capture all of the anticipated
synergies related thereto or to capture the anticipated synergies
within the expected time period; the Company's ability to manage
and complete divestitures; the disruption of the Company's cash
flow and ability to return value to its stockholders in accordance
with its past practices; interest rate and foreign currency
exchange rate fluctuations; declining economic conditions in the
United States and abroad; and other economic, business,
competitive, legal, tax, regulatory and/or operational factors
affecting the Company's business generally. Certain additional
factors that management believes could cause actual outcomes and
results to differ materially from those described in
forward-looking statements are set forth (i) in Item 1A (Risk
Factors), in the Company’s Annual Report on Form 10-K for the
fiscal year ended September 30, 2018 and elsewhere in that report
and (ii) in other reports filed by the Company pursuant to the
Securities Exchange Act. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, except as
required by the federal securities laws.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY (In thousands, except per share data)
(unaudited)
Three
Months Ended September 30,
2019
% of
Revenue
Three
Months Ended September 30,
2018
% of
Revenue
%
Change
Revenue
$
45,637,802
$
43,297,136
5.4%
Cost of goods sold
44,453,065
42,264,495
5.2%
Gross profit 1
1,184,737
2.60%
1,032,641
2.39%
14.7%
Operating expenses:
Distribution, selling, and
administrative
721,944
1.58%
657,805
1.52%
9.8%
Depreciation and amortization
108,545
0.24%
120,558
0.28%
(10.0)%
Goodwill impairment charge 2
—
59,684
Employee severance, litigation, and other
3
174,407
40,497
Total operating expenses
1,004,896
2.20%
878,544
2.03%
14.4%
Operating income
179,841
0.39%
154,097
0.36%
16.7%
Other income
(1,213
)
(820
)
Interest expense, net
36,403
43,047
(15.4)%
Income before income taxes
144,651
0.32%
111,870
0.26%
29.3%
Income tax expense (benefit)
12,344
(82,134
)
Net income
132,307
0.29%
194,004
0.45%
(31.8)%
Net income attributable to noncontrolling
interest
312
39,284
Net income attributable to
AmerisourceBergen Corporation
$
132,619
0.29%
$
233,288
0.54%
(43.2)%
Earnings per share:
Basic
$
0.64
$
1.08
(40.7)%
Diluted
$
0.63
$
1.07
(41.1)%
Weighted average common shares
outstanding:
Basic
207,979
215,430
(3.5)%
Diluted
209,680
217,492
(3.6)%
________________________________________
1
Includes a $57.2 million LIFO expense,
$6.7 million of PharMEDium remediation costs, and a $3.1 million
gain from antitrust litigation settlements in the three months
ended September 30, 2019. Includes an $83.5 million LIFO expense,
$26.6 million of PharMEDium remediation costs, and an estimated
$22.0 million assessment relating to the New York State Opioid
Stewardship Act (for the period covering January 1, 2017 through
September 30, 2018) in the three months ended September 30,
2018.
2
The goodwill impairment charge in the
three months ended September 30, 2018 was related to the Company's
non-wholly owned subsidiary in Brazil.
3
Includes $4.5 million of employee severance, $116.7 million of
legal settlements, $21.3 million of litigation and opioid-related
costs primarily related to legal fees in connection with opioid
lawsuits and investigations, and $31.9 million of other costs in
connection with acquisition-related deal and integration costs,
business transformation efforts, and other restructuring
initiatives in the three months ended September 30, 2019. Includes
$3.5 million of employee severance, $12.1 million of litigation
costs primarily related to opioid lawsuits and investigations, and
$25.0 million of other costs related to acquisition-related deal
and integration costs, business transformation efforts, and other
restructuring initiatives in the three months ended September 30,
2018.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY (In thousands, except per share data)
(unaudited)
Fiscal Year Ended
September 30, 2019
% of
Revenue
Fiscal Year Ended
September 30, 2018
% of
Revenue
%
Change
Revenue
$
179,589,121
$
167,939,635
6.9%
Cost of goods sold
174,450,809
163,327,318
6.8%
Gross profit 1
5,138,312
2.86%
4,612,317
2.75%
11.4%
Operating expenses:
Distribution, selling, and
administrative
2,663,508
1.48%
2,460,301
1.46%
8.3%
Depreciation and amortization
462,407
0.26%
465,127
0.28%
(0.6)%
Goodwill impairment charge 2
—
59,684
Employee severance, litigation, and other
3
330,474
183,520
Impairment of long-lived assets 4
570,000
—
Total operating expenses
4,026,389
2.24%
3,168,632
1.89%
27.1%
Operating income
1,111,923
0.62%
1,443,685
0.86%
(23.0)%
Other (income) loss 5
(12,952
)
25,469
Interest expense, net
157,769
174,699
(9.7)%
Loss on consolidation of equity
investments
—
42,328
Loss on early retirement of debt
—
23,766
Income before income taxes
967,106
0.54%
1,177,423
0.70%
(17.9)%
Income tax expense (benefit)
112,971
(438,469
)
Net income
854,135
0.48%
1,615,892
0.96%
(47.1)%
Net loss attributable to noncontrolling
interest
1,230
42,513
Net income attributable to
AmerisourceBergen Corporation
$
855,365
0.48%
$
1,658,405
0.99%
(48.4)%
Earnings per share:
Basic
$
4.07
$
7.61
(46.5)%
Diluted
$
4.04
$
7.53
(46.3)%
Weighted average common shares
outstanding:
Basic
210,165
217,872
(3.5)%
Diluted
211,840
220,336
(3.9)%
________________________________________ 1
Includes a $145.9 million gain from
antitrust litigation settlements, $48.6 million of PharMEDium
remediation costs, a $22.5 million LIFO credit, and a $22.0 million
reversal of a prior period assessment relating to the New York
State Opioid Stewardship Act in the fiscal year ended September 30,
2019. Includes a $67.3 million LIFO expense, $61.1 million of
PharMEDium remediation costs, a $35.9 million gain from antitrust
litigation settlements, and an estimated $22.0 million assessment
relating to the New York State Opioid Stewardship Act (for the
period covering January 1, 2017 through September 30, 2018) in the
fiscal year ended September 30, 2018.
2
The goodwill impairment charge in the
fiscal year ended September 30, 2018 was related to the Company's
non-wholly owned subsidiary in Brazil.
3
Includes $34.1 million of employee
severance, $116.7 million of legal settlements, $68.5 million of
litigation and opioid-related costs primarily related to legal fees
in connection with opioid lawsuits and investigations, and $111.2
million of other costs in connection with acquisition-related deal
and integration costs, business transformation efforts, and other
restructuring initiatives in the fiscal year ended September 30,
2019. Includes $36.7 million of employee severance, $61.5 million
of litigation costs primarily related to opioid lawsuits,
investigations, and related initiatives, and $85.3 million of other
costs related to acquisition-related deal and integration costs,
business transformation efforts, and other restructuring
initiatives in the fiscal year ended September 30, 2018.
4
Impairment of finite-lived intangible
assets and property and equipment relating to PharMEDium in the
fiscal year ended September 30, 2019.
5
Includes a $13.7 million gain on the sale
of an equity investment in the fiscal year ended September 30,
2019. Includes a $30.0 million impairment on a non-customer note
receivable in the fiscal year ended September 30, 2018.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS (in thousands, except per share
data) (unaudited)
Three Months Ended September
30, 2019
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax
Expense
Net Loss (Income) Attributable
to Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
1,184,737
$
1,004,896
$
179,841
$
144,651
$
12,344
$
312
$
132,619
$
0.63
Gain from antitrust litigation
settlements
(3,137
)
—
(3,137
)
(3,137
)
(764
)
—
(2,373
)
(0.01
)
LIFO expense
57,203
—
57,203
57,203
14,956
—
42,247
0.20
PharMEDium remediation costs
6,660
(7,027
)
13,687
13,687
3,550
—
10,137
0.05
Acquisition-related intangibles
amortization
—
(34,078
)
34,078
34,078
8,844
(438
)
24,796
0.12
Employee severance, litigation, and
other
—
(174,407
)
174,407
174,407
43,855
—
130,552
0.62
Other
—
—
—
—
(204
)
—
204
—
Adjusted Non-GAAP
$
1,245,463
$
789,384
$
456,079
$
420,889
$
82,581
$
(126
)
$
338,182
$
1.61
Adjusted Non-GAAP % change vs. prior year
quarter
6.9
%
7.8
%
5.5
%
7.9
%
7.8
%
7.3
%
11.0
%
Percentages of Revenue:
GAAP
Adjusted
Non-GAAP
Gross profit
2.60%
2.73%
Operating expenses
2.20%
1.73%
Operating income
0.39%
1.00%
________________________________________
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS (in thousands, except per share
data) (unaudited)
Three Months Ended September
30, 2018
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax (Benefit)
Expense
Net Loss Attributable to
Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
1,032,641
$
878,544
$
154,097
$
111,870
$
(82,134
)
$
39,284
$
233,288
$
1.07
LIFO expense
83,466
—
83,466
83,466
23,124
—
60,342
0.28
PharMEDium remediation costs
26,580
(1,617
)
28,197
28,197
8,083
—
20,114
0.09
New York State Opioid Stewardship Act
22,000
—
22,000
22,000
6,122
—
15,878
0.07
Goodwill impairment charge
—
(59,684
)
59,684
59,684
—
(36,945
)
22,739
0.10
Acquisition-related intangibles
amortization
—
(44,484
)
44,484
44,484
13,191
(775
)
30,518
0.14
Employee severance, litigation, and
other
—
(40,497
)
40,497
40,497
83,317
1
—
(42,820
)
(0.20
)
Tax Reform 2
—
—
—
—
25,000
—
(25,000
)
(0.11
)
Other
—
—
—
—
(77
)
—
77
—
Adjusted Non-GAAP
$
1,164,687
$
732,262
$
432,425
$
390,198
$
76,626
$
1,564
$
315,136
$
1.45
3
Percentages of
Revenue:
GAAP
Adjusted
Non-GAAP
Gross profit
2.39%
2.69%
Operating expenses
2.03%
1.69%
Operating income
0.36%
1.00%
________________________________________
1
During the fourth quarter of fiscal 2018,
the Company determined a significant portion of a fiscal 2017 legal
settlement charge is tax deductible.
2
Includes a measurement period adjustment
of the one-time transition tax on historical foreign earnings and
profits through December 31, 2017.
3
The sum of the components does not equal
the total due to rounding.
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS (in thousands, except per share
data) (unaudited)
Fiscal Year Ended September
30, 2019
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax Expense
Net Loss (Income) Attributable
to Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
5,138,312
$
4,026,389
$
1,111,923
$
967,106
$
112,971
$
1,230
$
855,365
$
4.04
Gain from antitrust litigation
settlements
(145,872
)
—
(145,872
)
(145,872
)
(38,063
)
—
(107,809
)
(0.51
)
LIFO credit
(22,544
)
—
(22,544
)
(22,544
)
(5,883
)
—
(16,661
)
(0.08
)
PharMEDium remediation costs
48,603
(20,820
)
69,423
69,423
18,115
—
51,308
0.24
New York State Opioid Stewardship Act
(22,000
)
—
(22,000
)
(22,000
)
(5,741
)
—
(16,259
)
(0.08
)
Acquisition-related intangibles
amortization
—
(159,848
)
159,848
159,848
41,710
(1,821
)
116,317
0.55
Employee severance, litigation, and
other
—
(330,474
)
330,474
330,474
84,638
—
245,836
1.16
Impairment of long-lived assets
—
(570,000
)
570,000
570,000
148,734
—
421,266
1.99
Gain on sale of an equity investment
—
—
—
(13,692
)
(3,573
)
—
(10,119
)
(0.05
)
Tax reform 1
—
—
—
—
36,997
—
(36,997
)
(0.17
)
Adjusted Non-GAAP
$
4,996,499
$
2,945,247
$
2,051,252
$
1,892,743
$
389,905
$
(591
)
$
1,502,247
$
7.09
Adjusted Non-GAAP % change vs. prior
year
5.7
%
7.3
%
3.5
%
4.5
%
1.3
%
5.1
%
9.2
%
Percentages of Revenue:
GAAP
Adjusted
Non-GAAP
Gross profit
2.86%
2.78%
Operating expenses
2.24%
1.64%
Operating income
0.62%
1.14%
________________________________________
1
Includes a measurement period adjustment
to the one-time transition tax on historical foreign earnings and
profits through December 31, 2017.
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP
RECONCILIATIONS
(in thousands, except per share
data)
(unaudited)
Fiscal Year Ended September
30, 2018
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax (Benefit)
Expense
Net Loss Attributable to
Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
4,612,317
$
3,168,632
$
1,443,685
$
1,177,423
$
(438,469
)
$
42,513
$
1,658,405
$
7.53
Gain from antitrust litigation
settlements
(35,938
)
—
(35,938
)
(35,938
)
(10,000
)
—
(25,938
)
(0.12
)
LIFO expense
67,324
—
67,324
67,324
18,733
—
48,591
0.22
PharMEDium remediation costs
61,129
(5,075
)
66,204
66,204
18,421
—
47,783
0.22
New York State Opioid Stewardship Act
22,000
—
22,000
22,000
6,122
—
15,878
0.07
Goodwill impairment charge
—
(59,684
)
59,684
59,684
—
(36,945
)
22,739
0.10
Acquisition-related intangibles
amortization
—
(174,751
)
174,751
174,876
48,660
(1,846
)
124,370
0.56
Employee severance, litigation, and
other
—
(183,520
)
183,520
183,520
122,222
1
—
61,298
0.28
Loss on consolidation of equity
investments
—
—
—
42,328
—
—
42,328
0.19
Impairment on non-customer note
receivable
—
—
—
30,000
—
—
30,000
0.14
Loss on early retirement of debt
—
—
—
23,766
6,613
—
17,153
0.08
Tax reform 2
—
—
—
—
612,595
—
(612,595
)
(2.78
)
Adjusted Non-GAAP
$
4,726,832
$
2,745,602
$
1,981,230
$
1,811,187
$
384,897
$
3,722
$
1,430,012
$
6.49
Percentages of
Revenue:
GAAP
Adjusted Non-GAAP
Gross profit
2.75%
2.81%
Operating expenses
1.89%
1.63%
Operating income
0.86%
1.18%
________________________________________
1
The Company determined a significant
portion of a fiscal 2017 legal settlement charge is tax
deductible.
2
Includes the impact of applying a lower
U.S. federal income tax rate to the Company's net deferred tax
liabilities as of December 31, 2017, offset in part by a one-time
transition tax on historical foreign earnings and profits through
December 31, 2017.
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended September
30,
Revenue
2019
2018
% Change
Pharmaceutical Distribution Services
$
43,865,440
$
41,726,426
5.1%
Other
1,797,436
1,596,178
12.6%
Intersegment eliminations
(25,074
)
(25,468
)
Revenue
$
45,637,802
$
43,297,136
5.4%
Three Months Ended September
30,
Operating income
2019
2018
% Change
Pharmaceutical Distribution Services
$
369,303
$
356,808
3.5%
Other
86,737
75,465
14.9%
Intersegment eliminations
39
152
Total segment operating income
456,079
432,425
5.5%
Gain from antitrust litigation
settlements
3,137
—
LIFO expense
(57,203
)
(83,466
)
PharMEDium remediation costs
(13,687
)
(28,197
)
New York State Opioid Stewardship Act
—
(22,000
)
Goodwill impairment charge
—
(59,684
)
Acquisition-related intangibles
amortization
(34,078
)
(44,484
)
Employee severance, litigation, and
other
(174,407
)
(40,497
)
Operating income
$
179,841
$
154,097
Percentages of revenue:
Pharmaceutical Distribution Services
Gross profit
2.07%
2.06%
Operating expenses
1.23%
1.21%
Operating income
0.84%
0.86%
Other
Gross profit
18.76%
19.02%
Operating expenses
13.93%
14.29%
Operating income
4.83%
4.73%
AmerisourceBergen Corporation (GAAP)
Gross profit
2.60%
2.39%
Operating expenses
2.20%
2.03%
Operating income
0.39%
0.36%
AmerisourceBergen Corporation
(Non-GAAP)
Adjusted gross profit
2.73%
2.69%
Adjusted operating expenses
1.73%
1.69%
Adjusted operating income
1.00%
1.00%
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Fiscal Year Ended September
30,
Revenue
2019
2018
% Change
Pharmaceutical Distribution Services
$
172,813,537
$
161,699,343
6.9%
Other
6,868,341
6,332,730
8.5%
Intersegment eliminations
(92,757
)
(92,438
)
Revenue
$
179,589,121
$
167,939,635
6.9%
Fiscal Year Ended September
30,
Operating income
2019
2018
% Change
Pharmaceutical Distribution Services
$
1,671,251
$
1,626,748
2.7%
Other
380,660
355,091
7.2%
Intersegment eliminations
(659
)
(609
)
Total segment operating income
2,051,252
1,981,230
3.5%
Gain from antitrust litigation
settlements
145,872
35,938
LIFO credit (expense)
22,544
(67,324
)
PharMEDium remediation costs
(69,423
)
(66,204
)
New York State Opioid Stewardship Act
22,000
(22,000
)
Goodwill impairment charge
—
(59,684
)
Acquisition-related intangibles
amortization
(159,848
)
(174,751
)
Employee severance, litigation, and
other
(330,474
)
(183,520
)
Impairment of long-lived assets
(570,000
)
—
Operating income
$
1,111,923
$
1,443,685
Percentages of revenue:
Pharmaceutical Distribution Services
Gross profit
2.13%
2.14%
Operating expenses
1.16%
1.14%
Operating income
0.97%
1.01%
Other
Gross profit
19.13%
19.90%
Operating expenses
13.59%
14.30%
Operating income
5.54%
5.61%
AmerisourceBergen Corporation (GAAP)
Gross profit
2.86%
2.75%
Operating expenses
2.24%
1.89%
Operating income
0.62%
0.86%
AmerisourceBergen Corporation
(Non-GAAP)
Adjusted gross profit
2.78%
2.81%
Adjusted operating expenses
1.64%
1.63%
Adjusted operating income
1.14%
1.18%
Note: For more information related to
non-GAAP financial measures, refer to the section titled
"Supplemental Information Regarding Non-GAAP Financial Measures" of
this release.
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
(unaudited)
September 30,
September 30,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
3,374,194
$
2,492,516
Accounts receivable, net
12,386,879
11,314,226
Inventories
11,060,254
11,918,508
Right to recover asset 1
1,147,483
—
Prepaid expenses and other
163,244
169,122
Total current assets
28,132,054
25,894,372
Property and equipment, net
1,770,516
1,892,424
Goodwill and other intangible assets
9,000,343
9,612,100
Other long-term assets
269,067
270,942
Total assets
$
39,171,980
$
37,669,838
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
28,385,074
$
26,836,873
Other current liabilities
1,057,208
881,157
Short-term debt
139,012
151,657
Total current liabilities
29,581,294
27,869,687
Long-term debt
4,033,880
4,158,532
Accrued income taxes
284,075
299,600
Deferred income taxes
1,860,195
1,829,410
Other long-term liabilities
419,330
462,648
Total equity
2,993,206
3,049,961
Total liabilities and equity
$
39,171,980
$
37,669,838
1
Right to recover asset represents the
inventory value associated with the accrual for estimated customer
sales returns. The inventories balance at September 30, 2018
includes a $988.8 million accrual for estimated customer sales
returns.
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
(unaudited)
Fiscal Year Ended September
30,
2019
2018
Operating Activities:
Net income
$
854,135
$
1,615,892
Adjustments to reconcile net income to net
cash provided by operating activities 1, 2
1,126,509
(2,415
)
Changes in operating assets and
liabilities, excluding the effects of acquisitions:
Accounts receivable
(1,241,890
)
(657,770
)
Inventories
(167,990
)
(4,923
)
Accounts payable
1,561,048
859,036
Other 3
212,211
(398,432
)
Net cash provided by operating
activities
2,344,023
1,411,388
Investing Activities:
Capital expenditures
(310,222
)
(336,411
)
Cost of acquired companies, net of cash
acquired
(63,951
)
(785,299
)
Other
(1,659
)
10,596
Net cash used in investing activities
(375,832
)
(1,111,114
)
Financing Activities:
Net (repayments) borrowings 4
(133,073
)
635,695
Payment of premium on early retirement of
debt
—
(22,348
)
Purchases of common stock 5
(674,031
)
(639,235
)
Exercises of stock options
76,234
138,456
Cash dividends on common stock
(338,974
)
(333,041
)
Other
(16,669
)
(22,400
)
Net cash used in financing activities
(1,086,513
)
(242,873
)
Increase in cash and cash equivalents
881,678
57,401
Cash and cash equivalents at beginning of
year
2,492,516
2,435,115
Cash and cash equivalents at end of
year
$
3,374,194
$
2,492,516
________________________________________
1
Adjustments include a LIFO credit
of $22.5 million and an impairment of long-lived assets of $570.0
million for the fiscal year ended September 30, 2019. Includes a
LIFO credit of $67.3 million in the fiscal year ended September 30,
2018.
2
Includes a $795.5 million benefit
for deferred income taxes in the fiscal year ended September 30,
2018, primarily as a result of applying a lower U.S. federal income
tax rate to the Company's net deferred tax liabilities as of
December 31, 2017 in connection with tax reform.
3
Includes a $209.9 million
increase in income taxes payable in the fiscal year ended September
30, 2018, primarily as a result of a one-time transition tax on
historical foreign earnings and profits through December 31, 2017
in connection with tax reform. Includes a $625.0 million decrease
in a litigation accrual that was paid in the fiscal year ended
September 30, 2018.
4
Net borrowings in the fiscal year
ended September 30, 2018 were primarily used to finance the
acquisition of H.D. Smith, which was completed on January 2,
2018.
5
Purchases of common stock in the
fiscal year ended September 30, 2019 includes $24.0 million of
September 2018 purchases that cash settled in October 2018 and
excludes $14.8 million of September 2019 purchases that cash
settled in October 2019.
SUPPLEMENTAL INFORMATION REGARDING
NON-GAAP FINANCIAL MEASURES
To supplement the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP), the Company
uses the non-GAAP financial measures described below. The non-GAAP
financial measures should be viewed in addition to, and not in lieu
of, financial measures calculated in accordance with GAAP. These
supplemental measures may vary from, and may not be comparable to,
similarly titled measures by other companies.
The non-GAAP financial measures are presented because management
uses non-GAAP financial measures to evaluate the Company’s
operating performance, to perform financial planning, and to
determine incentive compensation. Therefore, the Company believes
that the presentation of non-GAAP financial measures provides
useful supplementary information to, and facilitates additional
analysis by, investors. The presented non-GAAP financial measures
exclude items that management does not believe reflect the
Company’s core operating performance because such items are outside
the control of the Company or are inherently unusual,
non-operating, unpredictable, non-recurring, or non-cash. We have
included the following non-GAAP earnings-related financial measures
in this release:
- Adjusted gross profit and adjusted gross profit margin:
Adjusted gross profit is a non-GAAP financial measure that excludes
the gain from antitrust litigation settlements, certain PharMEDium
remediation costs, LIFO expense (credit), and costs (credit)
related to the New York State Opioid Stewardship Act. Gain from
antitrust litigation settlements and LIFO expense (credit) are
excluded because the Company cannot control the amounts recognized
or timing of these items. PharMEDium remediation costs are excluded
because they are unpredictable expenses. The costs (credit) related
to the New York State Opioid Stewardship Act are excluded because
they are unusual, non-recurring and non-cash. Adjusted gross profit
margin is the ratio of adjusted gross profit to total revenue.
Management believes that these non-GAAP financial measures are
useful to investors as a supplemental measure of the Company’s
ongoing operating performance. The gain from antitrust litigation
settlements relates to the settlement of lawsuits that have been
filed against brand pharmaceutical manufacturers alleging that the
manufacturer, by itself or in concert with others, took improper
actions to delay or prevent generic drugs from entering the market.
The PharMEDium remediation costs relate to costs incurred in
connection with suspended production activities following U.S. Food
and Drug Administration inspections. LIFO expense (credit) is
affected by changes in inventory quantities, product mix, and
manufacturer pricing practices, which may be impacted by market and
other external influences. The New York State Opioid Stewardship
Act, which went into effect on July 1, 2018, established an annual
$100 million fund and required manufacturers, distributors, and
importers to ratably share the assessment based upon opioids sold
or distributed to or within New York state. In December 2018, the
New York State Opioid Stewardship Act was ruled unconstitutional by
the U.S. District Court for the Southern District of New York.
Accordingly, in fiscal 2019 the Company reversed the estimated
assessment that was previously recorded in fiscal 2018.
- Adjusted operating expenses and adjusted operating expense
margin: Adjusted operating expenses is a non-GAAP financial measure
that excludes acquisition-related intangibles amortization,
employee severance, litigation, and other, certain PharMEDium
remediation costs, impairment of long-lived assets, and a goodwill
impairment charge. Adjusted operating expense margin is the ratio
of adjusted operating expenses to total revenue.
Acquisition-related intangibles amortization and a goodwill
impairment charge are excluded because they are non-cash items.
Acquisition-related intangibles amortization is also excluded
because it does not reflect the operating performance of the
acquired companies. We exclude employee severance amounts that
relate to unpredictable and/or non-recurring business
restructurings. We exclude the amount of litigation settlements and
other expenses, as well as PharMEDium remediation costs and the
impairment of long-lived assets, that are unusual, non-operating,
unpredictable, non-recurring or non-cash in nature because we
believe these exclusions facilitate the analysis of our ongoing
operational performance.
- Adjusted operating income and adjusted operating income margin:
Adjusted operating income is a non-GAAP financial measure that
excludes the same items that are described above and excluded from
adjusted gross profit and adjusted operating expenses. Adjusted
operating income margin is the ratio of adjusted operating income
to total revenue. Management believes that these non-GAAP financial
measures are useful to investors as a supplemental way to evaluate
the Company’s performance because the adjustments are unusual,
non-operating, unpredictable, non-recurring or non-cash in
nature.
- Adjusted income before income taxes: Adjusted income before
income taxes is a non-GAAP financial measure that excludes the same
items that are described above and excluded from adjusted operating
income. In addition, the gain on sale of an equity investment in
fiscal 2019, the loss on consolidation of equity investments in
fiscal 2018, the impairment on a non-customer note receivable in
fiscal 2018, and the loss on the early retirement of debt in fiscal
2018 are also excluded from adjusted income before income taxes
because these amounts are unusual, non-operating, or non-recurring.
Management believes that this non-GAAP financial measure is useful
to investors because it facilitates the calculation of the
Company’s adjusted effective tax rate.
- Adjusted effective tax rate: Adjusted effective tax rate is a
non-GAAP financial measure that is determined by dividing adjusted
income tax expense (benefit) by adjusted income before income
taxes. Management believes that this non-GAAP financial measure is
useful to investors because it presents an effective tax rate that
does not reflect unusual, non-operating, unpredictable,
non-recurring, or non-cash amounts or items that are outside the
control of the Company.
- Adjusted income tax expense (benefit): Adjusted income tax
expense is a non-GAAP financial measure that excludes the income
tax expense (benefit) associated with the same items that are
described above and excluded from adjusted income before income
taxes. In addition, the one-time U.S. tax reform ("Tax Reform")
adjustments are excluded from adjusted income tax expense. Tax
Reform includes a benefit, and any measurement period adjustments,
from applying a lower U.S. federal income tax rate to the Company's
net deferred tax liabilities as of December 31, 2017, offset in
part by a one-time transition tax on historical foreign earnings
and profits through December 31, 2017. Management believes that
this non-GAAP financial measure is useful to investors as a
supplemental way to evaluate the Company’s performance because the
adjustments are unusual, non-operating, unpredictable,
non-recurring or non-cash in nature.
- Adjusted net income (loss) attributable to noncontrolling
interest: Adjusted net income attributable to noncontrolling
interest excludes the non-controlling interest portion of
acquisition-related intangibles amortization. Management believes
that this non-GAAP financial measure is useful to investors because
it facilitates the calculation of adjusted net income attributable
to ABC.
- Adjusted net income attributable to ABC: Adjusted net income
attributable to ABC is a non-GAAP financial measure that excludes
the same items that are described above. Management believes that
this non-GAAP financial measure is useful to investors as a
supplemental way to evaluate the Company's performance because the
adjustments are unusual, non-operating, unpredictable,
non-recurring or non-cash in nature.
- Adjusted diluted earnings per share: Adjusted diluted earnings
per share excludes the per share impact of adjustments including
gain from antitrust litigation settlements; LIFO expense (credit);
PharMEDium remediation costs; costs (credit) related to the New
York State Opioid Stewardship Act; a goodwill impairment charge;
acquisition-related intangibles amortization; employee severance,
litigation, and other; gain on sale of an equity investment;
impairment of long-lived assets; the loss on consolidation of
equity investments; the impairment on a non-customer note
receivable; and the loss on early retirement of debt; in each case
net of the tax effect calculated using the applicable effective tax
rate for those items. In addition, the per share impact of Tax
Reform is excluded from adjusted diluted earnings per share.
Management believes that this non-GAAP financial measure is useful
to investors because it eliminates the per share impact of the
items that are outside the control of the Company or that we
consider to not be indicative of our ongoing operating performance
due to their inherent unusual, non-operating, unpredictable,
non-recurring, or non-cash nature.
In addition, the Company has provided non-GAAP fiscal year 2020
guidance for diluted earnings per share, operating expense,
operating income, and effective income tax rate that excludes the
same or similar items as those that are excluded from the
historical non-GAAP financial measures, as well as significant
items that are outside the control of the Company or inherently
unusual, non-operating, unpredictable, non-recurring or non-cash in
nature. In addition, it has provided fiscal year 2020 adjusted free
cash flow guidance. For fiscal year 2020, we have defined the
non-GAAP financial measure of adjusted free cash flow as net cash
provided by operating activities, excluding other significant
unpredictable or non-recurring cash payments or receipts relating
to legal settlements, minus capital expenditures. The Company does
not provide forward looking guidance on a GAAP basis for such
metrics because certain financial information, the probable
significance of which cannot be determined, is not available and
cannot be reasonably estimated. For example, LIFO expense (credit)
is largely dependent upon the future inflation or deflation of
brand and generic pharmaceuticals, which is out of the Company’s
control, and acquisition-related intangibles amortization depends
on the timing and amount of future acquisitions, which cannot be
reasonably estimated. Similarly, the timing and amount of
litigation settlements is unpredictable and non-recurring.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107005196/en/
Bennett S. Murphy Vice President, Investor
Relations 610-727-3693
bmurphy@amerisourcebergen.com
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