Revenues of $47.9 Billion for the First
Quarter, a 5.4 Percent Increase Year-Over-Year
First Quarter GAAP Diluted EPS of $0.90 and
Adjusted Diluted EPS of $1.76
Adjusted Diluted EPS Guidance Range Raised to
$7.55 to $7.80 for Fiscal 2020
The Board of Directors Increased the Quarterly
Dividend Rate by 5% to $0.42 per share
AmerisourceBergen Corporation (NYSE:ABC) today reported that in
its fiscal year 2020 first quarter ended December 31, 2019, revenue
increased 5.4 percent to $47.9 billion. On the basis of U.S.
generally accepted accounting principles (GAAP), diluted earnings
per share (EPS) was $0.90 for the December quarter of fiscal 2020,
compared to $1.84 in the prior year quarter. Adjusted diluted EPS,
which is a non-GAAP measure that excludes items described below,
increased 10.0 percent to $1.76 in the fiscal first quarter.
"We delivered strong revenue and adjusted EPS growth in the
first quarter of fiscal 2020, driven by both the Pharmaceutical
Distribution and Global Commercialization Services & Animal
Health groups," said Steven H. Collis, Chairman, President and
Chief Executive Officer of AmerisourceBergen. "Our results continue
to demonstrate the strength of AmerisourceBergen's unique
pharmaceutical-centered strategy and compelling position in the
U.S. market," said Mr. Collis.
In late January 2020 the Company decided to exit the PharMEDium
compounding business and as a result, the Company will cease all
commercial and administrative operations related to this business.
Additional details can be found in the section labeled "PharMEDium
Update".
"After a comprehensive strategic and financial review of the
PharMEDium business and continued operational challenges and
financial burden, we have determined that the best path forward is
to shut down the PharMEDium business." Mr. Collis continued, "Our
increased fiscal 2020 guidance reflects the ongoing strength of our
business and the removal of PharMEDium's operating loss for the
remainder of the fiscal year."
Today, the Company announced that the Board of Directors
declared a quarterly dividend of $0.42 per common share, a 5%
increase in the quarterly dividend rate from $0.40 per common
share. The quarterly dividend of $0.42 per common share will be
payable March 2, 2020, to stockholders of record at the close of
business on February 14, 2020.
"As we move further into fiscal 2020, we remain confident that
we will continue to execute our unique and differentiated business
strategy to deliver long-term growth for our shareholders," Mr.
Collis said.
First Quarter Fiscal Year 2020 Summary
Results
GAAP
Adjusted (Non-GAAP)
Revenue
$47.9B
$47.9B
Gross Profit
$1.2B
$1.2B
Operating Expenses
$968M
$748M
Operating Income
$263M
$495M
Interest Expense, Net
$31M
$31M
Effective Tax Rate
18.7%
21.0%
Net Income Attributable to ABC
$188M
$365M
Diluted Earnings Per Share
$0.90
$1.76
Diluted Shares Outstanding
208M
208M
Below, AmerisourceBergen presents descriptive summaries of the
Company’s GAAP and adjusted (non-GAAP) quarterly 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.
First Quarter GAAP
Results
- Revenue: In the first quarter of
fiscal 2020, revenue was $47.9 billion, up 5.4 percent compared to
the same quarter in the previous fiscal year, reflecting a 5.2
percent increase in Pharmaceutical Distribution Services revenue
and a 10.5 percent increase in revenue within Other.
- Gross Profit: Gross profit in the
fiscal 2020 first quarter was $1.2 billion, a 5.1 percent decrease
compared to the same period in the previous fiscal year. Gross
profit in the current year quarter was unfavorably impacted by
lower gains from antitrust litigation settlements, a LIFO expense
in the current year quarter in comparison to a LIFO credit in the
prior year quarter, and the prior year reversal of a previously
estimated assessment related to the New York State Opioid
Stewardship Act, offset in part by the increases in gross profit in
Other and Pharmaceutical Distribution Services. Gross profit as a
percentage of revenue was 2.57 percent, a decrease of 29 basis
points from the prior year quarter.
- Operating Expenses: In the first
quarter of fiscal 2020, operating expenses were $967.8 million,
compared to $819.8 million in the same period last fiscal year. The
increase in operating expenses was primarily due to the $138.0
million impairment of PharMEDium's long-lived assets and an
increase in distribution, selling and administrative expenses in
the quarter, partially offset by lower depreciation and
amortization expense. Operating expenses as a percentage of revenue
in the fiscal 2020 first quarter was 2.02 percent, compared to 1.81
percent for the same period in the previous fiscal year.
- Operating Income: In the fiscal
2020 first quarter, operating income declined to $263.4 million
from $477.8 million in the prior year quarter due to the increase
in operating expenses and the decrease in gross profit. Operating
income as a percentage of revenue was 0.55 percent in the first
quarter of fiscal 2020, compared to 1.05 percent for the same
period in the previous fiscal year.
- Interest Expense, Net: In the
fiscal 2020 first quarter, net interest expense of $31.0 million
was down 26.5 percent versus the prior year quarter due to certain
finance leases now being accounted for as operating leases,
resulting from the adoption of the new lease accounting standard,
and higher interest income.
- Effective Tax Rate: The effective
tax rate was 18.7 percent for the first quarter of fiscal 2020. The
effective tax rate in the quarter was primarily impacted by the
$138.0 million impairment of PharMEDium's long-lived assets. The
prior year's first quarter effective tax rate of 9.4 percent was
favorably impacted by the 2017 Tax Cuts and Jobs Act.
- Diluted Earnings Per Share:
Diluted earnings per share was $0.90 in the first quarter of fiscal
2020 compared to $1.84 in the previous fiscal year’s first quarter.
This decline was primarily due to a decrease in operating
income.
- Diluted Shares Outstanding:
Diluted weighted average shares outstanding for the first quarter
of fiscal 2020 were 207.5 million, a 3.0 percent decline versus the
prior fiscal year first quarter primarily due to share
repurchases.
PharMEDium Update
- In late January 2020 the Company decided to exit the PharMEDium
compounding business and as a result, the Company will cease all
commercial and administrative operations related to this business.
The decision to exit the PharMEDium business was due to a number of
factors including, but not limited to, ongoing operational,
regulatory, and commercial challenges, such as PharMEDium's
decision in January 2020 to suspend production at the compounding
facility in New Jersey pending facility upgrades related to the air
handling and filtration systems. In addition to the PharMEDium
impairment charge of $138 million recognized in the three months
ended December 31, 2019, the Company expects it will impair the
majority of the remaining $55 million of PharMEDium tangible assets
and all of the remaining $185 million of PharMEDium intangible
assets in the three months ending March 31, 2020. Additionally, the
Company will incur other costs, such as employee separation costs,
in connection with exiting the PharMEDium compounding business
during the fiscal year ending September 30, 2020 estimated to total
approximately $80 million to $100 million.
- As a result of the decision to exit the PharMEDium compounding
business, the Company expects to claim an ordinary income tax
deduction and estimates that it will realize a cash tax benefit in
fiscal 2020 through fiscal 2022 totaling approximately $500 million
to $600 million.
First Quarter Adjusted (non-GAAP)
Results
The comments below compare adjusted results, which exclude: gain
from antitrust litigation settlements; LIFO expense/credit;
PharMEDium remediation costs; New York State Opioid Stewardship
Act; acquisition-related intangibles amortization; employee
severance, litigation, and other; impairment of long-lived assets;
and a one-time tax reform adjustment.
- Revenue: No adjustments were made
to the GAAP presentation of revenue. In the first quarter of fiscal
2020, revenue was $47.9 billion, up 5.4 percent compared to the
same quarter in the previous fiscal year, reflecting a 5.2 percent
increase in Pharmaceutical Distribution Services revenue and a 10.5
percent increase in revenue within Other.
- Adjusted Gross Profit: Adjusted
gross profit in the fiscal 2020 first quarter was $1.2 billion,
which was up 3.3 percent compared to the same period in the
previous year, due to the increases in gross profit in Other and
Pharmaceutical Distribution Services. Adjusted gross profit as a
percentage of revenue was 2.60 percent in the fiscal 2020 first
quarter, a decrease of 5 basis points from the prior year
quarter.
- Adjusted Operating Expenses: In
the first quarter of fiscal 2020, adjusted operating expenses were
$747.9 million, an increase of 2.3 percent compared to the same
period in the previous fiscal year primarily due to an increase in
costs to support revenue growth, offset in part by operational
synergies realized from the integration of H. D. Smith. Adjusted
operating expenses as a percentage of revenue in the fiscal 2020
first quarter was 1.56 percent, compared to 1.61 percent for the
same period in the previous fiscal year.
- Adjusted Operating Income: In the
fiscal 2020 first quarter, adjusted operating income of $495.3
million increased 5.0 percent from the prior year period due to a
5.0 percent increase in operating income within Pharmaceutical
Distribution Services and a 5.6 percent increase in operating
income within Other. Adjusted operating income as a percentage of
revenue decreased 1 basis point to 1.03 percent in the fiscal 2020
first quarter compared to the previous fiscal year’s first
quarter.
- Interest Expense, Net: No
adjustments were made to the GAAP presentation of net interest
expense. In the fiscal 2020 first quarter, net interest expense of
$31.0 million was down 26.5 percent versus the prior year quarter
due to certain finance leases now being accounted for as operating
leases, resulting from the adoption of the new lease accounting
standard, and higher interest income.
- Adjusted Effective Tax Rate: The
adjusted effective tax rate was 21.0 percent for the first quarter
of fiscal 2020 and was 19.9 percent in the previous fiscal year’s
first quarter. The adjusted effective tax rate in the prior year
quarter was favorably impacted by a discrete state tax item.
- Adjusted Diluted Earnings Per
Share: Adjusted diluted earnings per share was up 10.0
percent to $1.76 in the first quarter of fiscal 2020 compared to
$1.60 in the previous fiscal year’s first 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
first quarter of fiscal 2020 were 207.5 million, a 3.0 percent
decline versus the prior fiscal year first 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 $46.0 billion,
an increase of 5.2 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 $391.7
million in the first quarter of fiscal 2020 was up 5.0 percent
compared to the same period in the previous fiscal year, primarily
due to the increase in gross profit resulting from the growth in
revenue.
Other
Revenue in Other was $1.8 billion in the first quarter of fiscal
2020, an increase of 10.5 percent compared to the same period in
the prior fiscal year, primarily due to growth at MWI, ABCS and
World Courier. Operating income in Other increased 5.6 percent to
$104.5 million in the first quarter of fiscal 2020. This increase
was primarily due to the performance of ABCS and World Courier.
Recent Company Highlights &
Milestones
- AmerisourceBergen enhanced its logistics offering by
integrating two of its businesses, World Courier, a global
logistics provider, and ICS, a third party logistics (3PL)
provider, creating the first and only specialty logistics partner
to deliver complete support from clinical trials through
commercialization. The integration offers enhanced global
capabilities for manufacturers navigating the complexities of their
product’s journey end-to-end, ultimately progressing the global
growth of the advanced therapy industry and enabling more patients
to be treated with these life-changing products.
- AmerisourceBergen was named one of America’s “Most Responsible
Companies” by Newsweek magazine and ranked 10th in the Health Care
& Life Sciences category.
- AmerisourceBergen received a perfect score of 100 on the 2019
Corporate Equality Index, the nation’s premier benchmarking survey
and report on corporate policies and practices related to LGBTQ
workplace equality, administered by the Human Rights Campaign
Foundation.
- The AmerisourceBergen Foundation announced a number of grants
aimed at improving education and access to care in animal health
throughout 2020 and beyond, including new collaborations with the
National FFA Foundation, the National Disaster Search Dog
Foundation and K9 Partners for Patriots.
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 or 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 updated its fiscal year 2020 financial
guidance to reflect the Company’s strong performance, opportunistic
share repurchases and the exit of our PharMEDium business. The
Company now expects:
- Adjusted Diluted EPS to be in the range of $7.55 to $7.80, up
from the previous range of $7.30 to $7.60.
Additional expectations now include:
- Adjusted operating income growth in the mid-single digit
percent range, up from the low-to mid-single percent range;
- Pharmaceutical Distribution Services segment operating income
growth in the mid-single digit percent range, up from the low- to
mid-single digit percent range;
- Weighted average diluted shares are now expected to be
approximately 208 million, down from the previous expectation of
between 209 million to 210 million for the fiscal year.
All other previously communicated aspects of the Company's
fiscal year 2020 financial guidance and assumptions remain the
same.
Conference Call & Slide
Presentation
The Company will host a conference call to discuss the results
at 8:30 a.m. ET on January 30, 2020. 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 (866) 270-1533.
From outside the United States, dial (412) 317-0797. 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 one hour after the
completion of the call and will remain available for one year. The
telephone replay will also be available approximately one hour
after the completion of the call and will remain available for
seven days. To access the telephone replay from within the U.S.,
dial (877) 344-7529. From Canada, dial (855) 669-9658. From outside
the United States and Canada, dial (412) 317-0088. The access code
for the replay is 10138176.
Upcoming Investor Events
AmerisourceBergen management will be attending the following
investor conference in the coming months:
- Barclays Global Healthcare Conference, March 10-12, Miami.
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 due to failure to achieve a global resolution of the
multi-district opioid litigation and other related state court
litigation, 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 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; 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 the
impairments at PharMEDium and any additional impairments with
respect to foreign operations), resulting in a charge to earnings;
the acquisition of businesses that do not perform as expected, or
that are difficult to integrate or control, 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, 2019 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 December 31,
2019
% of
Revenue
Three
Months Ended December 31,
2018
% of
Revenue
%
Change
Revenue
$
47,864,742
$
45,392,452
5.4%
Cost of goods sold
46,633,528
44,094,872
5.8%
Gross profit 1
1,231,214
2.57%
1,297,580
2.86%
(5.1)%
Operating expenses:
Distribution, selling, and
administrative
685,953
1.43%
656,585
1.45%
4.5%
Depreciation and amortization
104,515
0.22%
122,500
0.27%
(14.7)%
Employee severance, litigation, and other
2
39,309
40,672
Impairment of long-lived assets 3
138,000
—
Total operating expenses
967,777
2.02%
819,757
1.81%
18.1%
Operating income
263,437
0.55%
477,823
1.05%
(44.9)%
Other loss
2,842
3,097
Interest expense, net
31,007
42,170
(26.5)%
Income before income taxes
229,588
0.48%
432,556
0.95%
(46.9)%
Income tax expense
43,020
40,803
Net income
186,568
0.39%
391,753
0.86%
(52.4)%
Net loss attributable to noncontrolling
interest
1,072
1,899
Net income attributable to
AmerisourceBergen Corporation
$
187,640
0.39%
$
393,652
0.87%
(52.3)%
Earnings per share:
Basic
$
0.91
$
1.86
(51.1)%
Diluted
$
0.90
$
1.84
(51.1)%
Weighted average common shares
outstanding:
Basic
206,008
212,054
(2.9)%
Diluted
207,517
213,969
(3.0)%
_____________________________________
1
Includes a $13.3 million LIFO expense, an
$8.5 million gain from antitrust litigation settlements, and $7.1
million of PharMEDium remediation costs in the three months ended
December 31, 2019. Includes an $87.3 million gain from antitrust
litigation settlements, a $22.0 million reversal of a prior period
assessment relating to the New York State Opioid Stewardship Act,
$17.9 million of PharMEDium remediation costs, and a $3.0 million
LIFO credit in the three months ended December 31, 2018.
2
Includes $0.8 million of employee
severance, $24.7 million of litigation and opioid-related costs
related to legal fees in connection with opioid lawsuits and
investigations, and $13.8 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 December 31, 2019. Includes $4.8 million of
employee severance, $14.5 million of litigation costs related to
opioid lawsuits and investigations, and $21.4 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 December 31, 2018.
3
Impairment of finite-lived intangible
assets, property and equipment, and right-of-use assets relating to
PharMEDium in the three months ended December 31, 2019.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP
RECONCILIATIONS
(in thousands, except per share
data)
(unaudited)
Three Months Ended December
31, 2019
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax Expense
Net Loss Attributable to
Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
1,231,214
$
967,777
$
263,437
$
229,588
$
43,020
$
1,072
$
187,640
$
0.90
Gain from antitrust litigation
settlements
(8,492
)
—
(8,492
)
(8,492
)
(1,974
)
—
(6,518
)
(0.03
)
LIFO expense
13,281
—
13,281
13,281
3,087
—
10,194
0.05
PharMEDium remediation costs
7,135
(9,030
)
16,165
16,165
3,757
—
12,408
0.06
Acquisition-related intangibles
amortization
—
(33,566
)
33,566
33,566
7,801
(436
)
25,329
0.12
Employee severance, litigation, and
other
—
(39,309
)
39,309
39,309
9,136
—
30,173
0.15
Impairment of long-lived assets
—
(138,000
)
138,000
138,000
32,071
—
105,929
0.51
Adjusted Non-GAAP
$
1,243,138
$
747,872
$
495,266
$
461,417
$
96,898
$
636
$
365,155
$
1.76
Adjusted Non-GAAP % change vs. prior year
period
3.3
%
2.3
%
5.0
%
8.2
%
14.1
%
6.4
%
10.0
%
Percentages of Revenue:
GAAP
Adjusted Non-GAAP
Gross profit
2.57%
2.60%
Operating expenses
2.02%
1.56%
Operating income
0.55%
1.03%
_____________________________________
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 December
31, 2018
Gross Profit
Operating Expenses
Operating Income
Income Before Income
Taxes
Income Tax Expense
Net Loss Attributable to
Noncontrolling Interest
Net Income Attributable to
ABC
Diluted Earnings Per
Share
GAAP
$
1,297,580
$
819,757
$
477,823
$
432,556
$
40,803
$
1,899
$
393,652
$
1.84
Gain from antitrust litigation
settlements
(87,279
)
—
(87,279
)
(87,279
)
(18,470
)
—
(68,809
)
(0.32
)
LIFO credit
(3,029
)
—
(3,029
)
(3,029
)
(641
)
—
(2,388
)
(0.01
)
PharMEDium remediation costs
17,911
(2,584
)
20,495
20,495
4,337
—
16,158
0.08
New York State Opioid Stewardship Act
(22,000
)
—
(22,000
)
(22,000
)
(4,656
)
—
(17,344
)
(0.08
)
Acquisition-related intangibles
amortization
—
(45,152
)
45,152
45,152
9,555
(506
)
35,091
0.16
Employee severance, litigation, and
other
—
(40,672
)
40,672
40,672
16,980
—
23,692
0.11
Tax Reform 1
—
—
—
—
36,997
—
(36,997
)
(0.17
)
Adjusted Non-GAAP
$
1,203,183
$
731,349
$
471,834
$
426,567
$
84,905
$
1,393
$
343,055
$
1.60
2
Percentages of Revenue:
GAAP
Adjusted
Non-GAAP
Gross profit
2.86%
2.65%
Operating expenses
1.81%
1.61%
Operating income
1.05%
1.04%
_____________________________________
1
Amount represents the final
measurement period adjustment to the one-time transition tax on
historical foreign earnings and profits through December 31,
2017.
2
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
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended December
31,
Revenue
2019
2018
% Change
Pharmaceutical Distribution Services
$
46,036,828
$
43,744,381
5.2%
Other
1,846,984
1,670,938
10.5%
Intersegment eliminations
(19,070
)
(22,867
)
Revenue
$
47,864,742
$
45,392,452
5.4%
Three Months Ended December
31,
Operating income
2019
2018
% Change
Pharmaceutical Distribution
Services
$
391,694
$
373,207
5.0%
Other
104,479
98,934
5.6%
Intersegment eliminations
(907
)
(307
)
Total segment operating
income
495,266
471,834
5.0%
Gain from antitrust litigation
settlements
8,492
87,279
LIFO (expense) credit
(13,281
)
3,029
PharMEDium remediation costs
(16,165
)
(20,495
)
New York State Opioid Stewardship
Act
—
22,000
Acquisition-related intangibles
amortization
(33,566
)
(45,152
)
Employee severance, litigation,
and other
(39,309
)
(40,672
)
Impairment of long-lived
assets
(138,000
)
—
Operating income
$
263,437
$
477,823
Percentages of revenue:
Pharmaceutical Distribution
Services
Gross profit
1.94%
2.01%
Operating expenses
1.09%
1.16%
Operating income
0.85%
0.85%
Other
Gross profit
19.01%
19.45%
Operating expenses
13.35%
13.53%
Operating income
5.66%
5.92%
AmerisourceBergen Corporation
(GAAP)
Gross profit
2.57%
2.86%
Operating expenses
2.02%
1.81%
Operating income
0.55%
1.05%
AmerisourceBergen Corporation
(Non-GAAP)
Adjusted gross profit
2.60%
2.65%
Adjusted operating expenses
1.56%
1.61%
Adjusted operating income
1.03%
1.04%
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)
December 31,
September 30,
2019
2019
ASSETS
Current assets:
Cash and cash equivalents
$
3,232,604
$
3,374,194
Accounts receivable, net
12,568,816
12,386,879
Inventories
11,686,466
11,060,254
Right to recover asset
1,277,714
1,147,483
Prepaid expenses and other
189,216
163,244
Total current assets
28,954,816
28,132,054
Property and equipment, net
1,442,383
1,770,516
Goodwill and other intangible assets
8,846,162
9,000,343
Other long-term assets
773,377
269,067
Total assets
$
40,016,738
$
39,171,980
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable
$
29,181,860
$
28,385,074
Other current liabilities
916,107
1,057,208
Short-term debt
532,489
139,012
Total current liabilities
30,630,456
29,581,294
Long-term debt
3,636,114
4,033,880
Accrued income taxes
289,047
284,075
Deferred income taxes
1,895,453
1,860,195
Other long-term liabilities
496,587
419,330
Total equity
3,069,081
2,993,206
Total liabilities and equity
$
40,016,738
$
39,171,980
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended December
31,
2019
2018
Operating Activities:
Net income
$
186,568
$
391,753
Adjustments to reconcile net
income to net cash provided by operating activities 1
341,020
206,905
Changes in operating assets and
liabilities, excluding the effects of acquisitions:
Accounts receivable
(307,204
)
(658,890
)
Inventories
(630,980
)
(898,775
)
Accounts payable
787,037
1,498,643
Other
(233,631
)
(60,668
)
Net cash provided by operating
activities
142,810
478,968
Investing Activities:
Capital expenditures
(67,305
)
(79,233
)
Cost of acquired companies, net
of cash acquired
—
(52,398
)
Other
4,966
4,013
Net cash used in investing
activities
(62,339
)
(127,618
)
Financing Activities:
Net (repayments) borrowings
(13,981
)
8,442
Purchases of common stock 2
(135,128
)
(239,008
)
Exercises of stock options
20,113
22,400
Cash dividends on common
stock
(83,088
)
(85,535
)
Other
(9,977
)
(10,009
)
Net cash used in financing
activities
(222,061
)
(303,710
)
(Decrease) increase in cash and
cash equivalents
(141,590
)
47,640
Cash and cash equivalents at
beginning of period
3,374,194
2,492,516
Cash and cash equivalents at end
of period
$
3,232,604
$
2,540,156
_____________________________________
1
Includes a LIFO expense of $13.3 million
and an impairment of long-lived assets of $138.0 million in the
three months ended December 31, 2019. Includes a LIFO credit of
$3.0 million in the three months ended December 31, 2018.
2
Purchases of common stock in the three
months ended December 31, 2019 includes $14.8 million of September
2019 purchases that cash settled in October 2019 and excludes $9.4
million of December 2019 purchases that cash settled in January
2020. Purchases of common stock in the three months ended December
31, 2018 includes $24.0 million of September 2018 purchases that
cash settled in October 2018 and excludes $10.8 million of December
2018 purchases that cash settled in January 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, LIFO expense
(credit), certain PharMEDium remediation costs, and the (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 (credit) related to
the New York State Opioid Stewardship Act is excluded because it is
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 requires 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.
- 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, and impairment of long-lived assets. Adjusted
operating expense margin is the ratio of adjusted operating
expenses to total revenue. Acquisition-related intangibles
amortization is excluded because it is a non-cash item and does not
reflect the operating performance of the acquired companies. We
exclude employee severance amounts that relate to unpredictable
and/or non-recurring business restructuring. 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. 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: Adjusted income tax expense is a
non-GAAP financial measure that excludes the income tax expense
associated with the same items that are described above and
excluded from adjusted income before income taxes. In addition, the
final U.S. tax reform measurement period adjustment to the one-time
transition tax liability on historical foreign earnings and profits
through December 31, 2017 ("Tax Reform") is excluded from adjusted
income tax expense for the three months ended December 31, 2018.
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 loss attributable to noncontrolling interest:
Adjusted net loss 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; the (credit) related to the New York
State Opioid Stewardship Act; acquisition-related intangibles
amortization; employee severance, litigation, and other; and
impairment of long-lived assets; 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 for the three months ended
December 31, 2018. 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. For the three
months ended December 31, 2019 adjusted free cash flow of $133.7
million consisted of net cash provided by operating activities of
$142.8 million, plus $66.7 million in cash payments made relating
to unfavorable legal settlements, minus $8.5 million in cash
payments received related to favorable legal settlements, and minus
capital expenditures of $67.3 million. 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/20200130005132/en/
Bennett S. Murphy Senior Vice President, Investor
Relations 610-727-3693
bmurphy@amerisourcebergen.com
AmerisourceBergen (NYSE:ABC)
Historical Stock Chart
From Mar 2024 to Apr 2024
AmerisourceBergen (NYSE:ABC)
Historical Stock Chart
From Apr 2023 to Apr 2024