Revenue of $49.2 Billion for the Fourth
Quarter, a 7.9 Percent Increase Year-Over-Year
Fourth Quarter GAAP Diluted EPS of $(23.74) and
Adjusted Diluted EPS of $1.89
Revenue of $189.9 Billion for Fiscal Year 2020,
a 5.7 Percent Increase Year-Over-Year
Fiscal Year 2020 GAAP Diluted EPS of $(16.65)
and Adjusted Diluted EPS of $7.90
AmerisourceBergen Corporation (NYSE:ABC) today reported that in
its fiscal year 2020 fourth quarter ended September 30, 2020,
revenue increased 7.9 percent to $49.2 billion. Revenue increased
5.7 percent to $189.9 billion for the fiscal year. On the basis of
U.S. generally accepted accounting principles (GAAP), diluted
earnings per share (EPS) was $(23.74) for the September quarter of
fiscal 2020, compared to $0.63 in the prior year quarter. Adjusted
diluted EPS, which is a non-GAAP measure that excludes items
described below, including a $6.6 billion expense accrual related
to opioid lawsuits, increased 17.4 percent to $1.89 in the fiscal
fourth quarter. For fiscal year 2020, adjusted diluted EPS
increased 11.4 percent to $7.90.
“AmerisourceBergen delivered strong revenue and adjusted diluted
EPS growth in fiscal year 2020. Working in an unprecedented
environment, our associates rallied around our purpose of being
united in our responsibility to create healthier futures. They
proved the resilience of our business by continuously innovating to
meet customer needs and delivering unparalleled execution to meet
patient needs. By focusing on our values, we ensured a stable
supply chain and demonstrated the vital nature of our role in the
health system," said Steven H. Collis, Chairman, President &
Chief Executive Officer of AmerisourceBergen.
"We are well-positioned as we enter fiscal 2021," Mr. Collis
continued. "We will leverage our strong customer base, leadership
in specialty, dedication to innovation, and successful corporate
stewardship to grow our portfolio of pharmaceutical-centric
services and solutions, further our execution excellence, advance
our talent, and become an even more unified AmerisourceBergen. We
also remain committed to delivering long-term growth and creating
value for our shareholders, partners, customers, and the patients
they serve."
Fourth Quarter Fiscal Year 2020 Summary
Results
GAAP
Adjusted (Non-GAAP)
Revenue
$49.2B
$49.2B
Gross Profit
$1.3B
$1.3B
Operating Expenses
$7.5B
$795M
Operating (Loss)
Income
$(6.1)B
$530M
Interest Expense, Net
$35M
$35M
Effective Tax Rate
21.1%
21.7%
Net (Loss) Income Attributable
to ABC
$(4.8)B
$389M
Diluted Earnings Per
Share
$(23.74)
$1.89
Diluted Shares
Outstanding
204.1M
206.4M
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 2020, revenue was $49.2 billion, up 7.9 percent compared to
the same quarter in the previous fiscal year, reflecting a 7.8
percent increase in Pharmaceutical Distribution Services revenue
and a 10.8 percent increase in revenue within Other.
- Gross Profit: Gross profit in the
fiscal 2020 fourth quarter was $1.3 billion, a 13.7 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 $35.8 million LIFO credit in the current year quarter
versus a $57.2 million LIFO expense in the prior year period. Gross
profit as a percentage of revenue was 2.74 percent, an increase of
14 basis points from the prior year quarter.
- Operating Expenses: In the fourth
quarter of fiscal 2020, operating expenses were $7.5 billion,
compared to $1.0 billion in the same prior year period primarily
due to a $6.6 billion expense accrual in connection with opioid
lawsuits. Operating expenses as a percentage of revenue in the
fiscal 2020 fourth quarter were 15.15 percent, compared to 2.20
percent for the same period in the previous fiscal year.
- Operating (Loss) Income: In the
fiscal 2020 fourth quarter, operating (loss) income was $(6.1)
billion versus $179.8 million in the prior year quarter. Operating
income was negatively impacted by the previously mentioned legal
expense accrual. Operating (loss) income as a percentage of revenue
in the fiscal 2020 fourth quarter was (12.41) percent compared to
0.39 percent for the same period in the previous fiscal year.
- Interest Expense, Net: In the
fiscal 2020 fourth quarter, net interest expense of $34.7 million
was down 4.7 percent versus the prior year quarter due to a
decrease in interest expense, substantially offset by a decrease in
interest income as a result of a decline in investment interest
rates.
- Effective Tax Rate: The effective
tax rate was 21.1 percent for the fourth quarter of fiscal 2020
reflecting the legal expense accrual and a credit related to Swiss
tax reform.
- Diluted Earnings Per Share:
Diluted earnings per share was $(23.74) in the fourth quarter of
fiscal 2020 compared to $0.63 in the previous fiscal year fourth
quarter. This decrease was primarily due to the legal expense
accrual.
- Diluted Shares Outstanding:
Diluted weighted average shares outstanding for the fourth quarter
of fiscal 2020 were 204.1 million, a 2.7 percent decline versus the
prior fiscal year fourth quarter primarily due to share repurchases
made earlier in the fiscal year, net of stock option
exercises.
Opioid Litigation
In the fourth quarter of fiscal 2020, with regard to litigation
relating to the distribution of prescription opioid pain
medications, the Company recorded a $6.6 billion ($5.5 billion
after tax) charge, which is excluded from its adjusted (non-GAAP)
results. The Company is in advanced discussions, which are ongoing,
to reach a global settlement to be paid over an 18-year period to
resolve cases currently filed and that could be filed by states,
counties, municipalities and other governmental entities covered by
the settlement. The Company has recorded the charge now that it has
determined that a loss is probable and the amount is reasonably
estimable. A global settlement remains subject to contingencies
that could impact whether the parties ultimately decide to move
forward.
Fourth Quarter Adjusted (non-GAAP)
Results
- Revenue: No adjustments were made
to the GAAP presentation of revenue. In the fourth quarter of
fiscal 2020, revenue was $49.2 billion, up 7.9 percent compared to
the same quarter in the previous fiscal year, reflecting a 7.8
percent increase in Pharmaceutical Distribution Services revenue
and a 10.8 percent increase in revenue within Other.
- Adjusted Gross Profit: Adjusted
gross profit in the fiscal 2020 fourth quarter was $1.3 billion,
which was up 6.4 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 2.69 percent in the fiscal 2020 fourth quarter, a
decrease of 4 basis points from the prior year quarter.
- Adjusted Operating Expenses: In
the fourth quarter of fiscal 2020, adjusted operating expenses were
$795.4 million, an increase of 0.8 percent compared to the same
period in the previous fiscal year. Adjusted operating expenses as
a percentage of revenue in the fiscal 2020 fourth quarter was 1.62
percent, compared to 1.73 percent for the same period in the
previous fiscal year.
- Adjusted Operating Income: In the
fiscal 2020 fourth quarter, adjusted operating income of $530.0
million increased 16.2 percent from the prior year period due to a
15.2 percent increase in operating income within Pharmaceutical
Distribution Services and a 20.5 percent increase in operating
income within Other. Adjusted operating income as a percentage of
revenue was 1.08 percent, which was up 8 basis points from the
prior year quarter.
- Interest Expense, Net: No
adjustments were made to the GAAP presentation of net interest
expense. In the fiscal 2020 fourth quarter, net interest expense of
$34.7 million was down 4.7 percent versus the prior year quarter
due to a decrease in interest expense, substantially offset by a
decrease in interest income as a result of a decline in investment
interest rates.
- Adjusted Effective Tax Rate: The
adjusted effective tax rate was 21.7 percent for the fourth quarter
of fiscal 2020 and included a discrete unfavorable item. The prior
year fourth quarter effective tax rate was 19.6 percent and
included a favorable discrete item.
- Adjusted Diluted Earnings Per
Share: Adjusted diluted earnings per share was up 17.4
percent to $1.89 in the fourth quarter of fiscal 2020 compared to
$1.61 in the previous fiscal year fourth quarter, primarily driven
by the increase in adjusted operating income and a slightly lower
diluted share count.
- Adjusted Diluted Shares
Outstanding: Adjusted diluted weighted average shares
outstanding for the fourth quarter of fiscal 2020 were 206.4
million, a 1.6 percent decline versus the prior fiscal year fourth
quarter primarily due to share repurchases earlier in the fiscal
year, net of stock option exercises.
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 $47.3 billion,
an increase of 7.8 percent compared to the same quarter in the
prior fiscal year primarily due to increased volume associated with
the growth of some of its largest customers and continued strong
specialty product sales. Segment operating income of $425.6 million
in the fourth quarter of fiscal 2020 was up 15.2 percent compared
to the same period in the previous fiscal year, primarily due to
the increase in gross profit, the exit of the PharMEDium
compounding business, and modest expense growth.
Other
Revenue in Other was $2.0 billion in the fourth quarter of
fiscal 2020, an increase of 10.8 percent compared to the same
period in the prior fiscal year due to growth at all three
operating segments: MWI, ABCS, and World Courier. Operating income
in Other increased 20.5 percent to $104.5 million in the fourth
quarter of fiscal 2020 primarily due to an increase at World
Courier.
Fiscal Year 2020 Summary
Results
GAAP
Adjusted (non-GAAP)
Revenue
$189.9B
$189.9B
Gross Profit
$5.2B
$5.2B
Operating Expenses
$10.3B
$3.0B
Operating (Loss)
Income
$(5.1)B
$2.2B
Interest Expense, Net
$138M
$138M
Effective Tax Rate
35.8%
20.8%
Net (Loss) Income Attributable
to ABC
$(3.4)B
$1.6B
Diluted Earnings Per
Share
$(16.65)
$7.90
Diluted Shares
Outstanding
204.8M
206.6M
Summary Fiscal Year GAAP
Results
In fiscal year 2020, GAAP diluted EPS was $(16.65), compared to
$4.04 in the prior year. Revenue of $189.9 billion was up 5.7
percent over the last fiscal year. Gross profit increased 1.0
percent to $5.2 billion primarily due to increases in gross profit
within Pharmaceutical Distribution Services and Other and was
partially offset by lower gains from antitrust litigation
settlements and a LIFO expense in the current year versus a LIFO
credit in the prior year. Operating expenses increased 156.5
percent and operating income decreased 561.8 percent over the prior
fiscal year primarily due to the expense accrual in connection with
opioid lawsuits. Diluted weighted average shares outstanding in
fiscal 2020 were 204.8 million, down 3.3 percent from the prior
fiscal year.
Summary Fiscal Year Adjusted (non-GAAP)
Results
In fiscal year 2020, adjusted diluted EPS was $7.90, an increase
of 11.4 percent over the prior fiscal year primarily due to an
increase in operating income, and a decrease in adjusted diluted
weighted average shares outstanding. Revenue increased 5.7 percent
from last fiscal year to $189.9 billion. Adjusted gross profit
increased by $221.1 million, or 4.4 percent, from the prior fiscal
year to $5.2 billion due to the increases in gross profit within
Pharmaceutical Distribution Services and Other. Adjusted operating
income increased 7.5 percent due to an increase in gross profit and
a favorable comparison due to the exit of the PharMEDium
compounding business, and modest expense growth. Adjusted operating
income margin increased 2 basis points from 1.14 percent to 1.16
percent. Adjusted diluted weighted average shares outstanding in
fiscal 2020 were 206.6 million, down 2.5 percent from the prior
fiscal year.
Recent Company Highlights &
Milestones
- AmerisourceBergen was selected by the Department of Health and
Human Services to store, manage, and distribute pharmaceuticals for
the Strategic National Stockpile.
- Good Neighbor Pharmacy, AmerisourceBergen's national
independent pharmacy network, hosted ThoughtSpot, its annual
conference and tradeshow. Thousands of independent pharmacists
participated in ThoughtSpot 2020 which included a virtual general
session and keynote address, more than 40 on-demand continuing
education sessions, and a selection of live webinars hosted on
AmerisourceBergen's new virtual event platform.
- AmerisourceBergen hosted its first-ever ThinkLive Trade virtual
event, a three-day online summit geared toward brand, specialty and
generic manufacturers. The event addressed current industry
challenges and how AmerisourceBergen will collaborate with
partners, manufacturers and customers to drive supply chain
sophistication and optimize the development and delivery of
pharmaceuticals and healthcare products in the future.
- The AmerisourceBergen Foundation, a separate not-for-profit
charitable giving organization, has continued making grants to
organizations that promote social justice, health access and
equity, and organizations that are providing relief to those
impacted by the pandemic, Hurricane Sally, and wildfires throughout
the West Coast.
Dividend Declaration
The Company's Board of Directors declared a quarterly dividend
of $0.44 per common share, a 5% increase in its quarterly dividend
rate from $0.42 per common share. The quarterly dividend of $0.44
per common share will be payable November 30, 2020, to stockholders
of record at the close of business on November 16, 2020.
Fiscal Year 2021
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 2021 Expectations on an
Adjusted (non-GAAP) Basis
AmerisourceBergen has introduced its fiscal year 2021 financial
guidance, which reflects growth in both Pharmaceutical Distribution
Services and businesses focused on Global Commercialization
Services & Animal Health. AmerisourceBergen does not include
unidentified capital allocation opportunities into its
forward-looking guidance. The Company expects:
- Revenue growth in the mid-single digit percent range; and
- Adjusted diluted earnings per share to be in the range of $8.20
to $8.45.
Additional expectations include:
- Adjusted operating expenses to increase in the mid-single digit
percent range;
- Adjusted operating income growth in the mid-single digit
percent range;
- Pharmaceutical Distribution Services segment operating income
growth in the mid-single digit percent range;
- Other, which is comprised of businesses focused on Global
Commercialization Services & Animal Health, operating income
growth in the mid-single digit percent range;
- Adjusted effective tax rate to be approximately 21 percent to
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 206
million to 207 million for the fiscal year.
Conference Call & Slide
Presentation
The Company will host a conference call to discuss the results
at 8:00 a.m. ET on November 5, 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 (844) 808-6694. 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 (877) 344-7529. From outside the U.S., dial +1 (412) 317-0088.
The access code for the replay is 10148255.
Upcoming Investor Events
AmerisourceBergen management will be attending the following
investor conference in the coming months:
- J.P. Morgan Healthcare Conference, January 10-14.
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
$185 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; 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, including
as a result of the COVID-19 impact on such 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; managing foreign expansion, including
non-compliance with the U.S. Foreign Corrupt Practices Act,
anti-bribery laws, economic sanctions and import laws and
regulations; substantial defaults in payment, material reduction in
purchases by or the loss, bankruptcy or insolvency of a major
customer, including as a result of COVID-19; the loss, bankruptcy
or insolvency of a major supplier, including as a result of
COVID-19; financial market volatility and disruption; financial and
other impacts of COVID-19 on our operations or business continuity;
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),
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
September 30, 2020
% of Revenue
Three Months Ended
September 30, 2019
% of Revenue
% Change
Revenue
$
49,244,768
$
45,637,802
7.9
%
Cost of goods sold
47,897,921
44,453,065
7.7
%
Gross profit 1
1,346,847
2.74
%
1,184,737
2.60
%
13.7
%
Operating expenses:
Distribution, selling, and administrative
2
720,966
1.46
%
721,944
1.58
%
(0.1
)%
Depreciation and amortization
97,337
0.20
%
108,545
0.24
%
(10.3
)%
Employee severance, litigation, and other
3
6,641,681
174,407
Total operating expenses
7,459,984
15.15
%
1,004,896
2.20
%
642.4
%
Operating (loss) income
(6,113,137
)
(12.41
)%
179,841
0.39
%
(3,499.2
)%
Other income, net
(4,387
)
(1,213
)
Interest expense, net
34,707
36,403
(4.7
)%
(Loss) income before income taxes
(6,143,457
)
(12.48
)%
144,651
0.32
%
(4,347.1
)%
Income tax (benefit) expense 4
(1,298,952
)
12,344
Net (loss) income
(4,844,505
)
(9.84
)%
132,307
0.29
%
(3,761.6
)%
Net (income) loss attributable to
noncontrolling interest
(1,567
)
312
Net (loss) income attributable to
AmerisourceBergen Corporation
$
(4,846,072
)
(9.84
)%
$
132,619
0.29
%
(3,754.1
)%
Earnings per share:
Basic
$
(23.74
)
$
0.64
(3,809.4
)%
Diluted
$
(23.74
)
$
0.63
(3,868.3
)%
Weighted average common shares
outstanding:
Basic
204,094
207,979
(1.9
)%
Diluted
204,094
209,680
(2.7
)%
________________________________________
1
Includes a $35.8 million LIFO credit, an
estimated $14.8 million assessment relating to the New York State
Opioid Stewardship Act (for the period covering January 1, 2017
through December 31, 2018), and a $0.5 million gain from antitrust
litigation settlements in the three months ended September 30,
2020. 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.
2
Includes a $2.2 million credit of
PharMEDium shutdown costs in the three months ended September 30,
2020. Includes $7.0 million of PharMEDium remediation costs in the
three months ended September 30, 2019.
3
Includes $2.0 million of employee
severance, a $6,606.9 million legal accrual and $28.5 million of
legal fees in connection with opioid lawsuits and investigations,
and $4.2 million of other costs in connection with business
transformation efforts, acquisition-related deal and integration
costs, and other restructuring initiatives in the three months
ended September 30, 2020. 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 business transformation
efforts, acquisition-related deal and integration costs, and other
restructuring initiatives in the three months ended September 30,
2019.
4
Includes a $1,078.6 million tax benefit
relating to the $6.6 billion legal expense accrual in connection
with opioid lawsuits, a $360.7 million tax benefit relating to
Swiss tax reform, and a $20.4 million adjustment to discrete tax
benefits previously recognized primarily attributable to the income
tax deductions resulting from the permanent shutdown of the
PharMEDium business in the three months ended September 30,
2020.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share
data)
(unaudited)
Fiscal Year Ended
September 30, 2020
% of Revenue
Fiscal Year Ended
September 30, 2019
% of Revenue
% Change
Revenue
$
189,893,926
$
179,589,121
5.7
%
Cost of goods sold
184,702,042
174,450,809
5.9
%
Gross profit 1
5,191,884
2.73
%
5,138,312
2.86
%
1.0
%
Operating expenses:
Distribution, selling, and administrative
2
2,767,217
1.46
%
2,663,508
1.48
%
3.9
%
Depreciation and amortization
391,062
0.21
%
462,407
0.26
%
(15.4
)%
Employee severance, litigation, and other
3
6,807,307
330,474
Impairment of PharMEDium assets
361,652
570,000
Total operating expenses
10,327,238
5.44
%
4,026,389
2.24
%
156.5
%
Operating (loss) income
(5,135,354
)
(2.70
)%
1,111,923
0.62
%
(561.8
)%
Other income, net 4
(1,581
)
(12,952
)
Interest expense, net
137,883
157,769
(12.6
)%
Loss on early retirement of debt
22,175
—
(Loss) income before income taxes
(5,293,831
)
(2.79
)%
967,106
0.54
%
(647.4
)%
Income tax (benefit) expense 5
(1,894,273
)
112,971
Net (loss) income
(3,399,558
)
(1.79
)%
854,135
0.48
%
(498.0
)%
Net (income) loss attributable to
noncontrolling interest
(9,158
)
1,230
Net (loss) income attributable to
AmerisourceBergen Corporation
$
(3,408,716
)
(1.80
)%
$
855,365
0.48
%
(498.5
)%
Earnings per share:
Basic
$
(16.65
)
$
4.07
(509.1
)%
Diluted
$
(16.65
)
$
4.04
(512.1
)%
Weighted average common shares
outstanding:
Basic
204,783
210,165
(2.6
)%
Diluted
204,783
211,840
(3.3
)%
________________________________________
1
Includes an estimated $14.8
million assessment relating to the New York State Opioid
Stewardship Act (for the period covering January 1, 2017 through
December 31, 2018), $12.6 million of PharMEDium remediation and
shutdown costs, a $9.1 million gain from antitrust litigation
settlements, and a $7.4 million LIFO expense in the fiscal year
ended September 30, 2020. 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 estimated assessment relating to the New
York State Opioid Stewardship Act in the fiscal year ended
September 30, 2019.
2
Includes $46.8 million of
PharMEDium remediation and shutdown costs and a $12.2 million
adjustment to Profarma's estimate of contingent consideration
related to the purchase price of one of its prior business
acquisitions in the fiscal year ended September 30, 2020. Includes
$20.8 million of PharMEDium remediation costs in the fiscal year
ended September 30, 2019.
3
Includes $34.4 million of
employee severance, a $6,606.9 million legal accrual and $115.4
million of legal fees in connection with opioid lawsuits and
investigations, and $50.6 million of other costs in connection with
business transformation efforts, other restructuring initiatives,
and acquisition-related deal and integration costs in the fiscal
year ended September 30, 2020. 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 business transformation
efforts, acquisition-related deal and integration costs, and other
restructuring initiatives in the fiscal year ended September 30,
2019.
4
Includes a $13.7 million gain on
the sale of an equity investment in the fiscal year ended September
30, 2019.
5
Includes a $1,078.6 million tax
benefit relating to the $6.6 billion legal expense accrual in
connection with opioid lawsuits, $720.6 million of discrete tax
benefits primarily attributable to the income tax deductions
resulting from the permanent shutdown of the PharMEDium business,
and a $360.7 million tax benefit relating to Swiss tax reform in
the fiscal year ended September 30, 2020. Includes a $37.0 million
measurement period adjustment of the one-time transition tax on
historical foreign earnings and profits through December 31, 2017
in the fiscal year ended September 30, 2019.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP
RECONCILIATIONS
(in thousands, except per share
data)
(unaudited)
Three Months Ended September
30, 2020
Gross Profit
Operating Expenses
Operating (Loss)
Income
(Loss) Income Before Income
Taxes
Income Tax (Benefit)
Expense
Net Income Attributable to
Noncontrolling Interest
Net (Loss) Income
Attributable to ABC
Diluted Earnings Per
Share
GAAP
$
1,346,847
$
7,459,984
$
(6,113,137
)
$
(6,143,457
)
$
(1,298,952
)
$
(1,567
)
$
(4,846,072
)
$
(23.74
)
Gain from antitrust litigation
settlements
(530
)
—
(530
)
(530
)
112
—
(642
)
—
LIFO credit
(35,773
)
—
(35,773
)
(35,773
)
(8,989
)
—
(26,784
)
(0.13
)
PharMEDium shutdown costs
—
2,200
(2,200
)
(2,200
)
(2,132
)
—
(68
)
—
New York State Opioid Stewardship Act
14,800
—
14,800
14,800
3,240
—
11,560
0.06
Acquisition-related intangibles
amortization
—
(25,133
)
25,133
25,133
3,213
(437
)
21,483
0.10
Employee severance, litigation, and other
1
—
(6,641,681
)
6,641,681
6,641,681
1,081,721
—
5,559,960
27.20
Impairment of PharMEDium assets
—
—
—
—
(9,700
)
—
9,700
0.05
Contingent consideration adjustment
—
—
—
—
327
189
(138
)
—
Loss on early retirement of debt
—
—
—
—
(595
)
—
595
—
Certain discrete tax benefits 2
—
—
—
—
(20,425
)
—
20,425
0.10
Tax reform 3
—
—
—
—
360,745
—
(360,745
)
(1.75
)
Adjusted Non-GAAP
$
1,325,344
$
795,370
$
529,974
$
499,654
$
108,565
$
(1,815
)
$
389,274
$
1.89
Adjusted Non-GAAP % change vs. prior year
quarter
6.4
%
0.8
%
16.2
%
18.7
%
31.5
%
15.1
%
17.4
%
Percentages of Revenue:
GAAP
Adjusted Non-GAAP
Gross profit
2.74%
2.69%
Operating expenses
15.15%
1.62%
Operating (loss) income
(12.41)%
1.08%
________________________________________
1
Includes a $6.6 billion legal
expense accrual in connection with opioid lawsuits.
2
Represents an adjustment to
discrete tax benefits previously recognized primarily attributable
to the income tax deductions resulting from the permanent shutdown
of the PharMEDium business.
3
Represents a tax benefit relating
to Swiss tax reform.
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, 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
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)
Fiscal Year Ended September
30, 2020
Gross Profit
Operating Expenses
Operating (Loss)
Income
(Loss) Income Before Income
Taxes
Income Tax (Benefit)
Expense
Net Income Attributable to
Noncontrolling Interest
Net (Loss) Income Attributable
to ABC
Diluted Earnings Per
Share
GAAP
$
5,191,884
$
10,327,238
$
(5,135,354
)
$
(5,293,831
)
$
(1,894,273
)
$
(9,158
)
$
(3,408,716
)
$
(16.65
)
Gain from antitrust litigation
settlements
(9,076
)
—
(9,076
)
(9,076
)
(1,988
)
—
(7,088
)
(0.03
)
LIFO expense
7,422
—
7,422
7,422
1,625
—
5,797
0.03
PharMEDium shutdown and remediation
costs
12,556
(46,815
)
59,371
59,371
12,996
—
46,375
0.22
New York State Opioid Stewardship Act
14,800
—
14,800
14,800
3,240
—
11,560
0.06
Acquisition-related intangibles
amortization
—
(110,478
)
110,478
110,478
24,184
(1,745
)
84,549
0.41
Employee severance, litigation, and other
1
—
(6,807,307
)
6,807,307
6,807,307
1,122,417
—
5,684,890
27.66
Impairment of PharMEDium assets
—
(361,652
)
361,652
361,652
79,165
—
282,487
1.37
Contingent consideration adjustment
—
12,153
(12,153
)
(12,153
)
(2,660
)
5,867
(3,626
)
(0.02
)
Loss on early retirement of debt
—
—
—
22,175
4,854
—
17,321
0.08
Certain discrete tax benefits 2
—
—
—
—
720,590
—
(720,590
)
(3.49
)
Tax reform 3
—
—
—
—
360,745
—
(360,745
)
(1.75
)
Adjusted Non-GAAP
$
5,217,586
$
3,013,139
$
2,204,447
$
2,068,145
$
430,895
$
(5,036
)
$
1,632,214
$
7.90
4
Adjusted Non-GAAP % change vs. prior
year
4.4
%
2.3
%
7.5
%
9.3
%
10.5
%
8.7
%
11.4
%
Percentages of Revenue:
GAAP
Adjusted Non-GAAP
Gross profit
2.73%
2.75%
Operating expenses
5.44%
1.59%
Operating (loss) income
(2.70)%
1.16%
________________________________________
1
Includes a $6.6 billion legal
expense accrual in connection with opioid lawsuits.
2
Represents discrete tax benefits
primarily attributable to the income tax deductions resulting from
the permanent shutdown of the PharMEDium business.
3
Represents a tax benefit relating
to Swiss tax reform.
4
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 PharMEDium 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
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 of 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
RECONCILIATION OF DILUTED
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (GAAP TO NON-GAAP)
(in thousands)
(unaudited)
Three Months Ended
September 30,
Fiscal Year Ended
September 30,
2020
2019
2020
2019
Basic shares outstanding
204,094
207,979
204,783
210,165
Stock option and restricted stock unit
dilution
—
1,701
—
1,675
GAAP diluted shares outstanding
204,094
209,680
204,783
211,840
Stock option and restricted stock unit
dilution1
2,262
—
1,839
—
Non-GAAP diluted shares outstanding
206,356
209,680
206,622
211,840
1 For the non-GAAP presentation, diluted
weighted average common shares outstanding has been adjusted to
include the impact of the stock options and restricted stock units
that were anti-dilutive for GAAP presentation.
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
2020
2019
% Change
Pharmaceutical Distribution Services
$
47,288,572
$
43,865,440
7.8
%
Other
1,990,992
1,797,436
10.8
%
Intersegment eliminations
(34,796
)
(25,074
)
Revenue
$
49,244,768
$
45,637,802
7.9
%
Three Months Ended September
30,
Operating (loss) income
2020
2019
% Change
Pharmaceutical Distribution Services
$
425,567
$
369,303
15.2
%
Other
104,525
86,737
20.5
%
Intersegment eliminations
(118
)
39
Total segment operating income
529,974
456,079
16.2
%
Gain from antitrust litigation
settlements
530
3,137
LIFO credit (expense)
35,773
(57,203
)
PharMEDium shutdown and remediation
costs
2,200
(13,687
)
New York State Opioid Stewardship Act
(14,800
)
—
Acquisition-related intangibles
amortization
(25,133
)
(34,078
)
Employee severance, litigation, and
other
(6,641,681
)
(174,407
)
Operating (loss) income
$
(6,113,137
)
$
179,841
Percentages of revenue:
Pharmaceutical Distribution Services
Gross profit
2.05
%
2.07
%
Operating expenses
1.15
%
1.23
%
Operating income
0.90
%
0.84
%
Other
Gross profit
18.08
%
18.76
%
Operating expenses
12.83
%
13.93
%
Operating income
5.25
%
4.83
%
AmerisourceBergen Corporation (GAAP)
Gross profit
2.74
%
2.60
%
Operating expenses
15.15
%
2.20
%
Operating (loss) income
(12.41
)%
0.39
%
AmerisourceBergen Corporation
(Non-GAAP)
Adjusted gross profit
2.69
%
2.73
%
Adjusted operating expenses
1.62
%
1.73
%
Adjusted operating income
1.08
%
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
2020
2019
% Change
Pharmaceutical Distribution Services
$
182,467,189
$
172,813,537
5.6
%
Other
7,525,102
6,868,341
9.6
%
Intersegment eliminations
(98,365
)
(92,757
)
Revenue
$
189,893,926
$
179,589,121
5.7
%
Fiscal Year Ended September
30,
Operating (loss) income
2020
2019
% Change
Pharmaceutical Distribution Services
$
1,807,001
$
1,671,251
8.1
%
Other
400,139
380,660
5.1
%
Intersegment eliminations
(2,693
)
(659
)
Total segment operating income
2,204,447
2,051,252
7.5
%
Gain from antitrust litigation
settlements
9,076
145,872
LIFO (expense) credit
(7,422
)
22,544
PharMEDium shutdown and remediation
costs
(59,371
)
(69,423
)
New York State Opioid Stewardship Act
(14,800
)
22,000
Acquisition-related intangibles
amortization
(110,478
)
(159,848
)
Employee severance, litigation, and
other
(6,807,307
)
(330,474
)
Impairment of PharMEDium assets
(361,652
)
(570,000
)
Contingent consideration adjustment
12,153
—
Operating (loss) income
$
(5,135,354
)
$
1,111,923
Percentages of revenue:
Pharmaceutical Distribution Services
Gross profit
2.10
%
2.13
%
Operating expenses
1.11
%
1.16
%
Operating income
0.99
%
0.97
%
Other
Gross profit
18.60
%
19.13
%
Operating expenses
13.28
%
13.59
%
Operating income
5.32
%
5.54
%
AmerisourceBergen Corporation (GAAP)
Gross profit
2.73
%
2.86
%
Operating expenses
5.44
%
2.24
%
Operating (loss) income
(2.70
)%
0.62
%
AmerisourceBergen Corporation
(Non-GAAP)
Adjusted gross profit
2.75
%
2.78
%
Adjusted operating expenses
1.59
%
1.64
%
Adjusted operating income
1.16
%
1.14
%
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)
Fiscal Year Ended September
30,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
4,597,746
$
3,374,194
Accounts receivable, net
13,846,301
12,386,879
Inventories
12,589,278
11,060,254
Right to recover asset
1,344,649
1,147,483
Income tax receivable
452,579
5,859
Prepaid expenses and other
189,300
157,385
Total current assets
33,019,853
28,132,054
Property and equipment, net
1,484,808
1,770,516
Goodwill and other intangible assets
8,592,826
9,000,343
Deferred income taxes
70,522
—
Other long-term assets
779,854
269,067
Total assets
$
43,947,863
$
39,171,980
LIABILITIES AND STOCKHOLDERS’
(DEFICIT) EQUITY
Current liabilities:
Accounts payable
$
31,705,055
$
28,385,074
Other current liabilities
1,646,763
1,057,208
Short-term debt
501,259
139,012
Total current liabilities
33,853,077
29,581,294
Long-term debt
3,618,261
4,033,880
Accrued income taxes
644,363
284,075
Deferred income taxes
—
1,860,195
Other long-term liabilities
472,855
419,330
Commitments and contingencies
6,198,943
—
Total (deficit) equity
(839,636
)
2,993,206
Total liabilities and (deficit) equity
$
43,947,863
$
39,171,980
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(in thousands)
(unaudited)
Fiscal Year Ended September
30,
2020
2019
Operating Activities:
Net (loss) income
$
(3,399,558
)
$
854,135
Adjustments to reconcile net (loss) income
to net cash provided by operating activities 1
(1,057,797
)
1,120,690
Changes in operating assets and
liabilities, excluding the effects of acquisitions:
Accounts receivable
(1,628,991
)
(1,241,890
)
Inventories
(1,621,143
)
(167,990
)
Accounts payable
3,300,832
1,561,048
Other, net 2
6,613,697
218,030
Net cash provided by operating
activities
2,207,040
2,344,023
Investing Activities:
Capital expenditures
(369,677
)
(310,222
)
Cost of equity investments and acquired
companies, net of cash acquired
(56,080
)
(63,951
)
Other
45,886
(1,659
)
Net cash used in investing activities
(379,871
)
(375,832
)
Financing Activities:
Net repayments
(32,006
)
(133,073
)
Payment of premium on early retirement of
debt
(21,448
)
—
Purchases of common stock 3
(420,449
)
(674,031
)
Exercises of stock options
159,533
76,234
Cash dividends on common stock
(343,578
)
(338,974
)
Other
54,331
(16,669
)
Net cash used in financing activities
(603,617
)
(1,086,513
)
Increase in cash and cash equivalents
1,223,552
881,678
Cash and cash equivalents at beginning of
year
3,374,194
2,492,516
Cash and cash equivalents at end of
year
$
4,597,746
$
3,374,194
________________________________________
1
Includes a LIFO expense of $7.4
million, an impairment of PharMEDium assets of $361.7 million, and
a $1,940.3 million benefit for deferred income taxes primarily
attributable to Swiss tax reform and a legal accrual in connection
with opioid lawsuits in the fiscal year ended September 30, 2020.
Includes a LIFO credit of $22.5 million and an impairment of
PharMEDium assets of $570.0 million in the fiscal year ended
September 30, 2019.
2
Includes a $6.6 billion expense
accrual in connection with opioid lawsuits in the fiscal year ended
September 30, 2020. Also includes a $446.7 million increase in
income tax receivable in the fiscal year ended September 30, 2020
primarily as a result of recognizing certain discrete tax
benefits.
3
Purchases of common stock in the
fiscal year ended September 30, 2020 includes $14.8 million of
September 2019 purchases that cash settled in October 2019.
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, LIFO expense
(credit), certain PharMEDium remediation costs, certain PharMEDium
shutdown costs, and the expense (credit) related to the New York
State Opioid Stewardship Act (the "NYS Opioid 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 were unpredictable expenses. The expense (credit)
related to the NYS Opioid Act and PharMEDium shutdown costs are
excluded because they are unusual and non-recurring. 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 related to costs incurred in
connection with suspended production activities following U.S. Food
and Drug Administration inspections. PharMEDium shutdown costs are
costs incurred in connection with the permanent shutdown of the
PharMEDium business. 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 NYS Opioid 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 NYS Opioid Act was ruled
unconstitutional by the U.S. District Court for the Southern
District of New York but, in September 2020, the United States
Court of Appeals for the Second Circuit reversed the District
Court's decision.
- 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, certain PharMEDium shutdown costs, impairment of
PharMEDium assets, and a contingent consideration adjustment.
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 restructurings. We
exclude the amount of litigation settlements and other expenses,
such as the accrual related to opioid lawsuits and investigations,
as well as PharMEDium remediation costs, PharMEDium shutdown costs,
a contingent consideration adjustment and the impairment of
PharMEDium 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. The contingent consideration adjustment reflects an
adjustment made by one of the Company’s non-wholly-owned
subsidiaries, Profarma Distribuidora de Produtos Farmacêuticos
S.A., of its previous estimate of contingent consideration related
to the purchase price of a prior business acquisition.
- 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 loss on early retirement of debt in fiscal
2020 and the gain on sale of an equity investment in fiscal 2019
are excluded from adjusted income before income taxes because these
amounts are unusual, non-operating, and 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: 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. Certain discrete
tax benefits primarily attributable to the income tax deduction
recognized in connection with the permanent shutdown of PharMEDium
as well as the Coronavirus Aid, Relief and Economic Security Act
(the "CARES Act") are also excluded from adjusted income tax
expense for the three months and fiscal year ended September 30,
2020. Further, certain benefits relating to tax reform in
Switzerland are excluded from adjusted income tax expense for the
three months and fiscal year ended September 30, 2020. 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 fiscal year ended
September 30, 2019. 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/loss attributable to noncontrolling
interest excludes the non-controlling interest portion of
acquisition-related intangibles amortization and a contingent
consideration adjustment. 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; PharMEDium shutdown costs; the
expense (credit) related to the NYS Opioid Act; acquisition-related
intangibles amortization; employee severance, litigation, and
other; impairment of PharMEDium assets; a contingent consideration
adjustment; loss on early retirement of debt; and gain on sale of
an equity investment; 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 fiscal year ended
September 30, 2019. The per share impact of certain discrete tax
benefits primarily attributable to the income tax deduction
recognized in connection with the permanent shutdown of PharMEDium
as well as the CARES Act and the per share impact of certain
benefits relating to tax reform in Switzerland are also excluded
from adjusted diluted earnings per share for the three months and
fiscal year ended September 30, 2020. 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.
Diluted weighted average common shares outstanding has been
adjusted to include the impact of the stock options and restricted
stock units that were anti-dilutive for the GAAP presentation due
to a GAAP net loss in the fourth quarter and fiscal year ended
September 30, 2020. Management believes that adjusted diluted
shares outstanding is useful to investors because it facilitates
the calculation of adjusted diluted earnings per share.
In addition, the Company has provided non-GAAP fiscal year 2021
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 2021 adjusted free
cash flow guidance. For fiscal year 2021, 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/20201105005165/en/
Bennett S. Murphy Senior Vice President, Investor
Relations 610-727-3693
bmurphy@amerisourcebergen.com
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