Delaware | 1-16671 | 23-3079390 | ||
(State or other jurisdiction of | (Commission File Number) | (IRS Employer | ||
incorporation) | Identification No.) | |||
1300 Morris Drive | ||||
Chesterbrook, PA 19087 | ||||
(Address of principal executive offices, including Zip Code) |
AMERISOURCEBERGEN CORPORATION | |||
Date: | August 3, 2017 | By: | /s/ Tim G. Guttman |
Name: | Tim G. Guttman | ||
Title: | Executive Vice President & Chief Financial Officer |
Exhibit Number | Description of Exhibit | |
99.1 | News Release of AmerisourceBergen Corporation dated August 3, 2017. |
AmerisourceBergen Corporation | |
P.O. Box 959 | |
Valley Forge, PA 19482 |
GAAP | Adjusted (Non-GAAP) | |
Revenue | $38.7B | $38.7B |
Gross Profit | $1.1B | $1.1B |
Operating Expenses | $909M | $584M |
Operating Income | $170M | $471M |
Interest Expense, Net | $36M | $35M |
Tax Rate | 62.2% | 27.0% |
Diluted Shares Outstanding | 222M | 222M |
Diluted Earnings Per Share | $0.23 | $1.43 |
• | Revenue: In the third quarter of fiscal 2017, revenue was $38.7 billion, up 4.9 percent compared to the same quarter in the previous fiscal year, reflecting a 4.7 percent increase in Pharmaceutical Distribution Services revenue and a 10.6 percent increase in revenue within Other. |
• | Gross Profit: Gross profit in the fiscal 2017 third quarter was $1.1 billion, a 2.5 percent decrease over the same period in the previous fiscal year, primarily due to a $121.0 million decrease in gains from antitrust litigation settlements and a decrease in gross profit in Pharmaceutical Distribution Services, offset in part by a reduction of LIFO expense, which was a credit of $24.7 million in the current year quarter versus a LIFO expense of $80.4 million in the prior year period, and an increase in gross profit in Other. The change in LIFO is driven by lower expected brand inflation and greater expected generic deflation for fiscal year 2017 in comparison to those expectations at June 30, 2016 for the prior fiscal year. Gross profit as a percentage of revenue was 2.79 percent, a decrease of 21 basis points from the prior year quarter. |
• | Operating Expenses: In the third quarter of fiscal 2017, operating expenses were $909 million, compared to $579 million in the same period last fiscal year. Current year quarter operating expenses included $273 million for litigation settlements. Additionally, the prior year’s operating expenses included $84 million of Warrants income. Distribution, selling, and administrative expenses of $525 million increased slightly from the prior year period. |
• | Operating Income: In the fiscal 2017 third quarter, operating income was $170 million versus $529 million in the prior year period. The decline in operating income was primarily driven by the increase in operating expenses, as described above. |
• | Interest Expense, Net: In the fiscal 2017 third quarter, net interest expense of $36 million was up 1.3 percent versus the prior year quarter. |
• | Tax Rate: The effective tax rate for the third quarter of fiscal 2017 was 62.2 percent versus 29.6 percent in the prior year third quarter. Our tax rate was negatively impacted primarily due to non-deductible litigation settlement charges of $273 million. |
• | Diluted Earnings Per Share: Diluted earnings per share was down 85.2 percent to $0.23 in the third quarter of fiscal year 2017 compared to $1.55 in the previous fiscal year’s third quarter, driven primarily by the decrease in net income. |
• | Diluted Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal year 2017 were 221.9 million, a 1.3 percent decline versus the prior fiscal year third quarter due to share repurchases, net of stock option exercises. |
• | Warrants expense / income; |
• | Gain from antitrust litigation settlements; |
• | LIFO expense / credit; |
• | Acquisition-related intangibles amortization; |
• | Employee severance, litigation, and other expenses; and a |
• | Pension settlement. |
• | Revenue: In the third quarter of fiscal 2017, revenue was $38.7 billion, up 4.9 percent compared to the same quarter in the previous fiscal year, reflecting a 4.7 percent increase in Pharmaceutical Distribution Services revenue and a 10.6 percent increase in revenue within Other. |
• | Adjusted Gross Profit: Gross profit in the fiscal 2017 third quarter was $1.1 billion, which was slightly down when compared to the same period in the previous year. A decrease in gross profit in Pharmaceutical Distribution Services was largely offset by an increase in gross profit in Other. Gross profit as a percentage of revenue was 2.73 percent, a decrease of 16 basis points from the prior year quarter. |
• | Adjusted Operating Expenses: In the third quarter of fiscal 2017, operating expenses were $584 million, an increase of 2.1 percent compared to the same period in the last fiscal year. Operating expenses as a percentage of revenue in the fiscal 2017 third quarter were 1.51 percent, compared to 1.55 percent for the same period in the previous fiscal year. |
• | Adjusted Operating Income: In the fiscal 2017 third quarter, operating income of $471 million was down 4.9 percent versus the prior year period, driven equally by the $12 million decline in gross profit and the $12 million increase in operating expenses. Operating income as a percentage of revenue decreased 12 basis points to 1.22 percent in the fiscal 2017 third quarter compared to the previous fiscal year’s third quarter. |
• | Adjusted Interest Expense, Net: In the fiscal 2017 third quarter, net interest expense of $35 million was up 4.7 percent versus the prior year quarter. |
• | Adjusted Tax Rate: The effective tax rate for the third quarter of fiscal 2017 was 27.0 percent, down from 32.8 percent in the previous fiscal year’s third quarter. Our tax rate declined primarily due to a greater than anticipated benefit from share-based compensation resulting from a high number of stock options exercised and certain discrete items including $10 million related to prior fiscal years. |
• | Adjusted Diluted Earnings Per Share: Diluted earnings per share was up 4.4 percent to $1.43 in the third quarter of fiscal year 2017 compared to $1.37 in the previous fiscal year’s third quarter, driven primarily by the lower tax rate and a lower number of adjusted diluted shares outstanding. |
• | Adjusted Diluted Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal year 2017 were 221.9 million, a 2.9 percent decline versus the prior fiscal year third quarter due to share repurchases, net of stock option exercises. |
• | Announced a new organizational structure designed to further align the AmerisourceBergen operating model, unique portfolio of services and overall organization to the evolving customer needs in the healthcare industry in a more seamless and unified way, while supporting corporate strategy and accelerating growth. |
• | Made significant progress in advancing our customer experience and operational efficiency programs and capabilities, including the full unveiling and roll out of our innovative ABC Order platform, announced that a comprehensive DIR fee estimator tool is now available to independent customers and formally opened a new distribution center in Seattle. |
• | Continued to successfully execute our specialty product growth strategy with both distribution services to key specialty pharmacy accounts as well as commercialization services to manufacturer partners. As the established and growing leader in the space, AmerisourceBergen provided consulting services to support more than 70 percent of the new specialty product launches so far this calendar year. |
• | Hosted ThoughtSpot, the annual Good Neighbor Pharmacy conference and trade show event for independent community pharmacies. Approximately 5,000 attending pharmacists received practical and clinical education to help diversify their revenue streams and optimize their core business. Sessions at the meeting included a keynote speech by former Speaker of the U.S. House of Representatives, John Boehner, and an Advocacy in Action panel featuring Representative Doug Collins of Georgia and National Community Pharmacists Association (NCPA) CEO Doug Hoey, where the discussion focused on the current state of affairs in independent pharmacy and important issues like Provider Status and DIR Transparency. |
• | Revenue growth in the range of approximately 5 percent, compared to the previous assumption of 5.5 percent to 6.5 percent; and |
• | Adjusted diluted earnings per share to be in the range of $5.82 to $5.92, compared to the previous range of $5.77 to $5.92. |
• | Adjusted operating income to be approximately flat, compared to the previous assumption of flat to up 2 percent; |
• | Adjusted effective tax rate of approximately 31 percent, compared to the previous assumption of approximately 32 percent; and |
• | Free cash flow to be approximately $750 million to $1 billion. |
• | Brand drug inflation in the range of 7 percent to 9 percent; |
• | Generic drug deflation in the range of -7 percent to -9 percent; |
• | Contributions from new generic launches similar to the prior year; and |
• | No significant contributions from biosimilars. |
• | Morgan Stanley 15th Annual Global Healthcare Conference, September 11-13, New York. |
Three Months Ended June 30, 2017 | % of Revenue | Three Months Ended June 30, 2016 | % of Revenue | % Change | ||||||||||
Revenue | $ | 38,707,144 | $ | 36,881,680 | 4.9% | |||||||||
Cost of goods sold | 37,627,269 | 35,773,817 | 5.2% | |||||||||||
Gross profit 1 | 1,079,875 | 2.79% | 1,107,863 | 3.00% | (2.5)% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 525,463 | 1.36% | 516,438 | 1.40% | 1.7% | |||||||||
Depreciation and amortization | 99,519 | 0.26% | 94,268 | 0.26% | 5.6% | |||||||||
Warrants | — | (83,704 | ) | |||||||||||
Employee severance, litigation, and other 2 | 284,517 | 52,234 | ||||||||||||
Total operating expenses | 909,499 | 2.35% | 579,236 | 1.57% | 57.0% | |||||||||
Operating income | 170,376 | 0.44% | 528,627 | 1.43% | (67.8)% | |||||||||
Other loss (income) | 1,398 | (2,158 | ) | |||||||||||
Interest expense, net | 35,603 | 35,153 | 1.3% | |||||||||||
Income before income taxes | 133,375 | 0.34% | 495,632 | 1.34% | (73.1)% | |||||||||
Income tax expense | 83,023 | 146,477 | (43.3)% | |||||||||||
Net income | $ | 50,352 | 0.13% | $ | 349,155 | 0.95% | (85.6)% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 0.23 | $ | 1.62 | (85.8)% | |||||||||
Diluted | $ | 0.23 | $ | 1.55 | (85.2)% | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 218,676 | 215,688 | 1.4% | |||||||||||
Diluted | 221,873 | 224,802 | (1.3)% |
Nine Months Ended June 30, 2017 | % of Revenue | Nine Months Ended June 30, 2016 | % of Revenue | % Change | ||||||||||
Revenue | $ | 114,023,811 | $ | 109,289,083 | 4.3% | |||||||||
Cost of goods sold | 110,649,829 | 106,141,012 | 4.2% | |||||||||||
Gross profit 1 | 3,373,982 | 2.96% | 3,148,071 | 2.88% | 7.2% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 1,567,853 | 1.38% | 1,560,981 | 1.43% | 0.4% | |||||||||
Depreciation and amortization | 293,268 | 0.26% | 270,066 | 0.25% | 8.6% | |||||||||
Warrants | — | (120,275 | ) | |||||||||||
Employee severance, litigation, and other 2 | 317,517 | 88,719 | ||||||||||||
Pension settlement | — | 47,607 | ||||||||||||
Total operating expenses | 2,178,638 | 1.91% | 1,847,098 | 1.69% | 17.9% | |||||||||
Operating income | 1,195,344 | 1.05% | 1,300,973 | 1.19% | (8.1)% | |||||||||
Other income | (3,958 | ) | (3,224 | ) | ||||||||||
Interest expense, net | 109,874 | 104,860 | 4.8% | |||||||||||
Income before income taxes | 1,089,428 | 0.96% | 1,199,337 | 1.10% | (9.2)% | |||||||||
Income tax expense (benefit) | 380,357 | (82,907 | ) | |||||||||||
Net income | $ | 709,071 | 0.62% | $ | 1,282,244 | 1.17% | (44.7)% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 3.25 | $ | 6.11 | (46.8)% | |||||||||
Diluted | $ | 3.20 | $ | 5.68 | (43.7)% | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 218,336 | 209,898 | 4.0% | |||||||||||
Diluted | 221,698 | 225,646 | (1.7)% |
Three Months Ended June 30, 2017 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Interest Expense, Net | Income Before Income Taxes | Income Tax Expense | Net Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 1,079,875 | $ | 909,499 | $ | 170,376 | $ | 35,603 | $ | 133,375 | $ | 83,023 | $ | 50,352 | $ | 0.23 | |||||||||||||||||
Warrants expense 1 | — | — | — | (1,049 | ) | 1,049 | 184 | 865 | — | ||||||||||||||||||||||||
Gain from antitrust litigation settlements | — | — | — | — | — | 55 | (55 | ) | — | ||||||||||||||||||||||||
LIFO credit | (24,723 | ) | — | (24,723 | ) | — | (24,723 | ) | (6,009 | ) | (18,714 | ) | (0.08 | ) | |||||||||||||||||||
Acquisition-related intangibles amortization | — | (40,946 | ) | 40,946 | — | 41,041 | 10,758 | 30,283 | 0.14 | ||||||||||||||||||||||||
Employee severance, litigation, and other 2 | — | (284,517 | ) | 284,517 | — | 284,517 | 29,556 | 254,961 | 1.15 | ||||||||||||||||||||||||
Adjusted Non-GAAP | $ | 1,055,152 | $ | 584,036 | $ | 471,116 | $ | 34,554 | $ | 435,259 | $ | 117,567 | $ | 317,692 | $ | 1.43 | 3 | ||||||||||||||||
Adjusted Non-GAAP % changes vs. prior year quarter | (1.1)% | 2.1% | (4.9)% | 4.7% | (6.3)% | (22.8)% | 1.8% | 4.4% |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.79% | 2.73% | ||
Operating expenses | 2.35% | 1.51% | ||
Operating income | 0.44% | 1.22% |
1 | In connection with the fiscal 2014 special $650 million share repurchase program, which was established to mitigate the dilutive effect of the Warrants, the Company issued $600 million of 1.15% senior notes that were repaid in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation. |
Three Months Ended June 30, 2016 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Interest Expense, Net | Income Before Income Taxes | Income Tax Expense | Net Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 1,107,863 | $ | 579,236 | $ | 528,627 | $ | 35,153 | $ | 495,632 | $ | 146,477 | $ | 349,155 | $ | 1.55 | |||||||||||||||||
Warrants income 1 | — | 83,704 | (83,704 | ) | (2,155 | ) | (81,549 | ) | (29,709 | ) | (51,840 | ) | (0.25 | ) | |||||||||||||||||||
Gain from antitrust litigation settlements | (120,960 | ) | — | (120,960 | ) | — | (120,960 | ) | (47,979 | ) | (72,981 | ) | (0.32 | ) | |||||||||||||||||||
LIFO expense | 80,364 | — | 80,364 | — | 80,364 | 40,618 | 39,746 | 0.17 | |||||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (38,681 | ) | 38,681 | — | 38,767 | 18,484 | 20,283 | 0.09 | ||||||||||||||||||||||||
Employee severance, litigation, and other | — | (52,234 | ) | 52,234 | — | 52,234 | 22,177 | 30,057 | 0.13 | ||||||||||||||||||||||||
Pension settlement | — | — | — | — | — | 2,243 | (2,243 | ) | (0.01 | ) | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 1,067,267 | $ | 572,025 | $ | 495,242 | $ | 32,998 | $ | 464,488 | $ | 152,311 | $ | 312,177 | $ | 1.37 | 2 |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 3.00% | 2.89% | ||
Operating expenses | 1.57% | 1.55% | ||
Operating income | 1.43% | 1.34% |
1 | In connection with the fiscal 2014 special $650 million share repurchase program, which was established to mitigate the dilutive effect of the Warrants, the Company issued $600 million of 1.15% senior notes that were repaid in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation. |
2 | The sum of the components does not equal the total due to rounding. |
Nine Months Ended June 30, 2017 | ||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Interest Expense, Net | Income Before Income Taxes | Income Tax Expense | Net Income | Diluted Earnings Per Share | |||||||||||||||||||||||||
GAAP | $ | 3,373,982 | $ | 2,178,638 | $ | 1,195,344 | $ | 109,874 | $ | 1,089,428 | $ | 380,357 | $ | 709,071 | $ | 3.20 | ||||||||||||||||
Warrants expense 1 | — | — | — | (5,358 | ) | 5,358 | 1,792 | 3,566 | 0.02 | |||||||||||||||||||||||
Gain from antitrust litigation settlements | (1,395 | ) | — | (1,395 | ) | — | (1,395 | ) | (466 | ) | (929 | ) | — | |||||||||||||||||||
LIFO credit | (82,919 | ) | — | (82,919 | ) | — | (82,919 | ) | (27,735 | ) | (55,184 | ) | (0.25 | ) | ||||||||||||||||||
Acquisition-related intangibles amortization | — | (117,234 | ) | 117,234 | — | 117,515 | 39,307 | 78,208 | 0.35 | |||||||||||||||||||||||
Employee severance, litigation, and other 2 | — | (317,517 | ) | 317,517 | — | 317,517 | 41,876 | 275,641 | 1.24 | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 3,289,668 | $ | 1,743,887 | $ | 1,545,781 | $ | 104,516 | $ | 1,445,504 | $ | 435,131 | $ | 1,010,373 | $ | 4.56 | ||||||||||||||||
Adjusted Non-GAAP % changes vs. prior year period | —% | 1.2% | (1.3)% | 6.2% | (1.7)% | (9.8)% | 2.2% | 5.8% |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.96% | 2.89% | ||
Operating expenses | 1.91% | 1.53% | ||
Operating income | 1.05% | 1.36% |
1 | In connection with the fiscal 2014 special $650 million share repurchase program, which was established to mitigate the dilutive effect of the Warrants, the Company issued $600 million of 1.15% senior notes that were repaid in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation. |
2 | Includes $289.4 million for litigation settlements with no corresponding income tax benefit. |
Nine Months Ended June 30, 2016 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Interest Expense, Net | Income Before Income Taxes | Income Tax (Benefit) Expense | Net Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 3,148,071 | $ | 1,847,098 | $ | 1,300,973 | $ | 104,860 | $ | 1,199,337 | $ | (82,907 | ) | $ | 1,282,244 | $ | 5.68 | ||||||||||||||||
Warrants income 1 | — | 120,275 | (120,275 | ) | (6,464 | ) | (113,811 | ) | 414,273 | (528,084 | ) | (2.39 | ) | ||||||||||||||||||||
Gain from antitrust litigation settlements | (133,758 | ) | — | (133,758 | ) | — | (133,758 | ) | (52,389 | ) | (81,369 | ) | (0.36 | ) | |||||||||||||||||||
LIFO expense | 274,305 | — | 274,305 | — | 274,305 | 107,438 | 166,867 | 0.73 | |||||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (108,611 | ) | 108,611 | — | 108,801 | 42,614 | 66,187 | 0.29 | ||||||||||||||||||||||||
Employee severance, litigation, and other | — | (88,719 | ) | 88,719 | — | 88,719 | 34,748 | 53,971 | 0.24 | ||||||||||||||||||||||||
Pension settlement | — | (47,607 | ) | 47,607 | — | 47,607 | 18,646 | 28,961 | 0.13 | ||||||||||||||||||||||||
Adjusted Non-GAAP | $ | 3,288,618 | $ | 1,722,436 | $ | 1,566,182 | $ | 98,396 | $ | 1,471,200 | $ | 482,423 | $ | 988,777 | $ | 4.31 | 2 |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.88% | 3.01% | ||
Operating expenses | 1.69% | 1.58% | ||
Operating income | 1.19% | 1.43% |
1 | The Company received a private letter ruling from the Internal Revenue Service in November 2015, which entitled it to an income tax deduction equal to the fair value of the Warrants on the date of exercise. As a result, the Company recognized a tax benefit adjustment of approximately $456 million, which represented the estimated tax deduction for the increase in the fair value of the Warrants from the issuance date through September 30, 2015. In connection with the fiscal 2014 special $650 million share repurchase program, the Company issued $600 million of 1.15% senior notes that were repaid in May 2017. The interest expense incurred relating to this borrowing has been excluded from the non-GAAP presentation. |
2 | The sum of the components does not equal the total due to rounding. |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
Basic shares outstanding | 218,676 | 215,688 | 218,336 | 209,898 | |||||||
Stock option, restricted stock, and restricted stock unit dilution | 3,197 | 3,042 | 3,362 | 3,440 | |||||||
Warrants dilution | — | 6,072 | — | 12,308 | |||||||
GAAP diluted shares outstanding | 221,873 | 224,802 | 221,698 | 225,646 | |||||||
Warrants dilution 1 | — | (6,072 | ) | — | (12,308 | ) | |||||
Shares repurchased under special share repurchase programs, net of shares reissued 1 | — | 9,849 | — | 15,926 | |||||||
Non-GAAP diluted shares outstanding | 221,873 | 228,579 | 221,698 | 229,264 |
1 | For the non-GAAP presentation, diluted weighted average common shares outstanding for the three and nine months ended June 30, 2016 have been adjusted to exclude the impact of the unexercised Warrants and the net shares repurchased under special share repurchase programs, which were established to mitigate the dilutive effect of the Warrants. |
Three Months Ended June 30, | ||||||||||
Revenue | 2017 | 2016 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 37,032,709 | $ | 35,373,725 | 4.7% | |||||
Other | 1,743,954 | 1,576,368 | 10.6% | |||||||
Intersegment eliminations | (69,519 | ) | (68,413 | ) | 1.6% | |||||
Revenue | $ | 38,707,144 | $ | 36,881,680 | 4.9% |
Three Months Ended June 30, | ||||||||||
Operating income | 2017 | 2016 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 376,632 | $ | 412,731 | (8.7)% | |||||
Other | 94,682 | 82,511 | 14.8% | |||||||
Intersegment eliminations | (198 | ) | — | |||||||
Total segment operating income | 471,116 | 495,242 | (4.9)% | |||||||
Gain from antitrust litigation settlements | — | 120,960 | ||||||||
LIFO credit (expense) | 24,723 | (80,364 | ) | |||||||
Acquisition-related intangibles amortization | (40,946 | ) | (38,681 | ) | ||||||
Warrants income | — | 83,704 | ||||||||
Employee severance, litigation, and other | (284,517 | ) | (52,234 | ) | ||||||
Operating income | $ | 170,376 | $ | 528,627 | ||||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.05% | 2.25% | ||||||||
Operating expenses | 1.03% | 1.08% | ||||||||
Operating income | 1.02% | 1.17% | ||||||||
Other | ||||||||||
Gross profit | 16.98% | 17.31% | ||||||||
Operating expenses | 11.55% | 12.07% | ||||||||
Operating income | 5.43% | 5.23% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 2.79% | 3.00% | ||||||||
Operating expenses | 2.35% | 1.57% | ||||||||
Operating income | 0.44% | 1.43% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Gross profit | 2.73% | 2.89% | ||||||||
Operating expenses | 1.51% | 1.55% | ||||||||
Operating income | 1.22% | 1.34% |
Nine Months Ended June 30, | ||||||||||
Revenue | 2017 | 2016 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 109,127,631 | $ | 104,734,137 | 4.2% | |||||
Other | 5,103,745 | 4,753,988 | 7.4% | |||||||
Intersegment eliminations | (207,565 | ) | (199,042 | ) | 4.3% | |||||
Revenue | $ | 114,023,811 | $ | 109,289,083 | 4.3% |
Nine Months Ended June 30, | ||||||||||
Operating income | 2017 | 2016 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 1,232,899 | $ | 1,294,150 | (4.7)% | |||||
Other | 313,094 | 272,032 | 15.1% | |||||||
Intersegment eliminations | (212 | ) | — | |||||||
Total segment operating income | 1,545,781 | 1,566,182 | (1.3)% | |||||||
Gain from antitrust litigation settlements | 1,395 | 133,758 | ||||||||
LIFO credit (expense) | 82,919 | (274,305 | ) | |||||||
Acquisition-related intangibles amortization | (117,234 | ) | (108,611 | ) | ||||||
Warrants income | — | 120,275 | ||||||||
Employee severance, litigation, and other | (317,517 | ) | (88,719 | ) | ||||||
Pension settlement | — | (47,607 | ) | |||||||
Operating income | $ | 1,195,344 | $ | 1,300,973 | ||||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.18% | 2.34% | ||||||||
Operating expenses | 1.05% | 1.10% | ||||||||
Operating income | 1.13% | 1.24% | ||||||||
Other | ||||||||||
Gross profit | 17.76% | 17.67% | ||||||||
Operating expenses | 11.63% | 11.95% | ||||||||
Operating income | 6.13% | 5.72% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 2.96% | 2.88% | ||||||||
Operating expenses | 1.91% | 1.69% | ||||||||
Operating income | 1.05% | 1.19% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Gross profit | 2.89% | 3.01% | ||||||||
Operating expenses | 1.53% | 1.58% | ||||||||
Operating income | 1.36% | 1.43% |
June 30, | September 30, | ||||||
2017 | 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 1,311,467 | $ | 2,741,832 | |||
Accounts receivable, net | 10,553,258 | 9,175,876 | |||||
Merchandise inventories | 11,669,529 | 10,723,920 | |||||
Prepaid expenses and other | 142,970 | 210,219 | |||||
Total current assets | 23,677,224 | 22,851,847 | |||||
Property and equipment, net | 1,749,914 | 1,530,682 | |||||
Goodwill and other intangible assets | 8,913,978 | 8,959,346 | |||||
Other long-term assets | 312,894 | 295,626 | |||||
Total assets | $ | 34,654,010 | $ | 33,637,501 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 24,804,544 | $ | 23,926,320 | |||
Other current liabilities | 946,532 | 1,354,049 | |||||
Total current liabilities | 25,751,076 | 25,280,369 | |||||
Long-term debt | 3,429,074 | 3,576,493 | |||||
Other long-term liabilities | 2,920,346 | 2,651,235 | |||||
Stockholders’ equity | 2,553,514 | 2,129,404 | |||||
Total liabilities and stockholders’ equity | $ | 34,654,010 | $ | 33,637,501 |
Nine Months Ended June 30, | |||||||
2017 | 2016 | ||||||
Operating Activities: | |||||||
Net income | $ | 709,071 | $ | 1,282,244 | |||
Adjustments to reconcile net income to net cash provided by operating activities 1 | 522,765 | 331,037 | |||||
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures: | |||||||
Accounts receivable | (1,419,099 | ) | (705,462 | ) | |||
Merchandise inventories | (829,903 | ) | (949,887 | ) | |||
Accounts payable | 876,977 | 1,776,565 | |||||
Other | 263,873 | 89,479 | |||||
Net cash provided by operating activities | 123,684 | 1,823,976 | |||||
Investing Activities: | |||||||
Capital expenditures | (371,428 | ) | (310,178 | ) | |||
Cost of acquired companies, net of cash acquired | (61,633 | ) | (2,731,356 | ) | |||
Net proceeds from sales of investments in available-for-sale securities | 21,373 | 60,693 | |||||
Other | 5,122 | (40,220 | ) | ||||
Net cash used in investing activities | (406,566 | ) | (3,021,061 | ) | |||
Financing Activities: | |||||||
Net (repayments) borrowings | (757,252 | ) | 914,822 | ||||
Purchases of common stock 2 | (229,928 | ) | (1,023,149 | ) | |||
Exercises of warrants | — | 1,168,891 | |||||
Exercises of stock options | 94,325 | 73,356 | |||||
Cash dividends on common stock | (240,168 | ) | (215,070 | ) | |||
Other | (14,460 | ) | (24,005 | ) | |||
Net cash (used in) provided by financing activities | (1,147,483 | ) | 894,845 | ||||
Decrease in cash and cash equivalents | (1,430,365 | ) | (302,240 | ) | |||
Cash and cash equivalents at beginning of period | 2,741,832 | 2,167,442 | |||||
Cash and cash equivalents at end of period | $ | 1,311,467 | $ | 1,865,202 |
1 | Adjustments include a LIFO credit of $82.9 million in the nine months ended June 30, 2017 and a LIFO expense of $274.3 million and non-cash Warrants income of $120.3 million in the nine months ended June 30, 2016. |
2 | Includes purchases made under special share repurchase programs totaling $820.0 million that cash settled in the nine months ended June 30, 2016. |
• | Adjusted gross profit: Adjusted gross profit is a non-GAAP financial measure that excludes the gain from antitrust litigation settlements and LIFO expense/credit because the Company cannot control the amounts recognized or timing of these items. Management believes that this non-GAAP financial measure is useful to investors because it provides a supplemental measure of the Company’s ongoing operating performance. The gain from antitrust litigation settlements relates to the settlement of class action 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. 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. |
• | Adjusted operating expenses: Adjusted operating expenses is a non-GAAP financial measure that excludes Warrants expense/income, acquisition-related intangibles amortization, employee severance, litigation, and other expenses, and a pension settlement charge. The Warrants expense/income related to changes in the fair value of warrants, which we issued in March 2013 (the “Warrants”) to wholly-owned subsidiaries of Walgreens Boot Alliance, Inc., prior to their exercise in fiscal 2016. We believe that this adjustment was useful to investors because the Warrants did not relate to the Company’s ongoing business performance. In addition, Warrants expense/income is a non-cash item, and the Company did not control and could not predict the change in the fair value of the Warrants prior to their exercise. The 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 non-recurring organizational restructuring. We exclude the amount of litigation settlements and other expenses 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. We excluded the charge related to the settlement of benefits under our salaried defined benefit pension plan because this charge was unusual, non-recurring and non-cash in nature. |
• | Adjusted operating income: 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. 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 interest expense, net: Adjusted interest expense is a non-GAAP financial measure that excludes the interest expense on our $600 million of 1.15% senior notes that were repaid in May 2017 (the “2017 Notes”). The 2017 Notes were issued to fund a special $650 million share repurchase program under which we purchased shares to reduce the dilution related to the Warrants. Management believes that this non-GAAP financial measure is useful to investors in evaluating the Company’s ongoing interest expense, net. |
• | Adjusted net income: Adjusted net income is a non-GAAP financial measure that excludes the same items that are described above and excluded from adjusted gross profit, adjusted operating expenses, adjusted operating income, and adjusted interest expense, net. 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: Through fiscal 2016, we adjusted the number of diluted weighted average common shares outstanding in presenting adjusted diluted earnings per share to exclude the dilutive impact of the Warrants prior to their exercise and the shares purchased under our special share repurchase programs, net of the weighted average number of shares issued related to the exercises of the Warrants. Adjusted diluted earnings per share excludes the per share impact of adjustments including Warrants expense/income, and the related interest expense incurred in connection with the 2017 Notes; gain from antitrust litigation settlements; LIFO expense/credit; acquisition-related intangibles amortization; employee severance, litigation, and other; and the charge related to a pension settlement; in each case net of the tax effect calculated using the applicable effective tax rate for those items. 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. |