Delaware | 1-16671 | 23-3079390 | ||
(State or Other | Commission File Number | (I.R.S. Employer | ||
Jurisdiction of | Identification | |||
Incorporation or | Number) | |||
Organization) |
1300 Morris Drive | ||
Chesterbrook, PA | 19087 | |
(Address of principal executive offices) | (Zip Code) |
Exhibit Number | Description of Exhibit | |
99.1 |
AMERISOURCEBERGEN CORPORATION | |||
Date: | November 6, 2018 | By: | /s/ Tim G. Guttman |
Name: | Tim G. Guttman | ||
Title: | Executive Vice President and Chief Financial Officer |
AmerisourceBergen Corporation | |
P.O. Box 959 | |
Valley Forge, PA 19482 |
GAAP | Adjusted (Non-GAAP) | |
Revenue | $43.3B | $43.3B |
Gross Profit | $1.0B | $1.2B |
Operating Expenses | $879M | $732M |
Operating Income | $154M | $432M |
Interest Expense, Net | $43M | $43M |
Tax Rate | (73.4)% | 19.6% |
Net Income Attributable to ABC | $233M | $315M |
Diluted Shares Outstanding | 217M | 217M |
Diluted Earnings Per Share | $1.07 | $1.45 |
• | Revenue: In the fourth quarter of fiscal 2018, revenue was $43.3 billion, up 10.7 percent compared to the same quarter in the previous fiscal year, reflecting a 10.8 percent increase in Pharmaceutical Distribution Services revenue and a 7.9 percent increase in revenue within Other. |
• | Gross Profit: Gross profit in the fiscal 2018 fourth quarter was $1.0 billion, an 11.9 percent decrease over the same period in the previous fiscal year due to higher LIFO expense in comparison to the prior fiscal year, PharMEDium remediation costs, and an estimated assessment relating to the New York State Opioid Stewardship Act.These increases in cost of goods sold were partially offset by a 7.1 percent increase in Pharmaceutical Distribution Services gross profit and a 3.5 percent increase in gross profit within Other. Gross profit as a percentage of revenue was 2.39 percent, a decrease of 61 basis points from the prior year quarter. |
• | Operating Expenses: In the fourth quarter of fiscal 2018, operating expenses were $879 million, compared to $1,307 million in the same period last fiscal year. The decline in operating expenses was primarily due to the litigation settlement accrual of $625 million recorded in the prior year quarter and was partially offset by an increase in operating expenses within Pharmaceutical Distribution Services primarily due to the January 2018 acquisition of H. D. Smith, the January 2018 consolidation of Profarma and a goodwill impairment charge related to Profarma. |
• | Operating Income / (Loss): In the fiscal 2018 fourth quarter, operating income was $154 million versus a loss of $135 million in the prior year period. The increase in operating income was primarily driven by the large decrease in operating expenses, as explained above. |
• | Interest Expense, Net: In the fiscal 2018 fourth quarter, net interest expense of $43 million was up 21.9 percent versus the prior year quarter primarily due to the debt issued to finance the H. D. Smith acquisition and the consolidation of Profarma's debt and related interest expense. |
• | Tax Rate: The current year's effective tax rate was favorably impacted by the determination that a portion of a significant prior year legal settlement accrual was deductible.The prior year's effective tax rate was unfavorably impacted by non-deductible legal settlement charges. |
• | Diluted Earnings Per Share: Diluted earnings per share was $1.07 in the fourth quarter of fiscal year 2018 compared to a loss of $1.58 in the previous fiscal year’s fourth quarter. This increase was largely driven by an increase in operating income and a decrease in income tax expense. |
• | Diluted Shares Outstanding: Diluted weighted average shares outstanding for the fourth quarter of fiscal year 2018 were 217.5 million, a 0.5 percent decline versus the prior fiscal year fourth quarter. |
• | Gain from antitrust litigation settlements; |
• | LIFO expense / credit; |
• | PharMEDium remediation costs; |
• | New York State Opioid Stewardship Act; |
• | Goodwill impairment; |
• | Acquisition-related intangibles amortization; |
• | Employee severance, litigation, and other; |
• | Loss on consolidation of equity investments; |
• | Impairment of non-customer note receivable; |
• | Loss on early retirement of debt; and a |
• | One-time tax reform adjustment. |
• | Revenue: In the fourth quarter of fiscal 2018, revenue was $43.3 billion, up 10.7 percent compared to the same quarter in the previous fiscal year, reflecting a 10.8 percent increase in Pharmaceutical Distribution Services revenue and a 7.9 percent increase in revenue within Other. |
• | Adjusted Gross Profit: Gross profit in the fiscal 2018 fourth quarter was $1.2 billion, which was up 6.2 percent when compared to the same period in the previous year due to an increase in gross profit in Pharmaceutical Distribution Services, which benefited from the acquisition of H. D. Smith and the consolidation of Profarma, both in January 2018, and was partially offset by lower contribution from PharMEDium. Gross profit as a percentage of revenue was 2.69 percent, down 11 basis points when compared to the prior year quarter. |
• | Adjusted Operating Expenses: In the fourth quarter of fiscal 2018, operating expenses were $732 million, an increase of 17.0 percent compared to the same period in the last fiscal year, primarily due to consolidation of Profarma and the specialty joint venture in Brazil in January 2018 and the acquisition of H. D. Smith in January 2018. Operating expenses as a percentage of revenue in the fiscal 2018 fourth quarter were 1.69 percent, compared to 1.60 percent for the same period in the previous fiscal year. |
• | Adjusted Operating Income: In the fiscal 2018 fourth quarter, operating income of $432 million decreased 8.2 percent from the prior year period. Operating income as a percentage of revenue decreased 20 basis points to 1.00 percent in the fiscal 2018 fourth quarter compared to the previous fiscal year’s fourth quarter. |
• | Adjusted Interest Expense, Net: In the fiscal 2018 fourth quarter, net interest expense of $43 million was up 21.9 percent from the prior year quarter primarily due to the debt issued to finance the H. D. Smith acquisition and the consolidation of Profarma's debt and related interest expense. |
• | Adjusted Tax Rate: The effective tax rate for the fourth quarter of fiscal 2018 was 19.6 percent, down from 32.5 percent in the previous fiscal year’s fourth quarter, primarily driven by a reduction in the U.S. federal income tax rate from 35% to 21%. |
• | Adjusted Diluted Earnings Per Share: Diluted earnings per share was up 9.0 percent to $1.45 in the fourth quarter of fiscal year 2018 compared to $1.33 in the previous fiscal year’s fourth quarter, driven primarily by the benefits of tax reform. |
• | Adjusted Diluted Shares Outstanding: Diluted weighted average shares outstanding for the fourth quarter of fiscal year 2018 were 217.5 million, compared to 221.3 million in the prior fiscal year fourth quarter due to share repurchases, net of stock option exercises. |
GAAP | Adjusted (Non-GAAP) | |
Revenue | $167.9B | $167.9B |
Gross Profit | $4.6B | $4.7B |
Operating Expenses | $3.2B | $2.7B |
Operating Income | $1.4B | $2.0B |
Interest Expense, Net | $175M | $175M |
Tax Rate | (37.2)% | 21.3% |
Net Income Attributable to ABC | $1.7B | $1.4B |
Diluted Shares Outstanding | 220M | 220M |
Diluted Earnings Per Share | $7.53 | $6.49 |
• | Awarded the 2018 “Champion of Board Diversity” award by The Forum of Executive Women’s Philadelphia chapter. This award recognizes AmerisourceBergen for its gender diversity on our Corporate Board of Directors and leading the way for public companies in the state of Pennsylvania. |
• | Good Neighbor Pharmacy, AmerisourceBergen’s independent pharmacy network, received the #1 “Highest in Customer Satisfaction” ranking among brick-and-mortar chain drug stores in the 2018 J.D. Power U.S. Pharmacy survey. This marks the seventh time that Good Neighbor Pharmacy has earned this achievement in the last nine years. |
• | The AmerisourceBergen Foundation provided a grant to support the Health Care Improvement Foundation’s (HCIF) launch of a two-year pilot program that aims to help prevent chronic opioid use among post-surgical patients. The program will address the issue through patient education and engagement, as well as provider improvement strategies. |
• | Recorded the 19th consecutive quarter with 10 percent or greater revenue growth in Specialty distribution. |
• | ICS, AmerisourceBergen's third-party logistics provider for pharmaceutical manufacturers, opened its new flagship distribution center in Columbus, Ohio. |
• | US Bioservices, AmerisourceBergen’s independent specialty pharmacy, earned the Joint Commission’s Gold Seal of Approval for Home Care Accreditation by demonstrating continuous compliance with its performance standards. |
• | Hosted ThinkLive, AmerisourceBergen's annual global pharmaceutical manufacturer summit, convening hundreds of manufacturers with the Company’s distribution and commercialization experts to share insights for expanding patient access and driving product success. |
• | Revenue growth in the mid-single digit percent range; and |
• | Adjusted diluted earnings per share to be in the range of $6.65 to $6.95. |
• | Adjusted operating expenses to increase in the mid-single digit percent range; |
• | Adjusted operating income growth in the low- to mid-single digit percent range; |
• | Pharmaceutical Distribution Services segment operating income growth in the low- to mid-single digit percent range; |
• | Other, which is comprised of businesses focused on Global Commercialization Services and Animal Health, operating income growth in the high-single digit percent range; |
• | Adjusted effective tax rate between 21 percent and 22 percent; |
• | Adjusted free cash flow to be approximately $1.4 billion to $1.6 billion; |
• | Capital expenditures in the $300 million range; and |
• | Weighted average diluted shares are expected to be approximately 216 million for the year. |
• | Evercore ISI HealthCONx Conference, November 27-29, Boston; |
• | J.P. Morgan Healthcare Conference, January 7-11, San Francisco. |
Three Months Ended September 30, 2018 | % of Revenue | Three Months Ended September 30, 2017 | % of Revenue | % Change | ||||||||||
Revenue | $ | 43,297,136 | $ | 39,120,015 | 10.7% | |||||||||
Cost of goods sold | 42,264,495 | 37,947,995 | 11.4% | |||||||||||
Gross profit 1 | 1,032,641 | 2.39% | 1,172,020 | 3.00% | (11.9)% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 657,805 | 1.52% | 560,877 | 1.43% | 17.3% | |||||||||
Depreciation and amortization | 120,558 | 0.28% | 104,335 | 0.27% | 15.5% | |||||||||
Goodwill impairment charge 2 | 59,684 | — | ||||||||||||
Employee severance, litigation, and other 3 | 40,497 | 641,810 | ||||||||||||
Total operating expenses | 878,544 | 2.03% | 1,307,022 | 3.34% | (32.8)% | |||||||||
Operating income (loss) | 154,097 | 0.36% | (135,002 | ) | (0.35)% | |||||||||
Other (income) loss | (820 | ) | 1,228 | |||||||||||
Interest expense, net | 43,047 | 35,311 | 21.9% | |||||||||||
Income (loss) before taxes | 111,870 | 0.26% | (171,541 | ) | (0.44)% | |||||||||
Income tax (benefit) expense | (82,134 | ) | 173,046 | |||||||||||
Net income (loss) | 194,004 | 0.45% | (344,587 | ) | (0.88)% | |||||||||
Net income attributable to noncontrolling interest | 39,284 | — | ||||||||||||
Net income (loss) attributable to AmerisourceBergen Corporation | $ | 233,288 | 0.54% | $ | (344,587 | ) | (0.88)% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 1.08 | $ | (1.58 | ) | |||||||||
Diluted | $ | 1.07 | $ | (1.58 | ) | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 215,430 | 218,501 | (1.4)% | |||||||||||
Diluted | 217,492 | 218,501 | (0.5)% |
1 | Includes an $83.5 million LIFO expense, $26.6 million of PharMEDium remediation costs, and an estimated $22.0 million assessment relating to the New York State Opioid Stewardship Act (for the period covering January 1, 2017 through September 30, 2018) in the three months ended September 30, 2018. Includes a $74.9 million LIFO credit in the three months ended September 30, 2017. |
3 | Includes $3.5 million of employee severance, $12.1 million of litigation costs primarily related to opioid lawsuits and investigations, and $25.0 million of acquisition-related deal and integration costs, other costs related to business transformation efforts, and other restructuring initiatives in the three months ended September 30, 2018. Includes $7.5 million of employee severance, $628.2 million of litigation settlements and accruals, and $6.2 million of other costs related to business transformation efforts, other restructuring initiatives, and acquisition-related deal and integration costs in the three months ended September 30, 2017. |
Fiscal Year Ended September 30, 2018 | % of Revenue | Fiscal Year Ended September 30, 2017 | % of Revenue | % Change | ||||||||||
Revenue | $ | 167,939,635 | $ | 153,143,826 | 9.7% | |||||||||
Cost of goods sold | 163,327,318 | 148,597,824 | 9.9% | |||||||||||
Gross profit 1 | 4,612,317 | 2.75% | 4,546,002 | 2.97% | 1.5% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 2,460,301 | 1.46% | 2,128,730 | 1.39% | 15.6% | |||||||||
Depreciation and amortization | 465,127 | 0.28% | 397,603 | 0.26% | 17.0% | |||||||||
Goodwill impairment charge 2 | 59,684 | — | ||||||||||||
Employee severance, litigation, and other 3 | 183,520 | 959,327 | ||||||||||||
Total operating expenses | 3,168,632 | 1.89% | 3,485,660 | 2.28% | (9.1)% | |||||||||
Operating income | 1,443,685 | 0.86% | 1,060,342 | 0.69% | 36.2% | |||||||||
Other loss (income) 4 | 25,469 | (2,730 | ) | |||||||||||
Interest expense, net | 174,699 | 145,185 | 20.3% | |||||||||||
Loss on consolidation of equity investments | 42,328 | — | ||||||||||||
Loss on early retirement of debt | 23,766 | — | ||||||||||||
Income before income taxes | 1,177,423 | 0.70% | 917,887 | 0.60% | 28.3% | |||||||||
Income tax (benefit) expense | (438,469 | ) | 553,403 | |||||||||||
Net income | 1,615,892 | 0.96% | 364,484 | 0.24% | 343.3% | |||||||||
Net loss attributable to noncontrolling interest | 42,513 | — | ||||||||||||
Net income attributable to AmerisourceBergen Corporation | $ | 1,658,405 | 0.99% | $ | 364,484 | 0.24% | 355.0% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 7.61 | $ | 1.67 | 355.7% | |||||||||
Diluted | $ | 7.53 | $ | 1.64 | 359.1% | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 217,872 | 218,375 | (0.2)% | |||||||||||
Diluted | 220,336 | 221,602 | (0.6)% |
Three Months Ended September 30, 2018 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Income Before Income Taxes | Income Tax (Benefit) Expense | Net Loss Atrributable to Noncontrolling Interest | Net Income Attributable to ABC | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 1,032,641 | $ | 878,544 | $ | 154,097 | $ | 111,870 | $ | (82,134 | ) | $ | 39,284 | $ | 233,288 | $ | 1.07 | ||||||||||||||||
Gain from antitrust litigation settlements | — | — | — | — | (225 | ) | — | 225 | — | ||||||||||||||||||||||||
LIFO expense | 83,466 | — | 83,466 | 83,466 | 23,124 | — | 60,342 | 0.28 | |||||||||||||||||||||||||
PharMEDium remediation costs | 26,580 | (1,617 | ) | 28,197 | 28,197 | 8,083 | — | 20,114 | 0.09 | ||||||||||||||||||||||||
New York State Opioid Stewardship Act | 22,000 | — | 22,000 | 22,000 | 6,122 | — | 15,878 | 0.07 | |||||||||||||||||||||||||
Goodwill impairment charge | — | (59,684 | ) | 59,684 | 59,684 | — | (36,945 | ) | 22,739 | 0.10 | |||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (44,484 | ) | 44,484 | 44,484 | 13,191 | (775 | ) | 30,518 | 0.14 | |||||||||||||||||||||||
Employee severance, litigation, and other | — | (40,497 | ) | 40,497 | 40,497 | 83,317 | 1 | — | (42,820 | ) | (0.20 | ) | |||||||||||||||||||||
Loss on early retirement of debt | — | — | — | — | 148 | — | (148 | ) | — | ||||||||||||||||||||||||
Tax reform 2 | — | — | — | — | 25,000 | — | (25,000 | ) | (0.11 | ) | |||||||||||||||||||||||
Adjusted Non-GAAP | 1,164,687 | 732,262 | 432,425 | 390,198 | 76,626 | 1,564 | 315,136 | 1.45 | 3 | ||||||||||||||||||||||||
Less non-wholly owned subsidiaries | 51,991 | 47,130 | 4,861 | (1,926 | ) | — | 1,564 | (363 | ) | — | |||||||||||||||||||||||
Adjusted Non-GAAP excluding non-wholly owned subsidiaries | $ | 1,112,696 | $ | 685,132 | $ | 427,564 | $ | 392,124 | $ | 76,626 | $ | — | $ | 315,499 | $ | 1.45 | |||||||||||||||||
Adjusted Non-GAAP % change vs. prior year quarter | 6.2% | 17.0% | (8.2)% | (10.2)% | (45.8)% | 7.4% | 9.0% | ||||||||||||||||||||||||||
Adjusted Non-GAAP, excluding non-wholly owned subsidiaries, % change vs. prior year quarter | 1.4% | 9.4% | (9.2)% | (9.8)% | (45.8)% | 7.5% | 9.0% |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.39% | 2.69% | ||
Operating expenses | 2.03% | 1.69% | ||
Operating income | 0.36% | 1.00% |
Three Months Ended September 30, 2017 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating (Loss) Income | Interest Expense, Net | (Loss) Income Before Income Taxes | Income Tax Expense | Net (Loss) Income | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 1,172,020 | $ | 1,307,022 | $ | (135,002 | ) | $ | 35,311 | $ | (171,541 | ) | $ | 173,046 | $ | (344,587 | ) | $ | (1.58 | ) | |||||||||||||
Warrants expense 1 | — | — | — | — | — | 132 | (132 | ) | — | ||||||||||||||||||||||||
Gain from antitrust litigation settlements | — | — | — | — | — | (35 | ) | 35 | — | ||||||||||||||||||||||||
LIFO credit | (74,863 | ) | — | (74,863 | ) | — | (74,863 | ) | (28,926 | ) | (45,937 | ) | (0.21 | ) | |||||||||||||||||||
Acquisition-related intangibles amortization | — | (39,144 | ) | 39,144 | — | 39,237 | 16,984 | 22,253 | 0.10 | ||||||||||||||||||||||||
Employee severance, litigation, and other 2 | — | (641,810 | ) | 641,810 | — | 641,810 | (19,942 | ) | 661,752 | 3.01 | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 1,097,157 | $ | 626,068 | $ | 471,089 | $ | 35,311 | $ | 434,643 | $ | 141,259 | $ | 293,384 | $ | 1.33 | 3 |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 3.00% | 2.80% | ||
Operating expenses | 3.34% | 1.60% | ||
Operating (loss) income | (0.35)% | 1.20% |
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 a $625.0 million litigation accrual with no corresponding tax benefit. |
3 | The sum of the components does not equal the total due to rounding. |
Fiscal Year Ended September 30, 2018 | |||||||||||||||||||||||||||||||||
Gross Profit | Operating Expenses | Operating Income | Income Before Income Taxes | Income Tax (Benefit) Expense | Net Loss Attributable to Noncontrolling Interest | Net Income Attributable to ABC | Diluted Earnings Per Share | ||||||||||||||||||||||||||
GAAP | $ | 4,612,317 | $ | 3,168,632 | $ | 1,443,685 | $ | 1,177,423 | $ | (438,469 | ) | $ | 42,513 | $ | 1,658,405 | $ | 7.53 | ||||||||||||||||
Gain from antitrust litigation settlements | (35,938 | ) | — | (35,938 | ) | (35,938 | ) | (10,000 | ) | — | (25,938 | ) | (0.12 | ) | |||||||||||||||||||
LIFO expense | 67,324 | — | 67,324 | 67,324 | 18,733 | — | 48,591 | 0.22 | |||||||||||||||||||||||||
PharMEDium remediation costs | 61,129 | (5,075 | ) | 66,204 | 66,204 | 18,421 | — | 47,783 | 0.22 | ||||||||||||||||||||||||
New York State Opioid Stewardship Act | 22,000 | — | 22,000 | 22,000 | 6,122 | — | 15,878 | 0.07 | |||||||||||||||||||||||||
Goodwill impairment charge | — | (59,684 | ) | 59,684 | 59,684 | — | (36,945 | ) | 22,739 | 0.10 | |||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (174,751 | ) | 174,751 | 174,876 | 48,660 | (1,846 | ) | 124,370 | 0.56 | |||||||||||||||||||||||
Employee severance, litigation, and other | — | (183,520 | ) | 183,520 | 183,520 | 122,222 | 1 | — | 61,298 | 0.28 | |||||||||||||||||||||||
Loss on consolidation of equity investments | — | — | — | 42,328 | — | — | 42,328 | 0.19 | |||||||||||||||||||||||||
Impairment of non-customer note receivable | — | — | — | 30,000 | — | — | 30,000 | 0.14 | |||||||||||||||||||||||||
Loss on early retirement of debt | — | — | — | 23,766 | 6,613 | — | 17,153 | 0.08 | |||||||||||||||||||||||||
Tax reform 2 | — | — | — | — | 612,595 | — | (612,595 | ) | (2.78 | ) | |||||||||||||||||||||||
Adjusted Non-GAAP | 4,726,832 | 2,745,602 | 1,981,230 | 1,811,187 | 384,897 | 3,722 | 1,430,012 | 6.49 | |||||||||||||||||||||||||
Less non-wholly owned subsidiaries | 149,832 | 140,668 | 9,164 | (4,680 | ) | — | 3,722 | (958 | ) | — | |||||||||||||||||||||||
Adjusted Non-GAAP excluding non-wholly owned subsidiaries | $ | 4,577,000 | $ | 2,604,934 | $ | 1,972,066 | $ | 1,815,867 | $ | 384,897 | $ | — | $ | 1,430,970 | $ | 6.49 | |||||||||||||||||
Adjusted Non-GAAP % change vs. prior year | 7.8% | 15.9% | (1.8)% | (3.7)% | (33.2)% | 9.7% | 10.4% | ||||||||||||||||||||||||||
Adjusted Non-GAAP, excluding non-wholly owned subsidiaries, % change vs. prior year | 4.3% | 9.9% | (2.2)% | (3.4)% | (33.2)% | 9.8% | 10.4% |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.75% | 2.81% | ||
Operating expenses | 1.89% | 1.63% | ||
Operating income | 0.86% | 1.18% |
2 | Includes the impact of applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities as of December 31, 2017, offset in part by a one-time transition tax on historical foreign earning and profits through December 31, 2017. |
Fiscal Year Ended September 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 | $ | 4,546,002 | $ | 3,485,660 | $ | 1,060,342 | $ | 145,185 | $ | 917,887 | $ | 553,403 | $ | 364,484 | $ | 1.64 | ||||||||||||||||
Warrants expense 1 | — | — | — | (5,358 | ) | 5,358 | 1,924 | 3,434 | 0.02 | |||||||||||||||||||||||
Gain from antitrust litigation settlements | (1,395 | ) | — | (1,395 | ) | — | (1,395 | ) | (501 | ) | (894 | ) | — | |||||||||||||||||||
LIFO credit | (157,782 | ) | — | (157,782 | ) | — | (157,782 | ) | (56,661 | ) | (101,121 | ) | (0.46 | ) | ||||||||||||||||||
Acquisition-related intangibles amortization | — | (156,378 | ) | 156,378 | — | 156,752 | 56,291 | 100,461 | 0.45 | |||||||||||||||||||||||
Employee severance, litigation, and other 2 | — | (959,327 | ) | 959,327 | — | 959,327 | 21,934 | 937,393 | 4.23 | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 4,386,825 | $ | 2,369,955 | $ | 2,016,870 | $ | 139,827 | $ | 1,880,147 | $ | 576,390 | $ | 1,303,757 | $ | 5.88 |
Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
Gross profit | 2.97% | 2.86% | ||
Operating expenses | 2.28% | 1.55% | ||
Operating income | 0.69% | 1.32% |
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 $914.4 million for litigation settlements and accruals with no corresponding income tax benefit. |
Three Months Ended September 30, | Fiscal Year Ended September 30, | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Basic shares outstanding | 215,430 | 218,501 | 217,872 | 218,375 | ||||||||
Stock option, restricted stock, and restricted stock unit dilution | 2,062 | — | 2,464 | 3,227 | ||||||||
GAAP diluted shares outstanding | 217,492 | 218,501 | 220,336 | 221,602 | ||||||||
Stock option, restricted stock, and restricted stock unit dilution 1 | — | 2,822 | — | — | ||||||||
Non-GAAP diluted shares outstanding | 217,492 | 221,323 | 220,336 | 221,602 |
1 | For the non-GAAP presentation, diluted weighted average common shares outstanding have been adjusted to include the impact of the stock options, restricted stock, and restricted stock units that were anti-dilutive for the GAAP presentation. |
Three Months Ended September 30, 2018 | ||||||||||||||||||||||
AmerisourceBergen Corporation and Wholly Owned Subsidiaries | % Change vs. Prior Year Quarter | Non-Wholly Owned Subsidiaries | Noncontrolling Interest | Consolidated AmerisourceBergen Corporation | % Change vs. Prior Year Quarter | |||||||||||||||||
Revenue | $ | 42,950,048 | 9.8 | % | $ | 347,088 | $ | — | $ | 43,297,136 | 10.7 | % | ||||||||||
Gross profit | $ | 980,650 | (16.3 | )% | $ | 51,991 | $ | — | $ | 1,032,641 | (11.9 | )% | ||||||||||
Operating expenses | $ | 770,334 | (41.1 | )% | $ | 108,210 | $ | — | $ | 878,544 | (32.8 | )% | ||||||||||
Operating income (loss) | $ | 210,316 | $ | (56,219 | ) | $ | — | $ | 154,097 | |||||||||||||
Interest expense, net | $ | 39,839 | 12.8 | % | $ | 3,208 | $ | — | $ | 43,047 | 21.9 | % | ||||||||||
Net income (loss) | $ | 256,898 | $ | (62,894 | ) | $ | 39,284 | $ | 233,288 |
Fiscal Year Ended September 30, 2018 | ||||||||||||||||||||||
AmerisourceBergen Corporation and Wholly Owned Subsidiaries | % Change vs. Prior Year | Non-Wholly Owned Subsidiaries | Noncontrolling Interest | Consolidated AmerisourceBergen Corporation | % Change vs. Prior Year | |||||||||||||||||
Revenue | $ | 166,962,154 | 9.0 | % | $ | 977,481 | $ | — | $ | 167,939,635 | 9.7 | % | ||||||||||
Gross profit | $ | 4,462,485 | (1.8 | )% | $ | 149,832 | $ | — | $ | 4,612,317 | 1.5 | % | ||||||||||
Operating expenses | $ | 2,964,144 | (15.0 | )% | $ | 204,488 | $ | — | $ | 3,168,632 | (9.1 | )% | ||||||||||
Operating income (loss) | $ | 1,498,341 | 41.3 | % | $ | (54,656 | ) | $ | — | $ | 1,443,685 | 36.2 | % | |||||||||
Interest expense, net | $ | 162,109 | 11.7 | % | $ | 12,590 | $ | — | $ | 174,699 | 20.3 | % | ||||||||||
Net income (loss) | $ | 1,683,323 | 361.8 | % | $ | (67,431 | ) | $ | 42,513 | $ | 1,658,405 | 355.0 | % |
Three Months Ended September 30, | ||||||||||
Revenue | 2018 | 2017 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 41,726,426 | $ | 37,654,651 | 10.8% | |||||
Other | 1,596,178 | 1,479,987 | 7.9% | |||||||
Intersegment eliminations | (25,468 | ) | (14,623 | ) | ||||||
Revenue | $ | 43,297,136 | $ | 39,120,015 | 10.7% |
Three Months Ended September 30, | ||||||||||
Operating income (loss) | 2018 | 2017 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 356,808 | $ | 399,715 | (10.7)% | |||||
Other | 75,465 | 71,718 | 5.2% | |||||||
Intersegment eliminations | 152 | (344 | ) | |||||||
Total segment operating income | 432,425 | 471,089 | (8.2)% | |||||||
PharMEDium remediation costs | (28,197 | ) | — | |||||||
LIFO (expense) credit | (83,466 | ) | 74,863 | |||||||
New York State Opioid Stewardship Act | (22,000 | ) | — | |||||||
Goodwill impairment charge | (59,684 | ) | — | |||||||
Acquisition-related intangibles amortization | (44,484 | ) | (39,144 | ) | ||||||
Employee severance, litigation, and other | (40,497 | ) | (641,810 | ) | ||||||
Operating income (loss) | $ | 154,097 | $ | (135,002 | ) | |||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.06% | 2.14% | ||||||||
Operating expenses | 1.21% | 1.07% | ||||||||
Operating income | 0.86% | 1.06% | ||||||||
Other | ||||||||||
Gross profit | 19.02% | 19.82% | ||||||||
Operating expenses | 14.29% | 14.97% | ||||||||
Operating income | 4.73% | 4.85% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 2.39% | 3.00% | ||||||||
Operating expenses | 2.03% | 3.34% | ||||||||
Operating income (loss) | 0.36% | (0.35)% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Adjusted gross profit | 2.69% | 2.80% | ||||||||
Adjusted operating expenses | 1.69% | 1.60% | ||||||||
Adjusted operating income | 1.00% | 1.20% |
Fiscal year Ended September 30, | ||||||||||
Revenue | 2018 | 2017 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 161,699,343 | $ | 147,453,495 | 9.7% | |||||
Other | 6,332,730 | 5,747,863 | 10.2% | |||||||
Intersegment eliminations | (92,438 | ) | (57,532 | ) | ||||||
Revenue | $ | 167,939,635 | $ | 153,143,826 | 9.7% |
Fiscal Year Ended September 30, | ||||||||||
Operating income | 2018 | 2017 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 1,626,748 | $ | 1,643,629 | (1.0)% | |||||
Other | 355,091 | 373,797 | (5.0)% | |||||||
Intersegment eliminations | (609 | ) | (556 | ) | ||||||
Total segment operating income | 1,981,230 | 2,016,870 | (1.8)% | |||||||
Gain from antitrust litigation settlements | 35,938 | 1,395 | ||||||||
PharMEDium remediation costs | (66,204 | ) | — | |||||||
LIFO (expense) credit | (67,324 | ) | 157,782 | |||||||
New York State Opioid Stewardship Act | (22,000 | ) | — | |||||||
Goodwill impairment charge | (59,684 | ) | — | |||||||
Acquisition-related intangibles amortization | (174,751 | ) | (156,378 | ) | ||||||
Employee severance, litigation, and other | (183,520 | ) | (959,327 | ) | ||||||
Operating income | $ | 1,443,685 | $ | 1,060,342 | ||||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.14% | 2.16% | ||||||||
Operating expenses | 1.14% | 1.04% | ||||||||
Operating income | 1.01% | 1.11% | ||||||||
Other | ||||||||||
Gross profit | 19.90% | 20.96% | ||||||||
Operating expenses | 14.30% | 14.45% | ||||||||
Operating income | 5.61% | 6.50% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 2.75% | 2.97% | ||||||||
Operating expenses | 1.89% | 2.28% | ||||||||
Operating income | 0.86% | 0.69% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Adjusted gross profit | 2.81% | 2.86% | ||||||||
Adjusted operating expenses | 1.63% | 1.55% | ||||||||
Adjusted operating income | 1.18% | 1.32% |
September 30, | ||||||||
2018 | 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,492,516 | $ | 2,435,115 | ||||
Accounts receivable, net | 11,314,226 | 10,303,324 | ||||||
Merchandise inventories | 11,918,508 | 11,461,428 | ||||||
Prepaid expenses and other | 169,122 | 103,432 | ||||||
Total current assets | 25,894,372 | 24,303,299 | ||||||
Property and equipment, net | 1,892,424 | 1,797,945 | ||||||
Goodwill and other intangible assets | 9,612,100 | 8,877,562 | ||||||
Other long-term assets | 270,942 | 337,664 | ||||||
Total assets | $ | 37,669,838 | $ | 35,316,470 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 26,836,873 | $ | 25,404,042 | ||||
Other current liabilities | 1,032,814 | 1,414,123 | ||||||
Total current liabilities | 27,869,687 | 26,818,165 | ||||||
Long-term debt | 4,158,532 | 3,429,934 | ||||||
Accrued income taxes | 299,600 | 84,257 | ||||||
Deferred income taxes | 1,829,410 | 2,492,612 | ||||||
Other long-term liabilities | 462,648 | 427,041 | ||||||
Total equity | 3,049,961 | 2,064,461 | ||||||
Total liabilities and equity | $ | 37,669,838 | $ | 35,316,470 |
Fiscal Year Ended September 30, | ||||||||
2018 | 2017 | |||||||
Operating Activities: | ||||||||
Net income | $ | 1,615,892 | $ | 364,484 | ||||
Adjustments to reconcile net income to net cash provided by operating activities 1,2 | (33,787 | ) | 672,502 | |||||
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures: | ||||||||
Accounts receivable | (657,770 | ) | (1,277,896 | ) | ||||
Merchandise inventories | (4,923 | ) | (431,454 | ) | ||||
Accounts payable | 859,036 | 1,473,389 | ||||||
Other 3 | (367,060 | ) | 703,113 | |||||
Net cash provided by operating activities | 1,411,388 | 1,504,138 | ||||||
Investing Activities: | ||||||||
Capital expenditures | (336,411 | ) | (466,397 | ) | ||||
Cost of acquired companies, net of cash acquired | (785,299 | ) | (61,648 | ) | ||||
Net proceeds from investment securities available-for-sale | — | 26,143 | ||||||
Other | 10,596 | 3,861 | ||||||
Net cash used in investing activities | (1,111,114 | ) | (498,041 | ) | ||||
Financing Activities: | ||||||||
Net borrowings (repayments) 4 | 635,695 | (749,553 | ) | |||||
Purchases of common stock 5 | (639,235 | ) | (329,929 | ) | ||||
Payment of premium on early retirement of debt | (22,348 | ) | — | |||||
Exercises of stock options | 138,456 | 102,923 | ||||||
Cash dividends on common stock | (333,041 | ) | (320,270 | ) | ||||
Other | (22,400 | ) | (15,985 | ) | ||||
Net cash used in financing activities | (242,873 | ) | (1,312,814 | ) | ||||
Increase (decrease) in cash and cash equivalents | 57,401 | (306,717 | ) | |||||
Cash and cash equivalents at beginning of year | 2,435,115 | 2,741,832 | ||||||
Cash and cash equivalents at end of year | $ | 2,492,516 | $ | 2,435,115 |
1 | Includes a $67.3 million LIFO expense in the fiscal year ended September 30, 2018. Includes a $157.8 million LIFO credit in the fiscal year ended September 30, 2017. |
2 | Includes $826.9 million benefit for deferred income taxes for the fiscal year ended September 30, 2018, primarily as a result of applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities as of December 31, 2017 in connection with tax reform. |
3 | Includes a $241.3 million increase in income taxes payable for the fiscal year ended September 30, 2018, primarily as a result of a one-time transition tax on historical foreign earnings and profits through December 31, 2017 in connection with tax reform. Includes a $625.0 million litigation accrual in the fiscal year ended September 30, 2017, which was settled and paid in the fiscal year ended September 30, 2018. |
4 | Net borrowing in the fiscal year ended September 30, 2018 were primarily used to finance the acquisition of H.D. Smith, which was completed in January 2018. |
5 | Additional purchases made in September 2018 totaling $24.0 million cash settled in October 2018. |
• | Adjusted gross profit and adjusted gross profit margin: Adjusted gross profit is a non-GAAP financial measure that excludes the gain from antitrust litigation settlements, certain PharMEDium remediation costs, LIFO expense (credit), and costs related to the New York State Opioid Stewardship Act. Gain from antitrust litigation settlements and LIFO expense (credit) are excluded because the Company cannot control the amounts recognized or timing of these items. PharMEDium remediation costs are excluded because they are unpredictable and non-recurring expenses. The New York State Opioid Stewardship Act assessment (for the period covering January 1, 2017 through September 30, 2018) is excluded because it is not expected to be a normal, recurring operating expenditure of the Company, as the Company's distribution model has been revised to substantially eliminate the expense in future periods. 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 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. The PharMEDium remediation costs relate to costs incurred in connection with suspended production activities following U.S. Food and Drug Administration inspections. LIFO expense (credit) is affected by changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other external influences. The New York State Opioid Stewardship Act, which went into effect on July 1, 2018, established an annual $100 million fund and requires manufacturers, distributors, and importers to ratably share the assessment based upon opioids sold or distributed to or within New York state. |
• | Adjusted operating expenses and adjusted operating expense margin: Adjusted operating expenses is a non-GAAP financial measure that excludes acquisition-related intangibles amortization and impairments, employee severance, litigation, and other, and certain PharMEDium remediation costs. Adjusted operating expense margin is the ratio of adjusted operating expenses to total revenue. The acquisition-related intangibles amortization and impairments are excluded because they are non-cash items and the amortization does not reflect the operating performance of the acquired companies. We exclude employee severance amounts that relate to unpredictable and/or non-recurring business restructuring. We exclude the amount of litigation settlements and other expenses, as well as PharMEDium remediation costs, that are unusual, non-operating, unpredictable, non-recurring or non-cash in nature because we believe these exclusions facilitate the analysis of our ongoing operational performance. |
• | Adjusted operating income and adjusted operating income margin: Adjusted operating income is a non-GAAP financial measure that excludes the same items that are described above and excluded from adjusted gross profit and adjusted operating expenses. Adjusted operating income margin is the ratio of adjusted operating income to total revenue. Management believes that these non-GAAP financial measures are useful to investors as a supplemental way to evaluate the Company’s performance because the adjustments are unusual, non-operating, unpredictable, non-recurring or non-cash in nature. |
• | Adjusted 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 that we issued in March 2013 to wholly-owned subsidiaries of Walgreens Boots Alliance, Inc. Management believes that this non-GAAP financial measure is useful to investors in evaluating the Company’s ongoing interest expense, net. |
• | 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 consolidation of equity investments, impairment on a non-customer note receivable, and the loss on the early retirement of debt are also |
• | 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. |
• | 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 and excluded from adjusted income before income taxes. In addition, the one-time impact of U.S. tax reform ("Tax Reform") is excluded from adjusted net income attributable to ABC. Tax Reform includes a benefit from applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities as of December 31, 2017, offset in part by a one-time transition tax on historical foreign earnings and profits through December 31, 2017. Management believes that this non-GAAP financial measure is useful to investors as a supplemental way to evaluate the Company's performance because the adjustments are unusual, non-operating, unpredictable, non-recurring or non-cash in nature. |
• | Adjusted net income (loss) attributable to noncontrolling interest: Adjusted net income attributable to noncontrolling interest excludes the non-controlling interest portion of acquisition-related intangibles amortization and impairment. 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 diluted earnings per share: Adjusted diluted earnings per share excludes the per share impact of adjustments including gain from antitrust litigation settlements; LIFO expense (credit); PharMEDium remediation costs; costs related to the New York State Opioid Stewardship Act; acquisition-related intangibles amortization and impairment; employee severance, litigation, and other; loss on consolidation of equity investments; impairment of a non-customer note receivable; the interest expense incurred in connection with the 2017 Notes; and the loss on early retirement of debt; in each case net of the tax effect calculated using the applicable effective tax rate for those items. In addition, the per share impact of Tax Reform is excluded from adjusted diluted earnings per share. Management believes that this non-GAAP financial measure is useful to investors because it eliminates the per share impact of the items that are outside the control of the Company or that we consider to not be indicative of our ongoing operating performance due to their inherent unusual, non-operating, unpredictable, non-recurring, or non-cash nature. |
• | Each of the non-GAAP financial metrics discussed in this appendix has been adjusted to exclude non-wholly owned subsidiaries. Management believes that these further adjusted non-GAAP financial measures are useful to investors to provide comparable information to historical non-GAAP financial measures that do not reflect the consolidation of non-wholly owned subsidiaries. |