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Business Wire 2-May-2019 6:30 AM
Revenues of $43.3 billion for the Second Quarter, a 5.6 Percent Increase Year-Over-Year
Second Quarter GAAP Diluted EPS of $0.13 and Adjusted Diluted EPS of $2.11
Adjusted Diluted EPS Guidance Range Raised to $6.70 to $6.90 for Fiscal 2019
AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2019 second quarter ended March 31, 2019, revenue increased 5.6 percent to $43.3 billion. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $0.13 for the March quarter of fiscal 2019, compared to $1.29 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 8.8% to $2.11 in the fiscal second quarter.
The Company raised its adjusted diluted EPS guidance range for fiscal 2019 to $6.70 to $6.90, from $6.65 to $6.85 previously. The Company does not provide forward-looking guidance on a GAAP basis, as discussed below in Fiscal Year 2019 Expectations.
"AmerisourceBergen continues to execute and deliver strong performance with good growth in customer volumes, double-digit Specialty distribution growth and overall strong execution across both the Pharmaceutical Distribution Services and Global Commercialization Services & Animal Health groups this quarter," said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen.
"As we move into the second half of the year, our fiscal 2019 outlook remains strong," Mr. Collis continued. "AmerisourceBergen continues to be well positioned for long-term growth and we have the utmost confidence that our differentiated strategy and focus on providing innovative services and solutions for our partners will continue to drive sustainable value for all of our stakeholders."
Second Quarter Fiscal Year 2019 Summary Results
GAAP | Adjusted (Non-GAAP) | |||
Revenue | $43.3B | $43.3B | ||
Gross Profit | $1.4B | $1.3B | ||
Operating Expenses | $1,377M | $702M | ||
Operating Income | $48M | $617M | ||
Interest Expense, Net | $43M | $43M | ||
Effective Tax Rate | (49.5)% | 21.5% | ||
Net Income Attributable to ABC | $27M | $449M | ||
Diluted Earnings Per Share | $0.13 | $2.11 | ||
Diluted Shares Outstanding | 213M | 213M |
Below, AmerisourceBergen presents descriptive summaries of the Company's GAAP and adjusted (non-GAAP) quarterly results. In the tables that follow, GAAP results and GAAP to non-GAAP reconciliations are presented. For more information related to non-GAAP financial measures, including adjustments made in the periods presented, please refer to the Supplemental Information Regarding non-GAAP Financial Measures following the tables.
Second Quarter GAAP Results
Second Quarter Adjusted (non-GAAP) Results
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 $41.7 billion, an increase of 5.6 percent compared to the same quarter in the prior fiscal year primarily due to the growth of some of its largest customers, continued strong specialty product sales, and overall market growth. Segment operating income of $517.0 million in the second quarter of fiscal 2019 was up 5.7 percent compared to the same period in the previous fiscal year, primarily due to the increase in gross profit, offset in part by an increase in operating expenses.
Other
Revenue in Other was $1.7 billion in the second quarter of fiscal 2019, an increase of 4.5 percent compared to the same period in the prior fiscal year, primarily due to ABCS's growth in its Canadian operations and growth at World Courier and MWI. Operating income in Other increased 2.9 percent to $99.9 million in the second quarter of fiscal 2019. This increase was primarily driven by increases in operating income at ABCS's Canadian operations and World Courier.
Recent Company Highlights & Milestones
Fiscal Year 2019 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 2019 Expectations on an Adjusted (non-GAAP) Basis
AmerisourceBergen has updated its fiscal year 2019 financial guidance to reflect the Company's continued solid execution and greater than anticipated number of share repurchases. The company now expects:
Additional expectations now include:
All other previously communicated aspects of the Company's fiscal year 2019 financial guidance and assumptions remain the same.
Conference Call & Slide Presentation
The Company will host a conference call to discuss the results at 8:30 a.m. ET on May 2, 2019. A slide presentation for investors has also been posted on the Company's website at investor.amerisourcebergen.com. Participating in the conference call will be:
The dial-in number for the live call will be (612) 326-1019. No access code is required. The live call will also be webcast via the Company's website at investor.amerisourcebergen.com. Users are encouraged to log on to the webcast approximately 10 minutes in advance of the scheduled start time of the call.
Replays of the call will be made available via telephone and webcast. A replay of the webcast will be posted on investor.amerisourcebergen.com approximately two hours after the completion of the call and will remain available for 30 days. The telephone replay will also be available approximately two hours after the completion of the call and will remain available for seven days. To access the telephone replay from within the U.S., dial (800) 475-6701. From outside the U.S., dial (320) 365-3844. The access code for the replay is 465792.
Upcoming Investor Events
AmerisourceBergen management will be attending the following investor conference in the coming months:
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 21,000 associates—we are united in our responsibility to create healthier futures. AmerisourceBergen is ranked #12 on the Fortune 500, with more than $160 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. These statements are not guarantees of future performance and are based on assumptions 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 pharmaceutical market growth rates; changes in the United States healthcare and regulatory environment, including changes that could impact prescription drug reimbursement under Medicare and Medicaid; increasing governmental regulations regarding the pharmaceutical supply channel and pharmaceutical compounding; declining reimbursement rates for pharmaceuticals; federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances; increased public concern over the abuse of opioid medications; prosecution or suit by federal, state and other governmental entities of alleged violations of laws and regulations regarding controlled substances, 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; material adverse resolution of pending legal proceedings; the retention of key customer or supplier relationships under less favorable economics or the adverse resolution of any contract or other dispute with customers or suppliers; changes to customer or supplier payment terms; risks associated with the strategic, long-term relationship between Walgreens Boots Alliance, Inc. and the Company, including principally with respect to the pharmaceutical distribution agreement and/or the global generic purchasing services arrangement; changes in tax laws or legislative initiatives that could adversely affect the Company's tax positions and/or the Company's tax liabilities or adverse resolution of challenges to the Company's tax positions; regulatory or enforcement action, including a consent decree, in connection with the production, labeling or packaging of products compounded by our compounded sterile preparations (CSP) business; suspension of production of CSPs, including continued suspension at our Memphis facility; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws, economic sanctions and import laws and regulations; financial market volatility and disruption; substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; the loss, bankruptcy or insolvency of a major supplier; changes to the customer or supplier mix; malfunction, failure or breach of sophisticated information systems to operate as designed; risks generally associated with data privacy regulation and the international transfer of personal data; natural disasters or other unexpected events that affect the Company's operations; the impairment of goodwill or other intangible assets (including any additional impairments with respect to foreign operations or PharMEDium), resulting in a charge to earnings; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, including the integration of H. D. Smith and PharMEDium, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period; the fact the acquisition of H. D. Smith may make it more difficult to establish or maintain relationships with employees, suppliers, customers and other business partners; the Company's ability to manage and complete divestitures; the disruption of the Company's cash flow and ability to return value to its stockholders in accordance with its past practices; interest rate and foreign currency exchange rate fluctuations; declining economic conditions in the United States and abroad; and other economic, business, competitive, legal, tax, regulatory and/or operational factors affecting the Company's business generally. Certain additional factors that management believes could cause actual outcomes and results to differ materially from those described in forward-looking statements are set forth (i) in Item 1A (Risk Factors), in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018 and elsewhere in that report and (ii) in other reports filed by the Company pursuant to the Securities Exchange Act.
AMERISOURCEBERGEN CORPORATION FINANCIAL SUMMARY (In thousands, except per share data) (unaudited) |
||||||||||||||
Three
Months Ended March 31, 2019 |
% of
Revenue |
Three
Months Ended March 31, 2018 |
% of
Revenue |
%
Change |
||||||||||
Revenue | $ | 43,319,602 | $ | 41,033,858 | 5.6% | |||||||||
Cost of goods sold | 41,894,846 | 39,778,175 | 5.3% | |||||||||||
Gross profit 1 | 1,424,756 | 3.29% | 1,255,683 | 3.06% | 13.5% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 628,036 | 1.45% | 617,426 | 1.50% | 1.7% | |||||||||
Depreciation and amortization | 123,766 | 0.29% | 119,388 | 0.29% | 3.7% | |||||||||
Employee severance, litigation, and other 2 | 55,389 | 37,449 | ||||||||||||
Impairment of long-lived assets 3 | 570,000 | — | ||||||||||||
Total operating expenses | 1,377,191 | 3.18% | 774,263 | 1.89% | 77.9% | |||||||||
Operating income | 47,565 | 0.11% | 481,420 | 1.17% | (90.1)% | |||||||||
Other (income) loss 4 | (14,494 | ) | 29,123 | |||||||||||
Interest expense, net | 43,275 | 48,637 | (11.0)% | |||||||||||
Loss on consolidation of equity investments | — | 42,328 | ||||||||||||
Income before income taxes | 18,784 | 0.04% | 361,332 | 0.88% | (94.8)% | |||||||||
Income tax (benefit) expense | (9,289 | ) | 79,172 | |||||||||||
Net income | 28,073 | 0.06% | 282,160 | 0.69% | (90.1)% | |||||||||
Net (income) loss attributable to noncontrolling interest | (938 | ) | 5,295 | |||||||||||
Net income attributable to AmerisourceBergen Corporation | $ | 27,135 | 0.06% | $ | 287,455 | 0.70% | (90.6)% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 0.13 | $ | 1.31 | (90.1)% | |||||||||
Diluted | $ | 0.13 | $ | 1.29 | (89.9)% | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 210,934 | 219,200 | (3.8)% | |||||||||||
Diluted | 212,563 | 222,303 | (4.4)% |
________________________________________ | ||
1 | Includes a $66.8 million LIFO credit, a $52.0 million gain from antitrust litigation settlements, and $12.3 million of PharMEDium remediation costs in the three months ended March 31, 2019. Includes $22.5 million of PharMEDium remediation costs and a $0.3 million gain from antitrust litigation settlements in the three months ended March 31, 2018. | |
2 | Includes $14.0 million of employee severance, $13.8 million of litigation costs primarily related to opioid lawsuits and investigations, and $27.5 million of other costs in connection with acquisition-related deal and integration costs, business transformation efforts, and other restructuring initiatives in the three months ended March 31, 2019. Includes $20.8 million of employee severance, $7.6 million of litigation costs primarily related to opioid lawsuits and investigations, and $9.0 million of other costs in connection with acquisition-related deal and integration costs, business transformation efforts, and other restructuring initiatives in the three months ended March 31, 2018. | |
3 | Impairment of finite-lived intangible assets and property and equipment relating to PharMEDium. | |
4 | Includes a $13.7 million gain on the sale of an equity investment in the three months ended March 31, 2019. Includes a $30.0 million impairment on a non-customer note receivable in the three months ended March 31, 2018. |
AMERISOURCEBERGEN CORPORATION FINANCIAL SUMMARY (In thousands, except per share data) (unaudited) |
||||||||||||||
Six
Months Ended March 31, 2019 |
% of
Revenue |
Six
Months Ended March 31, 2018 |
% of
Revenue |
%
Change |
||||||||||
Revenue | $ | 88,712,054 | $ | 81,500,190 | 8.8% | |||||||||
Cost of goods sold | 85,989,718 | 79,131,855 | 8.7% | |||||||||||
Gross profit 1 | 2,722,336 | 3.07% | 2,368,335 | 2.91% | 14.9% | |||||||||
Operating expenses: | ||||||||||||||
Distribution, selling, and administrative | 1,284,621 | 1.45% | 1,175,948 | 1.44% | 9.2% | |||||||||
Depreciation and amortization | 246,266 | 0.28% | 224,524 | 0.28% | 9.7% | |||||||||
Employee severance, litigation, and other 2 | 96,061 | 67,470 | ||||||||||||
Impairment of long-lived assets 3 | 570,000 | — | ||||||||||||
Total operating expenses | 2,196,948 | 2.48% | 1,467,942 | 1.80% | 49.7% | |||||||||
Operating income | 525,388 | 0.59% | 900,393 | 1.10% | (41.6)% | |||||||||
Other (income) loss 4 | (11,397 | ) | 29,447 | |||||||||||
Interest expense, net | 85,445 | 84,501 | 1.1% | |||||||||||
Loss on consolidation of equity investments | — | 42,328 | ||||||||||||
Loss on early retirement of debt | — | 23,766 | ||||||||||||
Income before income taxes | 451,340 | 0.51% | 720,351 | 0.88% | (37.3)% | |||||||||
Income tax expense (benefit) | 31,514 | (423,662 | ) | |||||||||||
Net income | 419,826 | 0.47% | 1,144,013 | 1.40% | (63.3)% | |||||||||
Net loss attributable to noncontrolling interest | 961 | 5,295 | ||||||||||||
Net income attributable to AmerisourceBergen Corporation | $ | 420,787 | 0.47% | $ | 1,149,308 | 1.41% | (63.4)% | |||||||
Earnings per share: | ||||||||||||||
Basic | $ | 1.99 | $ | 5.25 | (62.1)% | |||||||||
Diluted | $ | 1.97 | $ | 5.19 | (62.0)% | |||||||||
Weighted average common shares outstanding: | ||||||||||||||
Basic | 211,503 | 218,763 | (3.3)% | |||||||||||
Diluted | 213,275 | 221,565 | (3.7)% |
________________________________________ | ||
1 | Includes a $139.3 million gain from antitrust litigation settlements, a $69.8 million LIFO credit, $30.2 million of PharMEDium remediation costs, and a $22.0 million reversal of a prior period assessment relating to the New York Opioid Stewardship Act in the six months ended March 31, 2019. Includes $22.5 million of PharMEDium remediation costs and a $0.3 million gain from antitrust litigation settlements in the six months ended March 31, 2018. | |
2 | Includes $18.8 million of employee severance, $28.4 million of litigation costs primarily related to opioid lawsuits and investigations, and $48.9 million of other costs in connection with acquisition-related deal and integration costs, business transformation efforts, and other restructuring initiatives in the six months ended March 31, 2019. Includes $28.4 million of employee severance, $10.4 million of litigation costs primarily related to opioid lawsuits, investigations, and initiatives, and $28.6 million of other costs in connection with acquisition-related deal and integration costs, business transformation efforts, and other restructuring initiatives in the six months ended March 31, 2018. | |
3 | Impairment of finite-lived intangible assets and property and equipment relating to PharMEDium. | |
4 | Includes a $13.7 million gain on the sale of an equity investment in the six months ended March 31, 2019. Includes a $30.0 million impairment on a non-customer note receivable in the six months ended March 31, 2018. |
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP RECONCILIATIONS (in thousands, except per share data) (unaudited) |
||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2019 | ||||||||||||||||||||||||||||||||||
Gross Profit | OperatingExpenses | OperatingIncome | IncomeBefore Income Taxes |
Income Tax(Benefit)Expense |
Net IncomeAttributable toNoncontrollingInterest |
Net IncomeAttributableto ABC |
DilutedEarnings Per Share |
|||||||||||||||||||||||||||
GAAP | $ | 1,424,756 | $ | 1,377,191 | $ | 47,565 | $ | 18,784 | $ | (9,289 | ) | $ | (938 | ) | $ | 27,135 | $ | 0.13 | ||||||||||||||||
Gain from antitrust litigation settlements | (51,976 | ) | — | (51,976 | ) | (51,976 | ) | (16,980 | ) | — | (34,996 | ) | (0.16 | ) | ||||||||||||||||||||
LIFO credit | (66,805 | ) | — | (66,805 | ) | (66,805 | ) | (17,137 | ) | — | (49,668 | ) | (0.23 | ) | ||||||||||||||||||||
PharMEDium remediation costs | 12,334 | (3,563 | ) | 15,897 | 15,897 | 4,927 | — | 10,970 | 0.05 | |||||||||||||||||||||||||
New York State Opioid Stewardship Act | — | — | — | — | (944 | ) | — | 944 | — | |||||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (46,594 | ) | 46,594 | 46,594 | 13,800 | (437 | ) | 32,357 | 0.15 | ||||||||||||||||||||||||
Employee severance, litigation, and other | — | (55,389 | ) | 55,389 | 55,389 | 7,474 | — | 47,915 | 0.23 | |||||||||||||||||||||||||
Impairment of long-lived assets | — | (570,000 | ) | 570,000 | 570,000 | 145,103 | — | 424,897 | 2.00 | |||||||||||||||||||||||||
Gain on sale of an equity investment | — |
|
— | — | (13,692 | ) | (3,485 | ) | — | (10,207 | ) | (0.05 | ) | |||||||||||||||||||||
Adjusted Non-GAAP | $ | 1,318,309 | $ | 701,645 | $ | 616,664 | $ | 574,191 | $ | 123,469 | $ | (1,375 | ) | $ | 449,347 | $ | 2.11 | 1 | ||||||||||||||||
Adjusted Non-GAAP % change vs. prior year period | 3.2 | % | 1.5 | % | 5.2 | % | 6.6 | % | 10.9 | % | 4.0 | % | 8.8 | % | ||||||||||||||||||||
Percentages of Revenue: |
GAAP |
Adjusted
Non-GAAP |
||||||||||||||||||||||||||||||||
Gross profit | 3.29% | 3.04% | ||||||||||||||||||||||||||||||||
Operating expenses | 3.18% | 1.62% | ||||||||||||||||||||||||||||||||
Operating income | 0.11% | 1.42% |
1 | 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) |
|||||||||||||||||||||||||||||||
Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||||||
Gross Profit |
OperatingExpenses |
OperatingIncome |
Income BeforeIncome Taxes |
Income TaxExpense |
Net LossAttributable toNoncontrollingInterest |
Net IncomeAttributableto ABC |
DilutedEarnings Per Share |
||||||||||||||||||||||||
GAAP | $ | 1,255,683 | $ | 774,263 | $ | 481,420 | $ | 361,332 | $ | 79,172 | $ | 5,295 | $ | 287,455 | $ | 1.29 | |||||||||||||||
Gain from antitrust litigation settlements | (338 | ) | — | (338 | ) | (338 | ) | (97 | ) | — | (241 | ) | — | ||||||||||||||||||
PharMEDium remediation costs | 22,506 | — | 22,506 | 22,506 | 6,478 | — | 16,028 | 0.07 | |||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (45,295 | ) | 45,295 | 45,325 | 13,882 | (669 | ) | 30,774 | 0.14 | |||||||||||||||||||||
Employee severance, litigation, and other | — | (37,449 | ) | 37,449 | 37,449 | 11,420 | — | 26,029 | 0.12 | ||||||||||||||||||||||
Loss on consolidation of equity investments | — | — | — | 42,328 | — | — | 42,328 | 0.19 | |||||||||||||||||||||||
Impairment on non-customer note receivable | — | — | — | 30,000 | — | — | 30,000 | 0.13 | |||||||||||||||||||||||
Loss on early retirement of debt | — | — | — | — | 507 | — | (507 | ) | — | ||||||||||||||||||||||
Adjusted Non-GAAP | $ | 1,277,851 | $ | 691,519 | $ | 586,332 | $ | 538,602 | $ | 111,362 | $ | 4,626 | $ | 431,866 | $ | 1.94 | |||||||||||||||
Percentages of Revenue: | GAAP |
Adjusted
Non-GAAP |
|||||||||||||||||||||||||||||
Gross profit | 3.06% | 3.11% | |||||||||||||||||||||||||||||
Operating expenses | 1.89% | 1.69% | |||||||||||||||||||||||||||||
Operating income | 1.17% | 1.43% |
________________________________________ | ||
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) |
|||||||||||||||||||||||||||||||||
Six Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||||
Gross Profit |
OperatingExpenses |
OperatingIncome |
IncomeBefore Income Taxes |
Income TaxExpense |
Net LossAttributable toNoncontrollingInterest |
Net IncomeAttributableto ABC |
DilutedEarnings Per Share |
||||||||||||||||||||||||||
GAAP | $ | 2,722,336 | $ | 2,196,948 | $ | 525,388 | $ | 451,340 | $ | 31,514 | $ | 961 | $ | 420,787 | $ | 1.97 | |||||||||||||||||
Gain from antitrust litigation settlements | (139,255 | ) | — | (139,255 | ) | (139,255 | ) | (35,450 | ) | — | (103,805 | ) | (0.49 | ) | |||||||||||||||||||
LIFO credit | (69,834 | ) | — | (69,834 | ) | (69,834 | ) | (17,778 | ) | — | (52,056 | ) | (0.24 | ) | |||||||||||||||||||
PharMEDium remediation costs | 30,245 | (6,147 | ) | 36,392 | 36,392 | 9,264 | — | 27,128 | 0.13 | ||||||||||||||||||||||||
New York State Opioid Stewardship Act | (22,000 | ) | — | (22,000 | ) | (22,000 | ) | (5,600 | ) | — | (16,400 | ) | (0.08 | ) | |||||||||||||||||||
Acquisition-related intangibles amortization | — | (91,746 | ) | 91,746 | 91,746 | 23,355 | (943 | ) | 67,448 | 0.32 | |||||||||||||||||||||||
Employee severance, litigation, and other | — | (96,061 | ) | 96,061 | 96,061 | 24,454 | — | 71,607 | 0.34 | ||||||||||||||||||||||||
Impairment of long-lived assets | — | (570,000 | ) | 570,000 | 570,000 | 145,103 | — | 424,897 | 1.99 | ||||||||||||||||||||||||
Gain on sale of an equity investment | — | — | — | (13,692 | ) | (3,485 | ) | — | (10,207 | ) | (0.05 | ) | |||||||||||||||||||||
Tax reform 1 | — | — | — | — | 36,997 | — | (36,997 | ) | (0.17 | ) | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 2,521,492 | $ | 1,432,994 | $ | 1,088,498 | $ | 1,000,758 | $ | 208,374 | $ | 18 | $ | 792,402 | $ | 3.72 | |||||||||||||||||
Adjusted Non-GAAP % change vs. prior year period | 5.5 | % | 8.9 | % | 1.3 | % | 1.0 | % | (5.7 | )% | 2.3 | % | 6.6 | % | |||||||||||||||||||
Percentages of Revenue: | GAAP |
Adjusted
Non-GAAP |
|||||||||||||||||||||||||||||||
Gross profit | 3.07% | 2.84% | |||||||||||||||||||||||||||||||
Operating expenses | 2.48% | 1.62% | |||||||||||||||||||||||||||||||
Operating income | 0.59% | 1.23% |
1 | Includes a measurement period adjustment to the one-time transition tax on historical foreign earnings and profits through December 31, 2017. | |
Note: For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release. |
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP RECONCILIATIONS (in thousands, except per share data) (unaudited) |
|||||||||||||||||||||||||||||||||
Six Months Ended March 31, 2018 | |||||||||||||||||||||||||||||||||
Gross Profit | OperatingExpenses | OperatingIncome |
Income BeforeIncome Taxes |
Income Tax(Benefit)Expense |
Net LossAttributable toNoncontrollingInterest |
Net IncomeAttributableto ABC |
DilutedEarnings Per Share |
||||||||||||||||||||||||||
GAAP | $ | 2,368,335 | $ | 1,467,942 | $ | 900,393 | $ | 720,351 | $ | (423,662 | ) | $ | 5,295 | $ | 1,149,308 | $ | 5.19 | ||||||||||||||||
Gain from antitrust litigation settlements | (338 | ) | — | (338 | ) | (338 | ) | (97 | ) | — | (241 | ) | — | ||||||||||||||||||||
PharMEDium remediation costs | 22,506 | — | 22,506 | 22,506 | 6,478 | — | 16,028 | 0.07 | |||||||||||||||||||||||||
Acquisition-related intangibles amortization | — | (84,351 | ) | 84,351 | 84,476 | 24,317 | (669 | ) | 59,490 | 0.27 | |||||||||||||||||||||||
Employee severance, litigation and other | — | (67,470 | ) | 67,470 | 67,470 | 19,421 | — | 48,049 | 0.22 | ||||||||||||||||||||||||
Loss on consolidation of equity investments | — | — | — | 42,328 | — | — | 42,328 | 0.19 | |||||||||||||||||||||||||
Impairment on non-customer note receivable | — | — | — | 30,000 | — | — | 30,000 | 0.14 | |||||||||||||||||||||||||
Loss on early retirement of debt | — | — | — | 23,766 | 6,841 | — | 16,925 | 0.08 | |||||||||||||||||||||||||
Tax Reform 1 | — | — | — | — | 587,595 | — | (587,595 | ) | (2.65 | ) | |||||||||||||||||||||||
Adjusted Non-GAAP | $ | 2,390,503 | $ | 1,316,121 | $ | 1,074,382 | $ | 990,559 | $ | 220,893 | $ | 4,626 | $ | 774,292 | $ | 3.49 | 2 | ||||||||||||||||
Percentages of Revenue: | GAAP |
Adjusted
Non-GAAP |
|||||||||||||||||||||||||||||||
Gross profit | 2.91% | 2.93% | |||||||||||||||||||||||||||||||
Operating expenses | 1.80% | 1.61% | |||||||||||||||||||||||||||||||
Operating income | 1.10% | 1.32% |
________________________________________ | ||
1 | Represents the impact of applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities as of December 31, 2017, offset in part by a one-time transition tax on historical foreign earnings and profits through December 31, 2017. | |
2 | The sum of the components does not equal the total due to rounding. | |
Note: For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release. |
AMERISOURCEBERGEN CORPORATION SUMMARY SEGMENT INFORMATION (dollars in thousands) (unaudited) |
||||||||||
Three Months Ended March 31, | ||||||||||
Revenue | 2019 | 2018 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 41,676,164 | $ | 39,453,353 | 5.6% | |||||
Other | 1,665,429 | 1,594,378 | 4.5% | |||||||
Intersegment eliminations | (21,991 | ) | (13,873 | ) | ||||||
Revenue | $ | 43,319,602 | $ | 41,033,858 | 5.6% | |||||
Three Months Ended March 31, | ||||||||||
Operating income | 2019 | 2018 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 517,034 | $ | 489,106 | 5.7% | |||||
Other | 99,879 | 97,055 | 2.9% | |||||||
Intersegment eliminations | (249 | ) | 171 | |||||||
Total segment operating income | 616,664 | 586,332 | 5.2% | |||||||
Gain from antitrust litigation settlements | 51,976 | 338 | ||||||||
LIFO credit | 66,805 | — | ||||||||
PharMEDium remediation costs | (15,897 | ) | (22,506 | ) | ||||||
Acquisition-related intangibles amortization | (46,594 | ) | (45,295 | ) | ||||||
Employee severance, litigation, and other | (55,389 | ) | (37,449 | ) | ||||||
Impairment of long-lived assets | (570,000 | ) | — | |||||||
Operating income | $ | 47,565 | $ | 481,420 | ||||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.38% | 2.41% | ||||||||
Operating expenses | 1.14% | 1.17% | ||||||||
Operating income | 1.24% | 1.24% | ||||||||
Other | ||||||||||
Gross profit | 19.60% | 20.48% | ||||||||
Operating expenses | 13.60% | 14.39% | ||||||||
Operating income | 6.00% | 6.09% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 3.29% | 3.06% | ||||||||
Operating expenses | 3.18% | 1.89% | ||||||||
Operating income | 0.11% | 1.17% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Adjusted gross profit | 3.04% | 3.11% | ||||||||
Adjusted operating expenses | 1.62% | 1.69% | ||||||||
Adjusted operating income | 1.42% | 1.43% |
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) |
||||||||||
Six Months Ended March 31, | ||||||||||
Revenue | 2019 | 2018 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 85,420,545 | $ | 78,391,051 | 9.0% | |||||
Other | 3,336,367 | 3,139,329 | 6.3% | |||||||
Intersegment eliminations | (44,858 | ) | (30,190 | ) | ||||||
Revenue | $ | 88,712,054 | $ | 81,500,190 | 8.8% | |||||
Six Months Ended March 31, | ||||||||||
Operating income | 2019 | 2018 | % Change | |||||||
Pharmaceutical Distribution Services | $ | 890,241 | $ | 877,288 | 1.5% | |||||
Other | 198,813 | 197,330 | 0.8% | |||||||
Intersegment eliminations | (556 | ) | (236 | ) | ||||||
Total segment operating income | 1,088,498 | 1,074,382 | 1.3% | |||||||
Gain from antitrust litigation settlements | 139,255 | 338 | ||||||||
LIFO credit | 69,834 | — | ||||||||
PharMEDium remediation costs | (36,392 | ) | (22,506 | ) | ||||||
New York State Opioid Stewardship Act | 22,000 | — | ||||||||
Acquisition-related intangibles amortization | (91,746 | ) | (84,351 | ) | ||||||
Employee severance, litigation, and other | (96,061 | ) | (67,470 | ) | ||||||
Impairment of long-lived assets | (570,000 | ) | — | |||||||
Operating income | $ | 525,388 | $ | 900,393 | ||||||
Percentages of revenue: | ||||||||||
Pharmaceutical Distribution Services | ||||||||||
Gross profit | 2.19% | 2.22% | ||||||||
Operating expenses | 1.15% | 1.11% | ||||||||
Operating income | 1.04% | 1.12% | ||||||||
Other | ||||||||||
Gross profit | 19.53% | 20.61% | ||||||||
Operating expenses | 13.57% | 14.32% | ||||||||
Operating income | 5.96% | 6.29% | ||||||||
AmerisourceBergen Corporation (GAAP) | ||||||||||
Gross profit | 3.07% | 2.91% | ||||||||
Operating expenses | 2.48% | 1.80% | ||||||||
Operating income | 0.59% | 1.10% | ||||||||
AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
Adjusted gross profit | 2.84% | 2.93% | ||||||||
Adjusted operating expenses | 1.62% | 1.61% | ||||||||
Adjusted operating income | 1.23% | 1.32% |
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) |
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March 31, | September 30, | ||||||
2019 | 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 2,875,750 | $ | 2,492,516 | |||
Accounts receivable, net | 12,222,271 | 11,314,226 | |||||
Inventories | 11,373,730 | 11,918,508 | |||||
Right to recover asset 1 | 977,860 | — | |||||
Prepaid expenses and other | 172,572 | 169,122 | |||||
Total current assets | 27,622,183 | 25,894,372 | |||||
Property and equipment, net | 1,858,867 | 1,892,424 | |||||
Goodwill and other intangible assets | 9,055,678 | 9,612,100 | |||||
Other long-term assets | 273,582 | 270,942 | |||||
Total assets | $ | 38,810,310 | $ | 37,669,838 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 28,189,390 | $ | 26,836,873 | |||
Other current liabilities | 1,022,509 | 1,032,814 | |||||
Total current liabilities | 29,211,899 | 27,869,687 | |||||
Long-term debt | 4,009,500 | 4,158,532 | |||||
Accrued income taxes | 273,662 | 299,600 | |||||
Deferred income taxes | 1,857,201 | 1,829,410 | |||||
Other long-term liabilities | 419,717 | 462,648 | |||||
Total equity | 3,038,331 | 3,049,961 | |||||
Total liabilities and equity | $ | 38,810,310 | $ | 37,669,838 |
1 Right to recover assets represents the inventory value associated with the accrual for estimated customer sales returns. The inventories balance at September 30, 2018 includes a $988.8 million accrual for estimated customer sales returns.
AMERISOURCEBERGEN CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) |
||||||||
Six Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Operating Activities: | ||||||||
Net income | $ | 419,826 | $ | 1,144,013 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities 1, 2 | 820,403 | (414,709 | ) | |||||
Changes in operating assets and liabilities, excluding the effects of acquisitions: | ||||||||
Accounts receivable | (880,805 | ) | (590,386 | ) | ||||
Inventories | (420,190 | ) | (805,164 | ) | ||||
Accounts payable | 1,350,728 | 384,378 | ||||||
Other 3 | (186,630 | ) | 204,626 | |||||
Net cash provided by (used in) operating activities | 1,103,332 | (77,242 | ) | |||||
Investing Activities: | ||||||||
Capital expenditures | (161,488 | ) | (168,816 | ) | ||||
Cost of acquired companies, net of cash acquired | (52,398 | ) | (777,085 | ) | ||||
Other | 2,659 | 10,479 | ||||||
Net cash used in investing activities | (211,227 | ) | (935,422 | ) | ||||
Financing Activities: | ||||||||
Net (repayments) borrowings 4 | (16,017 | ) | 820,724 | |||||
Payment of premium on early retirement of debt | — | (22,348 | ) | |||||
Purchases of common stock 5 | (347,959 | ) | (60,208 | ) | ||||
Exercises of stock options | 37,590 | 115,236 | ||||||
Cash dividends on common stock | (170,428 | ) | (167,533 | ) | ||||
Other | (12,057 | ) | (16,963 | ) | ||||
Net cash (used in) provided by financing activities | (508,871 | ) | 668,908 | |||||
Increase (decrease) in cash and cash equivalents | 383,234 | (343,756 | ) | |||||
Cash and cash equivalents at beginning of period | 2,492,516 | 2,435,115 | ||||||
Cash and cash equivalents at end of period | $ | 2,875,750 | $ | 2,091,359 |
________________________________________ | ||
1 | Adjustments include a LIFO credit of $69.8 million and an impairment of long-lived assets of $570.0 million for the six months ended March 31, 2019. | |
2 | Includes a $798.4 million benefit for deferred income taxes for the six months ended March 31, 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 $262.5 million increase in income taxes payable for the six months ended March 31, 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. | |
4 | Net borrowings for the six months ended March 31, 2018 were primarily used to finance the acquisition of H.D. Smith, which was completed on January 2, 2018. | |
5 | Purchases of common stock in the six months ended March 31, 2019 includes $24.0 million of September 2018 purchases that cash settled in October 2018. |
SUPPLEMENTAL INFORMATION REGARDINGNON-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:
In addition, the Company has provided non-GAAP fiscal year 2019 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 2019 adjusted free cash flow guidance. For fiscal year 2019, 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.
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