Revenues of $37.1 Billion for the Second
Quarter, a 4 Percent Increase Year-Over-Year
Second Quarter GAAP Diluted EPS of $1.86 and
Adjusted Diluted EPS of $1.77
Adjusted Diluted EPS Guidance Raised to $5.77
to $5.92 for Fiscal Year 2017
Company Continues to Expect Brand Inflation of
7% to 9% and Generic Deflation of -7% to -9% for Fiscal Year
2017
AmerisourceBergen Corporation (NYSE:ABC) today reported that in
its fiscal year 2017 second quarter ended March 31, 2017, revenue
increased 4.1 percent to $37.1 billion. On the basis of U.S.
generally accepted accounting principles (GAAP), diluted earnings
per share (EPS) was $1.86 for the March quarter of fiscal 2017,
compared to $2.68 in the prior year quarter. Adjusted diluted EPS,
which excludes items described below, increased 5.4 percent to
$1.77 in the fiscal second quarter.
The Company is updating its outlook for fiscal year 2017. The
Company does not provide forward-looking guidance on a GAAP basis,
as discussed below in Fiscal Year 2017 Expectations. Adjusted
diluted EPS guidance has been raised from the previous expectation
of $5.72 to $5.92 to a range of $5.77 to $5.92, reflecting growth
of 3 percent to 5 percent versus last fiscal year.
“AmerisourceBergen is consistently delivering solid performance
in a challenging marketplace. We are very pleased with our second
quarter results, our team’s ability to strategically execute and
the continued growth of our anchor customers. We also take great
pride in our strong customer relationships, including our long-term
contract with Express Scripts, which we recently renewed and now
extends through 2022,” said Steven H. Collis, Chairman, President
and Chief Executive Officer of AmerisourceBergen. “We offer our
pharmaceutical manufacturer and provider customers the most
innovative and business-critical services and solutions to support
and drive their growth. The overall response to these offerings has
been extremely positive and their adoption continues to grow.”
“In the second quarter of the fiscal year, we continued to lead
the market in specialty distribution and pharmaceutical services,
deliver excellent growth across our businesses in Other - including
Consulting Services, MWI Animal Health and World Courier - and
effectively manage our operating expenses,” Mr. Collis continued.
“As we move further into 2017, we continue to have great confidence
in our unique portfolio of integrated services, the significant
value we bring to our customers and our ability to create healthier
futures - AmerisourceBergen enables people to access the healthcare
products they need, ultimately improving the lives of patients and
delivering long-term value to all of our stakeholders.”
Second Quarter Fiscal Year 2017 Summary
Results
GAAP
Adjusted (Non-GAAP) Revenue $37.1B
$37.1B
Gross Profit $1.3B $1.2B
Operating
Expenses $631M $581M
Operating Income
$625M $588M
Interest Expense, Net $37M
$35M
Tax Rate 30.6% 30.1%
Diluted
Shares Outstanding 221M 221M
Diluted Earnings
Per Share $1.86 $1.77
Below, AmerisourceBergen presents descriptive summaries of the
Company’s GAAP quarterly results as well as its 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, please refer to the
Supplemental Information Regarding Non-GAAP Financial Measures
following the tables.
Second Quarter GAAP Quarterly
Results
- Revenue:
In the second quarter of fiscal 2017, revenue was $37.1 billion, up
4.1 percent compared to the same quarter in the previous fiscal
year, reflecting a 4.0 percent increase in Pharmaceutical
Distribution Services revenue and a 6.0 percent increase in revenue
within Other.
- Gross
Profit: Gross profit in the fiscal 2017 second quarter was
$1.3 billion, a 16.8 percent increase over the same period in the
previous fiscal year, primarily driven by a LIFO credit of $86.5
million in the current year quarter versus a LIFO expense charge of
$92.4 million in the prior year period. The change in LIFO is
driven by lower expected brand inflation and greater generic
deflation for fiscal year 2017 in comparison to those expectations
at March 31, 2016 for the prior fiscal year. Gross profit as a
percentage of revenue was 3.38 percent, an increase of 37 basis
points from the prior year quarter.
- Operating
Expenses: In the second quarter of fiscal 2017, operating
expenses were $631 million, compared to $125 million in the same
period last fiscal year. Prior year’s operating expenses included
$504 million of Warrants income. Distribution, selling, and
administrative expenses of $522 million were relatively flat
compared to the prior year period.
- Operating
Income: In the fiscal 2017 second quarter, operating income
was $625 million versus $950 million in the prior year period. The
decline in operating income was driven by the $504 million of
Warrants income in the prior year quarter.
- Interest Expense,
Net: In the fiscal 2017 second quarter, net interest expense
of $37 million was up 3.7 percent versus the prior year
quarter.
- Tax Rate:
The effective tax rate for the second quarter of fiscal 2017 was
30.6 percent versus 34.1 percent in the prior year second quarter.
Our tax rate was approximately 2.0 percent lower than expected due
primarily to a greater than anticipated benefit from share-based
compensation resulting from a high number of stock option exercises
in the current quarter, which was partially offset by certain
unfavorable discrete tax items.
- Diluted Earnings
Per Share: Diluted earnings per share was down 30.6 percent
to $1.86 in the second quarter of fiscal year 2017 compared to
$2.68 in the previous fiscal year’s second quarter, driven
primarily by the decrease in net income.
- Diluted Shares
Outstanding: Diluted weighted average shares outstanding for
the second quarter of fiscal year 2017 were 221.2 million, a 1.9
percent decline versus the prior fiscal year second quarter due to
share repurchases, net of stock option exercises.
Definition of Adjusted (Non-GAAP)
Results
The comments below compare adjusted results, which exclude:
- 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.
In addition, we previously issued $600 million of 1.15 percent
senior notes due in May 2017 to fund our initial special share
repurchase program. The interest expense incurred relating to this
borrowing is excluded from the Non-GAAP presentation.
AmerisourceBergen also calculated its adjusted earnings per share
for each period in fiscal year 2016 using an adjusted diluted
weighted average share count.
Second Quarter Adjusted (Non-GAAP)
Results
- Revenue:
In the second quarter of fiscal 2017, revenue was $37.1 billion, up
4.1 percent compared to the same quarter in the previous fiscal
year, reflecting a 4.0 percent increase in Pharmaceutical
Distribution Services revenue and a 6.0 percent increase in revenue
within Other.
- Adjusted Gross
Profit: Gross profit in the fiscal 2017 second quarter was
$1.2 billion, which was relatively flat when compared to the same
period in the previous year. Gross profit as a percentage of
revenue was 3.15 percent, a decrease of 12 basis points from the
prior year quarter.
- Adjusted
Operating Expenses: In the second quarter of fiscal 2017,
operating expenses were $581 million, an increase of 1.4 percent
compared to the same period in the last fiscal year. Operating
expenses as a percentage of revenue in the fiscal 2017 second
quarter were 1.57 percent, compared to 1.61 percent for the same
period in the previous fiscal year.
- Adjusted
Operating Income: In the fiscal 2017 second quarter,
operating income of $588 million was down 1.0 percent versus the
prior year period, driven by the increase in operating expenses and
partially offset by the increase in gross profit. Operating income
as a percentage of revenue decreased 8 basis points to 1.58 percent
in the fiscal 2017 second quarter compared to the previous fiscal
year’s second quarter.
- Adjusted Interest
Expense, Net: In the fiscal 2017 second quarter, net
interest expense of $35 million was up 3.9 percent versus the prior
year quarter.
- Adjusted Tax
Rate: The effective tax rate for the second quarter of
fiscal 2017 was 30.1 percent, down from 31.3 percent in the
previous fiscal year’s second quarter. Our tax rate was
approximately 2.0 percent lower than expected, due primarily to a
greater than anticipated benefit from share-based compensation
resulting from a high number of stock options exercised in the
second quarter, which was partially offset by certain unfavorable
discrete tax items.
- Adjusted Diluted
Earnings Per Share: Diluted earnings per share was up 5.4
percent to $1.77 in the second quarter of fiscal year 2017 compared
to $1.68 in the previous fiscal year’s second 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 second quarter of fiscal year 2017 were 221.2
million, a 3.5 percent decline versus the prior fiscal year second
quarter due primarily to purchases made under our share repurchase
programs.
Segment Discussion
The Pharmaceutical Distribution Services segment includes both
AmerisourceBergen Drug Corporation (ABDC) and AmerisourceBergen
Specialty Group (ABSG). Other consists of businesses that focus on
manufacturer and other services and includes AmerisourceBergen
Consulting Services (ABCS), World Courier and MWI Animal Health
(MWI).
Pharmaceutical Distribution Services
Segment
Pharmaceutical Distribution Services revenue was $35.5 billion,
an increase of 4.0 percent compared to the same quarter in the
prior fiscal year. ABDC revenue increased 3.6 percent, due
primarily to organic sales growth. ABSG revenue increased 11.0
percent - its 13th consecutive quarter of revenue growth of 10% or
more - driven by overall strong performance, especially in the sale
of oncology products, and increased sales in the Company’s
third-party logistics business. Intrasegment revenues between ABDC
and ABSG have been eliminated in the presentation of total
Pharmaceutical Distribution Services revenue. Total intrasegment
revenue was $2.2 billion and $1.8 billion in the quarters ended
March 31, 2017 and 2016, respectively.
Segment operating income of $482 million in the March quarter of
fiscal 2017 was down 3.6 percent compared to the same period in the
previous fiscal year as a decline in gross profit was partially
offset by a decline in operating expenses.
Other
Revenue in Other was $1.7 billion in the second quarter of
fiscal 2017, an increase of 6.0 percent compared to the same period
in the prior fiscal year as business unit revenue increased at ABCS
and MWI. Operating income in Other increased 13.0 percent to $106
million in the second quarter of fiscal 2017. This increase was
driven by performance across all three business units: ABCS, World
Courier and MWI.
Recent Company Highlights &
Milestones
- Entered into a new, strategic,
long-term contract with Express Scripts Holding Company, extending
the relationship through 2022.
- Made significant progress in advancing
our customer experience and operational efficiency programs and
capabilities, including bringing our new Olive Branch, Mississippi
distribution center on line.
- Continued to renew several key
specialty pharmacy accounts and was selected as the pharmaceutical
services partner for a wide range of new specialty products with
access through both full-line distribution and specialty
distribution.
- Increased our investment in
PharMEDium's quality control and quality assurance systems to
enhance product quality and patient safety and to meet all
PharMEDium commitments to the U.S. Food and Drug Administration,
pursuant to the new federal requirements for outsourcing
facilities. While a slight throughput and bottom-line impact is
expected in fiscal year 2017 as a result of these efforts, the
initiative creates a competitive advantage and further builds on
PharMEDium's commitment to serve as a high-quality partner and
provider of choice to its customers.
- Hosted the AmerisourceBergen annual
employee management leadership summit, ThoughtLeaders 2017,
bringing together more than 225 leaders from across all businesses
and functions of the company with a focus on fostering strategic
thinking, collaboration across the enterprise and professional
development.
Fiscal Year 2017
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 2017 Expectations on an
Adjusted (Non-GAAP) Basis
Based upon the strength of the Company’s performance in the
first and second quarters of fiscal year 2017 as well as the
Company’s assessment of the current market and sector landscape,
AmerisourceBergen has updated its fiscal year 2017 financial
guidance. The Company now expects:
- Revenue growth in the range of 5.5
percent to 6.5 percent, compared to the previous assumption of 6.5
percent to 8 percent; and
- Adjusted diluted earnings per share to
be in the range of $5.77 to $5.92, compared to the previous range
of $5.72 to $5.92.
These expectations, as well as the other assumptions below, do
not include any potential benefit from new business from pending
transactions at any of the Company’s large customers and exclude
the same items discussed above in adjusted results.
Additional assumptions now include:
- Adjusted operating expense growth in
the range of 2 percent to 3 percent, compared to the previous
assumption of 4.5 to 6 percent;
- Adjusted operating income in the range
of flat to up 2 percent, compared to the previous assumption of
flat to up 4 percent; and
- Adjusted effective tax rate of
approximately 32 percent, compared to the previous assumption of 33
percent.
AmerisourceBergen also continues to operate under the following
working assumptions regarding the pharmaceutical market into its
fiscal 2017 expectations:
- 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.
All other previously communicated aspects of the Company’s
fiscal year 2017 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 4, 2017. A slide presentation for investors
has also been posted on the Investors page of the AmerisourceBergen
website at http://www.amerisourcebergen.com. Participating in the
conference call will be:
- Steven H. Collis, Chairman, President
& Chief Executive Officer
- Tim G. Guttman, Executive Vice
President & Chief Financial Officer
The dial-in number for the live call will be (612) 288-0340. No
access code is required. The live call will also be webcast via the
Company’s website at www.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
www.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 421966.
Upcoming Investor Events
AmerisourceBergen management will be attending the following
investor conference in the coming months:
- Goldman Sachs 38th Annual Global
Healthcare Conference 2017 in Rancho Palos Verdes, California from
June 13-15, 2017.
Please check the website for updates regarding the timing of the
live presentation webcasts, if any, and for replay information.
About AmerisourceBergen
AmerisourceBergen is one of the largest global pharmaceutical
sourcing and distribution services companies, helping both
healthcare providers and pharmaceutical and biotech manufacturers
improve patient access to products and enhance patient care. With
services ranging from drug distribution and niche premium logistics
to reimbursement and pharmaceutical consulting services,
AmerisourceBergen delivers innovative programs and solutions across
the pharmaceutical supply channel in human and animal health. With
over $145 billion in annual revenue, AmerisourceBergen is
headquartered in Valley Forge, PA, and employs approximately 19,000
people. AmerisourceBergen is ranked #12 on the Fortune 500 list.
For more information, go to www.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," "will," "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 change 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; substantial defaults
in payment, material reduction in purchases by or the loss,
bankruptcy or insolvency of a major customer; changes to the
customer or supplier mix; 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; the
disruption of AmerisourceBergen's cash flow and ability
to return value to its stockholders in accordance with its past
practices; risks associated with the strategic, long-term
relationship between Walgreens Boots Alliance,
Inc. and AmerisourceBergen, including with respect to the
pharmaceutical distribution agreement and/or the global sourcing
arrangement; 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; federal and state government
enforcement initiatives to detect and prevent suspicious orders of
controlled substances and the diversion of controlled substances;
federal and state prosecution of alleged violations of related laws
and regulations, and any related litigation, including shareholder
derivative lawsuits or other disputes relating to our distribution
of controlled substances; increased federal scrutiny and qui tam
litigation for alleged violations of fraud and abuse laws and
regulations and/or any other laws and regulations governing the
marketing, sale, purchase and/or dispensing of pharmaceutical
products or services and any related litigation; material adverse
resolution of pending legal proceedings; declining reimbursement
rates for pharmaceuticals; the acquisition of businesses that do
not perform as expected, or that are difficult to integrate or
control, including the integration of PharMEDium, or the inability
to capture all of the anticipated synergies related thereto;
regulatory action in connection with the production, labeling or
packaging of products compounded by our compounded sterile
preparations (CSP) business; declining economic conditions
in the United States and abroad; financial market
volatility and disruption; the loss, bankruptcy or insolvency of a
major supplier; interest rate and foreign currency exchange rate
fluctuations; managing foreign expansion, including non-compliance
with the U.S. Foreign Corrupt Practices Act, anti-bribery laws and
economic sanctions and import laws and regulations; 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; changes
in tax laws or legislative initiatives that could adversely
affect AmerisourceBergen's tax positions and/or
AmerisourceBergen’s tax liabilities or adverse resolution of
challenges to AmerisourceBergen's tax positions; natural
disasters or other unexpected events that
affect AmerisourceBergen's operations; the impairment of
goodwill or other intangible assets, resulting in a charge to
earnings; and other economic, business, competitive, legal, tax,
regulatory and/or operational factors
affecting AmerisourceBergen'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, 2016 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
Three Months Ended Months Ended March
31, % of March 31, % of % 2017 Revenue 2016 Revenue Change
Revenue $ 37,147,402 $ 35,698,357 4.1 % Cost of goods sold
35,890,975 34,623,026 3.7 %
Gross profit (1) 1,256,427 3.38 % 1,075,331 3.01 % 16.8 %
Operating expenses: Distribution, selling, and administrative
521,843 1.40 % 519,466 1.46 % 0.5 % Depreciation and amortization
97,669 0.26 % 92,836 0.26 % 5.2 % Warrants - (503,946 ) Employee
severance, litigation, and other (2) 11,934 17,617 Pension
settlement - (1,124 ) Total operating expenses
631,446 1.70 % 124,849 0.35 % Operating income 624,981 1.68
% 950,482 2.66 % -34.2 % Other income (5,233 ) (756 )
Interest expense, net 37,299 35,966 3.7
% Income before income taxes 592,915 1.60 % 915,272 2.56 %
-35.2 % Income tax expense 181,442
311,822 -41.8 % Net income $ 411,473 1.11 % $
603,450 1.69 % -31.8 % Earnings per share:
Basic $ 1.89 $ 2.90 -34.8 % Diluted $ 1.86 $ 2.68 -30.6 %
Weighted average common shares outstanding: Basic 217,650 207,858
4.7 % Diluted 221,221 225,450 -1.9 %
(1)
Includes an $86.5 million LIFO credit in
the three months ended March 31, 2017. Includes a $92.4 million
LIFO expense charge in the three months ended March 31, 2016.
(2)
Includes $7.6 million of costs primarily
related to facility closures and certain acquisition-related
integration costs, and $4.3 million of deal-related transaction
costs in the three months ended March 31, 2017. Includes $13.0
million of costs related to customer contract extensions (primarily
related to the settlement of certain disputed items), $2.6 million
of employee severance and other costs, and $2.0 million of
deal-related transaction costs in the three months ended March 31,
2016.
AMERISOURCEBERGEN CORPORATION FINANCIAL SUMMARY (In
thousands, except per share data) (unaudited)
Six Six Months Ended Months Ended March
31, % of March 31, % of % 2017 Revenue 2016 Revenue Change
Revenue $ 75,316,667 $ 72,407,403 4.0 % Cost of goods sold
73,022,560 70,367,195 3.8 %
Gross profit (1) 2,294,107 3.05 % 2,040,208 2.82 % 12.4 %
Operating expenses: Distribution, selling, and administrative
1,042,390 1.38 % 1,044,543 1.44 % -0.2 % Depreciation and
amortization 193,749 0.26 % 175,798 0.24 % 10.2 % Warrants -
(36,571 ) Employee severance, litigation, and other (2) 33,000
36,485 Pension settlement - 47,607
Total operating expenses 1,269,139 1.69 % 1,267,862 1.75 %
Operating income 1,024,968 1.36 % 772,346 1.07 % 32.7 %
Other income (5,356 ) (1,066 ) Interest expense, net
74,271 69,707 6.5 % Income before
income taxes 956,053 1.27 % 703,705 0.97 % 35.9 % Income tax
expense (benefit) 297,334 (229,384 )
Net income $ 658,719 0.87 % $ 933,089 1.29 % -29.4 %
Earnings per share: Basic $ 3.02 $ 4.51 -33.0 %
Diluted $ 2.97 $ 4.13 -28.1 % Weighted average common shares
outstanding: Basic 218,166 207,017 5.4 % Diluted 221,611 226,082
-2.0 %
(1)
Includes a $58.2 million LIFO credit and a
$1.4 million gain from antitrust litigation settlements in the six
months ended March 31, 2017. Includes a $193.9 million LIFO expense
charge and a $12.8 million gain from antitrust litigation
settlements in the six months ended March 31, 2016.
(2)
Includes a $16.0 million litigation
settlement, $12.2 million of costs primarily related to facility
closures and certain
acquisition-related integration costs, and
$4.8 million of deal-related transactions costs in the six months
ended March 31, 2017. Includes $18.1 million of deal-related
transaction costs (primarily related to professional fees with
respect to the PharMEDium acquisition), $13.0 million of costs
related to customer contract extensions (primarily related to the
settlement of certain disputed items), and $5.4 million of employee
severance and other costs in the six months ended March 31,
2016.
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP
RECONCILIATIONS (in thousands, except per share data) (unaudited)
Three Months Ended March 31, 2017
Diluted Operating Operating
Interest Income Before Income Tax Earnings Per Gross Profit
Expenses Income Expense, Net Income Taxes Expense Net Income Share
GAAP $ 1,256,427 $ 631,446 $ 624,981 $ 37,299 $ 592,915 $
181,442 $ 411,473 $ 1.86 Warrants expense (1) - - - (2,154 )
2,154 787 1,367 0.01 Gain from antitrust litigation
settlements - - - - - 10 (10 ) - LIFO credit (86,504 ) -
(86,504 ) - (86,504 ) (32,502 ) (54,002 ) (0.24 )
Acquisition-related intangibles amortization - (38,059 ) 38,059 -
38,152 13,961 24,191 0.11 Employee severance, litigation,
and other - (11,934 ) 11,934 - 11,934 4,300 7,634 0.03
Adjusted Non-GAAP
$ 1,169,923 $ 581,453 $ 588,470 $ 35,145
$ 558,651 $ 167,998 $ 390,653 $ 1.77
Adjusted Non-GAAP % changes vs. prior year quarter
0.2 % 1.4 % -1.0 % 3.9 % -0.4 % -4.4 % 1.4 % 5.4 %
Percentages of Revenue: Adjusted GAAP Non-GAAP Gross profit
3.38 % 3.15 % Operating expenses 1.70 % 1.57 % Operating income
1.68 % 1.58 %
(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 due in May 2017. The interest
expense incurred relating to this borrowing has been excluded from
the non-GAAP presentation.
Note: For more information related to non-GAAP financial
measures, refer to the section titled "Supplemental Information
Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP
RECONCILIATIONS (in thousands, except per share data) (unaudited)
Three Months Ended March 31, 2016
Diluted Operating Operating
Interest Income Before Income Tax Earnings Per Gross Profit
Expenses Income Expense, Net Income Taxes Expense Net Income Share
GAAP $ 1,075,331 $ 124,849 $ 950,482 $ 35,966 $ 915,272 $
311,822 $ 603,450 $ 2.68 Warrants income (1) - 503,946
(503,946 ) (2,154 ) (501,792 ) (185,207 ) (316,585 ) (1.43 )
Gain from antitrust litigation settlements (7 ) - (7 ) - (7 ) 111
(118 ) - LIFO expense 92,379 - 92,379 - 92,379 30,919 61,460
0.27 Acquisition-related intangibles amortization - (38,720
) 38,720 - 38,796 13,088 25,708 0.11 Employee severance,
litigation, and other - (17,617 ) 17,617 - 17,617 5,901 11,716 0.05
Pension settlement - 1,124 (1,124 ) - (1,124 ) (823 ) (301 )
- Adjusted
Non-GAAP $ 1,167,703 $ 573,582 $ 594,121 $
33,812 $ 561,141 $ 175,811 $ 385,330 $
1.68 Percentages of Revenue: Adjusted GAAP Non-GAAP
Gross profit 3.01 % 3.27 % Operating expenses 0.35 % 1.61 %
Operating income 2.66 % 1.66 %
(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 due in May 2017. The interest
expense incurred relating to this borrowing has been excluded from
the non-GAAP presentation.
Note: For more information related to non-GAAP financial
measures, refer to the section titled "Supplemental Information
Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP
RECONCILIATIONS (in thousands, except per share data) (unaudited)
Six Month Ended March 31, 2017
Diluted Operating Operating Interest Income
Before Income Tax Earnings Per Gross Profit Expenses Income
Expense, Net Income Taxes Expense Net Income Share GAAP $
2,294,107 $ 1,269,139 $ 1,024,968 $ 74,271 $ 956,053 $ 297,334 $
658,719 $ 2.97 Warrants expense (1) - - - (4,309 ) 4,309
1,608 2,701 0.01 Gain from antitrust litigation settlements
(1,395 ) - (1,395 ) - (1,395 ) (521 ) (874 ) - LIFO credit
(58,196 ) - (58,196 ) - (58,196 ) (21,726 ) (36,470 ) (0.16 )
Acquisition-related intangibles amortization - (76,288 )
76,288 - 76,474 28,549 47,925 0.22 Employee severance,
litigation, and other - (33,000 ) 33,000 - 33,000 12,320 20,680
0.09
Adjusted Non-GAAP $ 2,234,516 $ 1,159,851 $ 1,074,665
$ 69,962 $ 1,010,245 $ 317,564 $
692,681 $ 3.13 Adjusted Non-GAAP % changes vs.
prior year period 0.6 % 0.8 % 0.3 % 7.0 % 0.4 % -3.8 % 2.4 % 6.1 %
Percentages of Revenue: Adjusted GAAP Non-GAAP Gross
profit 3.05 % 2.97 % Operating expenses 1.69 % 1.54 % Operating
income 1.36 % 1.43 %
(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 due in May 2017. The interest
expense incurred relating to this borrowing has been excluded from
the non-GAAP presentation.
Note: For more information related to non-GAAP financial
measures, refer to the section titled "Supplemental Information
Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION GAAP TO NON-GAAP
RECONCILIATIONS (in thousands, except per share data) (unaudited)
Six Months Ended March 31, 2016
Income Tax Diluted Operating Operating
Interest Income Before (Benefit) Earnings Per Gross Profit Expenses
Income Expense, Net Income Taxes Expense Net Income Share
GAAP $ 2,040,208 $ 1,267,862 $ 772,346 $ 69,707 $ 703,705
($229,384 ) $ 933,089 $ 4.13 Warrants income (1) - 36,571
(36,571 ) (4,309 ) (32,262 ) 443,982 (476,244 ) (2.14 ) Gain
from antitrust litigation settlements (12,798 ) - (12,798 ) -
(12,798 ) (4,410 ) (8,388 ) (0.04 ) LIFO expense 193,941 -
193,941 - 193,941 66,820 127,121 0.55 Acquisition-related
intangibles amortization - (69,930 ) 69,930 - 70,034 24,130 45,904
0.20 Employee severance, litigation, and other - (36,485 )
36,485 - 36,485 12,571 23,914 0.10 Pension settlement -
(47,607 ) 47,607 - 47,607 16,403 31,204 0.14
Adjusted Non-GAAP $ 2,221,351
$ 1,150,411 $ 1,070,940 $ 65,398 $
1,006,712 $ 330,112 $ 676,600 $ 2.95
(2)
Percentages of Revenue: Adjusted GAAP Non-GAAP Gross
profit 2.82 % 3.07 % Operating expenses 1.75 % 1.59 % Operating
income 1.07 % 1.48 %
(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. A tax expense of approximately $13 million was
recognized primarily related to the change in the fair value of the
Warrants during the six months ended March 31, 2016. In connection
with the fiscal 2014 special $650 million share repurchase program,
the Company issued $600 million of 1.15% senior notes due 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.
Note: For more information related to non-GAAP financial
measures, refer to the section titled "Supplemental Information
Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION RECONCILIATION OF DILUTED
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (GAAP TO NON-GAAP) (In
thousands) (unaudited) Three Months
Ended March 31, Six Months Ended March 31, 2017 2016
2017 2016 Basic shares outstanding 217,650 207,858
218,166 207,017 Stock option, restricted stock, and
restricted stock unit dilution 3,571 3,421 3,445 3,639
Warrants dilution - 14,171 - 15,426
GAAP diluted shares outstanding 221,221 225,450 221,611
226,082 Warrants dilution (1) - (14,171 ) - (15,426 )
Shares repurchased under special share repurchase programs,
net of shares reissued (1) - 17,981 - 18,948
Non-GAAP diluted shares outstanding 221,221 229,260
221,611 229,604
(1) For the non-GAAP presentation, diluted
weighted average common shares outstanding for the three and six
months ended March 31, 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.
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 2017 2016 % Change
Pharmaceutical Distribution Services $ 35,518,955 $ 34,165,733 4.0
% Other 1,696,137 1,599,805 6.0 % Intersegment eliminations
(67,690 ) (67,181 ) 0.8 % Revenue $ 37,147,402
$ 35,698,357 4.1 % Three Months
Ended March 31, Operating income 2017 2016 % Change
Pharmaceutical Distribution Services $ 482,265 $ 500,165 -3.6 %
Other 106,206 93,956 13.0 % Intersegment eliminations (1 )
- Total segment operating income 588,470 594,121 -1.0
% Gain from antitrust litigation settlements - 7 LIFO credit
(expense) 86,504 (92,379 ) Acquisition-related intangibles
amortization (38,059 ) (38,720 ) Warrants income - 503,946 Employee
severance, litigation, and other (11,934 ) (17,617 ) Pension
settlement - 1,124 Operating
income $ 624,981 $ 950,482
Percentages of revenue: Pharmaceutical Distribution Services
Gross profit 2.45 % 2.58 % Operating expenses 1.09 % 1.12 %
Operating income 1.36 % 1.46 % Other Gross profit 17.75 %
17.85 % Operating expenses 11.49 % 11.97 % Operating income 6.26 %
5.87 % AmerisourceBergen Corporation (GAAP) Gross profit
3.38 % 3.01 % Operating expenses 1.70 % 0.35 % Operating income
1.68 % 2.66 % AmerisourceBergen Corporation (Non-GAAP) Gross
profit 3.15 % 3.27 % Operating expenses 1.57 % 1.61 % Operating
income 1.58 % 1.66 % 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 2017 2016 %
Change Pharmaceutical Distribution Services $ 72,094,922 $
69,360,412 3.9 % Other 3,359,791 3,177,620 5.7 % Intersegment
eliminations (138,046 ) (130,629 ) 5.7 %
Revenue $ 75,316,667 $ 72,407,403 4.0 %
Six Months Ended March 31, Operating income 2017 2016
% Change Pharmaceutical Distribution Services $ 856,267 $
881,419 -2.9 % Other 218,412 189,521 15.2 % Intersegment
eliminations (14 ) - Total segment operating
income 1,074,665 1,070,940 0.3 % Gain from antitrust
litigation settlements 1,395 12,798 LIFO credit (expense) 58,196
(193,941 ) Acquisition-related intangibles amortization (76,288 )
(69,930 ) Warrants income - 36,571 Employee severance, litigation,
and other (33,000 ) (36,485 ) Pension settlement -
(47,607 ) Operating income $ 1,024,968 $
772,346 Percentages of revenue:
Pharmaceutical Distribution Services Gross profit 2.25 % 2.38 %
Operating expenses 1.07 % 1.11 % Operating income 1.19 % 1.27 %
Other Gross profit 18.17 % 17.85 % Operating expenses 11.67
% 11.88 % Operating income 6.50 % 5.96 % AmerisourceBergen
Corporation (GAAP) Gross profit 3.05 % 2.82 % Operating expenses
1.69 % 1.75 % Operating income 1.36 % 1.07 %
AmerisourceBergen Corporation (Non-GAAP) Gross profit 2.97 % 3.07 %
Operating expenses 1.54 % 1.59 % Operating income 1.43 % 1.48 %
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) ASSETS March
31, September 30, 2017 2016 Current assets: Cash and cash
equivalents $ 2,404,433 $ 2,741,832 Accounts receivable, net
9,583,520 9,175,876 Merchandise inventories 11,335,816 10,723,920
Prepaid expenses and other 170,152 210,219 Total
current assets 23,493,921 22,851,847 Property and equipment,
net 1,702,060 1,530,682 Goodwill and other intangible assets
8,876,649 8,959,346 Other long-term assets 324,383
295,626 Total assets $ 34,397,013 $ 33,637,501
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 24,276,019 $ 23,926,320 Other current
liabilities 1,255,407 1,354,049 Total current
liabilities 25,531,426 25,280,369 Long-term debt 3,478,214
3,576,493 Other long-term liabilities 2,858,081 2,651,235
Stockholders' equity 2,529,292 2,129,404
Total liabilities and stockholders' equity $ 34,397,013 $
33,637,501 AMERISOURCEBERGEN CORPORATION CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Six Months Ended March 31, 2017 2016 Operating
Activities: Net income $ 658,719 $ 933,089 Adjustments to reconcile
net income to net cash provided by operating activities (1) 353,404
147,884 Changes in operating assets and liabilities, excluding the
effects of acquisitions and divestitures: Accounts receivable
(417,705 ) (472,074 ) Merchandise inventories (556,057 ) (1,047,018
) Accounts payable 350,960 2,070,716 Other (20,937 )
(577 ) Net cash provided by operating activities 368,384
1,632,020 Investing Activities: Capital
expenditures (262,700 ) (180,012 ) Cost of acquired companies, net
of cash acquired (2,403 ) (2,731,356 ) Net (purchases) proceeds
from sales of investments in available-for-sale securities (12,507
) 47,693 Other 8,136 (10,878 ) Net cash used
in investing activities (269,474 ) (2,874,553 )
Financing Activities: Net (repayments) borrowings (94,883 )
994,943 Purchases of common stock (2) (229,928 ) (436,804 )
Exercises of warrants - 1,168,891 Exercises of stock options 61,383
37,285 Cash dividends on common stock (160,093 ) (141,829 ) Other
(12,788 ) (22,108 ) Net cash (used in) provided by
financing activities (436,309 ) 1,600,378
(Decrease) increase in cash and cash equivalents (337,399 )
357,845 Cash and cash equivalents at beginning of period
2,741,832 2,167,442 Cash and
cash equivalents at end of period $ 2,404,433 $ 2,525,287
(1) Adjustments include a LIFO credit of $58.2
million for the six months ended March 31, 2017 and a LIFO expense
charge of $193.9 million and non-cash Warrants income of $36.6
million for the six months ended March 31, 2016. (2)
Includes purchases made under special share repurchase programs
totaling $336.8 million that cash settled in the six months ended
March 31, 2016.
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 following non-GAAP financial measures: (i) adjusted gross
profit; (ii) adjusted operating expenses; (iii) adjusted operating
income; (iv) adjusted interest expense, net; (v) adjusted tax rate;
(vi) adjusted diluted earnings per share; and (vii) adjusted
diluted shares outstanding. 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 as such items are outside the
control of the Company or due to their inherent unusual,
non-operating, unpredictable, non-recurring, or non-cash nature. We
have included the following non-GAAP earnings-related financial
measures in this release:
- 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 due in May 2017 (the “2017 Notes”) that we 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.
- 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.
In addition, the Company has provided non-GAAP fiscal year 2017
earnings guidance. The Company does not provide forward looking
diluted earnings per share guidance on a GAAP basis 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504005208/en/
AmerisourceBergen CorporationKeri P. MattoxVice
President, Corporate & Investor
Relations610-576-7801kmattox@amerisourcebergen.comorBennett
S. MurphyDirector, Corporate & Investor
Relations610-727-3693bmurphy@amerisourcebergen.com
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