AmerisourceBergen Reports Fiscal 2019 Fourth Quarter and Year End Results

Revenues of $45.6 Billion for the Fourth Quarter, a 5.4 Percent Increase Year-Over-Year

Fourth Quarter GAAP Diluted EPS of $0.63 and Adjusted Diluted EPS of $1.61

Revenues of $179.6 Billion for Fiscal Year 2019, a 6.9 Percent Increase Year-Over-Year

Fiscal Year 2019 GAAP Diluted EPS of $4.04 and Adjusted Diluted EPS of $7.09

VALLEY FORGE, Pa.–(BUSINESS WIRE)–AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2019 fourth quarter ended September 30, 2019, revenue increased 5.4 percent to $45.6 billion. Revenue increased 6.9 percent to $179.6 billion for the fiscal year. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $0.63 for the September quarter of fiscal 2019, compared to $1.07 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 11.0 percent to $1.61 in the fiscal fourth quarter. For fiscal year 2019, adjusted diluted EPS increased 9.2 percent to $7.09.

“In fiscal 2019, AmerisourceBergen performed extremely well, driven by execution across our Pharmaceutical Distribution and Global Commercialization Services & Animal Health teams. Working as a unified and connected organization, we created value for our shareholders, partners, customers, and the patients they serve,” said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen.

“As we enter fiscal 2020, we will continue to leverage our differentiated strategy and partnerships to grow our business,” Mr. Collis continued. “AmerisourceBergen is well positioned to deliver long-term value for all of our stakeholders as we continue to focus on innovation, execution, advancing our talent and culture, and living our purpose of being united in our responsibility to create healthier futures.”

Fourth Quarter Fiscal Year 2019 Summary Results

	GAAP	Adjusted (Non-GAAP)
Revenue	$45.6B	$45.6B
Gross Profit	$1.2B	$1.2B
Operating Expenses	$1,005M	$789M
Operating Income	$180M	$456M
Interest Expense, Net	$36M	$36M
Effective Tax Rate	8.5%	19.6%
Net Income Attributable to ABC	$133M	$338M
Diluted Earnings Per Share	$0.63	$1.61
Diluted Shares Outstanding	210M	210M

Below, AmerisourceBergen presents descriptive summaries of the Company’s GAAP and adjusted (non-GAAP) quarterly and fiscal year results. In the tables that follow, GAAP results and GAAP to non-GAAP reconciliations are presented. For more information related to non-GAAP financial measures, including adjustments made in the periods presented, please refer to the Supplemental Information Regarding non-GAAP Financial Measures following the tables.

Fourth Quarter GAAP Results

• Revenue: In the fourth quarter of fiscal 2019, revenue was $45.6 billion, up 5.4 percent compared to the same quarter in the previous fiscal year, reflecting a 5.1 percent increase in Pharmaceutical Distribution Services revenue and a 12.6 percent increase in revenue within Other.

• Gross Profit: Gross profit in the fiscal 2019 fourth quarter was $1.2 billion, a 14.7 percent increase compared to the same period in the previous fiscal year. Gross profit in the current fiscal quarter was favorably impacted by the increases in gross profit for both Pharmaceutical Distribution Services and Other. Gross profit was also favorably impacted by a reduction in LIFO expense, lower PharMEDium remediation costs, and a prior year estimated assessment related to the New York State Opioid Stewardship Act that was subsequently reversed in the first quarter of fiscal 2019. Gross profit as a percentage of revenue was 2.60 percent, an increase of 21 basis points from the prior year quarter.

• Operating Expenses: In the fourth quarter of fiscal 2019, operating expenses were $1,004.9 million, compared to $878.5 million in the same period last fiscal year. The increase in operating expenses was primarily due to higher employee severance, litigation and other expenses due to legal settlements. Operating expenses as a percentage of revenue in the fiscal 2019 fourth quarter was 2.20 percent, compared to 2.03 percent for the same period in the previous fiscal year.

• Operating Income: In the fiscal 2019 fourth quarter, operating income was $179.8 million versus $154.1 million in the prior year quarter as the increase in gross profit exceeded the increase in operating expenses. Operating income as a percentage of revenue in the fiscal 2019 fourth quarter was 0.39 percent compared to 0.36 percent for the same period in the previous fiscal year.

• Interest Expense, Net: In the fiscal 2019 fourth quarter, net interest expense of $36.4 million was down 15.4 percent versus the prior year quarter due to an increase in interest income as a result of an increase in our invested cash balance and an increase in interest rates. Additionally, interest expense was lower due to a decrease in average borrowings.

• Effective Tax Rate: The effective tax rate of 8.5 percent for the fourth quarter of fiscal 2019 was primarily impacted by legal settlements, which changed the mix of domestic and international income. The prior year’s effective tax rate of (73.4) percent was favorably impacted by the determination that a portion of a significant fiscal 2017 legal settlement accrual was deductible.

• Diluted Earnings Per Share: Diluted earnings per share was $0.63 in the fourth quarter of fiscal 2019 compared to $1.07 in the previous fiscal year fourth quarter. This decrease was primarily due to an increase in income tax expense, offset in part by an increase in income before income taxes.

• Diluted Shares Outstanding: Diluted weighted average shares outstanding for the fourth quarter of fiscal 2019 were 209.7 million, a 3.6 percent decline versus the prior fiscal year fourth quarter primarily due to share repurchases.

Opioid Litigation

• On October 21, 2019, the Company announced an agreement in principle with two Ohio counties, Cuyahoga and Summit, to settle all claims brought by the two counties against the Company in the first track of the multi-district opioid litigation. As a result, the Company recorded an after-tax charge of $50.9 million in the quarter ended September 30, 2019 within Employee Severance, Litigation and Other in its Statement of Operations. While the Company disputes the allegations made by the two counties, the Company believes settling their claims is an important stepping stone to achieving a global resolution of the related pending multi-district litigation and delivering meaningful relief. The Company expects settlement funds to be used by the counties in support of initiatives to combat the opioid epidemic, including treatment, rehabilitation, mental health and other important efforts.

• Also, on October 21, 2019, the Attorneys General for North Carolina, Pennsylvania, Tennessee, and Texas announced a potential framework for a global resolution of the multi-district opioid litigation and other related state court litigation, including cases currently filed and that could be filed. The Company is currently engaged in discussions that include the four attorneys general, plaintiffs’ lawyers representing local governments, and other parties regarding the terms of the potential framework. The parties’ objective is to reach agreement in principle on terms for the potential framework, which could be the foundation for a global resolution. This framework would then be presented to the other states and local governments that will need to accept the framework in the coming days and weeks in order to achieve the finality that the Company would require from a global resolution. Given the large number of parties involved, the complexity and difficulty of the underlying issues, and the resulting uncertainty of achieving a potential global resolution, the Company continues to litigate and prepare for trial in the cases pending in the multi-district opioid litigation as well as in state courts where lawsuits have been filed, and intends to continue to vigorously defend itself in all such cases. Accordingly, the Company has not recognized a liability related to the potential framework as of September 30, 2019. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. The Company will continue to evaluate its accounting position based on the facts and circumstances as they develop.

Fourth Quarter Adjusted (non-GAAP) Results

• Revenue: No adjustments were made to the GAAP presentation of revenue. In the fourth quarter of fiscal 2019, revenue was $45.6 billion, up 5.4 percent compared to the same quarter in the previous fiscal year, reflecting a 5.1 percent increase in Pharmaceutical Distribution Services revenue and a 12.6 percent increase in revenue within Other.

• Adjusted Gross Profit: Adjusted gross profit in the fiscal 2019 fourth quarter was $1.2 billion, which was up 6.9 percent compared to the same period in the previous year, due to the increases in gross profit within Pharmaceutical Distribution Services and Other primarily resulting from higher revenue. Adjusted gross profit as a percentage of revenue was 2.73 percent in the fiscal 2019 fourth quarter, an increase of 4 basis points from the prior year quarter.

• Adjusted Operating Expenses: In the fourth quarter of fiscal 2019, adjusted operating expenses were $789.4 million, an increase of 7.8 percent compared to the same period in the previous fiscal year primarily due to an increase in costs to support revenue growth. Adjusted operating expenses as a percentage of revenue in the fiscal 2019 fourth quarter was 1.73 percent, compared to 1.69 percent for the same period in the previous fiscal year.

• Adjusted Operating Income: In the fiscal 2019 fourth quarter, adjusted operating income of $456.1 million increased 5.5 percent from the prior year period due to a 3.5 percent increase in operating income within Pharmaceutical Distribution Services and a 14.9 percent increase in operating income within Other. Adjusted operating income as a percentage of revenue was 1.00 percent, which was flat compared to the prior year quarter.

• Interest Expense, Net: No adjustments were made to the GAAP presentation of net interest expense. In the fiscal 2019 fourth quarter, net interest expense of $36.4 million was down 15.4 percent versus the prior year quarter due to an increase in interest income as a result of an increase in our invested cash balance and an increase in interest rates. Additionally, interest expense was lower due to a decrease in average borrowings.

• Adjusted Effective Tax Rate: The adjusted effective tax rate was 19.6 percent for the fourth quarter of fiscal 2019, which was flat compared to the prior year quarter.

• Adjusted Diluted Earnings Per Share: Adjusted diluted earnings per share was up 11.0 percent to $1.61 in the fourth quarter of fiscal 2019 compared to $1.45 in the previous fiscal year fourth quarter, driven by the increase in adjusted operating income, a lower share count, and lower net interest expense.

• Diluted Shares Outstanding: No adjustments were made to the GAAP presentation of diluted shares outstanding. Diluted weighted average shares outstanding for the fourth quarter of fiscal 2019 were 209.7 million, a 3.6 percent decline versus the prior fiscal year fourth quarter primarily due to share repurchases.

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 $43.9 billion, an increase of 5.1 percent compared to the same quarter in the prior fiscal year primarily due to continued strong specialty product sales and increased volume associated with the growth of some of its largest customers. Segment operating income of $369.3 million in the fourth quarter of fiscal 2019 was up 3.5 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 $1.8 billion in the fourth quarter of fiscal 2019, an increase of 12.6 percent compared to the same period in the prior fiscal year primarily due to growth at MWI and ABCS’s growth in its Canadian operations. Operating income in Other increased 14.9 percent to $86.7 million in the fourth quarter of fiscal 2019. This increase was due to the results of World Courier, ABCS’s Lash Consulting Services, and MWI.

Fiscal Year 2019 Summary Results

	GAAP	Adjusted (non-GAAP)
Revenue	$179.6B	$179.6B
Gross Profit	$5.1B	$5.0B
Operating Expenses	$4.0B	$2.9B
Operating Income	$1.1B	$2.1B
Interest Expense, Net	$158M	$158M
Tax Rate	11.7%	20.6%
Net Income Attributable to ABC	$855M	$1,502M
Diluted Earnings Per Share	$4.04	$7.09
Diluted Shares Outstanding	212M	212M

Summary Fiscal Year GAAP Results

In fiscal year 2019, GAAP diluted EPS was $4.04, compared to $7.53 in the prior year. Revenue of $179.6 billion was up 6.9 percent over the last fiscal year. Gross profit increased 11.4 percent to $5.1 billion primarily due to increases in gross profit within Pharmaceutical Distribution Services and Other. Total gross profit in fiscal year 2019 was also favorably impacted by increases in gains from antitrust litigation settlements, a LIFO credit in the current year period versus a LIFO expense in the prior year, and the reversal of a previously estimated assessment related to the New York State Opioid Stewardship Act. Operating expenses increased 27.1 percent over the prior fiscal year primarily due to a $570 million impairment of PharMEDium’s long-lived assets, an increase in employee severance, litigation, and other costs, and an increase in distribution, selling and administrative expenses. Operating income decreased 23.0 percent and operating income margin decreased 24 basis points in the current fiscal year as the increase in operating expenses exceeded the increase in gross profit. Diluted weighted average shares outstanding in fiscal 2019 were 211.8 million, down 3.9 percent from the prior fiscal year.

Summary Fiscal Year Adjusted (non-GAAP) Results

In fiscal year 2019, adjusted diluted EPS was $7.09, an increase of 9.2 percent over the prior fiscal year primarily due to an increase in operating income, a decrease in net interest expense, and a decrease in adjusted diluted weighted average shares outstanding. Adjusted diluted weighted average shares outstanding in fiscal 2019 were 211.8 million, down 3.9 percent from the prior fiscal year. Revenue increased 6.9 percent from last fiscal year to $179.6 billion. Adjusted gross profit increased by $269.7 million, or 5.7 percent, from prior fiscal year to $5.0 billion primarily due to the increases in gross profit within Pharmaceutical Distribution Services and Other. Adjusted operating income increased 3.5 percent as the increase in adjusted gross profit exceeded the increase in adjusted operating expenses. Adjusted operating income margin decreased 4 basis points from 1.18 percent to 1.14 percent primarily due to a lower contribution from PharMEDium.

Recent Company Highlights & Milestones

• Good Neighbor Pharmacy, AmerisourceBergen’s national independent pharmacy network, announced that it has been ranked “Highest in Customer Satisfaction with Chain Drug Store Pharmacies” in the 2019 J.D. Power U.S. Pharmacy Study. This marks the eighth time that Good Neighbor Pharmacy has earned the achievement in the last 10 years.
• AmerisourceBergen hosted its annual two-day manufacturer summit ThinkLive 2019. The conference assembled nearly 400 leading pharmaceutical manufacturers and AmerisourceBergen executives to collaborate and share perspectives on embracing innovation, driving patient access and supporting biosimilars and other novel therapies.
• UPS announced its drone logistics partnership with AmerisourceBergen. The collaboration will deploy the UPS Flight Forward drone airline to transport certain pharmaceuticals, supplies and records to qualifying medical campuses served by AmerisourceBergen across the United States, and then expand its use to other sites of care. The addition of drone transportation provides an option for aerial delivery via UPS Flight Forward drone services enabling the ability to avoid roadway delays, increase medical distribution efficiency, lower costs and improve the patient experience with potentially life-saving benefits.
• The AmerisourceBergen Foundation announced that it has partnered with more than 20 organizations to help prevent and curb the harmful effects of prescription drug misuse, especially among youth. Through the Foundation’s Opioid Resource Grant Program, several youth-based organizations will receive the necessary funding to support their prevention initiatives focused on education, youth advocacy, and community building. The AmerisourceBergen Foundation also committed more than $75,000 to support relief efforts in the communities affected by Hurricane Dorian.

Dividend Declaration

The Company’s Board of Directors declared a quarterly cash dividend of $0.40 per common share, payable December 2, 2019, to stockholders of record at the close of business on November 18, 2019.

Fiscal Year 2020 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 2020 Expectations on an Adjusted (non-GAAP) Basis

AmerisourceBergen has introduced its fiscal year 2020 financial guidance, which reflects growth in both Pharmaceutical Distribution Services and businesses focused on Global Commercialization Services & Animal Health. Notably, our revenue growth reflects the onboarding of new volume through our second largest customer. The Company expects:

• Revenue growth in the mid- to high-single digit percent range; and
• Adjusted diluted earnings per share to be in the range of $7.30 to $7.60.

Additional expectations include:

• 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 & 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 $1.5 billion;
• Capital expenditures in the $400 million range; and
• Weighted average diluted shares are expected to be between 209 million to 210 million for the fiscal year.

Conference Call & Slide Presentation

The Company will host a conference call to discuss the results at 8:30 a.m. ET on November 7, 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:

• Steven H. Collis, Chairman, President & Chief Executive Officer
• James F. Cleary, Executive Vice President & Chief Financial Officer

The dial-in number for the live call will be (612) 288-0340. 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 472893.

Upcoming Investor Events

AmerisourceBergen management will be attending the following investor conference in the coming months:

• J.P. Morgan Healthcare Conference, January 13-16, San Francisco.

Please check the website for updates regarding the timing of the live presentation webcasts, if any, and for replay information.

About AmerisourceBergen

AmerisourceBergen provides pharmaceutical products, value-driving services and business solutions that improve access to care. Tens of thousands of healthcare providers, veterinary practices and livestock producers trust us as their partner in the pharmaceutical supply chain. Global manufacturers depend on us for services that drive commercial success for their products. Through our daily work—and powered by our 22,000 associates—we are united in our responsibility to create healthier futures. AmerisourceBergen is ranked #10 on the Fortune 500, with more than $175 billion in annual revenue. The company is headquartered in Valley Forge, Pa. and has a presence in 50+ countries. Learn more at investor.amerisourcebergen.com.

AmerisourceBergen’s Cautionary Note Regarding Forward-Looking Statements

Certain of the statements contained in this press release are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as “expect,” “likely,” “outlook,” “forecast,” “would,” “could,” “should,” “can,” “project,” “intend,” “plan,” “continue,” “sustain,” “synergy,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “possible,” “assume,” variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances and speak only as of the date hereof. These statements are not guarantees of future performance and are based on assumptions and estimates that could prove incorrect or could cause actual results to vary materially from those indicated. Among the factors that could cause actual results to differ materially from those projected, anticipated, or implied are the following: unfavorable trends in brand and generic pharmaceutical pricing, including in rate or frequency of price inflation or deflation; competition and industry consolidation of both customers and suppliers resulting in increasing pressure to reduce prices for our products and services; changes in the United States healthcare and regulatory environment, including changes that could impact prescription drug reimbursement under Medicare and Medicaid; increasing governmental regulations regarding the pharmaceutical supply channel and pharmaceutical compounding; declining reimbursement rates for pharmaceuticals; continued federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances; continued prosecution or suit by federal, state and other governmental entities of alleged violations of laws and regulations regarding controlled substances, including opioid medications, and any related disputes, including shareholder derivative lawsuits; increased federal scrutiny and litigation, including qui tam litigation, for alleged violations of laws and regulations governing the marketing, sale, purchase and/or dispensing of pharmaceutical products or services, and associated reserves and costs; failure to comply with the Corporate Integrity Agreement; material adverse developments or 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.

Contacts

Bennett S. Murphy
Vice President, Investor Relations
610-727-3693
[email protected]

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