AmerisourceBergen Reports Fiscal 2019 Third Quarter Results

Revenues of $45.2 billion for the Third Quarter, a 4.9 Percent Increase Year-Over-Year

Third Quarter GAAP Diluted EPS of $1.43 and Adjusted Diluted EPS of $1.76

Adjusted Diluted EPS Guidance Range Raised to $7.00 to $7.10 for Fiscal 2019

VALLEY FORGE, Pa.–(BUSINESS WIRE)–AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2019 third quarter ended June 30, 2019, revenue increased 4.9 percent to $45.2 billion. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $1.43 for the June quarter of fiscal 2019, compared to $1.25 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 14.3% to $1.76 in the fiscal third quarter.

The Company raised its adjusted diluted EPS guidance range for fiscal 2019 from $6.70 to $6.90 to $7.00 to $7.10. The Company does not provide forward-looking guidance on a GAAP basis, as discussed below in Fiscal Year 2019 Expectations.

“We are extremely pleased with the continued overall strong performance by both the Pharmaceutical Distribution Services and Global Commercialization Services & Animal Health groups this quarter. Our associates continue to execute, grow and deliver differentiated value for our customers and partners,” said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen.

“As we move toward the end of fiscal 2019, our focus remains on serving our manufacturer and provider customers more efficiently and effectively,” Mr. Collis continued, “AmerisourceBergen’s strategy, execution and purpose position the Company to continue creating long-term value for all of our stakeholders.”

Third Quarter Fiscal Year 2019 Summary Results

	GAAP	Adjusted (Non-GAAP)
Revenue	$45.2B	$45.2B
Gross Profit	$1.2B	$1.2B
Operating Expenses	$825M	$723M
Operating Income	$407M	$507M
Interest Expense, Net	$36M	$36M
Effective Tax Rate	18.6%	21.0%
Net Income Attributable to ABC	$302M	$372M
Diluted Earnings Per Share	$1.43	$1.76
Diluted Shares Outstanding	211M	211M

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.

Third Quarter GAAP Results

• Revenue: In the third quarter of fiscal 2019, revenue was $45.2 billion, up 4.9 percent compared to the same quarter in the previous fiscal year, reflecting a 4.7 percent increase in Pharmaceutical Distribution Services revenue and an 8.6 percent increase in revenue within Other.
• Gross Profit: Gross profit in the fiscal 2019 third quarter was $1.2 billion, a 1.6 percent increase compared to the same period in the previous fiscal year. Gross profit in the current year quarter was favorably impacted by the increase in Pharmaceutical Distribution Services’ gross profit and the increase in gross profit in Other, offset in part by a decrease in gains from antitrust litigation settlements and a decrease in the LIFO credit. Gross profit as a percentage of revenue was 2.72 percent, a decrease of 9 basis points from the prior year quarter.
• Operating Expenses: In the third quarter of fiscal 2019, operating expenses were $824.5 million, compared to $822.1 million in the same period last fiscal year. An increase in distribution, selling and administrative costs to support revenue growth was substantially offset by lower depreciation and amortization expense and lower employee severance, litigation and other expenses. Operating expenses as a percentage of revenue in the fiscal 2019 third quarter was 1.82 percent, compared to 1.91 percent for the same period in the previous fiscal year.
• Operating Income: In the fiscal 2019 third quarter, operating income was $406.7 million versus $389.2 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 was 0.90 percent in the third quarter of fiscal 2019 and 2018.
• Interest Expense, Net: In the fiscal 2019 third quarter, net interest expense of $35.9 million was down 23.8 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 was 18.6 percent for the third quarter of fiscal 2019 and 19.5 percent in the prior year quarter.
• Diluted Earnings Per Share: Diluted earnings per share was $1.43 in the third quarter of fiscal 2019 compared to $1.25 in the previous fiscal year’s third quarter. This increase was primarily due to an increase in operating income, a lower share count, and lower net interest expense.
• Diluted Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal 2019 were 211.2 million, a 4.3 percent decline versus the prior fiscal year third quarter primarily due to share repurchases.

Third Quarter Adjusted (non-GAAP) Results

• Revenue: No adjustments were made to the GAAP presentation of revenue. In the third quarter of fiscal 2019, revenue was $45.2 billion, up 4.9 percent compared to the same quarter in the previous fiscal year, reflecting a 4.7 percent increase in Pharmaceutical Distribution Services revenue and an 8.6 percent increase in revenue within Other.
• Adjusted Gross Profit: Adjusted gross profit in the fiscal 2019 third quarter was $1.2 billion, which was up 4.9 percent compared to the same period in the previous year, due to the increase in gross profit in Pharmaceutical Distribution Services and an increase in gross profit in Other. Adjusted gross profit as a percentage of revenue was 2.72 percent in the fiscal 2019 third quarter, which was flat compared to the prior year quarter.
• Adjusted Operating Expenses: In the third quarter of fiscal 2019, adjusted operating expenses were $722.9 million, an increase of 3.7 percent compared to the same period in the last 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 third quarter was 1.60 percent, compared to 1.62 percent for the same period in the previous fiscal year.
• Adjusted Operating Income: In the fiscal 2019 third quarter, adjusted operating income of $506.7 million increased 6.8 percent from the prior year period due to a 4.9 percent increase in operating income within Pharmaceutical Distribution Services and a 15.6 percent increase in operating income within Other. Adjusted operating income as a percentage of revenue increased 2 basis points to 1.12 percent in the fiscal 2019 third quarter compared to the previous fiscal year’s third quarter.
• Interest Expense, Net: No adjustments were made to the GAAP presentation of net interest expense. In the fiscal 2019 third quarter, net interest expense of $35.9 million was down 23.8 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 21.0 percent for the third quarter of fiscal 2019 and was 20.3 percent in the previous fiscal year’s third quarter.
• Adjusted Diluted Earnings Per Share: Adjusted diluted earnings per share was up 14.3 percent to $1.76 in the third quarter of fiscal 2019 compared to $1.54 in the previous fiscal year’s third 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 third quarter of fiscal 2019 were 211.2 million, a 4.3 percent decline versus the prior fiscal year third 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 $43.5 billion, an increase of 4.7 percent compared to the same quarter in the prior fiscal year primarily due to continued strong specialty product sales, increased volume associated with the growth of some of its largest customers, and overall market growth. Segment operating income of $411.7 million in the third quarter of fiscal 2019 was up 4.9 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 third quarter of fiscal 2019, an increase of 8.6 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 15.6 percent to $95.1 million in the third quarter of fiscal 2019. This increase was primarily due to the results at MWI.

Recent Company Highlights & Milestones

• AmerisourceBergen and Good Neighbor Pharmacy unveiled new solutions to empower pharmacies to tell their unique stories at ThoughtSpot 2019, Good Neighbor Pharmacy’s annual tradeshow.
• AmerisourceBergen appointed Leslie Donato to its executive team as Executive Vice President & Chief Strategy Officer.
• AmerisourceBergen entered a long-term strategic relationship with OneOncology, a national partnership of community oncologists in the United States.
• AmerisourceBergen released its annual Corporate Citizenship Report, detailing how the company continues to advance sustainable practices and community investment to create healthier futures around the world. The report focuses on four core areas: opioid abuse mitigation efforts, engaged associates, sustainable operations and healthy communities.
• World Courier, a global leader in specialty logistics, expanded its commercial third-party logistics (3PL) storage and distribution services at 11 of its 14 pharmaceutical depots and began the rollout of a new online customer portal to provide partners with key data and insights to manage their products throughout the supply chain and support self-service reporting.
• Innomar Strategies, AmerisourceBergen’s Canadian operations business unit, announced the addition of Chronically Simple, a secure web-based service and mobile application that is designed to meet the complex needs of patients with chronic illnesses and ongoing health challenges, to its portfolio of digital solutions.
• Xcenda, AmerisourceBergen’s strategic consulting business unit, celebrated its 25th anniversary and launched several new solutions designed to help pharmaceutical manufacturers differentiate their products and reach more patients.
• The AmerisourceBergen Foundation, a separate not-for-profit charitable giving organization, hosted its inaugural conference, a two-day summit focused on developing strategies to address two of the most pressing challenges in healthcare today: access to healthcare and prescription drug and opioid safety. The conference brought together more than 50 like-minded nonprofit partners to identify best practices, share resources and learn from one another.
• AmerisourceBergen has been named a 2019 DiversityInc ‘Noteworthy’ company for the third year in a row, based on its hiring, retention and promotion of women, minorities, people with disabilities, LGBT and veterans.

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 strong performance, solid execution and greater than anticipated number of share repurchases. The Company now expects:

• Adjusted Diluted EPS to be in the range of $7.00 to $7.10, up from the previous range of $6.70 to $6.90.

Additional expectations now include:

• Adjusted operating income growth in the 3 percent to 4 percent range, up from low-single digit percent range;
  • Pharmaceutical Distribution Services segment operating income growth in the 2 percent to 3 percent range, narrowed from low-single digit percent range;
• Adjusted effective tax rate of approximately 21 percent, narrowed from between 21 percent and 22 percent;
• Adjusted Free Cash Flow is now expected to be between $1.5 billion to $1.7 billion, up from $1.4 billion to $1.6 billion;
• Weighted average diluted shares are now expected to be approximately 212 million, down from the previous expectation of approximately 214 million.

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 August 1, 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) 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 469499.

Upcoming Investor Events

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

• Morgan Stanley Annual Global Healthcare Conference, September 9-11, New York.

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 #10 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 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 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; continued 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; continued 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 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. 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 in connection with the production, labeling or packaging of products compounded by our compounded sterile preparations (CSP) business or the related consent decree; 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by the federal securities laws.

AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
		Three Months Ended June 30, 2019				% of Revenue		Three Months Ended June 30, 2018				% of Revenue		% Change
Revenue		$	45,239,265					$	43,142,309					4.9%
Cost of goods sold		44,008,026						41,930,968						5.0%
Gross profit 1		1,231,239				2.72%		1,211,341				2.81%		1.6%
Operating expenses:
Distribution, selling, and administrative		656,943				1.45%		626,548				1.45%		4.9%
Depreciation and amortization		107,596				0.24%		120,045				0.28%		(10.4)%
Employee severance, litigation, and other 2		60,006						75,553
Total operating expenses		824,545				1.82%		822,146				1.91%		0.3%
Operating income		406,694				0.90%		389,195				0.90%		4.5%
Other income		(342		)				(3,158		)
Interest expense, net		35,921						47,151						(23.8)%
Income before income taxes		371,115				0.82%		345,202				0.80%		7.5%
Income tax expense		69,113						67,327						2.7%
Net income		302,002				0.67%		277,875				0.64%		8.7%
Net income attributable to noncontrolling interest		(43		)				(2,066		)
Net income attributable to AmerisourceBergen Corporation		$	301,959			0.67%		$	275,809			0.64%		9.5%
Earnings per share:
Basic		$	1.44					$	1.26					14.3%
Diluted		$	1.43					$	1.25					14.4%
Weighted average common shares outstanding:
Basic		209,705						218,569						(4.1)%
Diluted		211,161						220,760						(4.3)%

Contacts

Bennett S. Murphy

Vice President, Investor Relations

610-727-3693

[email protected]

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