AmerisourceBergen Reports Fiscal 2020 First Quarter Results

Revenues of $47.9 Billion for the First Quarter, a 5.4 Percent Increase Year-Over-Year

First Quarter GAAP Diluted EPS of $0.90 and Adjusted Diluted EPS of $1.76

Adjusted Diluted EPS Guidance Range Raised to $7.55 to $7.80 for Fiscal 2020

The Board of Directors Increased the Quarterly Dividend Rate by 5% to $0.42 per share

VALLEY FORGE, Pa.–(BUSINESS WIRE)–AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2020 first quarter ended December 31, 2019, revenue increased 5.4 percent to $47.9 billion. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $0.90 for the December quarter of fiscal 2020, compared to $1.84 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 10.0 percent to $1.76 in the fiscal first quarter.

“We delivered strong revenue and adjusted EPS growth in the first quarter of fiscal 2020, driven by both the Pharmaceutical Distribution and Global Commercialization Services & Animal Health groups,” said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen. “Our results continue to demonstrate the strength of AmerisourceBergen’s unique pharmaceutical-centered strategy and compelling position in the U.S. market,” said Mr. Collis.

In late January 2020 the Company decided to exit the PharMEDium compounding business and as a result, the Company will cease all commercial and administrative operations related to this business. Additional details can be found in the section labeled “PharMEDium Update”.

“After a comprehensive strategic and financial review of the PharMEDium business and continued operational challenges and financial burden, we have determined that the best path forward is to shut down the PharMEDium business.” Mr. Collis continued, “Our increased fiscal 2020 guidance reflects the ongoing strength of our business and the removal of PharMEDium’s operating loss for the remainder of the fiscal year.”

Today, the Company announced that the Board of Directors declared a quarterly dividend of $0.42 per common share, a 5% increase in the quarterly dividend rate from $0.40 per common share. The quarterly dividend of $0.42 per common share will be payable March 2, 2020, to stockholders of record at the close of business on February 14, 2020.

“As we move further into fiscal 2020, we remain confident that we will continue to execute our unique and differentiated business strategy to deliver long-term growth for our shareholders,” Mr. Collis said.

First Quarter Fiscal Year 2020 Summary Results

 

GAAP

 

 

Adjusted (Non-GAAP)

Revenue

$47.9B

$47.9B

Gross Profit

$1.2B

$1.2B

Operating Expenses

$968M

$748M

Operating Income

$263M

$495M

Interest Expense, Net

$31M

$31M

Effective Tax Rate

18.7%

21.0%

Net Income Attributable to ABC

$188M

$365M

Diluted Earnings Per Share

$0.90

$1.76

Diluted Shares Outstanding

208M

208M

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.

First Quarter GAAP Results

  • Revenue: In the first quarter of fiscal 2020, revenue was $47.9 billion, up 5.4 percent compared to the same quarter in the previous fiscal year, reflecting a 5.2 percent increase in Pharmaceutical Distribution Services revenue and a 10.5 percent increase in revenue within Other.
  • Gross Profit: Gross profit in the fiscal 2020 first quarter was $1.2 billion, a 5.1 percent decrease compared to the same period in the previous fiscal year. Gross profit in the current year quarter was unfavorably impacted by lower gains from antitrust litigation settlements, a LIFO expense in the current year quarter in comparison to a LIFO credit in the prior year quarter, and the prior year reversal of a previously estimated assessment related to the New York State Opioid Stewardship Act, offset in part by the increases in gross profit in Other and Pharmaceutical Distribution Services. Gross profit as a percentage of revenue was 2.57 percent, a decrease of 29 basis points from the prior year quarter.
  • Operating Expenses: In the first quarter of fiscal 2020, operating expenses were $967.8 million, compared to $819.8 million in the same period last fiscal year. The increase in operating expenses was primarily due to the $138.0 million impairment of PharMEDium’s long-lived assets and an increase in distribution, selling and administrative expenses in the quarter, partially offset by lower depreciation and amortization expense. Operating expenses as a percentage of revenue in the fiscal 2020 first quarter was 2.02 percent, compared to 1.81 percent for the same period in the previous fiscal year.
  • Operating Income: In the fiscal 2020 first quarter, operating income declined to $263.4 million from $477.8 million in the prior year quarter due to the increase in operating expenses and the decrease in gross profit. Operating income as a percentage of revenue was 0.55 percent in the first quarter of fiscal 2020, compared to 1.05 percent for the same period in the previous fiscal year.
  • Interest Expense, Net: In the fiscal 2020 first quarter, net interest expense of $31.0 million was down 26.5 percent versus the prior year quarter due to certain finance leases now being accounted for as operating leases, resulting from the adoption of the new lease accounting standard, and higher interest income.
  • Effective Tax Rate: The effective tax rate was 18.7 percent for the first quarter of fiscal 2020. The effective tax rate in the quarter was primarily impacted by the $138.0 million impairment of PharMEDium’s long-lived assets. The prior year’s first quarter effective tax rate of 9.4 percent was favorably impacted by the 2017 Tax Cuts and Jobs Act.
  • Diluted Earnings Per Share: Diluted earnings per share was $0.90 in the first quarter of fiscal 2020 compared to $1.84 in the previous fiscal year’s first quarter. This decline was primarily due to a decrease in operating income.
  • Diluted Shares Outstanding: Diluted weighted average shares outstanding for the first quarter of fiscal 2020 were 207.5 million, a 3.0 percent decline versus the prior fiscal year first quarter primarily due to share repurchases.

PharMEDium Update

  • In late January 2020 the Company decided to exit the PharMEDium compounding business and as a result, the Company will cease all commercial and administrative operations related to this business. The decision to exit the PharMEDium business was due to a number of factors including, but not limited to, ongoing operational, regulatory, and commercial challenges, such as PharMEDium’s decision in January 2020 to suspend production at the compounding facility in New Jersey pending facility upgrades related to the air handling and filtration systems. In addition to the PharMEDium impairment charge of $138 million recognized in the three months ended December 31, 2019, the Company expects it will impair the majority of the remaining $55 million of PharMEDium tangible assets and all of the remaining $185 million of PharMEDium intangible assets in the three months ending March 31, 2020. Additionally, the Company will incur other costs, such as employee separation costs, in connection with exiting the PharMEDium compounding business during the fiscal year ending September 30, 2020 estimated to total approximately $80 million to $100 million.
  • As a result of the decision to exit the PharMEDium compounding business, the Company expects to claim an ordinary income tax deduction and estimates that it will realize a cash tax benefit in fiscal 2020 through fiscal 2022 totaling approximately $500 million to $600 million.

First Quarter Adjusted (non-GAAP) Results

The comments below compare adjusted results, which exclude: gain from antitrust litigation settlements; LIFO expense/credit; PharMEDium remediation costs; New York State Opioid Stewardship Act; acquisition-related intangibles amortization; employee severance, litigation, and other; impairment of long-lived assets; and a one-time tax reform adjustment.

  • Revenue: No adjustments were made to the GAAP presentation of revenue. In the first quarter of fiscal 2020, revenue was $47.9 billion, up 5.4 percent compared to the same quarter in the previous fiscal year, reflecting a 5.2 percent increase in Pharmaceutical Distribution Services revenue and a 10.5 percent increase in revenue within Other.
  • Adjusted Gross Profit: Adjusted gross profit in the fiscal 2020 first quarter was $1.2 billion, which was up 3.3 percent compared to the same period in the previous year, due to the increases in gross profit in Other and Pharmaceutical Distribution Services. Adjusted gross profit as a percentage of revenue was 2.60 percent in the fiscal 2020 first quarter, a decrease of 5 basis points from the prior year quarter.
  • Adjusted Operating Expenses: In the first quarter of fiscal 2020, adjusted operating expenses were $747.9 million, an increase of 2.3 percent compared to the same period in the previous fiscal year primarily due to an increase in costs to support revenue growth, offset in part by operational synergies realized from the integration of H. D. Smith. Adjusted operating expenses as a percentage of revenue in the fiscal 2020 first quarter was 1.56 percent, compared to 1.61 percent for the same period in the previous fiscal year.
  • Adjusted Operating Income: In the fiscal 2020 first quarter, adjusted operating income of $495.3 million increased 5.0 percent from the prior year period due to a 5.0 percent increase in operating income within Pharmaceutical Distribution Services and a 5.6 percent increase in operating income within Other. Adjusted operating income as a percentage of revenue decreased 1 basis point to 1.03 percent in the fiscal 2020 first quarter compared to the previous fiscal year’s first quarter.
  • Interest Expense, Net: No adjustments were made to the GAAP presentation of net interest expense. In the fiscal 2020 first quarter, net interest expense of $31.0 million was down 26.5 percent versus the prior year quarter due to certain finance leases now being accounted for as operating leases, resulting from the adoption of the new lease accounting standard, and higher interest income.
  • Adjusted Effective Tax Rate: The adjusted effective tax rate was 21.0 percent for the first quarter of fiscal 2020 and was 19.9 percent in the previous fiscal year’s first quarter. The adjusted effective tax rate in the prior year quarter was favorably impacted by a discrete state tax item.
  • Adjusted Diluted Earnings Per Share: Adjusted diluted earnings per share was up 10.0 percent to $1.76 in the first quarter of fiscal 2020 compared to $1.60 in the previous fiscal year’s first 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 first quarter of fiscal 2020 were 207.5 million, a 3.0 percent decline versus the prior fiscal year first 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 $46.0 billion, an increase of 5.2 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 $391.7 million in the first quarter of fiscal 2020 was up 5.0 percent compared to the same period in the previous fiscal year, primarily due to the increase in gross profit resulting from the growth in revenue.

Other

Revenue in Other was $1.8 billion in the first quarter of fiscal 2020, an increase of 10.5 percent compared to the same period in the prior fiscal year, primarily due to growth at MWI, ABCS and World Courier. Operating income in Other increased 5.6 percent to $104.5 million in the first quarter of fiscal 2020. This increase was primarily due to the performance of ABCS and World Courier.

Recent Company Highlights & Milestones

  • AmerisourceBergen enhanced its logistics offering by integrating two of its businesses, World Courier, a global logistics provider, and ICS, a third party logistics (3PL) provider, creating the first and only specialty logistics partner to deliver complete support from clinical trials through commercialization. The integration offers enhanced global capabilities for manufacturers navigating the complexities of their product’s journey end-to-end, ultimately progressing the global growth of the advanced therapy industry and enabling more patients to be treated with these life-changing products.
  • AmerisourceBergen was named one of America’s “Most Responsible Companies” by Newsweek magazine and ranked 10th in the Health Care & Life Sciences category.
  • AmerisourceBergen received a perfect score of 100 on the 2019 Corporate Equality Index, the nation’s premier benchmarking survey and report on corporate policies and practices related to LGBTQ workplace equality, administered by the Human Rights Campaign Foundation.
  • The AmerisourceBergen Foundation announced a number of grants aimed at improving education and access to care in animal health throughout 2020 and beyond, including new collaborations with the National FFA Foundation, the National Disaster Search Dog Foundation and K9 Partners for Patriots.

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 or 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 updated its fiscal year 2020 financial guidance to reflect the Company’s strong performance, opportunistic share repurchases and the exit of our PharMEDium business. The Company now expects:

  • Adjusted Diluted EPS to be in the range of $7.55 to $7.80, up from the previous range of $7.30 to $7.60.

Additional expectations now include:

  • Adjusted operating income growth in the mid-single digit percent range, up from the low-to mid-single percent range;

    • Pharmaceutical Distribution Services segment operating income growth in the mid-single digit percent range, up from the low- to mid-single digit percent range;
  • Weighted average diluted shares are now expected to be approximately 208 million, down from the previous expectation of between 209 million to 210 million for the fiscal year.

All other previously communicated aspects of the Company’s fiscal year 2020 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 January 30, 2020. 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 (866) 270-1533. From outside the United States, dial (412) 317-0797. 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 one hour after the completion of the call and will remain available for one year. The telephone replay will also be available approximately one hour after the completion of the call and will remain available for seven days. To access the telephone replay from within the U.S., dial (877) 344-7529. From Canada, dial (855) 669-9658. From outside the United States and Canada, dial (412) 317-0088. The access code for the replay is 10138176.

Upcoming Investor Events

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

  • Barclays Global Healthcare Conference, March 10-12, Miami.

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 due to failure to achieve a global resolution of the multi-district opioid litigation and other related state court litigation, 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 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; 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; the loss, bankruptcy or insolvency of a major supplier; 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; 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 the impairments at PharMEDium and any additional impairments with respect to foreign operations), resulting in a charge to earnings; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period; 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.

Contacts

Bennett S. Murphy
Senior Vice President, Investor Relations
610-727-3693
bmurphy@amerisourcebergen.com

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