Business Context and Reporting Period
This Form 8-K was filed by AmerisourceBergen Corporation (now Cencora, Inc.) on October 31, 2013. The report announces earnings results for the fiscal quarter and fiscal year ended September 30, 2013, and provides updated guidance for fiscal year 2014.
Key Financial Metrics
- Adjusted EPS (FY 2013): $3.21 per share (revised from previously reported $3.14 due to new accounting methodology).
- Adjusted EPS Guidance (FY 2014): Range of $3.60 to $3.73.
- Revenue Growth Guidance (FY 2014): 28% to 31%.
- Operating Income Growth Guidance (FY 2014): 12% to 16%.
- Free Cash Flow Guidance (FY 2014): $500 million to $700 million.
- Capital Expenditures Guidance (FY 2014): Approximately $300 million.
- Share Repurchases Guidance (FY 2014): Approximately $500 million, primarily in the second half of the fiscal year.
Note: Specific GAAP revenue, profit, cash flow, debt, and liquidity figures for the fiscal year ended September 30, 2013, are not provided in this filing text; they are referenced in the attached news release (Exhibit 99.1).
Material Changes and Methodology Updates
The Company announced a change in its reporting methodology for fiscal year 2014 and retroactively applied it to fiscal 2013 adjusted earnings. The new "adjusted earnings" definition excludes:
- LIFO charges and credits.
- Warrant expense.
- Acquisition-related expenses and intangibles amortization.
- Special one-time employee severance, litigation, and other expenses.
- Gains from antitrust litigation settlements.
Additionally, the diluted weighted average share count for adjusted EPS will exclude accounting dilution from unexercised equity warrants. This change increased the reported FY 2013 adjusted EPS by $0.07. The $0.07 increase was driven by $23.5 million in employee severance/litigation expenses and $24.4 million in intangibles amortization, partially offset by $22.9 million in antitrust litigation gains.
Outlook, Risks, and Management Commentary
Management expects operating margins to decline by a high-teens basis points range in fiscal 2014 due to the onboarding of significant new lower-margin business. Share repurchases are subject to market conditions. The filing incorporates by reference a news release containing reconciliations of GAAP to non-GAAP measures.
Investor Verification Checklist
- Verify the full GAAP financial statements and the specific revenue/profit numbers in the attached news release (Exhibit 99.1).
- Review the reconciliation table between GAAP and non-GAAP measures to understand the magnitude of excluded items.
- Confirm the impact of the "lower margin business" on future profitability trends.
- Monitor the execution of the $500 million share repurchase program, noting the concentration in the second half of fiscal 2014.