AmerisourceBergen Corporation (now Cencora) — Fiscal 2022 Q3 Form 10-Q
Reporting period: Quarter and nine months ended June 30, 2022; unaudited. The filing registrant is AmerisourceBergen Corporation, ticker ABC, although the request identifies Cencora.
Business context and results
The company distributes pharmaceuticals and provides related healthcare services through U.S. Healthcare Solutions and International Healthcare Solutions. The June 2021 Alliance Healthcare acquisition materially expanded international operations and affects year-over-year comparisons.
| Metric | Q3 FY2022 | Q3 FY2021 | Nine months FY2022 | Nine months FY2021 |
|---|---|---|---|---|
| Revenue | $60.1B | $53.4B | $177.4B | $155.1B |
| Gross profit | $2.015B | $1.888B | $6.311B | $4.874B |
| Operating income | $487.3M | $620.7M | $1.912B | $1.792B |
| Net income attributable to AmerisourceBergen | $407.0M | $292.1M | $1.404B | $1.102B |
| Diluted EPS | $1.92 | $1.40 | $6.63 | $5.31 |
| Cash from operating activities | Not separately reported | Not separately reported | $1.539B | $1.657B |
Q3 revenue rose 12.5% and nine-month revenue rose 14.4%. Q3 gross margin was approximately 3.36%, versus 3.54% a year earlier; operating margin was approximately 0.81%, versus 1.16%. The nine-month gross margin was approximately 3.56%, versus 3.14%.
Cash, debt and liquidity
- At June 30, cash and cash equivalents were $3.034B, compared with $2.547B at September 30, 2021. Cash, cash equivalents and restricted cash totaled $3.302B.
- Total debt was $6.062B, down from $6.684B at September 30, 2021; $1.422B was classified as short-term debt on the balance sheet. The company repaid its $250M term loan and $500M of 2023 notes during the period.
- Available borrowing capacity under listed facilities was approximately $3.865B. The company reported compliance with applicable credit-facility covenants and no commercial paper outstanding.
- Nine-month operating cash flow declined to $1.539B from $1.657B. Accounts receivable rose $1.551B and inventory rose $713M, partly offset by a $2.075B increase in accounts payable.
- Capital expenditures were $323M for the nine months; management expected approximately $500M for fiscal 2022. Nine-month dividends paid were $295M, and share repurchases were $260M.
Changes, outlook and unusual items
- Alliance Healthcare drove much of International Healthcare Solutions’ growth. U.S. revenue growth reflected market and unit-volume growth and higher specialty-practice sales, partly offset by lower sales of COVID-19 treatments.
- Operating income fell 21.5% in Q3 despite higher segment operating income. Comparisons included a $147.4M prior-year antitrust-litigation settlement gain and a prior-year LIFO credit versus a current-year LIFO expense; current-year results also included a $75.9M Profarma goodwill impairment.
- Management expected fiscal 2022 revenue growth in the high-single to low-double digits. It said future growth would depend on market and drug-utilization trends, pricing, reimbursement, competition, customer and supplier dynamics, regulation and COVID-19 impacts. No EPS guidance is provided in the supplied filing text.
- Turkey’s highly inflationary accounting reduced Q3 and nine-month gross profit by $27.6M and included a further $5.8M expense in other income/loss. Foreign-currency translation contributed to a $1.003B nine-month comprehensive loss component.
- The company recorded a $6.4B accrued liability for opioid-related litigation and settlements, including approximately $516M expected to be paid before June 30, 2023. The comprehensive settlement calls for approximately $5.9B of payments over 18 years; the ultimate amount and certain participation-dependent terms remain subject to contingencies. The company states that ultimate losses could differ materially from accruals.
- Other disclosed uncertainties include ongoing opioid claims and investigations, a criminal investigation concerning MWI Veterinary Supply, foreign-exchange and interest-rate exposure, potential goodwill impairment, Alliance integration, inflation and economic conditions. Management said inflation had not materially affected results to date and the Russia-Ukraine conflict’s fiscal 2022 financial impact was not material.
Most important facts for investors to verify
- Confirm the issuer and period: this is AmerisourceBergen’s fiscal Q3 2022 filing, not a filing under the Cencora name.
- Review the drivers of Q3 operating-income decline, particularly prior-year litigation gains, LIFO comparisons, acquisition costs and the Profarma impairment.
- Assess opioid-settlement payment timing, participation contingencies and potential exposure beyond recorded liabilities.
- Monitor working-capital movements, debt maturities, facility availability and whether management’s fiscal 2022 revenue and capital-spending expectations were achieved.
- Evaluate acquisition-related growth separately from underlying business trends, including currency effects and Turkey’s highly inflationary accounting.