AmerisourceBergen Reports Fiscal 2020 Third Quarter Results

AmerisourceBergen

VALLEY FORGE, PA — AmerisourceBergen Corporation (NYSE: ABC) recently reported that in its fiscal year 2020 third quarter ended June 30, 2020, revenue increased 0.3 percent year-over-year to $45.4 billion.

On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $1.41 for the June quarter of fiscal 2020, compared to $1.43 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 5.1 percent to $1.85 in the fiscal third quarter.

he Company raised its adjusted diluted EPS guidance for fiscal 2020 to a range of $7.80 to $7.95 from the previous range of $7.35 to $7.65. The Company does not provide forward-looking guidance on a GAAP basis, as discussed below in Fiscal Year 2020 Expectations.

“In the third quarter of the fiscal year, we saw the resilience of our business as our associates worked diligently to ensure continued patient access. Our updated outlook for fiscal 2020 reflects the continued execution by our teams and the strength of AmerisourceBergen’s value proposition, deep partnerships and strategic positioning,” said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen.

“Our teams are leveraging the power of AmerisourceBergen’s culture to deliver collaborative and innovative services and solutions for our partners as they navigate the complexity of the current environment,” Mr. Collis continued. “AmerisourceBergen is living our purpose of being united in our responsibility to create healthier futures as we continue to focus on protecting our associates, execution across our company and advancing our talent and culture, driving long-term value creation for all our stakeholders.”

Third Quarter Fiscal Year 2020 Summary Results

GAAP

Adjusted (Non-GAAP)

Revenue

$45.4B

$45.4B

Gross Profit

$1.2B

$1.2B

Operating Expenses

$821M

$725M

Operating Income

$405M

$508M

Interest Expense, Net

$38M

$38M

Effective Tax Rate

16.5%

18.8%

Net Income Attributable to ABC

$289M

$380M

Diluted Earnings Per Share

$1.41

$1.85

Diluted Shares Outstanding

206M

206M

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 2020, revenue was $45.4 billion, up 0.3 percent compared to the same quarter in the previous fiscal year, reflecting a 0.1 percent increase in Pharmaceutical Distribution Services revenue and a 4.4 percent increase in revenue within Other.
  • Gross Profit: Gross profit in the fiscal 2020 third quarter was $1.2 billion, a 0.4 percent decrease compared to the same period in the previous fiscal year. Gross profit was unfavorably impacted by lower gains from antitrust litigation settlements and a LIFO expense in comparison to a LIFO credit in the prior year period, which were offset in part by increases in gross profit in Pharmaceutical Distribution Services and Other and lower PharMEDium remediation and shutdown costs. Gross profit as a percentage of revenue was 2.70 percent, a decrease of 2 basis points from the prior year quarter.
  • Operating Expenses: In the third quarter of fiscal 2020, operating expenses were $820.9 million, compared to $824.5 million in the same period last fiscal year. The decrease in operating expenses was primarily due to lower depreciation and amortization expense, offset in part by an increase in distribution, selling and administrative costs. Operating expenses as a percentage of revenue in the fiscal 2020 third quarter was 1.81 percent, compared to 1.82 percent for the same period in the previous fiscal year.
  • Operating Income: In the fiscal 2020 third quarter, operating income decreased to $404.8 million from $406.7 million in the prior year quarter. Operating income as a percentage of revenue was 0.89 percent in the third quarter of fiscal 2020, compared to 0.90 percent for the same period in the previous fiscal year.
  • Interest Expense, Net: In the fiscal 2020 third quarter, net interest expense of $37.7 million was up 5.1 percent versus the prior year quarter due to a decrease in interest income resulting primarily from a decline in investment interest rates and was substantially offset by a decrease in interest expense.
  • Effective Tax Rate: The effective tax rate was 16.5 percent for the third quarter of fiscal 2020 and 18.6 percent in the prior year quarter, reflecting a benefit resulting from a discrete tax item.
  • Diluted Earnings Per Share: Diluted earnings per share was $1.41 in the third quarter of fiscal 2020 compared to $1.43 in the previous fiscal year’s third quarter.
  • Diluted Shares Outstanding: Diluted weighted average shares outstanding for the third quarter of fiscal 2020 were 205.5 million, a 2.7 percent decline versus the prior fiscal year third quarter primarily due to share repurchases, net of stock option exercises.

Third Quarter Adjusted (non-GAAP) Results

The comments below compare adjusted results, which exclude: gain from antitrust litigation settlements; LIFO expense/credit; PharMEDium remediation and shutdown costs; New York State Opioid Stewardship Act; contingent consideration adjustment; acquisition-related intangibles amortization; employee severance, litigation, and other; impairment of PharMEDium assets; a loss on early retirement of debt; a gain on the sale of an equity investment; certain discrete tax benefits; and tax reform.

  • Revenue: No adjustments were made to the GAAP presentation of revenue. In the third quarter of fiscal 2020, revenue was $45.4 billion, up 0.3 percent compared to the same quarter in the previous fiscal year, reflecting a 0.1 percent increase in Pharmaceutical Distribution Services revenue and a 4.4 percent increase in revenue within Other.
  • Adjusted Gross Profit: Adjusted gross profit in the fiscal 2020 third quarter was $1.2 billion, which was up 0.2 percent compared to the same period in the previous year, due to the increases in gross profit in Pharmaceutical Distribution Services and Other. Adjusted gross profit as a percentage of revenue was 2.72 percent in the fiscal 2020 third quarter, flat when compared to the prior year quarter.
  • Adjusted Operating Expenses: In the third quarter of fiscal 2020, adjusted operating expenses were $724.7 million, an increase of 0.3 percent compared to the same period in the previous fiscal year. Adjusted operating expenses as a percentage of revenue in the fiscal 2020 third quarter was 1.60 percent, flat when compared to the prior year quarter.
  • Adjusted Operating Income: In the fiscal 2020 third quarter, adjusted operating income of $507.5 million increased 0.2 percent from the prior year period due to a 3.6 percent increase in operating income within Pharmaceutical Distribution Services, offset in part by a 12.9 percent decline in operating income within Other. Adjusted operating income as a percentage of revenue was 1.12 percent in the fiscal 2020 third quarter, flat when compared to the prior year quarter.
  • Interest Expense, Net: No adjustments were made to the GAAP presentation of net interest expense. In the fiscal 2020 third quarter, net interest expense of $37.7 million was up 5.1 percent versus the prior year quarter due to a decrease in interest income resulting primarily from a decline in investment interest rates and was substantially offset by a decrease in interest expense.
  • Adjusted Effective Tax Rate: The adjusted effective tax rate was 18.8 percent for the third quarter of fiscal 2020 compared to 21.0 percent in the prior year quarter, reflecting a benefit resulting from a discrete tax item.
  • Adjusted Diluted Earnings Per Share: Adjusted diluted earnings per share was up 5.1 percent to $1.85 in the third quarter of fiscal 2020 compared to $1.76 in the previous fiscal year’s third quarter, driven primarily by the lower adjusted effective tax rate and a lower number of diluted shares outstanding.
  • 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 2020 were 205.5 million, a 2.7 percent decline versus the prior fiscal year third quarter primarily due to share repurchases, net of stock option exercises.

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 the 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 $43.6 billion, an increase of 0.1 percent compared to the same quarter in the prior fiscal year primarily due to the onset of COVID-19 in March 2020, when many of their customers increased their purchases in the fiscal quarter ended March 31, 2020, which resulted in fewer purchases in the fiscal quarter ended June 30, 2020. Segment operating income of $426.6 million in the third quarter of fiscal 2020 was up 3.6 percent compared to the same period in the previous fiscal year, due to lower operating expenses and higher gross profit.

Other

Revenue in Other was $1.8 billion in the third quarter of fiscal 2020, an increase of 4.4 percent compared to the same period in the prior fiscal year due to growth at ABCS and World Courier. Operating income in Other decreased 12.9 percent to $82.9 million in the third quarter of fiscal 2020. This decrease was primarily due to impacts of COVID-19 at MWI.

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 J.D. Power 2020 U.S. Pharmacy Study. This marks the ninth time that Good Neighbor Pharmacy has earned the achievement in the last 11 years.
  • AmerisourceBergen has been named a 2020 DiversityInc ‘Noteworthy’ company for the fourth year in a row, based on its hiring, retention and promotion of women, minorities, people with disabilities, LGBT and veterans.
  • The AmerisourceBergen Foundation, a separate not-for-profit charitable giving organization, hosted its second annual conference, bringing together over sixty non-profit partners to address challenging issues society is facing today and share strategies and best practices.

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 continued strong performance and solid execution. The Company now expects:

  • Revenue growth in the mid-single digit percent range, up from the low- to mid- single digit percent range; and
  • Adjusted Diluted EPS to be in the range of $7.80 to $7.95, up from the previous range of $7.35 to $7.65.

Additional expectations now include:

  • Adjusted operating income growth in the mid- to high-single digit percent range, up from the low- to mid-single digit percent range;
    • Pharmaceutical Distribution Services segment operating income growth in the mid- to high-single digit percent range, up from 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 low-single digit percent range, up from operating income decline in the low-single digit percent rage; and
  • Adjusted effective tax rate of approximately 21 percent, down from the previous range of 21 percent to 22 percent; and
  • Capital expenditures of approximately $375 million, down from the $400 million range.

All other previously communicated aspects of the Company’s fiscal year 2020 financial guidance and assumptions remain the same.

Dividend Declaration

The Company’s Board of Directors declared a quarterly cash dividend of $0.42 per common share, payable September 1, 2020, to stockholders of record at the close of business on August 17, 2020.

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