01—Abstract
Summary
Summary of the 10-K filed November 26, 2013. Cited figures are marked; the original filing is the authoritative source.
Cencora, Inc. (formerly AmerisourceBergen Corporation) reported strong revenue growth in fiscal year 2013, driven by its core pharmaceutical distribution business and a significant increase in its 'Other' segment, largely due to the acquisition of World Courier in the prior year.
The company's strategic focus on optimizing its distribution and specialty businesses, alongside a new ten-year distribution agreement with Walgreens (effective September 1, 2013), positions it for continued expansion. Despite revenue growth, gross profit saw a decline due to a substantial LIFO charge and lower gross profit margins in the Pharmaceutical Distribution segment, influenced by changes in customer mix and competitive pressures. Operating expenses increased, largely due to warrant expenses related to the Walgreens partnership and incremental costs from acquisitions.
Net income and earnings per share experienced a notable decrease year-over-year, impacted by these factors and higher effective tax rates. The company continues to manage its capital effectively through share repurchases and dividend payments, while also navigating regulatory environments and investing in information systems to support future growth.
02—Key points
Key Highlights
- Reported total revenue of $88.0 billion for fiscal year 2013, a 12.7% increase from the prior year, primarily driven by growth in the Pharmaceutical Distribution and Other segments.
- Secured a ten-year pharmaceutical distribution agreement with Walgreens, effective September 1, 2013, which is expected to significantly drive revenue growth in fiscal year 2014.
- Experienced a 4.8% decrease in gross profit to $2.5 billion, impacted by a significant $277.0 million LIFO charge and a 13.2% decline in Pharmaceutical Distribution gross profit.
- Operating expenses increased by 20.9% to $1.6 billion, largely due to a $90.1 million warrant expense related to the Walgreens strategic partnership and increased costs from recent acquisitions.
- Net income decreased by 39.5% to $433.7 million, and diluted earnings per share fell by 34.3% to $1.84, impacted by higher expenses and a higher effective tax rate.
- Maintained a strong liquidity position with $1.2 billion in cash and cash equivalents and significant availability under its revolving credit facilities.
- Continued to return capital to shareholders through share repurchases and dividend payments, with $363.0 million of availability remaining on its share repurchase program and a 12% increase in its quarterly dividend declared in November 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Cencora, Inc. kept $0.00.
- Revenue$87.96B100.0%
- Cost of revenue−$85.45B97.1%
- Gross profit$2.51B2.9%
- Operating costs−$1.61B1.8%
- Operating income$898.4M1.0%
- Interest, other & tax−$464.7M0.5%
- Net income$433.7M0.5%
Where FY2013 revenue went
$87.96B- Cost of revenue: $85.45B, 97% of revenue
- Net income: $433.7M, 0.5% of revenue
- SG&A: $1.33B, 1.5% of revenue
- Interest, other & tax: $464.7M, 0.5% of revenue
Kept 0.5% as net incomeNet income $433.7M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed November 26, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $87.96B$78.08B | +12.7% |
| Cost of Revenue | $85.45B$75.45B | +13.3% |
| Gross Profit | $2.51B$2.63B | −4.8% |
| SG&A Expenses | $1.33B$1.15B | +15.7% |
| Operating Income | $898.40M$1.30B | −31.1% |
| Net Income | $433.71M$718.99M | −39.7% |
| EPS (Basic) | $1.88$2.84 | −33.8% |
| EPS (Diluted) | $1.84$2.80 | −34.3% |
| Shares Outstanding (Basic) | 231K252.91M | −99.9% |
| Shares Outstanding (Diluted) | 235K256.90M | −99.9% |
05—Questions
Frequently Asked Questions
What was the most significant event impacting Cencora's financial performance in fiscal year 2013?
The most significant event was the entry into a ten-year distribution agreement with Walgreens, effective September 1, 2013. This strategic partnership is expected to be a major driver of future revenue growth, although it also contributed to increased operating expenses, including warrant expenses.
How did the Walgreens agreement affect the company's financial results in fiscal year 2013?
While the agreement began contributing revenue late in fiscal year 2013, its primary impact was on operating expenses, specifically warrant expenses totaling $90.1 million. The full financial benefits and integration costs will be more evident in fiscal year 2014 and beyond.
What caused the decline in gross profit in fiscal year 2013?
The decline in gross profit was primarily due to a substantial Last-In, First-Out (LIFO) charge of $277.0 million, which was significantly higher than in previous years. Additionally, the Pharmaceutical Distribution segment experienced lower gross profit margins due to factors like customer mix changes, competitive pressures, and a decrease in generic drug launches.
What are the key risks Cencora highlighted for its future business?
Key risks include intense competition potentially eroding profit margins, customer concentration (with Express Scripts being 24% of revenue in FY2013 and Walgreens becoming the largest customer in FY2014), potential disruption to the Walgreens relationship, increasing government regulation of the pharmaceutical supply chain, and adverse effects from economic conditions and changes in healthcare reimbursement rates.
06—Continue