01—Abstract
Summary
Summary of the 10-K filed November 22, 2016. Cited figures are marked; the original filing is the authoritative source.
Cencora, Inc. (COR) demonstrated robust revenue growth in fiscal year 2016, driven by an 8.0%a increase attributed to strong performance in its Pharmaceutical Distribution segment, bolstered by acquisitions like MWI and PharMEDium.
While gross profit saw a significant increase of 21.1%b year-over-year, partly due to a reduction in LIFO expense and antitrust litigation gains, the company's pharmaceutical distribution segment's gross profit margin slightly declined due to pricing pressures and less favorable contract renewals. The company managed its expenses effectively, with distribution, selling, and administrative expenses increasing due to acquisitions but remaining a relatively stable percentage of revenue.
A notable factor impacting the year's financial results was the significant decrease in Warrants expense, a positive development for the company. Cencora also continued its commitment to shareholder returns through dividend increases and substantial share repurchases, reflecting confidence in its financial position and future prospects despite facing a competitive market and ongoing regulatory scrutiny.
02—Key points
Key Highlights
- Revenue increased by 8.0% to $146.8 billion, primarily driven by growth in the Pharmaceutical Distribution segment and contributions from recent acquisitions (MWI and PharMEDium).
- Gross profit increased by 21.1% to $4.3 billion, benefiting from a $342.6 million decrease in LIFO expense and a $68.3 million increase in antitrust litigation settlement gains.
- Distribution, selling, and administrative expenses increased by 9.6% largely due to the acquisitions of MWI and PharMEDium.
- Warrants expense decreased significantly from $912.7 million in the prior year to $140.3 million, mainly due to a decline in the company's stock price.
- The company successfully managed its debt, with interest expense, net, increasing by 28.3% primarily due to increased borrowings to finance acquisitions.
- Cencora continued to return capital to shareholders, increasing its quarterly dividend by 7% in November 2016 and repurchasing shares under its authorized programs.
- The company faced some headwinds, including unfavorable trends in brand and generic pharmaceutical pricing and less favorable terms on renewed contracts with key customers like the Department of Defense and Kaiser Permanente.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Cencora, Inc. kept $0.01.
- Revenue$146.85B100.0%
- Cost of revenue−$142.58B97.1%
- Gross profit$4.27B2.9%
- Operating costs−$2.75B1.9%
- Operating income$1.53B1.0%
- Interest, other & tax−$97.8M0.1%
- Net income$1.43B1.0%
Where FY2016 revenue went
$146.85B- Cost of revenue: $142.58B, 97% of revenue
- Net income: $1.43B, 1.0% of revenue
- SG&A: $2.09B, 1.4% of revenue
Kept 1.0% as net incomeNet income $1.43B · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed November 22, 2016Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $146.85B$135.96B | +8.0% |
| Cost of Revenue | $142.58B$132.43B | +7.7% |
| Gross Profit | $4.27B$3.53B | +21.1% |
| SG&A Expenses | $2.09B$1.91B | +9.6% |
| Operating Income | $1.53B$422.22M | +261.4% |
| Net Income | $1.43B-$138.16M | +1133.5% |
| EPS (Basic) | $6.73$-0.63 | +1168.3% |
| EPS (Diluted) | $6.32$-0.63 | +1103.2% |
| Shares Outstanding (Basic) | 212.21M217.79M | −2.6% |
| Shares Outstanding (Diluted) | 225.96M217.79M | +3.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cencora's revenue growth in fiscal year 2016?
Cencora's revenue grew by 8.0% in fiscal year 2016. Key drivers included strong performance in its Pharmaceutical Distribution segment, with increased sales of both brand and generic products, and significant revenue growth from its Specialty Group. The acquisition of MWI Veterinary Supply in February 2015 also contributed to the overall revenue increase.
How did the acquisitions of MWI and PharMEDium impact the company's financial results?
The acquisition of MWI in February 2015 and PharMEDium in November 2015 contributed significantly to the company's financial results. MWI boosted revenue in the 'Other' segment by 33.8%. Both acquisitions increased distribution, selling, and administrative expenses and led to amortization of acquired intangible assets. However, they also contributed to overall gross profit growth and expanded the company's service offerings.
What was the impact of Warrants expense on the company's profitability?
Warrants expense decreased substantially from $912.7 million in fiscal year 2015 to $140.3 million in fiscal year 2016. This significant reduction was primarily due to a decline in Cencora's stock price, which directly impacted the fair value measurement of these warrants. The company also noted that the warrants were fully exercised by WBA during fiscal year 2016.
What are the key risks Cencora highlighted in its 10-K filing?
Cencora identified several key risks, including unfavorable trends in pharmaceutical pricing (both brand inflation and generic deflation), intense competition and industry consolidation, the potential loss of significant customers like Walgreens and Express Scripts (which represented 30% and 16% of 2016 revenue, respectively), and increasing governmental regulation of the pharmaceutical supply chain and compounding. The company also noted risks related to its acquisitions, data security, and legal/regulatory compliance, particularly concerning controlled substances.
06—Continue