01—Abstract
Summary
Summary of the 10-K filed November 20, 2018. Cited figures are marked; the original filing is the authoritative source.
Cencora, Inc. (COR), formerly AmerisourceBergen, reported strong revenue growth of 9.7% for the fiscal year ended September 30, 2018, reaching $167.9 billiona.
This growth was primarily driven by its Pharmaceutical Distribution Services segment, bolstered by significant acquisitions like H.D. Smith and consolidation of Profarma. Despite an increase in operating expenses, mainly due to integration costs and IT system implementations, operating income saw a substantial increase of 36.2%b compared to the prior year.
This improvement was largely attributed to a significant reduction in litigation and severance costs compared to the prior year, which had been impacted by large settlement charges. The company's financial performance was also positively influenced by the Tax Cuts and Jobs Act of 2017, which reduced the U.S. federal corporate tax rate, resulting in a significant income tax benefit.
While Cencora's core distribution business remains robust, the company is navigating challenges including an unfavorable pharmaceutical pricing environment, ongoing opioid-related litigation, and regulatory scrutiny on its pharmaceutical compounding operations. These factors, alongside customer concentration risk, present ongoing areas for investor attention.
02—Key points
Key Highlights
- Revenue increased by 9.7% to $167.9 billion, primarily driven by the Pharmaceutical Distribution Services segment and recent acquisitions (H.D. Smith, Profarma consolidation).
- Operating income increased by 36.2% due to reduced litigation and severance costs compared to the prior fiscal year.
- The company experienced an increase in distribution, selling, and administrative expenses, partly due to integration costs from acquisitions and IT system implementations.
- Net income attributable to AmerisourceBergen Corporation significantly increased, benefiting from the Tax Cuts and Jobs Act of 2017 and lower litigation charges from the prior year.
- The company repurchased approximately 7.7 million shares of common stock for $663.1 million under its share repurchase program.
- A goodwill impairment of $59.7 million was recorded for the Profarma reporting unit.
- Cencora is actively engaged in discussions with the FDA and DOJ regarding compliance efforts at its PharMEDium subsidiary, which had voluntarily suspended production at one facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Cencora, Inc. kept $0.01.
- Revenue$167.94B100.0%
- Cost of revenue−$163.33B97.3%
- Gross profit$4.61B2.7%
- Operating costs−$3.17B1.9%
- Operating income$1.44B0.9%
- Interest, other & tax$214.7M0.1%
- Net income$1.66B1.0%
Where FY2018 revenue went
$167.94B- Cost of revenue: $163.33B, 97% of revenue
- Operating income: $1.44B, 0.9% of revenue
- SG&A: $2.46B, 1.5% of revenue
Kept 0.9% as operating incomeOperating income $1.44B · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 20, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $167.94B$153.14B | +9.7% |
| Cost of Revenue | $163.33B$148.60B | +9.9% |
| Gross Profit | $4.61B$4.55B | +1.5% |
| SG&A Expenses | $2.46B$2.13B | +15.6% |
| Operating Income | $1.44B$1.06B | +36.2% |
| Net Income | $1.66B$364.48M | +355.0% |
| EPS (Basic) | $7.61$1.67 | +355.7% |
| EPS (Diluted) | $7.53$1.64 | +359.1% |
| Shares Outstanding (Basic) | 217.87M218.38M | −0.2% |
| Shares Outstanding (Diluted) | 220.34M221.60M | −0.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cencora's revenue growth in fiscal year 2018?
Cencora's revenue grew by 9.7% to $167.9 billion, primarily driven by its Pharmaceutical Distribution Services segment. This growth was fueled by increases in revenue from key customers, overall market growth, strong oncology product sales, and the impact of acquisitions made during the year, including H.D. Smith and the consolidation of Profarma.
What factors contributed to the significant increase in operating income?
The substantial 36.2% increase in operating income was primarily due to a significant reduction in employee severance, litigation, and other costs compared to the prior fiscal year. The prior year was heavily impacted by substantial litigation settlement charges, which were largely absent in the current fiscal year.
What are the key risks or challenges Cencora highlighted in this filing?
Cencora highlighted several key risks, including an unfavorable pharmaceutical pricing environment, potential erosion of profit due to competition and industry consolidation, increasing costs and potential impact of governmental regulations on pharmaceutical distribution and compounding, legal and regulatory changes affecting reimbursement and pricing, and ongoing opioid-related litigation and investigations which have led to significant costs and reputational concerns.
How did the Tax Cuts and Jobs Act of 2017 impact Cencora's financial results?
The Tax Cuts and Jobs Act of 2017 significantly impacted Cencora's financial results by reducing the U.S. federal corporate tax rate from 35% to 21%. This led to a substantial income tax benefit of $612.6 million recognized in fiscal year 2018 due to the remeasurement of deferred tax liabilities and a one-time transition tax on historical foreign earnings.
06—Continue