10-QPeriod: Q3 FY2015

Cencora, Inc. Quarterly Report for Q3 Ended Jun 30, 2015

Filed August 6, 2015For Securities:COR

Summary

Cencora, Inc. (formerly AmerisourceBergen Corporation) reported its financial results for the quarterly period ended June 30, 2015. The company demonstrated strong top-line growth, with revenue increasing by 12.8% for the quarter and 14.2% for the nine-month period compared to the prior year. This growth was primarily driven by increased sales to Walgreens Boots Alliance (WBA), the acquisition of MWI Veterinary Supply, and robust performance in its specialty distribution businesses. Despite the revenue growth, the company experienced a net loss of $499.2 million for the nine-month period, largely influenced by significant warrant expenses and LIFO (Last-In, First-Out) expense. The warrant expense, in particular, is highly sensitive to changes in the company's stock price. The company also highlighted its ongoing efforts to mitigate the potential dilutive effects of outstanding warrants through share repurchase programs and hedging strategies. Management expects continued revenue growth in fiscal year 2015, driven by ongoing WBA distribution and market trends.

Financial Highlights

54 data points
Beta

Revenue

$34.23B

2.6% Gross Margin

Net Income

$213.36M

0.6% Net Margin

EPS (Diluted)

$0.89

Total Assets

$27.33B

Cash & Equivalents

$2.56B

Free Cash Flow

$1.07B

Financial Statements
Beta
Revenue$34.23B
Cost of Revenue$33.34B
Gross Profit$891.46M
SG&A Expenses$502.74M
Operating Income$334.18M
Net Income$213.36M
EPS (Basic)$0.97
EPS (Diluted)$0.89
Shares Outstanding (Basic)219.36M
Shares Outstanding (Diluted)240.24M

Key Highlights

  • 1Revenue increased by 12.8% in the quarter and 14.2% year-to-date, driven by WBA sales and the MWI acquisition.
  • 2A significant net loss of $499.2 million was recorded for the nine-month period, primarily due to substantial warrant and LIFO expenses.
  • 3The company acquired MWI Veterinary Supply for $2.6 billion, adding to its revenue and goodwill.
  • 4Operating expenses rose due to the MWI acquisition and investments supporting revenue growth.
  • 5The company is actively managing its share repurchase programs and hedging strategies to offset the potential dilutive impact of outstanding warrants.
  • 6Total debt increased to $3.75 billion, largely to finance the MWI acquisition.
  • 7Segment operating income showed solid growth, with Pharmaceutical Distribution up 23.3% year-to-date and Other up 64.8%.

Frequently Asked Questions

The significant net loss of $499.2 million for the nine-month period ending June 30, 2015, was primarily driven by substantial 'Warrant expense' and 'LIFO (Last-In, First-Out) expense'. The warrant expense is particularly sensitive to fluctuations in the company's stock price and is related to strategic agreements with Walgreens Boots Alliance (WBA).

The acquisition of MWI Veterinary Supply for $2.6 billion significantly contributed to revenue growth, with MWI adding $810.0 million in revenue for the quarter and $1.1 billion year-to-date. This acquisition also increased goodwill by $1.16 billion and contributed to higher operating expenses due to its inclusion in the 'Other' segment, which has a lower gross profit margin compared to other segments.

Cencora is actively employing a multi-faceted strategy to mitigate the potential dilutive effect of outstanding warrants. This includes substantial share repurchase programs, both regular and special programs initiated to counter warrant dilution, and hedging strategies such as entering into capped call and call option transactions with financial institutions to secure shares at specified prices.

The company's total debt increased to $3.75 billion as of June 30, 2015. This increase was primarily to finance a portion of the $2.6 billion acquisition of MWI Veterinary Supply. The company issued new senior notes and entered into a term loan to fund this acquisition, while also maintaining significant availability under its revolving credit and securitization facilities.