10-QPeriod: Q2 FY2019

Cencora, Inc. Quarterly Report for Q2 Ended Mar 31, 2019

Filed May 2, 2019For Securities:COR

Summary

Cencora, Inc. (COR) reported a significant decline in net income for the quarter ended March 31, 2019, primarily due to a substantial $570 million impairment charge related to long-lived assets at its PharMEDium subsidiary. While revenue increased by 5.6% year-over-year to $43.3 billion, driven by growth in the Pharmaceutical Distribution Services segment, the substantial impairment charge overshadowed this top-line growth. Despite the net income drop, the company's core distribution business demonstrated resilience. The report also highlights the ongoing complexities of legal matters, particularly opioid-related lawsuits, and the successful resolution of certain antitrust litigation, which provided a notable gain. Investors should monitor the ongoing resolution of the PharMEDium situation and potential future impacts of legal liabilities.

Financial Highlights

56 data points
Beta

Revenue

$43.32B

3.3% Gross Margin

Net Income

$27.14M

0.1% Net Margin

EPS (Diluted)

$0.13

Total Assets

$38.81B

Cash & Equivalents

$2.88B

Free Cash Flow

$542.11M

Financial Statements
Beta
Revenue$43.32B
Cost of Revenue$41.89B
Gross Profit$1.42B
SG&A Expenses$628.04M
Operating Income$47.56M
Net Income$27.14M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)210.93M
Shares Outstanding (Diluted)212.56M

Key Highlights

  • 1Revenue increased by 5.6% to $43.3 billion for the quarter ended March 31, 2019, compared to the prior year period, driven by the Pharmaceutical Distribution Services segment.
  • 2A significant impairment charge of $570.0 million related to long-lived assets at PharMEDium negatively impacted operating income and net income.
  • 3Operating income decreased by 90.1% to $47.6 million, largely due to the aforementioned impairment charge.
  • 4Net income attributable to AmerisourceBergen Corporation decreased substantially to $27.1 million from $287.5 million in the prior year quarter.
  • 5Gains from antitrust litigation settlements provided a significant boost to gross profit, totaling $52.0 million for the quarter.
  • 6The company continues to manage various legal matters, including ongoing opioid-related lawsuits, with no material adverse outcome currently estimated, though significant uncertainties remain.
  • 7Cash provided by operating activities for the six months ended March 31, 2019, was $1.1 billion, a significant improvement from the prior year's comparable period which used $77.2 million.

Frequently Asked Questions

The primary driver for the substantial decrease in net income to $27.1 million from $287.5 million in the prior year quarter was a $570.0 million impairment of long-lived assets related to its PharMEDium subsidiary. This impairment charge significantly impacted the company's operating income.

Revenue increased by 5.6% to $43.3 billion for the quarter ended March 31, 2019, compared to the same period in the prior year. This growth was primarily fueled by the Pharmaceutical Distribution Services segment.

The company is a defendant in numerous lawsuits related to the distribution of prescription opioid pain medications. These cases are consolidated for Multidistrict Litigation, with bellwether trials scheduled. The company is vigorously defending itself but is not in a position to assess the likely outcome or its exposure. The report notes that while no material adverse outcome is currently estimated, significant uncertainties remain.

The company maintains strong liquidity, with $1.1 billion in cash provided by operating activities for the six months ended March 31, 2019. It has access to significant credit facilities and a well-structured debt portfolio, including both fixed-rate and variable-rate debt. Future cash flows from operations and borrowings are expected to be sufficient to meet ongoing requirements.