Cencora(US:COR)2021-11-22 16:00Part I Item 1. Business AmerisourceBergen is a global pharmaceutical sourcing and distribution company, organized into Pharmaceutical Distribution Services and an 'Other' category, focusing on core business optimization, global expansion, and strategic acquisitions - AmerisourceBergen is a global pharmaceutical sourcing and distribution services company, serving both human and animal health markets6 - The company's strategy includes optimizing its core distribution business, growing its global commercialization and animal health segments, and making strategic acquisitions131819 - On June 1, 2021, the company acquired a majority of Walgreens Boots Alliance, Inc.'s (WBA) Alliance Healthcare businesses, expanding its European presence and global manufacturer services20 Key Customer Revenue Concentration (FY 2021) | Customer | Percentage of Revenue | | :--- | :--- | | Walgreens Boots Alliance, Inc. (WBA) | ~31% | | Express Scripts, Inc. | ~12% | | Top 10 Customers (including GPOs) | ~69% | - The company's operations are organized into the Pharmaceutical Distribution Services reportable segment and an 'Other' category, including global commercialization, animal health, and international wholesale2425 - As of September 30, 2021, the company had approximately 42,000 employees, with about 40% in the U.S. and 27% covered by collective bargaining agreements41 Item 1A. Risk Factors The company faces significant risks from customer concentration, integration challenges of the Alliance Healthcare acquisition, industry competition, and extensive legal and regulatory challenges, particularly opioid litigation - The company faces significant business and operational risks, including potential loss or unfavorable renewal of contracts with major customers like WBA (31% of FY2021 revenue)757677 - The acquisition and integration of Alliance Healthcare present numerous risks, including operational difficulties, failure to achieve expected performance, and compliance issues in higher-risk jurisdictions8586 - Industry and economic risks include adverse impacts from manufacturer pricing changes, intense competition, industry consolidation, and potential credit failures of significant customers or suppliers99102103 - The company is subject to extensive litigation and regulatory risks, including increasing government efforts to regulate the pharmaceutical supply chain and legal challenges related to healthcare fraud and abuse110111129 - Significant legal risk stems from public concern and litigation over opioid medication abuse, with a proposed comprehensive settlement that, if not finalized, could have a material adverse effect131133134 - Other notable risks include health pandemics affecting operations and supply chains, cybersecurity threats, and potential impairment of goodwill and intangible assets145150153 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments158 Item 2. Properties The company operates from a mix of owned and leased facilities across the U.S. and globally, with its corporate headquarters in Conshohocken, Pennsylvania - The company conducts business from owned and leased facilities throughout the United States and select global markets, with a leased corporate headquarters in Conshohocken, PA159 - Key operating segments have geographically diverse properties, including Pharmaceutical Distribution Services across the U.S., Alliance Healthcare in Europe, World Courier in over 50 countries, and MWI in the U.S. and U.K.159160161162 Item 3. Legal Proceedings Legal proceedings information is detailed in Note 14 of the Notes to Consolidated Financial Statements - Legal proceedings are discussed in Note 14 (Legal Matters and Contingencies) of the Notes to Consolidated Financial Statements164 Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable165 Information about our Executive Officers The executive team, led by Steven H. Collis as Chairman, President, and CEO, includes James F. Cleary as CFO and Elizabeth S. Campbell as Chief Legal Officer - Steven H. Collis is the Chairman, President, and Chief Executive Officer169170 - James F. Cleary serves as the Executive Vice President and Chief Financial Officer169173 - Elizabeth S. Campbell was named Executive Vice President and Chief Legal Officer in September 2021169171 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under "ABC," with consistent dividend increases and ongoing share repurchase programs, while its five-year total stockholder return outperformed its peer group but lagged broader market indices - The company's common stock is traded on the New York Stock Exchange under the symbol "ABC"179 Quarterly Dividend Increases | Date | New Rate | Old Rate | % Increase | | :--- | :--- | :--- | :--- | | Nov 2018 | $0.400 | $0.380 | 5% | | Jan 2020 | $0.420 | $0.400 | 5% | | Nov 2020 | $0.440 | $0.420 | 5% | | Nov 2021 | $0.460 | $0.440 | 5% | - As of September 30, 2021, the company had $473.4 million of availability remaining under its May 2020 $500 million share repurchase program184 Five-Year Cumulative Total Stockholder Return (Assuming $100 Invested on 9/30/2016) | Index | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | AmerisourceBergen Corp. | $100.00 | $104.23 | $118.20 | $107.53 | $128.87 | $161.34 | | S&P 500 | $100.00 | $118.61 | $139.85 | $145.80 | $167.89 | $218.27 | | S&P Health Care | $100.00 | $115.49 | $136.68 | $131.80 | $158.31 | $194.03 | | Peer Group | $100.00 | $91.02 | $78.03 | $77.45 | $83.47 | $104.88 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Fiscal 2021 saw revenue increase to $214.0 billion and operating income to $2.4 billion, driven by the Alliance Healthcare acquisition and reduced opioid litigation accruals, with a new reporting structure planned for fiscal 2022 - On June 1, 2021, the company acquired Alliance Healthcare from WBA for approximately $6.9 billion in cash and stock, expanding its global reach197 - Beginning in Q1 fiscal 2022, the company will realign its reporting structure into two segments: U.S. Healthcare Solutions and International Healthcare Solutions201 Fiscal Year 2021 vs. 2020 Financial Highlights | Metric | FY 2021 | FY 2020 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $213.99B | $189.89B | 12.7% | | Gross Profit | $6.94B | $5.19B | 33.7% | | Operating Expenses | $4.59B | $10.33B | (55.6)% | | Operating Income | $2.35B | ($5.14B) | 145.8% | Cash Flow Summary (in millions) | Cash Flow | FY 2021 | FY 2020 | | :--- | :--- | :--- | | From Operating Activities | $2,666.6 | $2,207.0 | | Used in Investing Activities | ($6,141.6) | ($379.9) | | Provided by (Used in) Financing Activities | $1,952.8 | ($603.6) | - The company expects revenue growth to be in the high-single to low-double digits in fiscal 2022206 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on variable-rate debt and foreign currency exchange rate risk, significantly increased by the Alliance Healthcare acquisition - The company is exposed to market risk from interest rate fluctuations on its $0.9 billion variable-rate debt and $2.5 billion cash holdings as of September 30, 2021289290 - Exposure to foreign currency exchange rate risk has increased with the Alliance Healthcare acquisition, with largest exposures to the Euro, U.K. Pound Sterling, Turkish Lira, Egyptian Pound, Brazilian Real, and Canadian Dollar291 Item 8. Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for FY2021, including balance sheets and statements of operations, with an unqualified opinion from Ernst & Young LLP on financial statements and internal controls - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and internal control over financial reporting as of September 30, 2021300301 Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Sep 30, 2020 | | :--- | :--- | :--- | | Total Assets | $57,337,805 | $44,274,830 | | Total Liabilities | $56,753,394 | $45,114,466 | | Total Equity (Deficit) | $584,411 | ($839,636) | Consolidated Statement of Operations Highlights (in thousands) | Account | FY 2021 | FY 2020 | | :--- | :--- | :--- | | Revenue | $213,988,843 | $189,893,926 | | Gross Profit | $6,943,228 | $5,191,884 | | Operating Income (Loss) | $2,354,197 | ($5,135,354) | | Net Income (Loss) Attributable to ABC | $1,539,932 | ($3,408,716) | | Diluted EPS | $7.39 | ($16.65) | - Note 2 details the Alliance Healthcare acquisition on June 1, 2021, for $6.9 billion, resulting in $2.5 billion of goodwill and $3.7 billion of other intangible assets386389 - Note 14 discloses a total accrued liability of $6.7 billion related to opioid litigation, stemming from a proposed comprehensive settlement agreement483484 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on accounting principles, financial disclosure, or auditing scope - None reported512 Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of September 30, 2021, excluding the newly acquired Alliance Healthcare business - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021513 - Management's assessment concluded that internal control over financial reporting was effective as of September 30, 2021515 - The newly acquired Alliance Healthcare business was excluded from the scope of management's assessment of internal control over financial reporting for fiscal year 2021516 Item 9B. Other Information The company reports no other information for this item - None528 Part III Item 10. Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the Registrant's Proxy Statement for the 2022 Annual Meeting of Stockholders530 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement532 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership of beneficial owners, management, and related stockholder matters is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement533 Item 13. Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement534 Item 14. Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement - Information is incorporated by reference from the 2022 Proxy Statement535 Part IV Item 15. Exhibits, Financial Statement Schedules This section lists the financial statements, financial statement schedules, and numerous exhibits, including material contracts and compensatory plans, filed as part of the Form 10-K - This section contains the list of financial statements and the financial statement schedule (Schedule II — Valuation and Qualifying Accounts)538 - A comprehensive list of exhibits filed with the report is provided, including material contracts, debt agreements, and compensatory plans540541542 Item 16. Form 10-K Summary This item is not applicable - Not applicable546