Cencora 10-Q 2023-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM ___________ TO___________

Commission file number 1-16671

AMERISOURCEBERGEN CORPORATION

(Exact name of registrant as specified in its charter)

(610) 727-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The number of shares of common stock of AmerisourceBergen Corporation outstanding as of April 30, 2023 was 202,466,004.

AMERISOURCEBERGEN CORPORATION

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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Overview

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained herein and in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

We are one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. We deliver innovative programs and services designed to increase the effectiveness and efficiency of the pharmaceutical supply chain in both human and animal health.

We are organized geographically based upon the products and services we provide to our customers, and we report our results under two reportable segments: U.S. Healthcare Solutions and International Healthcare Solutions.

U.S. Healthcare Solutions Segment

The U.S. Healthcare Solutions reportable segment distributes a comprehensive offering of brand-name, specialty brand-name and generic pharmaceuticals, over-the-counter healthcare products, home healthcare supplies and equipment, and related services to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order pharmacies, medical clinics, long-term care and alternate site pharmacies, and other customers. The U.S. Healthcare Solutions reportable segment also provides pharmaceutical distribution (including plasma and other blood products, injectable pharmaceuticals, vaccines, and other specialty pharmaceutical products) and additional services to physicians who specialize in a variety of disease states, especially oncology, and to other healthcare providers, including hospitals and dialysis clinics. Additionally, the U.S. Healthcare Solutions reportable segment provides data analytics, outcomes research, and additional services for biotechnology and pharmaceutical manufacturers. The U.S. Healthcare Solutions reportable segment also provides pharmacy management, staffing and additional consulting services, and supply management software to a variety of retail and institutional healthcare providers. It also provides a full suite of integrated manufacturer services that ranges from clinical trial support to product post-approval and commercialization support. Additionally, it delivers packaging solutions to institutional and retail healthcare providers. Through its animal health business, the U.S. Healthcare Solutions reportable segment sells pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, and various other products to customers in both the companion animal and production animal markets. It also offers demand-creating sales force services to manufacturers.

International Healthcare Solutions Segment

The International Healthcare Solutions reportable segment consists of businesses that focus on international pharmaceutical wholesale and related service operations and global commercialization services. The International Healthcare Solutions reportable segment distributes pharmaceuticals, other healthcare products, and related services to healthcare providers, including pharmacies, doctors, health centers and hospitals primarily in Europe. It is a leading global specialty transportation and logistics provider for the biopharmaceutical industry. It is also a leading provider of specialized services, including regulatory affairs, development consulting and scientific affairs, pharmacovigilance, and quality management and compliance, for the life sciences industry. In Canada, the business drives innovative partnerships with manufacturers, providers, and pharmacies to improve product access and efficiency throughout the healthcare supply chain.

Recent Developments

PharmaLex Acquisition

We acquired and assumed control of PharmaLex Holding Gmbh ("PharmaLex") effective January 1, 2023 for $1.473 billion, subject to customary adjustments, including a $29.3 million cash holdback. PharmaLex is a leading provider of specialized services for the life sciences industry. PharmaLex's services include regulatory affairs, development consulting and scientific affairs, pharmacovigilance, and quality management and compliance. PharmaLex is headquartered in Germany and operates in over 30 countries. The acquisition advances our role as a partner of choice for biopharmaceutical partners across the pharmaceutical development and commercialization journey. PharmaLex is a component of our International Healthcare Solutions reportable segment.

Company Name Change

On January 24, 2023, we announced our intent to change our name to better reflect our bold vision and purpose-driven approach to creating healthier futures. We intend to begin operating as Cencora in the second half of calendar year 2023. The new name represents a unified presence that will continue to fuel our ongoing growth strategy and advance our impact across healthcare.

OneOncology Investment

On April 20, 2023, we and TPG, a global alternative asset management firm, announced an agreement to acquire OneOncology, a network of leading oncology practices. We will invest approximately $685 million (representing approximately 35%) in a joint venture formed to acquire OneOncology for approximately $2.1 billion, and TPG will acquire the majority interest in the joint venture.

The transaction is expected to close by the end of September 2023 and is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.

Executive Summary

This executive summary provides highlights from the results of operations that follow:

• Revenue increased by $5.7 billion, or 9.9%, from the prior year quarter and $9.0 billion, or 7.6%, from the prior year six-month period due to growth in our U.S. Healthcare Solutions segment. The U.S. Healthcare Solutions segment grew its revenue by $5.8 billion, or 11.3%, from the prior quarter and $9.0 billion, or 8.7%, from the prior year six-month period due to overall market growth primarily driven by unit volume growth, including increased sales to our two largest customers and increased sales of specialty products to physician practices and health systems, offset in part by a decrease in sales of COVID-19 treatments (primarily commercial treatments). Revenue in International Healthcare Solutions decreased $12.8 million, from the prior year quarter and $51.3 million from the prior year six-month period. The decrease from the prior year quarter and six-month period was primarily due to the June 2022 divestiture of our Brazil specialty business and a decrease in sales at Alliance Healthcare, our European distribution business, resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods, offset in part by incremental revenue resulting from our January 2023 acquisition of PharmaLex and increased revenue from our less-than-wholly-owned Brazil full-line distribution business;

• Gross profit increased by $60.4 million, or 2.7%, from the prior year quarter and $146.0 million, or 3.4% from the prior year six-month period. Gross profit in the current year quarter and six-month period was favorably impacted by an increase in gross profit in both reportable segments. The six-month period was also favorably impacted by an increase in gains from antitrust litigation settlements. The increases were offset in part by last-in, first-out ("LIFO") expense in the current year periods in comparison to a LIFO credit in the prior year periods. U.S. Healthcare Solutions gross profit increased by $89.3 million, or 6.1%, from the prior year quarter and $196.9 million, or 7.2%, from the prior year six-month period due to increased sales. Gross profit in International Healthcare Solutions increased by $48.1 million, or 6.4%, from the prior year quarter and $49.5 million, or 3.3%, from the prior year six-month period primarily due to the January 2023 acquisition of PharmaLex, increases in our global specialty logistics business, and our less-than-wholly-owned Brazil full-line distribution business, offset in part by the June 2022 divestiture of our Brazil specialty business and a decrease in our European distribution business resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods;

• Total operating expenses increased by $280.0 million, or 19.2%, compared to the prior year quarter and $376.9 million, or 13.1%, from the prior year six-month period primarily as a result of an increase in distribution, selling, and administrative expenses, restructuring and other expenses, and amortization expense;

• Total segment operating income increased by $15.5 million, or 1.7%, from the prior year quarter was flat from the prior year six-month period as increases in operating income in the U.S. Healthcare Solutions segment were offset in part by decreases in operating income in the International Healthcare Solutions segment resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods;

• Our effective tax rates were 16.4% and 18.2% for the three and six months ended March 31, 2023, respectively. Our effective tax rates were 23.7% and 24.1% for the three and six months ended March 31, 2022, respectively. The effective tax rate for the three and six months ended March 31, 2023 was lower than the U.S. statutory rate primarily due to the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate, benefits from tax authority audit resolutions, and tax benefits associated with the vesting of restricted stock units and stock option exercises, offset in part by U.S. state income taxes.

Results of Operations

Revenue

Our future revenue growth will continue to be affected by various factors, such as industry growth trends, including drug utilization, the introduction of new, innovative brand therapies, the likely increase in the number of generic drugs and biosimilars that will be available over the next few years as a result of the expiration of certain drug patents held by brand-name pharmaceutical manufacturers and the rate of conversion from brand products to those generic drugs and biosimilars, price inflation and price deflation, general economic conditions in the United States and Europe, currency exchange rates, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third-party reimbursement rates to our customers, changes in government rules and regulations, and the impact of the COVID-19 pandemic.

Revenue increased by 9.9% and 7.6% from the prior year quarter and six-month period, respectively, due to growth in the U.S. Healthcare Solutions segment.

The U.S. Healthcare Solutions segment grew its revenue by $5.8 billion, or 11.3%, from the prior year quarter and $9.0 billion, or 8.7%, from the prior year six-month period due to overall market growth primarily driven by unit volume growth, including increased sales to our two largest customers and increased sales of specialty products to physician practices and health systems, offset in part by a decrease in sales of COVID-19 treatments (primarily commercial treatments). Sales to our two largest customers increased by $1.9 billion and $2.9 billion in the three and six months ended March 31, 2023 in comparison to the same prior year periods. COVID-19 treatment revenue declined by $0.4 billion and $0.7 billion in the three and six months ended March 31, 2023 in comparison to the same prior year periods.

International Healthcare Solutions' revenue decreased by $12.8 million, or 0.2%, from the prior year quarter and $51.3 million, or 0.4%, from the prior year six-month period. The decreases from the prior year quarter and six-month period were primarily due to the June 2022 divestiture of our Brazil specialty business and a decrease in sales at Alliance Healthcare, our European distribution business, resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods, offset in part by incremental revenue from our January 2023 acquisition of PharmaLex and increased revenue from our less-than-wholly-owned Brazil full-line distribution business.

A number of our contracts with customers, including group purchasing organizations, are typically subject to expiration each year. We may lose a significant customer if an existing contract with such customer expires without being extended, renewed, or replaced. During the six months ended March 31, 2023, no significant contracts expired. Over the next twelve months, there are no significant contracts scheduled to expire. Additionally, from time to time, significant contracts may be terminated in accordance with their terms or extended, renewed, or replaced prior to their expiration dates. If those contracts are extended, renewed, or replaced at less favorable terms, they may also negatively impact our revenue, results of operations, and cash flows.

Gross Profit

Gross profit increased by $60.4 million, or 2.7%, from the prior year quarter and $146.0 million, or 3.4%, from the prior year six-month period. Gross profit in the current year quarter and six-month month period was favorably impacted by increases in gross profit in both reportable segments. The current year six-month period was also favorably impacted by an increase in gains from antitrust litigation settlements. The increases were offset in part by LIFO expense in the current year periods in comparison to a LIFO credit in the prior year periods.

U.S. Healthcare Solutions gross profit increased by $89.3 million, or 6.1%, from the prior year quarter and $196.9 million, or 7.2%, from the prior year six-month period primarily due to increased sales. As a percentage of revenue, U.S. Healthcare Solutions' gross profit margin was 2.74% and 2.60% in the current year quarter and six-month period, respectively, a 13-basis point decrease from prior year quarter and a 4-basis point decrease from the prior year six-month period primarily due to increased sales to our larger customers, which have lower gross profit margins, and lower sales of COVID-19 treatments.

Gross profit in International Healthcare Solutions increased by $48.1 million, or 6.4%, from the prior year quarter and $49.5 million, or 3.3%, from the prior year six-month period primarily due to the January 2023 acquisition of PharmaLex, increases in our global specialty logistics business and our less-than-wholly-owned Brazil full-line distribution business, offset in part by the June 2022 divestiture of our Brazil specialty business and a decrease in our European distribution business resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods.

We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $49.9 million in the six months ended March 31, 2023. We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $1.8 million in three and six months ended March 31, 2022. The gains were recorded as reductions to Cost of Goods Sold (see Note 11 of the Notes to Consolidated Financial Statements).

Our cost of goods sold for interim periods includes a LIFO provision that is recorded ratably on a quarterly basis and is based on our estimated annual LIFO provision. The annual LIFO provision, which we estimate on a quarterly basis, is affected by manufacturer pricing practices, which may be impacted by market and other external influences, expected changes in inventory quantities, and product mix, many of which are difficult to predict. Changes to any of the above factors may have a material impact on our annual LIFO provision. LIFO expense in the current year periods in comparison to LIFO credits in the prior year periods were primarily driven by lower generic pharmaceutical deflation, higher brand pharmaceutical inflation, and higher brand inventory product mix estimated in the current fiscal year LIFO provision.

Operating Expenses

Distribution, selling, and administrative expenses increased by $117.8 million, or 9.8%, compared to prior year quarter and $238.7 million, or 10.1%, compared to prior year six-month period primarily to support revenue growth in U.S. Healthcare Solutions and included inflationary impacts on certain operating expenses. As a percentage of revenue, distribution, selling, and administrative expenses were 2.08% and 2.07% in the current year quarter and six-month period, respectively, which was flat compared to the prior year quarter and represented a 5-basis point increase compared to the prior year six-month period.

Depreciation expense increased 4.3% and 4.2% from the prior year quarter and six-month period, respectively. Amortization expense increased 78.7% and 34.0% from the prior year quarter and six-month period, respectively, primarily due to accelerated amortization expense recorded in connection with the revised useful lives of certain trade names resulting from our intended company name change.

Litigation and opioid-related expenses in the three and six months ended March 31, 2023 included legal fees in connection with opioid lawsuits and investigations. Litigation and opioid-related expenses in the three months ended March 31, 2022 included a $29.8 million accrual related to opioid litigation settlements and $22.3 million of legal fees in connection with opioid lawsuits and investigations. Litigation and opioid-related expenses in the six months ended March 31, 2022 included $48.1 million of legal fees in connection with opioid lawsuits and investigations and a $36.6 million accrual related to opioid litigation settlements.

Acquisition-related deal and integration expenses in the three and six months ended March 31, 2023 primarily related to the acquisition of PharmaLex and the continued integration of Alliance Healthcare. Acquisition-related deal and integration expenses in the three and six months ended March 31, 2022 primarily related to the integration of Alliance Healthcare.

Restructuring and other expenses are comprised of the following for the periods indicated:

Restructuring and employee severance costs in the three and six months ended March 31, 2023 primarily included expenses incurred in connection with a workforce reduction in our U.S. Healthcare Solutions segment.

Business transformation efforts in the three and six months ended March 31, 2023 included rebranding costs associated with our name change to Cencora and non-recurring expenses related to significant strategic initiatives to improve operational efficiency. The majority of these costs related to services provided by third-party consultants, including certain technology initiatives.

Business transformation efforts in the three and six months ended March 31, 2022 primarily related to costs associated with reorganizing to further align our organization to our customers' needs. The majority of these costs related to services provided by third-party consultants, including certain technology initiatives.

In the three months ended March 31, 2023, one of our foreign business units experienced a cybersecurity event that impacted a standalone legacy information technology platform in one country and the foreign business unit's ability to operate in that country for approximately two weeks. In connection with this isolated event, we incurred costs to restore the foreign business unit's operations in that country, which was recorded in Other expenses in the above table. The majority of Other expenses in the three and six months ended March 31, 2023 related to the cybersecurity event.

Operating Income

Segment operating income is evaluated before gains from antitrust litigation settlements; LIFO (expense) credit; Turkey highly inflationary impact; acquisition-related intangibles amortization; litigation and opioid-related expenses; acquisition-related deal and integration expenses; restructuring and other expenses; and impairment of assets.

U.S. Healthcare Solutions' operating income increased by $26.6 million, or 3.6%, from prior year quarter and $29.9 million, or 2.3%, from prior year six-month period primarily due to the increases in gross profit, as noted above, and was offset in part by the increases in operating expenses. As a percentage of revenue, U.S. Healthcare Solutions' operating income margin was 1.33% and 1.18% in the current year quarter and six-month period ended March 31, 2023, respectively, and represented declines of 10 basis points and 7 basis points compared to the prior year quarter and prior year six-month period, respectively, primarily due to the declines in gross profit margins and an increase in the operating expense margin in the current year six-month period.

International Healthcare Solutions' operating income decreased by $11.1 million, or 5.9%, from the prior year quarter and $29.9 million, or 8.1%, from the prior year six-month period primarily due to a decrease in operating income in our European distribution business resulting from unfavorable foreign currency exchange rates in the current year periods in comparison to the prior year periods.

Interest Expense, Net

Interest expense, net and the respective weighted average interest rates for the three months ended March 31, 2023 and 2022 are as follows:

Interest expense, net and the respective weighted average interest rates for the six months ended March 31, 2023 and 2022 are as follows:

Interest expense, net increased by $11.2 million, or 21.2%, from prior year quarter and $3.8 million, or 3.6%, from the prior year six-month period primarily due to the increases in interest expense. The increases in interest expense were primarily driven by an increase in borrowings and interest rates associated with our variable-rate debt. The increases in interest expense were offset in part by increases in interest income, which were primarily driven by higher investment interest rates in the current year periods in comparison to the prior year periods. The higher investment interest rates were offset in part by lower average investment cash balances in the current year quarter in comparison to the prior year quarter.

Income Tax Expense

Our effective tax rates were 16.4% and 18.2% for the three and six months ended March 31, 2023, respectively. Our effective tax rates were 23.7% and 24.1% for the three and six months ended March 31, 2022, respectively. The effective tax rate for the three and six months ended March 31, 2023 was lower than the U.S. statutory rate primarily due to the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate, benefits from tax authority audit resolutions, and tax benefits associated with the vesting of restricted stock units and stock option exercises, offset in part by U.S. state income taxes. The effective tax rate in the three and six months ended March 31, 2022 were higher than the U.S. statutory rate primarily due to U.S. state income taxes as well as discrete tax expense associated with foreign valuation allowance adjustments, offset in part by the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate.

Liquidity and Capital Resources

Our operating results have generated cash flows, which, together with availability under our debt agreements and credit terms from suppliers, have provided sufficient capital resources to finance working capital and cash operating requirements, and to fund capital expenditures, acquisitions, repayment of debt, the payment of interest on outstanding debt, dividends, and purchases of shares of our common stock.

Our primary ongoing cash requirements will be to finance working capital, fund the repayment of debt, fund the payment of interest on debt, fund the payment of dividends, fund purchases of our common stock, finance acquisitions, and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund our ongoing cash requirements, including the opioid litigation payments that will be made over the next 16 years (see below).

Cash Flows

As of March 31, 2023 and September 30, 2022, our cash and cash equivalents held by foreign subsidiaries were $664.6 million and $688.4 million, respectively. We have the ability to repatriate the majority of our cash and cash equivalents held by our foreign subsidiaries without incurring significant additional taxes upon repatriation.

We have increased seasonal needs related to our inventory build during the December and March quarters that, depending on our cash balance, may require the use of our credit facilities to fund short-term capital needs. Our cash balances in the six months ended March 31, 2023 and 2022 were supplemented by intra-period credit facility borrowings to cover short-

term working capital needs. The largest amount of intra-period borrowings under our revolving and securitization credit facilities that was outstanding at any one time during the six months ended March 31, 2023 and 2022 was $2,121.0 million and $590.0 million, respectively. We had $35,443.6 million and $3,579.5 million of cumulative intra-period borrowings that were repaid under our credit facilities during the six months ended March 31, 2023 and 2022, respectively.

During the six months ended March 31, 2023, our operating activities provided cash of $1,339.6 million in comparison to $1,130.0 million in the prior year period. Cash provided by operations during the six months ended March 31, 2023 was principally the result of the following:

• An increase in accounts payable of $2,391.2 million primarily due to the increase in our inventory balances and the timing of scheduled payments to our suppliers;

• Net income of $904.4 million; and

• Positive non-cash items of $527.8 million, which is primarily comprised of amortization expense of $218.5 million and depreciation expense of $201.7 million.

The cash provided by the above items was offset in part by the following:

• An increase in inventories of $1,413.5 million to support the increase in business volume and due to seasonal needs;

• A increase in accounts receivable of $861.2 million primarily due to an increase in sales and the timing of scheduled payments from our customers;

• A decrease in accrued expenses of $260.3 million primarily due to the payment of accrued liabilities that were on our Consolidated Balance Sheet as of September 30, 2022.

Cash provided by operations during the six months ended March 31, 2022 was principally the result of the following:

• Net income of $1,004.7 million;

• An increase in accounts payable of $598.4 million primarily due to the increase in our inventory balances and the timing of scheduled payments to our suppliers; and

• Positive non-cash items of $423.4 million, which is primarily comprised of depreciation expense of $194.4 million and amortization expense of $165.6 million.

The cash provided by the above items was offset in part by the following:

• An increase in accounts receivable of $527.5 million primarily due to an increase in sales and the timing of scheduled payments from our customers;

• An increase in inventories of $215.5 million to support the increase in business volume and due to seasonal needs; and

• A decrease in accrued expenses of $134.7 million primarily due to the payment of accrual liabilities that were on our Consolidated Balance Sheet as of September 30, 2021.

We use days sales outstanding, days inventory on hand, and days payable outstanding to evaluate our working capital performance. The below financial metrics are calculated based upon a quarterly average and can be impacted by the timing of cash receipts and disbursements, which can vary significantly depending upon the day of the week on which the month ends.

Our cash flows from operating activities can vary significantly from period to period based upon fluctuations in our period-end working capital account balances. Additionally, any changes to payment terms with a significant customer or manufacturer supplier could have a material impact to our cash flows from operations. Operating cash flows during the six months ended March 31, 2023 included $127.1 million of interest payments and $190.4 million of income tax payments, net of refunds. Operating cash flows during the six months ended March 31, 2022 included $103.3 million of interest payments and $146.7 million of income tax payments, net of refunds.

Capital expenditures in the six months ended March 31, 2023 and 2022 were $178.6 million and $209.3 million, respectively. Significant capital expenditures in the six months ended March 31, 2023 and 2022 included investments in various technology initiatives, including technology investments at Alliance Healthcare.

We currently expect to invest approximately $500 million for capital expenditures during fiscal 2023. Larger 2023 capital expenditures will include investments relating to various technology initiatives, including technology investments at Alliance Healthcare and those needed to comply with new regulatory requirements.

In addition to capital expenditures, net cash used in investing activity in the six months ended March 31, 2023 included $1,406.3 million for the acquisition of PharmaLex (see Note 2 of the Notes to Consolidated Financial Statements). Net cash used in investing activity in the six months ended March 31, 2022 included $124.2 million of costs to acquire companies, including $60.0 million that was paid to settle accrued consideration related to the Alliance Healthcare acquisition.

Net cash used in financing activities in the six months ended March 31, 2023 principally resulted from a $675 million repayment of our 0.737% senior notes that matured in March 2023, $807.2 million purchases of our common stock and $201.5 million in cash dividends paid on our common stock. Net cash used in financing activities in the six months ended March 31, 2022 principally resulted from the repayment of our $250 million term loan and $197.9 million in cash dividends paid on our common stock.

Debt and Credit Facility Availability

The following table illustrates our debt structure as of March 31, 2023, including availability under the multi-currency revolving credit facility, the receivables securitization facility, the revolving credit note, the money market facility, the Alliance Healthcare debt, and the overdraft facility:

In March 2023, the remaining balance of $675 million on our original $1.5 billion, 0.737% senior notes matured and was repaid.

We have a $2.4 billion multi-currency senior unsecured revolving credit facility ("Multi-Currency Revolving Credit Facility") with a syndicate of lenders, which is scheduled to expire in October 2027. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based on our debt rating and ranges from 80.5 basis points to 122.5 basis points over SOFR/EURIBOR/CDOR/RFR, as applicable (102.5 basis points over SOFR/EURIBOR/CDOR/RFR as of March 31, 2023) and from 0 basis points to 22.5 basis points over the alternate base rate and Canadian prime rate, as applicable. We pay facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on our debt rating, ranging from 7 basis points to 15.0 basis points, annually, of the total commitment (10 basis points as of March 31, 2023). We may choose to repay or reduce our commitments under the Multi-Currency Revolving Credit Facility at any time. The Multi-Currency Revolving Credit Facility contains covenants, including compliance with a financial leverage ratio test, as well as others that impose limitations on, among other things, indebtedness of subsidiaries and asset sales, with which we were compliant as of March 31, 2023.

We have a commercial paper program whereby we may from time to time issue short-term promissory notes in an aggregate amount of up to $2.4 billion at any one time. Amounts available under the program may be borrowed, repaid, and re-borrowed from time to time. The maturities on the notes will vary, but may not exceed 365 days from the date of issuance. The notes will bear interest, if interest bearing, or will be sold at a discount from their face amounts. The commercial paper program does not increase our borrowing capacity as it is fully backed by our Multi-Currency Revolving Credit Facility. There were no borrowings outstanding under our commercial paper program as of March 31, 2023.

We have a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which is scheduled to expire in October 2025. We have available to us an accordion feature whereby the commitment on the Receivables Securitization Facility may be increased by up to $250 million, subject to lender approval, for seasonal needs during the December and March quarters. Interest rates are based on prevailing market rates for short-term commercial paper or 30-day Term SOFR plus a program fee. We pay a customary unused fee at prevailing market rates, annually, to maintain the availability under the Receivables Securitization Facility. The Receivables Securitization Facility contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of March 31, 2023.

We have an uncommitted, unsecured line of credit available to us pursuant to a revolving credit note ("Revolving Credit Note"). The Revolving Credit Note provides us with the ability to request short-term unsecured revolving credit loans from time to time in a principal amount not to exceed $75 million. The Revolving Credit Note may be decreased or terminated by the bank or us at any time without prior notice. We also have a £10 million uncommitted U.K. overdraft facility ("Overdraft Facility"), which expires in February 2024, to fund short-term normal trading cycle fluctuations related to our MWI Animal Health business. We have an uncommitted, unsecured line of credit available to us pursuant to a money market credit agreement ("Money Market Facility"). The Money Market Facility provides us with the ability to request short-term unsecured revolving credit loans from time to time in a principal amount not to exceed $100 million. The Money Market Facility may be decreased or terminated by the bank or us at any time without prior notice.

Alliance Healthcare debt is comprised of uncommitted revolving credit facilities in various currencies with various rates. A majority of the outstanding borrowings were held in Egypt (which is 50% owned) as of March 31, 2023. These facilities are used to fund its working capital needs.

Nonrecourse debt is comprised of short-term and long-term debt belonging to the Brazil subsidiary and is repaid solely from the Brazil subsidiary' cash flows and such debt agreements provide that the repayment of the loans (and interest thereon) is secured solely by the capital stock, physical assets, contracts, and cash flows of the Brazil subsidiary.

Share Purchase Programs and Dividends

In May 2022, our board of directors authorized a share repurchase program allowing us to purchase up to $1.0 billion of our outstanding shares of common stock, subject to market conditions. In the six months ended March 31, 2023, we purchased $778.8 million of our common stock, including $700 million from Walgreens Boots Alliance, Inc. These purchases excluded $28.4 million of purchases in September 2022 that cash settled in October 2022. As of March 31, 2023, we had $182.5 million of availability remaining under this program.

In March 2023, our board of directors authorized a new share repurchase program allowing us to purchase up to $1.0 billion of our outstanding shares of common stock, subject to market conditions. No shares were purchased under this program as of March 31, 2023.

In November 2022, our board of directors increased the quarterly dividend paid on common stock by 5% from $0.460 per share to $0.485 per share. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remains within the discretion of our board of directors and will depend upon future earnings, financial condition, capital requirements, and other factors.

Commitments and Obligations

As discussed and defined in Note 10 of the Notes to Consolidated Financial Statements, on July 21, 2021, it was announced that we and the two other national pharmaceutical distributors had negotiated a Distributor Settlement Agreement. The Distributor Settlement Agreement became effective on April 2, 2022, and as of March 31, 2023, it included 48 of 49 eligible states (the “Settling States”) as well as 99% by population of the eligible political subdivisions in the Settling States. Our remaining estimated liability related to the Distributor Settlement Agreement, the State of Alabama (with whom we have not reached a settlement agreement), and other opioid-related litigation for which we have reached settlement agreements is approximately $5.9 billion on our Consolidated Balance Sheet as of March 31, 2023 and is expected to be paid over the next 16 years. The payment of the aforementioned litigation liability has not and is not expected to have an impact on our ability to pay dividends.

The following is a summary of our contractual obligations for future principal and interest payments on our debt, minimum rental payments on our noncancellable operating leases, and minimum payments on our other commitments as of March 31, 2023:

The 2017 Tax Act requires a one-time transition tax to be recognized on historical foreign earnings and profits. We expect to pay $139.0 million, net of overpayments and tax credits, related to the transition tax as of March 31, 2023, which is payable in installments over a six-year period, and commenced in January 2021. The transition tax commitment is included in "Other Commitments" in the above table.

Our liability for uncertain tax positions was $528.3 million (including interest and penalties) as of March 31, 2023. This liability represents an estimate of tax positions that we have taken in our tax returns which may ultimately not be sustained upon examination by taxing authorities. Since the amount and timing of any future cash settlements cannot be predicted with reasonable certainty, the estimated liability has been excluded from the above contractual obligations table. Our liability for uncertain tax positions as of March 31, 2023 primarily includes an uncertain tax benefit related to the legal accrual for litigation related to the distribution of prescription opioid pain medications, as disclosed in Note 10 of the Notes to Consolidated Financial Statements.

Market Risks

We have exposure to foreign currency and exchange rate risk from our non-U.S. operations. Our largest exposure to foreign exchange rates exists primarily with the U.K. Pound Sterling, the Euro, the Turkish Lira, the Egyptian Pound, the Brazilian Real, and the Canadian Dollar. We use forward contracts to hedge against the foreign currency exchange rate impact on certain intercompany receivable and payable balances. We may use derivative instruments to hedge our foreign currency exposure, but not for speculative or trading purposes. Revenue from our foreign operations during the six months ended March 31, 2023 was approximately 11% of our consolidated revenue.

We have market risk exposure to interest rate fluctuations relating to our debt. We manage interest rate risk by using a combination of fixed-rate and variable-rate debt. The amount of variable-rate debt fluctuates during the year based on our working capital requirements. We had $678.1 million of variable-rate debt outstanding as of March 31, 2023. We periodically evaluate financial instruments to manage our exposure to fixed and variable interest rates. However, there are no assurances that such instruments will be available in the combinations we want and/or on terms acceptable to us. There were no such financial instruments in effect as of March 31, 2023.

We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had $1,539.4 million in cash and cash equivalents as of March 31, 2023. The unfavorable impact of a hypothetical decrease in interest rates on cash and cash equivalents would be partially offset by the favorable impact of such a decrease on variable-rate debt. For every $100 million of cash invested that is in excess of variable-rate debt, a 10 basis point decrease in interest rates would increase our annual net interest expense by $0.1 million.

Deterioration of general economic conditions, among other factors, could adversely affect the number of prescriptions that are filled and the amount of pharmaceutical products purchased by consumers and, therefore, could reduce purchases by our customers. In addition, volatility in financial markets may also negatively impact our customers' ability to obtain credit to finance their businesses on acceptable terms. Reduced purchases by our customers or changes in the ability of our customers to remit payments to us could adversely affect our revenue growth, our profitability, and our cash flow from operations.

Recent elevated levels of inflation in the global and U.S. economies have impacted certain operating expenses. If elevated levels of inflation persist or increase, our operations and financial results could be adversely affected, particularly in certain global markets.

We have risks from other geopolitical trends and events, such as the Russia-Ukraine war. Although the long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict has not been material.

The Company’s most significant market risks are the effects of foreign currency risk, changing interest rates, and changes in the price and volatility of the Company’s common stock. See the discussion under the heading "Market Risks," which is incorporated by reference herein.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are intended to ensure that information required to be disclosed in the Company’s reports submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. These controls and procedures also are intended to ensure that information required to be disclosed in such reports is accumulated and communicated to management to allow timely decisions regarding required disclosures.

The Company’s Chief Executive Officer and Chief Financial Officer, with the participation of other members of the Company’s management, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a — 15(e) and 15d — 15(e) under the Exchange Act) and have concluded that the Company’s disclosure controls and procedures were effective for their intended purposes as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

During the second quarter of fiscal 2023, there was no change in AmerisourceBergen Corporation’s internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

See Note 10 (Legal Matters and Contingencies) of the Notes to Consolidated Financial Statements set forth under Item 1 of Part I of this report for the Company’s current description of legal proceedings.

Our significant business risks are described in Item 1A to Form 10-K for the fiscal year ended September 30, 2022 to which reference is made herein. The information presented below describes updates and additions to such risk factors and should be read in conjunction with the risk factors and information disclosed in our Form 10-K.

Business and Operational Risks

Our results of operations and financial condition may be adversely affected if we undertake acquisitions of or investments in businesses that do not perform as we expect or that are difficult for us to integrate.

As part of our strategy we seek to pursue acquisitions of and investments in other companies. At any particular time, we may be in various stages of assessment, discussion, and negotiation with regard to one or more potential acquisitions or investments, not all of which will be consummated. We make public disclosure of pending and completed acquisitions when appropriate and required by applicable securities laws and regulations. On June 1, 2021, we completed our acquisition of Alliance Healthcare from WBA for $5,596.7 million in net cash, $229.1 million of our common stock, and $6.1 million of other equity consideration. On January 1, 2023, we completed our acquisition of PharmaLex Holding GmbH (“PharmaLex”) from AUCTUS Capital Partners AG for $1.473 billion in cash, which includes cash acquired and a cash holdback. Alliance Healthcare and PharmaLex operate in the United Kingdom, Germany, a number of other countries in the European Union, and in select other markets. On April 20, 2023, we announced our intent to acquire OneOncology (“OneOncology”) through a joint venture with TPG, a global alternative asset management firm, in which we committed to purchase an approximately 35% minority equity interest in OneOncology for approximately $685 million in cash. The OneOncology transaction is expected to close by the end of September 2023, and is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.

We may find that our ability to integrate and control Alliance Healthcare and PharmaLex is more difficult, time consuming or costly than expected, especially in certain countries where our investment is not wholly-owned, such as our 50%-owned Alliance Healthcare Egypt subsidiary. Each of Alliance Healthcare, PharmaLex and OneOncology may fail to achieve its expected future financial and operating performance and results and the transactions may have the effect of disrupting relationships with employees, suppliers, and other business partners.

Acquisitions involve numerous risks and uncertainties and may be of businesses or in regions in which we lack operational or market experience. Acquired companies may have business practices that we are not accustomed to or have unique terms and conditions with their business partners. As a result of the acquisition of Alliance Healthcare, PharmaLex and other future acquisitions or investments, including OneOncology, our results of operations and financial condition may be adversely affected by a number of factors, including: regulatory or compliance issues that could arise; changes in regulations and laws; the failure of the acquired businesses to achieve the results we have projected in either the near or long term; the assumption of unknown liabilities, including litigation risks; the fair value of assets acquired and liabilities assumed not being properly estimated; the difficulties of imposing adequate financial and operating controls on the acquired companies and their management and the potential liabilities that might arise pending the imposition of adequate controls; the difficulties in the integration of the operations, technologies, services and products of the acquired companies; and the failure to achieve the strategic objectives of these acquisitions.

Our businesses operate in a number of jurisdictions, including Egypt and other locations, that have a higher business, operating and regulatory risk profile than the United States and European Union jurisdictions. Such risks may include risks of violation of United States, United Kingdom and other anti-corruption, anti-bribery and international trade laws. Our results of operations and financial condition may be adversely affected if we are not able to effectively put in place effective financial controls and compliance policies to safeguard against such risks as part of our integration of businesses, including Alliance Healthcare and PharmaLex.

We are subject to operational and logistical risks that might not be covered by insurance.

We have distribution centers and facilities located in the United States, the United Kingdom, the European Union and throughout the world. Our business exposes us to risks that are inherent in the distribution of pharmaceuticals and the provision of related services, including cold chain storage and shipping. The volume of cold chain storage and shipping has increased in part due to the COVID-19 pandemic and the requirements for distribution of COVID-19 vaccines and certain treatments. We

expect this trend to continue. Although we seek to maintain adequate insurance coverage, coverage on acceptable terms might be unavailable, coverage might not cover our losses, coverage might be significantly more costly or may require large deductibles.

Additionally, we seek to maintain coverage for risks associated with cybersecurity, but such insurance has become increasingly difficult to secure, comes with increasingly high self-insured retentions and, in some cases, policies may not provide adequate coverage for possible losses. Further, both as a result of a cybersecurity event one of our foreign business units experienced in March 2023 and industry trends generally, we may incur higher costs for future cybersecurity insurance coverage. Uninsured losses or operational losses that result from large deductible payments under commercial insurance coverage might have an adverse impact on our business operations and our financial position or results of operations.

Litigation and Regulatory Risks

Our actual or perceived failure to adequately protect personal data could result in claims of liability against us, damage our reputation or otherwise materially harm our business.

Given the nature of our business, we, together with third parties acting on our behalf, receive, collect, process, use, and retain sensitive and confidential customer and employee data, in addition to proprietary business information. Some of our third-party service providers, such as identity verification and payment processing providers, also regularly have access to customer data. Additionally, we maintain other confidential, proprietary, or otherwise sensitive information relating to our business and from third parties.

Global privacy, cybersecurity and data protection-related laws and regulations are evolving, extensive, and complex. Compliance with these laws and regulations is difficult and costly. The interpretation and application of these laws in some instances is uncertain, and our legal and regulatory obligations are subject to frequent changes. We are required to comply with increasingly complex and changing data privacy regulations both in the United States and beyond that regulate the collection, use, security, processing, and transfer of personal data, including particularly the transfer of personal data between or among countries. Many of these regulations also grant rights to individuals. Many foreign data privacy regulations (including, without limitation, GDPR in the European Union, UK GDPR, Brazil’s General Data Protection Law, LGPD, and the Personal Information Protection and Electronic Documents Act in Canada) and certain state laws and regulations (including California’s CCPA and recently enacted consumer privacy laws in Colorado, Connecticut, Utah, and Virginia) impose requirements beyond those enacted under United States federal law including, in some instances, private rights of action. For example, the EU GDPR imposes more stringent data protection requirements, including a broader scope of protected data, restrictions on cross-border transfers of personal data and more onerous breach reporting requirements, and the EU GDPR imposes greater penalties for non-compliance than the federal data protection laws in the United States. Other states and countries continue to enact similar legislation. We are also required to comply with expanding and increasingly complex cybersecurity regulations in the United States and abroad with respect to reporting adverse events and additional requirements for avoiding or responding to an adverse event. We may also face audits or investigations by domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome under any such investigation or audit could subject us to fines or other penalties. We also have contractual obligations to our customers related to the protection of personal data and compliance with privacy laws.

Despite the security measures we have in place to ensure compliance with applicable laws and rules, our facilities and systems, and those of our third-party service providers, may be vulnerable to security breaches, acts of cyber terrorism, vandalism or theft, computer viruses, misplaced or lost data, programming and/or human errors or other similar events. A party who is able to compromise the security measures of our networks, or those of our third-party service providers, could misappropriate either proprietary business information or the personal information of our customers or employees. In March 2023, one of the Company’s foreign business units experienced a cybersecurity event that impacted a standalone legacy information technology platform in one country and the foreign business unit’s ability to operate in that country for approximately two weeks. The Company made an initial notification to the relevant regulator and is continuing to comply with applicable requirements to notify relevant regulators and any impacted parties or individuals. Any actual or perceived breach of confidential information could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, damage relating to loss of proprietary information, harm to our reputation and increases in our security costs. The foregoing or other circumstances related to our collection, use, and transfer of personal data could cause a loss of reputation in the market and/or adversely affect our business and financial position.

Other Risks

The loss or disruption of information systems could disrupt our operations and have a material adverse effect on our business.

Our businesses rely on sophisticated information systems to obtain, rapidly process, analyze, and manage data to facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers; to receive, process,

and ship orders on a timely basis; to account for other product and service transactions with customers; to manage the accurate billing and collections for thousands of customers; and to process payments to suppliers. We continue to make substantial investments in data centers and information systems, including, but not limited to, those relating to our acquisition of Alliance Healthcare. To the extent our information systems are not successfully implemented or fail, or to the extent there are data center interruptions or outages, our business and results of operations may be materially adversely affected. Our business and results of operations may also be adversely affected if a third-party service provider does not perform satisfactorily, or if the information systems are interrupted or damaged by unforeseen events, including due to the actions of third parties.

Information security risks have generally increased in recent years because of the proliferation of cloud-based infrastructure and other services, new technologies, and the increased sophistication and activities of perpetrators of cyberattacks. Security incidents such as ransomware attacks are becoming increasingly prevalent and severe, as well as increasingly difficult to detect. These risks have increased with the growth of our business, including as we integrate the information systems of acquired businesses, such as Alliance Healthcare, into our enterprise.

In addition, security incidents may disrupt our businesses and require that we expend substantial additional resources related to the security of information systems. We, and our third-party service providers, may experience cyberattacks aimed at disrupting services. In March 2023, one of the Company’s foreign business units became aware of a cybersecurity event. Upon detection, we undertook steps to address the event, including engaging a cybersecurity forensic firm, outside counsel and other incident response professionals, and notifying law enforcement and relevant government authorities. The ensuing investigation revealed that the event resulted in the unavailability of certain data stored on a standalone legacy information technology platform and was isolated to one country, which disrupted operations of the Company’s foreign business unit in that country. The investigation determined that systems and operations in other countries were not impacted. Over a period of approximately two weeks, the foreign business unit’s systems were substantially restored and operations in the effected country resumed. While we believe that the March 2023 cybersecurity event did not have a material adverse effect on our business, financial position, or results of operations, no assurances can be given as we continue to assess the full impact from the event. We are continuing to build and execute plans to further improve our existing systems and invest in our cybersecurity defenses and technology resiliency. Security breaches can also occur as a result of non-technical issues, including intentional or inadvertent actions by our employees, third-party service providers or their personnel or other parties. A failure, interruption, or breach of our operational or information security systems, or those of our third-party service providers, as a result of cyberattacks or information security breaches could disrupt our business, result in the disclosure or misuse of confidential or proprietary information or personal data, damage our reputation, cause loss of customers or revenue, increase our costs, result in litigation and/or regulatory action, and/or cause other losses, any of which might have a materially adverse impact on our business operations and our financial position or results of operations. As a result, cybersecurity and the continued development and enhancement of the controls and processes designed to protect our systems, computers, software, data, and networks from attack, damage, or unauthorized access remain a priority for us. Although we believe that we have robust information security procedures, controls and other safeguards in place, both as a result of the March 2023 cybersecurity event and as cyber threats continue to evolve, we may be required to expend additional resources and incur greater costs to continue to enhance our information security measures and/or to investigate and remediate information security vulnerabilities.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

(c) Issuer Purchases of Equity Securities

The following table sets forth the number of shares purchased, the average price paid per share, the total number of shares purchased as part of publicly announced programs, and the approximate dollar value of shares that may yet be purchased under the programs during each month in the second fiscal quarter ended March 31, 2023. See Note 7, "Stockholders' Equity and Earnings per Share," contained in "Notes to Condensed Consolidated Financial Statements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

None.

(a) Exhibits:

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.