Cencora 10-Q 2024-06-30

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 June 30, 2024

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

CENCORA, INC.

(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 Cencora, Inc. outstanding as of July 26, 2024 was 197,046,826.

CENCORA, INC.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Securities Exchange Act"). These forward-looking statements include, without limitation, statements regarding our financial position, business strategy and the plans and objectives of management for our future operations; anticipated trends and prospects in the industries in which our business operates; and new products, services and related strategies. These statements constitute projections, forecasts and forward-looking statements, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Annual Report on Form 10-K, words such as “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “on track,” “opportunity,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “strive,” “sustain,” “synergy,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, but the absence of these words doe

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Executive Summary

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

• Revenue increased by $7.3 billion, or 10.9%, and $21.7 billion, or 11.2%, from the prior year quarter and nine-month period, respectively, primarily due to growth in the U.S. Healthcare Solutions segment. The U.S. Healthcare Solutions segment grew its revenue by $7.3 billion, or 12.2%, and $20.8 billion, or 12.1%, from the prior year quarter and nine-month period, respectively, due to overall market growth primarily driven by unit volume growth, including increased sales of products labeled for diabetes and/or weight loss in the glucagon-like peptide-1, or "GLP-1," class, increased sales of specialty products to physician practices and health systems, and increased sales of COVID-19 vaccines. International Healthcare Solutions' revenue was flat compared to the prior year quarter and increased by $0.8 billion, or 4.0%, from the prior year nine-month period. The increase from the prior year nine-month period is primarily due to increased sales at Alliance Healthcare, our European distribution business, and increased sales in our Canadian business.

• Gross profit increased by $146.1 million, or 6.5%, and $711.6 million, or 10.6%, from the prior year quarter and nine-month period, respectively. The increase from the prior year quarter was primarily due to the increase in gross profit in the U.S. Healthcare Solutions segment and a lower Turkey highly inflationary impact on inventory, offset in part by lower gains from antitrust litigation settlements. The increase from the prior year nine-month period was primarily due to the increase in gross profit in both reportable segments and a LIFO credit in the current year period in comparison to LIFO expense in the prior year period, offset in part by lower gains from antitrust litigation settlements. U.S. Healthcare Solutions' gross profit increased by $136.2 million, or 9.7%, and $449.9 million, or 10.3%, from the prior year quarter and nine-month period, respectively, primarily due to increased sales. Gross profit in International Healthcare Solutions increased by $3.1 million, or 0.4%, and $129.5 million, or 5.5%, from the prior year quarter and nine-month period, respectively. The increase from the prior year nine-month period was due to growth at all of its businesses.

• Total operating expenses increased by $143.8 million, or 9.0%, and $526.8 million, or 10.9%, from the prior year quarter and nine-month period, respectively. The increase from the prior year quarter was largely due to increases in distribution, selling, and administrative expenses, and litigation and opioid-related expenses, which was a credit in the prior year quarter due to the receipt of funds previously held in an opioid indemnity escrow account. The increase from the prior year nine-month period is primarily a result of increases in distribution, selling, and administrative expenses, amortization expense, and litigation and opioid-related expenses, which was a credit in the prior year nine-month period due to the receipt of funds previously held in an opioid indemnity escrow account.

• Total segment operating income increased by $55.4 million, or 6.7%, and $309.1 million, or 12.4%, from the prior year quarter and nine-month period, respectively. U.S. Healthcare Solutions' operating income increased by $63.1 million and $273.8 million from prior year quarter and nine-month period, respectively, and International Healthcare Solutions' operating income decreased by $7.7 million and increased by $35.3 million from the prior year quarter and nine-month period, respectively.

• Our effective tax rates were 22.4% and 19.5% for the three and nine months ended June 30, 2024, respectively. Our effective tax rates were 21.3% and 19.3% for the three and nine months ended June 30, 2023, respectively. Our effective tax rates for the three months ended June 30, 2024 and 2023 were higher than the U.S. statutory rate primarily due to U.S. state income taxes, offset in part by the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate. Our effective tax rate for the nine months ended June 30, 2024 was lower than the U.S. statutory rate primarily due to discrete tax benefits associated with foreign valuation allowance adjustments, the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate, and tax benefits associated with equity compensation, offset in part by U.S. state incomes taxes. Our effective tax rate for the nine months ended June 30, 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 equity compensation, 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 (e.g., products labeled for diabetes and/or weight loss in the GLP-1 class), the introduction of new, innovative brand therapies and vaccines, 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, and changes in government rules and regulations.

Revenue increased by $7.3 billion, or 10.9%, and $21.7 billion, or 11.2%, from the prior year quarter and nine-month period, respectively, primarily due to growth in the U.S. Healthcare Solutions segment.

The U.S. Healthcare Solutions segment grew its revenue by $7.3 billion, or 12.2%, and $20.8 billion, or 12.1%, from the prior year quarter and nine-month period, respectively, due to overall market growth primarily driven by unit volume growth, including increased sales of $2.1 billion and $5.5 billion of products labeled for diabetes and/or weight loss in the GLP-1 class from the prior year quarter and nine-month period, respectively, increased sales of specialty products to physician practices and health systems, and increased sales of COVID-19 vaccines (primarily in the nine-month period). Sales, including GLP-1 products and COVID-19 vaccines, to our two largest customers increased by $2.0 billion and $7.8 billion in comparison to the prior year quarter and nine-month period, respectively.

International Healthcare Solutions' revenue was flat compared to the prior year quarter and increased $0.8 billion, or 4.0%, from the prior year nine-month period. The increase from the prior year nine-month period is primarily due to increased sales of $0.4 billion at our European distribution business and increased sales of $0.3 billion in our Canadian 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 nine months ended June 30, 2024, 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 $146.1 million, or 6.5%, and $711.6 million, or 10.6%, from the prior year quarter and nine-month period, respectively. The increase from the prior year quarter was primarily due to the increase in gross profit in the U.S. Healthcare Solutions segment and a lower Turkey highly inflationary impact on inventory, offset in part by lower gains from antitrust litigation settlements. The increase from the prior year nine-month period was primarily due to the increase in gross profit in both reportable segments and a LIFO credit in the current year period in comparison to LIFO expense in the prior year period, offset in part by lower gains from antitrust litigation settlements.

U.S. Healthcare Solutions' gross profit increased by $136.2 million, or 9.7%, and $449.9 million, or 10.3%, from the prior year quarter and nine-month period, respectively, primarily due to increased sales. As a percentage of revenue, U.S. Healthcare Solutions' gross profit margins were 2.30% and 2.48% in the current year quarter and nine-month period, respectively, and represented declines of 6 basis points and 4 basis points from the prior year quarter and nine-month period, respectively, primarily due to higher sales of GLP-1 products, which have lower gross profit margins, offset in part by higher sales of COVID-19 vaccines (primarily in the nine-month period), which have higher gross profit margins.

Gross profit in International Healthcare Solutions increased by $3.1 million, or 0.4%, and $129.5 million, or 5.5%, from the prior year quarter and nine-month period, respectively. The increase from the prior year nine-month period was due to growth at all of its businesses.

We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $51.6 million and $118.6 million in the three months ended June 30, 2024 and 2023, respectively, and $108.6 million and $168.5 million in the nine months ended June 30, 2024 and 2023, respectively. 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. Based on estimates in our current fiscal year LIFO provision, the LIFO credit in the current year nine-month period in comparison to the LIFO expense in the prior year nine-month period was primarily driven by lower brand pharmaceutical inflation largely due to price decreases by manufacturers of wholesale acquisition costs of certain products.

We recognized expenses in Cost of Goods Sold of $3.6 million and $50.6 million in the three months ended June 30, 2024 and 2023, respectively, and $43.9 million and $59.0 million in the nine months ended June 30, 2024 and 2023, respectively, related to the impact of Turkey highly inflationary accounting. These expenses were driven by the weakening of the Turkish Lira.

Operating Expenses

Distribution, selling, and administrative expenses increased by $79.1 million, or 6.1%, and $254.6 million, or 6.5%, compared to prior year quarter and nine-month period, respectively, primarily to support revenue growth. As a percentage of revenue, distribution, selling, and administrative expenses were 1.86% and 1.94% in the current year quarter and nine-month period, respectively, which represented declines of 9 basis points compared to the prior year quarter and nine-month period as initiatives taken in fiscal 2023 improved operating efficiency across many of our businesses and administrative functions and the 10.9% and 11.2% revenue growth in the current fiscal quarter and nine-month period, respectively, improved our operating leverage.

Depreciation expense increased 3.3% and 4.5% from the prior year quarter and nine-month period, respectively. Amortization expense decreased 3.0% from the prior year quarter and increased 29.7% from the prior year nine-month period. The increase from the prior year nine-month period was primarily due to accelerated amortization expense, which we began recording in February 2023, in connection with the shortened useful lives of certain trade names resulting from our company name change and gradual transition away from other tradenames used, which were acquired through prior acquisitions.

Litigation and opioid-related expenses, net in the three months ended June 30, 2024 included legal fees in connection with opioid lawsuits and investigations. Litigation and opioid-related expenses, net in the nine months ended June 30, 2024 included a $214.0 million litigation accrual for ongoing litigation related to the distribution of prescription opioid medications (see Note 10 of the Notes to Consolidated Financial Statements) and $39.7 million of legal fees in connection with opioid lawsuits and investigations, offset in part by a net $92.2 million opioid litigation settlement accrual reduction primarily as a result of our prepayment of the net present value of a future obligation as permitted under our opioid settlement agreements. Litigation and opioid-related credit in the three and nine months ended June 30, 2023 included the receipt of $83.4 million from the H.D. Smith opioid indemnity escrow and was offset in part by $16.3 million and $44.8 million of legal fees in connection with opioid lawsuits and investigations in three and nine months ended June 30, 2023, respectively.

Acquisition-related deal and integration expenses in the three and nine months ended June 30, 2024 and 2023 primarily related to the continued integration of Alliance Healthcare and PharmaLex.

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

Restructuring and employee severance costs in the three and nine months ended June 30, 2024 primarily included expenses incurred related to facility closures in connection with our office optimization plan and workforce reductions in both of our reportable segments. Restructuring and employee severance costs in the three and nine months ended June 30, 2023 primarily included expenses incurred in connection with workforce reductions in both of our reportable segments.

Business transformation efforts in the three and nine months ended June 30, 2024 and 2023 included rebranding costs associated with our name change to Cencora and non-recurring expenses related to significant strategic initiatives to improve

operational efficiency, including certain technology initiatives. The majority of these costs related to services provided by third-party consultants.

As previously disclosed in the March 2024 quarter, we experienced a cybersecurity event where data from our information systems was exfiltrated. In connection with this event, we incurred costs that were recorded in Other, net in the above table. The majority of the costs included in Other, net in the three and nine months ended June 30, 2024 related to this cybersecurity event.

In the nine months ended June 30, 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 event, we incurred costs to restore the foreign business unit's operations in that country, which were recorded in Other, net in the above table. The majority of the costs included in Other, net in the three and nine months ended June 30, 2023 related to this cybersecurity event.

Operating Income

U.S. Healthcare Solutions' operating income increased by $63.1 million, or 9.9%, and $273.8 million, or 13.9%, from prior year quarter and nine-month period, respectively, 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 1.04% in the current year quarter and represented a decline of 2 basis points compared to the prior year quarter primarily due to a decline in gross profit margin, as described above in the Gross Profit section. As a percentage of revenue, U.S. Healthcare Solutions' operating income margin was 1.16% in the current year nine-month period and represented an increase of 2 basis points from the prior year nine-month period primarily due to a decline in operating expense margin, as described above in the Operating Expense section.

International Healthcare Solutions' operating income decreased by $7.7 million, or 4.1%, from the prior year quarter and increased $35.3 million, or 6.7%, from the prior year nine-month period. The decrease in the current year quarter was primarily due to higher information technology operating expenses in our European distribution businesses and lower operating income at our global specialty logistics business, which was offset in part by the positive results of our Canadian business. We have also recently experienced a weakening in demand for specialized services in the life sciences industry, which may continue to impact the operating results of PharmaLex. The increase in the current year nine-month period was primarily due to our Canadian business, our global specialty logistics business, our less-than-wholly-owned Brazil full-line distribution business, and the January 2023 acquisition of PharmaLex, offset in part by foreign currency pressure and higher information technology operating expenses in our European distribution business and the September 2023 divestiture of its less-than-wholly-owned subsidiary in Egypt, which was profitable in the prior year nine-month period.

Other Loss (Income), Net

We recorded losses on the remeasurement of an equity investment of $13.3 million and $24.8 million in the three and nine months ended June 30, 2024, respectively.

Interest Expense, Net

Interest expense, net and the respective weighted average interest rates for the three months ended June 30, 2024 and 2023 are as follows:

Interest expense, net decreased by $26.5 million, or 45.9%, from the prior year quarter due to the increase in interest income and the decrease in interest expense. The increase in interest income was driven by higher investment interest rates and higher average investment cash balances in the current year quarter in comparison to the prior year quarter. The decrease in interest expense was driven by decreased variable-rate borrowings and the September 2023 divestiture of our less-than-wholly-owned subsidiary in Egypt.

Interest expense, net and the respective weighted average interest rates for the nine months ended June 30, 2024 and 2023 are as follows:

Interest expense, net decreased by $32.0 million, or 19.0%, from the prior year nine-month period due to the increase in interest income, and the decrease in interest expense. The increase in interest income was driven by higher investment interest rates and higher average investment cash balances in the current year period in comparison to the prior year period. The interest expense decrease was primarily driven by September 2023 divestiture of our less-than-wholly-owned subsidiary in Egypt, offset in part by increased variable-rate borrowings.

Income Tax Expense

Our effective tax rates were 22.4% and 19.5% for the three and nine months ended June 30, 2024, respectively. Our effective tax rates were 21.3% and 19.3% for the three and nine months ended June 30, 2023, respectively. Our effective tax rates for the three months ended June 30, 2024 and 2023 were higher than the U.S. statutory rate primarily due to U.S. state income taxes, offset in part by the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate. Our effective tax rate for the nine months ended June 30, 2024 was lower than the U.S. statutory rate primarily due to discrete tax benefits associated with foreign valuation allowance adjustments, the benefit of non-U.S. income taxed at rates lower than the U.S. statutory rate, and tax benefits associated with equity compensation, offset in part by U.S. state incomes taxes. Our effective tax rate for the nine months ended June 30, 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 equity compensation, offset in part by U.S. state income taxes.

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 14 years (see below).

Cash Flows

As of June 30, 2024 and September 30, 2023, our cash and cash equivalents held by foreign subsidiaries were $700.4 million and $640.5 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 nine months ended June 30, 2024 and 2023 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 nine months ended June 30, 2024 and 2023 was $3.2 billion and $2.1 billion, respectively. We had $56.7 billion and $49.5 billion of cumulative intra-period borrowings that were repaid under our credit facilities during the nine months ended June 30, 2024 and 2023, respectively.

Our net cash provided by operating activities increased by $399.8 million in the nine months ended June 30, 2024 compared to the nine months ended June 30, 2023 largely due to our growth and the timing of cash receipts and disbursements. More specifically, the drivers of this increase related to the following:

• Our growth led to an increase in our net income plus non-cash items to $2.4 billion in the nine months ended June 30, 2024 from $2.3 billion in the nine months ended June 30, 2023.

• The timing of cash receipts and disbursements can significantly impact our working capital. We are able to maintain a negative working capital balance, as our days payable outstanding is greater than the sum of our days sales outstanding and days inventory on hand. Therefore, as we grow, absent timing or a specifically identifiable event or transaction, accounts receivable, inventory, and accounts payable will correspondingly increase, with the increase in accounts payable outpacing the increase in accounts receivable and inventory. In the nine months ended June 30, 2024, the growth of our accounts receivable, inventories, and accounts payable balances provided $191.3 million of cash from operations compared to a use of cash from operations of $106.2 million in the nine months ended June 30, 2023.

During the nine months ended June 30, 2024, our operating activities provided cash of $2,484.3 million and was principally the result of the following:

• An increase in accounts payable of $4,112.5 million primarily due to the increase in our inventory balances and the timing of scheduled payments to our suppliers;

• Net income of $1,511.8 million; and

• Positive non-cash items of $897.3 million, which is primarily comprised of amortization expense of $502.1 million and depreciation expense of $337.0 million.

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

• An increase in accounts receivable of $3,085.6 million primarily due to an increase in sales and the timing of scheduled payments from our customers; and

• An increase in inventories of $835.6 million to support the increase in business volume.

During the nine months ended June 30, 2023, our operating activities provided cash of $2,084.5 million and was principally the result of the following:

• An increase in accounts payable of $3,513.7 million primarily due to the increase in our inventory balances and the timing of scheduled payments to our suppliers;

• Net income of $1,383.6 million; and

• Positive non-cash items of $899.8 million, which is primarily comprised of amortization expense of $389.8 million and depreciation expense of $307.3 million.

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

• An increase in accounts receivable of $2,249.9 million primarily due to an increase in sales and the timing of scheduled payments from our customers; and

• An increase in inventories of $1,370.0 million to support the increase in business volume.

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 period 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 nine months ended June 30, 2024 included $197.7 million of interest payments and $408.9 million of income tax payments, net of refunds. Operating cash flows during the nine months ended June 30, 2023 included $200.9 million of interest payments and $342.7 million of income tax payments, net of refunds.

Capital expenditures in the nine months ended June 30, 2024 and 2023 were $304.8 million and $282.9 million, respectively. Significant capital expenditures in the nine months ended June 30, 2024 and 2023 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 2024. Larger 2024 capital expenditures will include investments relating to various technology initiatives, including technology investments at Alliance Healthcare.

In addition to capital expenditures, net cash used in investing activities in the nine months ended June 30, 2023 included $1,406.3 million for the acquisition of PharmaLex and $718.4 million for our investment in OneOncology.

Net cash used in financing activities in the nine months ended June 30, 2024 principally resulted from $986.4 million purchases of our common stock, the repayment of our $500 million of 3.400% senior notes that matured in May 2024, and $315.2 million in cash dividends paid on our common stock, offset in part by the issuance of our $500 million of 5.125% senior notes in February 2024. Net cash used in financing activities in the nine months ended June 30, 2023 principally resulted from $907.2 million purchases of our common stock, a $675 million repayment of our 0.737% senior notes that matured in March 2023, and $300.4 million in cash dividends paid on our common stock.

Debt and Credit Facility Availability

The following table illustrates our debt structure as of June 30, 2024, including availability under the multi-currency revolving credit facility, the receivables securitization facility, the money market facility, and the Alliance Healthcare debt:

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 2028. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based on our debt rating. We also pay facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on our debt rating. 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 June 30, 2024.

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 June 30, 2024.

We have a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which was scheduled to expire in October 2025. In April 2024, we amended the Receivables Securitization Facility to extend the expiration to October 2026. 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 June 30, 2024.

We had an uncommitted, unsecured line of credit available to us pursuant to a revolving credit note that was terminated in April 2024. We also had a £10 million uncommitted U.K. overdraft facility, which expired 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.

In February 2024, we issued $500 million of 5.125% senior notes due in February 2034 (the "2034 Notes"). The 2034 Notes were sold at 99.867% of the principal amount with an effective yield of 5.132%. Interest on the 2034 Notes is payable semi-annually in arrears on February 15 and August 15 beginning on August 15, 2024. We used the proceeds from the 2034 Notes to repay the $500 million of 3.400% senior notes that matured in May 2024.

Alliance Healthcare debt is comprised of uncommitted revolving credit facilities in various currencies with various rates. 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 March 2023, 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 nine months ended June 30, 2024, we purchased $809.0 million of our common stock, including $522.6 million from Walgreens Boots Alliance, Inc. ("WBA"), to complete our authorization under this program.

In March 2024, our Board of Directors authorized a new share repurchase program allowing us to purchase up to $2.0 billion of our outstanding shares of common stock, subject to market conditions. In the nine months ended June 30, 2024, we purchased $177.4 million of our common stock, all of which was purchased from WBA. As of June 30, 2024, we had $1,822.6 million of availability under this program.

In November 2023, our Board of Directors increased the quarterly dividend paid on common stock by 5% from $0.485 per share to $0.51 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 June 30, 2024, 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 (pursuant to an agreement) and other opioid-related litigation for which we have reached settlement agreements is approximately $5.1 billion on our Consolidated Balance Sheet as of June 30, 2024 and is expected to be paid over the next 14 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 June 30, 2024:

The 2017 Tax Act requires a one-time transition tax to be recognized on historical foreign earnings and profits. As of June 30, 2024, we expect to pay a remaining $104.2 million, net of overpayments and tax credits, related to the transition tax over the next two years. The transition tax commitment is included in "Other Commitments" in the above table.

Our liability for uncertain tax positions was $580.6 million (including interest and penalties) as of June 30, 2024. 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 June 30, 2024 primarily includes an uncertain tax benefit related to the legal accrual for litigation in connection with the distribution of prescription opioid pain medications, as disclosed in Note 10 of the Notes to Consolidated Financial Statements.

Market and 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 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 nine months ended June 30, 2024 was approximately 10% 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 $447.8 million of variable-rate debt outstanding as of June 30, 2024. 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 June 30, 2024.

We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had $3,306.2 million in cash and cash equivalents as of June 30, 2024. 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 ongoing conflicts in Ukraine and between Israel and Hamas. Although the long-term implications of these conflicts are difficult to predict at this time, the financial impact of these conflicts 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 third quarter of fiscal 2024, there was no change in Cencora, Inc.'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 June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company's 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 our Form 10-K for the fiscal year ended September 30, 2023 to which reference is made herein.

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 third fiscal quarter ended June 30, 2024. 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.

During the quarter ended June 30, 2024, no director or officer adopted, modified or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule10b5-1 trading arrangement" as each term is defined in Section 408(a) of Regulation S-K under the Exchange Act.

(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.