Cover and table of contents

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)

Delaware												23-3079390
(State or other jurisdiction of												(I.R.S. Employer
incorporation or organization)												Identification No.)
1 West First Avenue			Conshohocken,			PA						19428-1800
(Address of principal executive offices)												(Zip Code)

(610) 727-7000

(Registrant’s telephone number, including area code)

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

Title of each class			Trading Symbol(s)			Name of exchange on which registered
Common stock, par value $0.01 per share			COR			New York Stock Exchange			(NYSE)

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

			Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of June 30, 2024 and September 30, 2023			4
Consolidated Statements of Operations for the three and nine months ended June 30, 2024 and 2023			5
Consolidated Statements of Comprehensive Income for the three and nine months ended June 30, 2024 and 2023			6
Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended June 30, 2024 and 2023			8
Consolidated Statements of Cash Flows for the nine months ended June 30, 2024 and 2023			9
Notes to Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			33
Item 4. Controls and Procedures			33
Part II. OTHER INFORMATION
Item 1. Legal Proceedings			34
Item 1A. Risk Factors			34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			34
Item 3. Defaults Upon Senior Securities			34
Item 4. Mine Safety Disclosures			34
Item 5. Other Information			34
Item 6. Exhibits			35
SIGNATURES			36

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 does not mean that a statement is not forward-looking. These statements are based on management's current expectations and beliefs and are subject to uncertainty and changes in circumstances and speak only as of the date hereof. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our financial condition, liquidity, results of operations or future prospects or which could cause actual results to differ materially from our expectations include, but are not limited to:

• our ability to achieve and maintain profitability in the future;

• the disruption of our cash flow and ability to return value to our stockholders in accordance with our past practices;

• our ability to respond to general economic conditions, including financial market volatility and disruption, elevated levels of inflation, and declining economic conditions in the United States and abroad;

• our ability to manage our growth and related expectations effectively;

• the retention of key customer or supplier relationships under less favorable economics or the adverse resolution of any contract or other dispute with customers or suppliers;

• changes to customer or supplier mix and payment terms;

• risks associated with our strategic, long-term relationship with WBA, including with respect to the pharmaceutical distribution agreement and/or the global generic purchasing services arrangement, and WBA sales or pledges of, or related activity for, our common stock;

• the acquisitions of or investments in businesses, including the acquisitions of the Alliance Healthcare and PharmaLex, and the investment in OneOncology, that do not perform as expected, fail to achieve expected or targeted future financial and operating performance and results, or that are difficult to integrate, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period;

• our ability to manage and complete divestitures;

• managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws, economic sanctions and import laws and regulations;

• risks associated with our international operations, including financial and other impacts of macroeconomic and geopolitical trends and events, including the conflicts in Ukraine and between Israel and Hamas and related regional and global ramifications;

• interest rate and foreign currency exchange rate fluctuations;

• risks and costs associated with maintaining adequate insurance coverages;

• our ability to attract, recruit and maintain qualified and experienced employees;

• the impact on our business of the regulatory environment and complexities with compliance;

• unfavorable trends in brand and generic pharmaceutical pricing, including in rate or frequency of price inflation or deflation;

• changes in the United States healthcare and regulatory environment, including changes that could impact prescription drug reimbursement under Medicare and Medicaid and declining reimbursement rates for pharmaceuticals;

• competition and industry consolidation of both customers and suppliers resulting in increasing pressure to reduce prices for our products and services;

• the loss, bankruptcy or insolvency of a major supplier, or substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer;

• our stock price and our ability to access capital markets;

• increasing governmental regulations regarding the pharmaceutical supply chain;

• continued federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances;

• continued prosecution or suit by federal and state governmental entities and other parties (including third-party payors, hospitals, hospital groups and individuals) of alleged violations of laws and regulations regarding controlled substances, and any related disputes, including shareholder derivative lawsuits;

• increased federal scrutiny and litigation, including qui tam litigation, for alleged violations of laws and regulations governing the marketing, sale, purchase and/or dispensing of pharmaceutical products or services, and associated reserves and costs;

• the outcome of any legal or governmental proceedings that may be instituted against us, including material adverse resolution of pending legal proceedings;

• changes in tax laws or legislative initiatives that could adversely affect the Company's tax positions and/or the Company's tax liabilities or adverse resolution of challenges to the Company's tax positions;

• malfunction, failure, or breach of sophisticated information systems to operate as designed, and risks generally associated with cybersecurity;

• risks generally associated with data privacy regulation and the protection and international transfer of personal data;

• our ability to protect our reputation and intellectual property rights;

• natural disasters or other unexpected events, such as pandemics, that affect the Company’s operations;

• the impairment of goodwill or other intangible assets (including any additional impairments with respect to foreign operations), resulting in a charge to earnings; and

• other economic, business, competitive, legal, tax, regulatory and/or operational factors affecting the Company’s business generally.

These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. You should not place undue reliance on these forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)						June 30, 2024						September 30, 2023
						(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents						$	3,306,200					$	2,592,051
Accounts receivable, less allowances for returns and credit losses: $1,271,241 as of June 30, 2024 and $1,433,396 as of September 30, 2023						24,051,478						20,911,081
Inventories						18,301,546						17,454,768
Right to recover assets						1,143,731						1,314,857
Income tax receivable						44,645						77,120
Prepaid expenses and other						459,662						448,949
Total current assets						47,307,262						42,798,826
Property and equipment, net						2,080,879						2,135,171
Goodwill						9,613,671						9,574,117
Other intangible assets						4,010,892						4,431,783
Deferred income taxes						229,653						200,667
Other assets						3,530,066						3,418,182
TOTAL ASSETS						$	66,772,423					$	62,558,746
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable						$	49,883,049					$	45,836,037
Accrued expenses and other						2,525,710						2,353,817
Short-term debt						565,108						641,344
Total current liabilities						52,973,867						48,831,198
Long-term debt						4,165,910						4,146,113
Accrued income taxes						332,364						310,676
Deferred income taxes						1,607,661						1,657,944
Accrued litigation liability						4,697,695						5,061,795
Other liabilities						1,934,423						1,884,733
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 296,054,632 shares, and 197,008,633 shares as of June 30, 2024, respectively, and 600,000,000 shares, 294,822,962 shares, and 200,814,804 shares as of September 30, 2023, respectively						2,961						2,948
Additional paid-in capital						5,989,201						5,844,578
Retained earnings						5,514,702						4,324,187
Accumulated other comprehensive loss						(1,279,169)						(1,402,607)
Treasury stock, at cost: 99,045,999 shares as of June 30, 2024 and 94,008,158 shares as of September 30, 2023						(9,302,486)						(8,247,103)
Total Cencora, Inc. stockholders' equity						925,209						522,003
Noncontrolling interest						135,294						144,284
Total stockholders' equity						1,060,503						666,287
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY						$	66,772,423					$	62,558,746

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

						Three months ended June 30,												Nine months ended June 30,
(in thousands, except per share data)						2024						2023						2024						2023
Revenue						$	74,241,353					$	66,947,043					$	214,908,493					$	193,251,080
Cost of goods sold						71,830,576						64,682,397						207,490,881						186,545,039
Gross profit						2,410,777						2,264,646						7,417,612						6,706,041
Operating expenses:
Distribution, selling, and administrative						1,383,206						1,304,141						4,170,763						3,916,156
Depreciation						107,940						104,504						318,348						304,727
Amortization						164,655						169,768						496,582						382,951
Litigation and opioid-related expenses (credit), net						14,485						(67,102)						161,553						(38,583)
Acquisition-related deal and integration expenses						25,758						19,283						69,431						99,392
Restructuring and other expenses						42,257						63,924						152,325						177,608
Operating income						672,476						670,128						2,048,610						1,863,790
Other loss (income), net						12,814						3,436						33,790						(18,612)
Interest expense, net						31,328						57,864						136,022						167,989
Income before income taxes						628,334						608,828						1,878,798						1,714,413
Income tax expense						140,740						129,615						366,991						330,817
Net income						487,594						479,213						1,511,807						1,383,596
Net (income) loss attributable to noncontrolling interests						(4,131)						368						(6,069)						11,132
Net income attributable to Cencora, Inc.						$	483,463					$	479,581					$	1,505,738					$	1,394,728
Earnings per share:
Basic						$	2.44					$	2.37					$	7.56					$	6.87
Diluted						$	2.42					$	2.35					$	7.49					$	6.80
Weighted average common shares outstanding:
Basic						198,260						202,349						199,253						202,908
Diluted						200,047						204,375						201,025						204,995
Cash dividends declared per share of common stock						$	0.510					$	0.485					$	1.530					$	1.455

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
Net income						$	487,594					$	479,213					$	1,511,807					$	1,383,596
Other comprehensive (loss) income
Foreign currency translation adjustments						(31,116)						96,999						111,731						572,217
Other, net						262						(455)						189						(1,578)
Total other comprehensive (loss) income						(30,854)						96,544						111,920						570,639
Total comprehensive income						456,740						575,757						1,623,727						1,954,235
Comprehensive loss (income) attributable to noncontrolling interests						7,842						(6,732)						5,449						44,769
Comprehensive income attributable to Cencora, Inc.						$	464,582					$	569,025					$	1,629,176					$	1,999,004

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands, except per share data)						Common Stock						Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Noncontrolling Interest						Total
March 31, 2024						$	2,959					$	5,953,642					$	5,133,770					$	(1,260,288)					$	(8,746,941)					$	143,880					$	1,227,022
Net income						—						—						483,463						—						—						4,131						487,594
Other comprehensive loss						—						—						—						(18,881)						—						(11,973)						(30,854)
Cash dividends, $0.510 per share						—						—						(102,531)						—						—						—						(102,531)
Exercises of stock options						2						12,929						—						—						—						—						12,931
Share-based compensation expense						—						22,178						—						—						—						—						22,178
Purchases of common stock						—						—						—						—						(555,510)						—						(555,510)
Employee tax withholdings related to restricted share vesting						—						—						—						—						(35)						—						(35)
Other, net						—						452						—						—						—						(744)						(292)
June 30, 2024						$	2,961					$	5,989,201					$	5,514,702					$	(1,279,169)					$	(9,302,486)					$	135,294					$	1,060,503

(in thousands, except per share data)						Common Stock						Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Noncontrolling Interests						Total
March 31, 2023						$	2,944					$	5,770,242					$	3,691,314					$	(1,316,138)					$	(7,866,676)					$	229,451					$	511,137
Net income (loss)						—						—						479,581						—						—						(368)						479,213
Other comprehensive income						—						—						—						89,444						—						7,100						96,544
Cash dividends, $0.485 per share						—						—						(98,934)						—						—						—						(98,934)
Exercises of stock options						2						18,364						—						—						—						—						18,366
Share-based compensation expense						—						20,567						—						—						—						—						20,567
Purchases of common stock						—						—						—						—						(100,000)						—						(100,000)
Employee tax withholdings related to restricted share vesting						—						—						—						—						(3,105)						—						(3,105)
Other, net						1						(1,588)						—						—						—						(157)						(1,744)
June 30, 2023						$	2,947					$	5,807,585					$	4,071,961					$	(1,226,694)					$	(7,969,781)					$	236,026					$	922,044

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)

(in thousands, except per share data)						Common Stock						Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Noncontrolling Interest						Total
September 30, 2023						$	2,948					$	5,844,578					$	4,324,187					$	(1,402,607)					$	(8,247,103)					$	144,284					$	666,287
Net income						—						—						1,505,738						—						—						6,069						1,511,807
Other comprehensive income (loss)						—						—						—						123,438						—						(11,518)						111,920
Cash dividends, $1.53 per share						—						—						(315,223)						—						—						—						(315,223)
Exercises of stock options						4						31,556						—						—						—						—						31,560
Share-based compensation expense						—						113,410						—						—						—						—						113,410
Purchases of common stock						—						—						—						—						(995,262)						—						(995,262)
Employee tax withholdings related to restricted share vesting						—						—						—						—						(60,121)						—						(60,121)
Other, net						9						(343)						—						—						—						(3,541)						(3,875)
June 30, 2024						$	2,961					$	5,989,201					$	5,514,702					$	(1,279,169)					$	(9,302,486)					$	135,294					$	1,060,503

(in thousands, except per share data)						Common Stock						Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Treasury Stock						Noncontrolling Interests						Total
September 30, 2022						$	2,927					$	5,658,733					$	2,977,646					$	(1,830,970)					$	(7,019,895)					$	282,832					$	71,273
Net income (loss)						—						—						1,394,728						—						—						(11,132)						1,383,596
Other comprehensive income (loss)						—						—						—						604,276						—						(33,637)						570,639
Cash dividends, $1.455 per share						—						—						(300,413)						—						—						—						(300,413)
Exercises of stock options						6						50,072						—						—						—						—						50,078
Share-based compensation expense						—						99,699						—						—						—						—						99,699
Purchases of common stock						—						—						—						—						(878,827)						—						(878,827)
Employee tax withholdings related to restricted share vesting						—						—						—						—						(71,059)						—						(71,059)
Other, net						14						(919)						—						—						—						(2,037)						(2,942)
June 30, 2023						$	2,947					$	5,807,585					$	4,071,961					$	(1,226,694)					$	(7,969,781)					$	236,026					$	922,044

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

						Nine months ended June 30,
(in thousands)						2024						2023
OPERATING ACTIVITIES
Net income						$	1,511,807					$	1,383,596
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, including amounts charged to cost of goods sold						336,955						307,345
Amortization, including amounts charged to interest expense						502,136						389,843
Provision for credit losses						30,216						21,264
Benefit for deferred income taxes						(106,076)						(89,968)
Share-based compensation expense						113,410						99,699
LIFO (credit) expense						(64,441)						114,272
Turkey highly inflationary impact						44,664						66,022
Loss on remeasurement of equity investment						24,752						—
Other, net						15,717						(8,674)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable						(3,085,563)						(2,249,881)
Inventories						(835,633)						(1,369,977)
Income taxes receivable						32,475						140,310
Prepaid expenses and other assets						126,998						95,435
Accounts payable						4,112,542						3,513,686
Accrued expenses						(87,271)						(163,660)
Income taxes payable and other liabilities						(97,896)						(158,031)
Long-term accrued litigation liability						(90,486)						(6,758)
NET CASH PROVIDED BY OPERATING ACTIVITIES						2,484,306						2,084,523
INVESTING ACTIVITIES
Capital expenditures						(304,849)						(282,862)
Cost of acquired companies, net of cash acquired						(24,487)						(1,409,681)
Cost of equity investments						(14,981)						(737,025)
Non-customer note receivable						(50,000)						—
Other, net						18,106						10,544
NET CASH USED IN INVESTING ACTIVITIES						(376,211)						(2,419,024)
FINANCING ACTIVITIES
Senior notes and loan borrowings						688,321						157,547
Senior notes and loan repayments						(659,255)						(759,593)
Borrowings under revolving and securitization credit facilities						56,683,347						49,810,302
Repayments under revolving and securitization credit facilities						(56,744,334)						(49,789,813)
Purchases of common stock						(986,388)						(907,214)
Exercises of stock options						31,560						50,078
Cash dividends on common stock						(315,223)						(300,413)
Employee tax withholdings related to restricted share vesting						(60,121)						(71,059)
Other, net						(11,641)						(5,099)
NET CASH USED IN FINANCING ACTIVITIES						(1,373,734)						(1,815,264)
EFFECT OF EXCHANGE RATE CHANGES ON CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						(10,854)						104,479
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						723,507						(2,045,286)
Cash, cash equivalents, and restricted cash at beginning of period						2,752,889						3,593,539
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD						$	3,476,396					$	1,548,253

See notes to consolidated financial statements.

CENCORA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements present the consolidated financial position, results of operations, and cash flows of Cencora, Inc. and its subsidiaries, including less-than-wholly-owned subsidiaries in which Cencora, Inc. has a controlling financial interest (the "Company"), as of the dates and for the periods indicated. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring accruals, except as otherwise disclosed herein) considered necessary to present fairly the financial position as of June 30, 2024 and the results of operations and cash flows for the interim periods ended June 30, 2024 and 2023 have been included. Certain information and disclosures normally included in financial statements presented in accordance with U.S. GAAP, but which are not required for interim reporting purposes, have been omitted. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ from these estimated amounts.

Restricted Cash

The Company is required to maintain certain cash deposits with banks mainly consisting of deposits restricted under contractual agency agreements and cash restricted by law and other obligations.

The following represents a reconciliation of cash and cash equivalents in the Consolidated Balance Sheets to cash, cash equivalents, and restricted cash used in the Consolidated Statements of Cash Flows:

(amounts in thousands)						June 30, 2024						September 30, 2023						June 30, 2023						September 30, 2022
						(unaudited)												(unaudited)
Cash and cash equivalents						$	3,306,200					$	2,592,051					$	1,389,345					$	3,388,189
Restricted cash (included in Prepaid Expenses and Other)						104,463						97,722						96,623						144,980
Restricted cash (included in Other Assets)						65,733						63,116						62,285						60,370
Cash, cash equivalents, and restricted cash						$	3,476,396					$	2,752,889					$	1,548,253					$	3,593,539

Recently Adopted Accounting Pronouncements

As of June 30, 2024, there were no recently-adopted accounting standards that had a material impact on the Company’s financial position, results of operations, cash flows, or notes to the financial statements upon their adoption.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures ("ASU 2023-07")." ASU 2023-07 requires public entities to disclose significant segment expenses on an annual and interim basis and to provide in interim periods all disclosures about a reportable segment's profit or loss that are currently required annually. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024. Early adoption is permitted. The guidance should be applied retrospectively to all periods presented in the financial statements. The Company is currently evaluating the impact of adopting this new accounting guidance.

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09")." ASU 2023-09 requires entities to provide additional information in their tax rate reconciliation

and additional disclosures about income taxes paid by jurisdiction. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted. The guidance should be applied prospectively, but entities have the option to apply it retrospectively for each period presented. The Company is currently evaluating the impact of adopting this new accounting guidance.

Note 2. Acquisition

PharmaLex Acquisition

The Company 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 the Company's role as a partner of choice for biopharmaceutical partners across the pharmaceutical development and commercialization journey. PharmaLex is a component of the Company's International Healthcare Solutions reportable segment.

The Company completed the purchase price allocations as of December 31, 2023. The purchase price was allocated to the underlying assets acquired, including $37.4 million of cash and cash equivalents, and liabilities assumed based upon their estimated fair values as of the date of the acquisition.

The purchase price exceeded the estimated fair value of the net tangible and intangible assets acquired by $1,010.2 million, which was allocated to goodwill. Goodwill resulting from this acquisition is not deductible for income tax purposes.

The estimated fair value of the intangible assets acquired of $558.9 million, and the estimated useful lives are as follows:

(in thousands, except useful lives)						Fair Value						Useful Lives
Customer relationships						$	522,634					12
Trade names						30,931						5
Software technology						5,333						6
Total						$	558,898

The Company established an estimated deferred tax liability of $146.0 million primarily in connection with the intangible assets acquired.

Note 3. Variable Interest Entity

The Company has substantial governance rights over Profarma Distribuidora de Produtos Farmacêuticos S.A. ("Profarma"), which allow it to direct the activities that significantly impact Profarma’s economic performance. As such, the Company consolidates the operating results of Profarma in its consolidated financial statements. The Company is not obligated to provide future financial support to Profarma.

The following assets and liabilities of Profarma are included in the Company's Consolidated Balance Sheets:

(in thousands)						June 30, 2024						September 30, 2023
Cash and cash equivalents						$	17,084					$	33,256
Accounts receivables, net						210,990						253,419
Inventories						256,024						255,801
Prepaid expenses and other						67,360						63,327
Property and equipment, net						46,221						42,759
Other intangible assets						59,179						62,384
Other long-term assets						77,805						77,889
Total assets						$	734,663					$	788,835
Accounts payable						$	257,445					$	300,875
Accrued expenses and other						48,589						56,280
Short-term debt						65,013						73,650
Long-term debt						96,305						74,132
Deferred income taxes						24,099						22,701
Other long-term liabilities						55,532						54,691
Total liabilities						$	546,983					$	582,329

Profarma's assets can only be used to settle its obligations, and its creditors do not have recourse to the general credit of the Company.

Note 4. Income Taxes

The Company files income tax returns in U.S. federal, state, and various foreign jurisdictions. As of June 30, 2024, the Company had unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s financial statements, of $580.6 million ($501.8 million, net of federal benefit). If recognized, $488.1 million of these tax benefits would have reduced income tax expense and the effective tax rate. Included in this amount is $33.9 million of interest and penalties, which the Company records in Income Tax Expense in the Company's Consolidated Statements of Operations. In the nine months ended June 30, 2024, unrecognized tax benefits increased by $28.8 million. Over the next 12 months, tax authority audit resolutions and the expiration of statutes of limitations are not expected to materially impact unrecognized tax benefits.

The Company's effective tax rates were 22.4% and 19.5% for the three and nine months ended June 30, 2024, respectively. The Company's effective tax rates were 21.3% and 19.3% for the three and nine months ended June 30, 2023, respectively. The 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. The 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. The 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.

Note 5. Goodwill and Other Intangible Assets

The following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the nine months ended June 30, 2024:

(in thousands)						U. S. Healthcare Solutions						International Healthcare Solutions						Total
Goodwill as of September 30, 2023						$	6,282,417					$	3,291,700					$	9,574,117
Purchase accounting adjustments						—						(12,904)						(12,904)
Goodwill recognized in connection with acquisitions						—						2,421						2,421
Foreign currency translation						988						49,049						50,037
Goodwill as of June 30, 2024						$	6,283,405					$	3,330,266					$	9,613,671

The following is a summary of other intangible assets:

						June 30, 2024																								September 30, 2023
(in thousands)						Weighted Average Remaining Useful Life						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount						Gross Carrying Amount						Accumulated Amortization						Net Carrying Amount
Indefinite-lived trade names												$	17,000					$	—					$	17,000					$	17,000					$	—					$	17,000
Finite-lived:
Customer relationships						13 years						4,919,430						(1,439,163)						3,480,267						4,845,091						(1,213,200)						3,631,891
Trade names and other						4 years						1,239,158						(725,533)						513,625						1,224,795						(441,903)						782,892
Total other intangible assets												$	6,175,588					$	(2,164,696)					$	4,010,892					$	6,086,886					$	(1,655,103)					$	4,431,783

Amortization expense for finite-lived intangible assets was $164.7 million and $169.8 million in the three months ended June 30, 2024 and 2023, respectively. Amortization expense for finite-lived intangible assets was $496.6 million and $383.0 million in the nine months ended June 30, 2024 and 2023, respectively. Amortization expense for finite-lived intangible assets is estimated to be $662.0 million in fiscal 2024, $535.8 million in fiscal 2025, $361.3 million in fiscal 2026, $303.4 million in fiscal 2027, $292.2 million in fiscal 2028, and $2,335.8 million thereafter.

Note 6. Debt

Debt consisted of the following:

(in thousands)						June 30, 2024						September 30, 2023
Multi-currency revolving credit facility due 2028						$	—					$	—
Receivables securitization facility due 2026						350,000						350,000
Money market facility						—						—
$500,000, 3.400% senior notes due 2024						—						499,677
$500,000, 3.250% senior notes due 2025						499,567						499,026
$750,000, 3.450% senior notes due 2027						747,095						746,464
$500,000, 2.800% senior notes due 2030						496,412						495,959
$1,000,000, 2.700% senior notes due 2031						992,438						991,600
$500,000, 5.125% senior notes due 2034						494,367						—
$500,000, 4.250% senior notes due 2045						495,540						495,378
$500,000, 4.300% senior notes due 2047						493,753						493,554
Alliance Healthcare debt						528						68,017
Nonrecourse debt						161,318						147,782
Total debt						4,731,018						4,787,457
Less Cencora, Inc. current portion						499,567						499,677
Less Alliance Healthcare current portion						528						68,017
Less nonrecourse current portion						65,013						73,650
Total, net of current portion						$	4,165,910					$	4,146,113

Multi-Currency Revolving Credit Facility

The Company has 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 upon the Company’s debt rating. The Company also pays facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on its debt rating. The Company may choose to repay or reduce its 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 the Company was compliant as of June 30, 2024.

Commercial Paper Program

The Company has a commercial paper program whereby it 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 the Company’s borrowing capacity as it is fully backed by the Company’s Multi-Currency Revolving Credit Facility. There were no borrowings outstanding under the commercial paper program as of June 30, 2024.

Receivables Securitization Facility

The Company has a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which was scheduled to expire in October 2025. In April 2024, the Company amended the Receivables Securitization Facility to extend the expiration to October 2026. The Company has available to it 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. The Company pays 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 the Company was compliant as of June 30, 2024.

Revolving Credit Note, Overdraft Facility, and Money Market Facility

The Company had a $75 million uncommitted, unsecured line of credit available to it pursuant to a revolving credit note that was terminated in April 2024. The Company 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 its MWI Animal Health business. The Company has an uncommitted, unsecured line of credit available to it pursuant to a money market credit agreement ("Money Market Facility"). The Money Market Facility provides the Company 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 the Company at any time without prior notice.

Senior Notes

In February 2024, the Company 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. The 2034 Notes rank pari passu to the Company's other senior notes, the Multi-Currency Revolving Credit Facility, and the Money Market Facility. In May 2024, the Company used the proceeds from the 2034 Notes to repay the $500 million of 3.400% senior notes that matured.

Alliance Healthcare Debt

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

Nonrecourse debt is comprised of short-term and long-term debt belonging to the Brazil subsidiary and is repaid solely from the Brazil subsidiary's 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.

Note 7. Stockholders’ Equity and Earnings per Share

In March 2023, the Company's Board of Directors authorized a share repurchase program allowing the Company to purchase up to $1.0 billion of its outstanding shares of common stock, subject to market conditions. During the nine months ended June 30, 2024, the Company purchased 3.9 million shares of its common stock for a total of $809.0 million, including 2.5 million shares from Walgreens Boots Alliance, Inc. ("WBA") for $522.6 million, to complete its authorization under this program.

In March 2024, the Company's Board of Directors authorized a new share repurchase program allowing the Company to purchase up to $2.0 billion of its outstanding shares of common stock, subject to market conditions. In the nine months ended June 30, 2024, the Company purchased 0.8 million shares of its common stock for a total of $177.4 million, all of which was purchased from WBA. As of June 30, 2024, the Company had $1,822.6 million of availability under this program.

Basic earnings per share is computed by dividing net income attributable to Cencora, Inc. by the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed by dividing net income attributable to Cencora, Inc. by the weighted average number of shares of common stock outstanding, plus the dilutive effect of restricted stock units and stock options during the periods presented.

The following illustrates the components of diluted weighted average shares outstanding for the periods indicated:

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
Weighted average common shares outstanding - basic						198,260						202,349						199,253						202,908
Dilutive effect of restricted stock units and stock options						1,787						2,026						1,772						2,087
Weighted average common shares outstanding - diluted						200,047						204,375						201,025						204,995

There were no potentially dilutive restricted stock units that were antidilutive for the three months ended June 30, 2024 and 2023. The potentially dilutive restricted stock units that were antidilutive for the nine months ended June 30, 2024 and 2023 were 110 thousand and 125 thousand, respectively.

Note 8. Related Party Transactions

WBA owns more than 10% of the Company’s outstanding common stock and is, therefore, considered a related party. The Company operates under various agreements and arrangements with WBA, including a pharmaceutical distribution agreement pursuant to which the Company distributes pharmaceutical products to WBA and an agreement that provides the Company the ability to access favorable economic pricing and generic products through a generic purchasing services arrangement with Walgreens Boots Alliance Development GmbH (both through 2029), as well as a distribution agreement pursuant to which it will supply branded and generic pharmaceutical products to WBA’s Boots UK Ltd. subsidiary (through 2031).

Revenue from the various agreements and arrangements with WBA was $18.8 billion and $55.7 billion in the three and nine months ended June 30, 2024, respectively. Revenue from the various agreements and arrangements with WBA was $17.4 billion and $50.4 billion in the three and nine months ended June 30, 2023, respectively. The Company’s receivable from WBA, net of incentives, was $7.9 billion and $8.1 billion as of June 30, 2024 and September 30, 2023, respectively.

Note 9. Restructuring and Other Expenses

The following illustrates the expenses incurred by the Company for Restructuring and Other Expenses for the periods indicated:

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
Restructuring and employee severance costs						$	18,840					$	38,209					$	41,865					$	85,060
Business transformation efforts						20,646						23,384						79,096						52,007
Other, net						2,771						2,331						31,364						40,541
Total restructuring and other expenses						$	42,257					$	63,924					$	152,325					$	177,608

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 the Company's office optimization plan and workforce reductions in both of its 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 the Company's reportable segments.

Business transformation efforts in the three and nine months ended June 30, 2024 and 2023 included rebranding costs associated with the Company's 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, the Company experienced a cybersecurity event where data from its information systems was exfiltrated. In connection with this event, the Company 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 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. In connection with this event, the Company 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.

Note 10. Legal Matters and Contingencies

In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings, government subpoenas, government investigations, stockholder demands, and other disputes, including antitrust, commercial, product liability, intellectual property, regulatory, employment discrimination, and other matters. Significant damages or penalties may be sought from the Company in some matters, and some matters may require years for the Company to resolve. The Company records a reserve for these matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

For those matters for which the Company has not recognized a liability, the Company cannot predict the outcome of their impact on the Company as uncertainty remains with regard to whether such matters will proceed to trial, whether settlements will be reached, and the amount and terms of any such settlements. Outcomes may include settlements in significant

amounts that are not currently estimable, limitations on the Company's conduct, the imposition of corporate integrity agreement obligations, consent decrees, and/or other civil and criminal penalties. From time to time, the Company is also involved in disputes with its customers, which the Company generally seeks to resolve through commercial negotiations. If negotiations are unsuccessful, the parties may litigate the dispute or otherwise attempt to settle the matter.

With respect to the specific legal proceedings and claims described below, unless otherwise noted, the amount or range of possible losses is not reasonably estimable. There can be no assurance that the settlement, resolution, or other outcome of one or more matters, including the matters set forth below, during any subsequent reporting period will not have a material adverse effect on the Company’s results of operations or cash flows for that period or on the Company's financial condition.

Opioid Lawsuits and Investigations

A significant number of counties, municipalities, and other governmental entities in a majority of U.S. states and Puerto Rico, as well as numerous states and tribes, filed lawsuits in various federal, state and other courts against pharmaceutical wholesale distributors (including the Company and certain subsidiaries, such as AmerisourceBergen Drug Corporation ("ABDC") and H.D. Smith, LLC ("H.D. Smith")), pharmaceutical manufacturers, retail pharmacy chains, medical practices, and physicians relating to the distribution of prescription opioid pain medications.

Starting in December 2017, more than 2,000 cases were transferred to Multidistrict Litigation ("MDL") proceedings before the United States District Court for the Northern District of Ohio (the "MDL Court"). Since then, several cases filed by government and tribal plaintiffs that were selected as bellwether cases in the MDL have been resolved through trial or settlement. Following trial in two consolidated cases in West Virginia federal court, the court entered judgment in favor of the defendants, including the Company. The plaintiffs filed an appeal of the court’s decision on August 2, 2022, which remains pending. The MDL Court selected four cases filed by third-party payors to serve as additional litigation bellwethers. On May 31, 2024, the MDL Court severed and stayed these four cases against the Company and the two other national pharmaceutical distributors, pursuant to the settlement discussions to resolve litigation filed by a class of third-party payors, as discussed further below.

On July 21, 2021, the Company announced that it and the two other national pharmaceutical distributors had negotiated a Distributor Settlement Agreement that, if all conditions were satisfied, would result in the resolution of a substantial majority of opioid lawsuits filed by state and local governmental entities. The Distributor Settlement Agreement became effective on April 2, 2022, and as of September 30, 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. Pursuant to the Distributor Settlement Agreement and related agreements with Settling States, the Company will pay up to approximately $6.4 billion over 18 years and comply with other requirements, including establishment of a clearinghouse that will consolidate data from all three national pharmaceutical distributors. The exact payment amount will depend on several factors, including the extent to which states take action to foreclose opioid lawsuits by subdivisions (e.g., laws barring opioid lawsuits by subdivisions). West Virginia and its subdivisions and Native American tribes are not a part of the Distributor Settlement Agreement, and the Company has reached separate agreements with those groups. The State of Alabama also did not participate in the Distributor Settlement Agreement and was pursuing a case against the Company (and another national pharmaceutical distributor) in Alabama state court, which was scheduled to begin trial on February 26, 2024. On February 28, 2024, the Company and another national distributor executed an agreement with the State of Alabama and all its participating subdivisions to resolve opioid-related claims. Pursuant to the agreement, the two distributors will pay approximately $245 million, including attorneys’ fees and costs, to the State of Alabama and its participating subdivisions. The Company’s 50% share of the $245 million settlement amount is a component of its overall $5.1 billion total liability accrual as of June 30, 2024. On July 1, 2024, the Court entered a Final Consent Judgment and Dismissal with Prejudice pursuant to the terms of the settlement agreement. In Maryland, a trial is scheduled for September 16, 2024 in a case filed by the Mayor and City Council of Baltimore.

The Company’s accrued litigation liability related to the Distributor Settlement Agreement, the State of Alabama, and non-participating government subdivisions (with whom the Company has not reached a settlement agreement), as well as other opioid-related litigation for which it has reached settlement agreements, as described above, was $5.1 billion as of June 30, 2024 and $5.5 billion as of September 30, 2023. The Company currently estimates that $431.1 million will be paid prior to June 30, 2025, which is recorded in Accrued Expenses and Other on the Company’s Consolidated Balance Sheet. In January 2024, the Company prepaid the net present value of a future obligation as permitted under its settlement agreements. The discount on the future obligation resulted in a $0.1 billion reduction of its accrued litigation liability. The remaining long-term liability of $4.7 billion is recorded in Accrued Litigation Liability on the Company's Consolidated Balance Sheet. While the Company has accrued its estimated liability for opioid litigation, it is unable to estimate the range of possible loss associated with the matters that are not included in the accrual. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. The Company regularly reviews opioid litigation matters to determine whether its accrual is adequate. The amount of ultimate loss may differ materially from the amount accrued to date. Until such time as otherwise resolved, the Company will continue to litigate and prepare for

trial and to vigorously defend itself in all such matters. Since these matters are still developing, the Company is unable to predict the outcome, but the result of these lawsuits could include excessive monetary verdicts and/or injunctive relief that may affect the Company’s operations.

During the March 31, 2024 quarter and in the month of April 2024, the Company and two other national pharmaceutical distributors engaged in settlement discussions to resolve litigation filed by hospitals and third-party payors, and as a result, the Company recorded a liability of $214 million, representing the Company's expected share of those potential class action settlements. This amount is incremental to the $5.1 billion liability accrual noted above and is recorded in Accrued Expenses and Other on the Company's Consolidated Balance Sheet. Pursuant to these settlement discussions, a case in Alabama that involved up to eight plaintiff hospitals, and that was scheduled to begin trial on July 8, 2024, has now been severed and stayed as to the Company.

Additional lawsuits regarding the distribution of prescription opioid pain medications have been filed and may continue to be filed by a variety of types of plaintiffs, including lawsuits filed by non-governmental or non-political entities and individuals, among others. The Company is vigorously defending itself in the pending lawsuits and intends to vigorously defend itself against any threatened lawsuits or enforcement proceedings.

Since July 2017, the Company has received subpoenas from several U.S. Attorney’s Offices, including grand jury subpoenas from the U.S. Attorney's Office for the District of New Jersey ("USAO-NJ") and the U.S. Attorney's Office for the Eastern District of New York ("USAO-EDNY"). Those subpoenas requested the production of a broad range of documents pertaining to the Company’s distribution of controlled substances through its various subsidiaries, including ABDC, and its diversion control programs. The Company produced documents in response to the subpoenas and engaged in discussions with the various U.S. Attorney’s Offices, including the Health Care and Government Fraud Unit of the Criminal Division of the USAO-NJ, the U.S. Department of Justice Consumer Protection Branch and the U.S. Drug Enforcement Administration, in an attempt to resolve these matters. On December 29, 2022, the Department of Justice filed a civil Complaint against the Company, ABDC, and Integrated Commercialization Services, LLC ("ICS"), a subsidiary of the Company, alleging violations of the Controlled Substances Act. Specifically, the Complaint alleges that the Company negligently failed to report suspicious orders to the Drug Enforcement Administration. In the Complaint, the Department of Justice seeks civil penalties and injunctive relief. This Complaint relates to the aforementioned and previously-disclosed investigations. On March 30, 2023, the Company filed a motion to dismiss the Complaint in its entirety on behalf of itself, ABDC, and ICS. On November 6, 2023, the United States District Court for the Eastern District of Pennsylvania granted in part and denied in part the motion, dismissing with prejudice all claims for civil penalties for Defendants’ alleged violations of the suspicious order reporting requirement prior to October 24, 2018, but otherwise denying the motion. On December 18, 2023, the Company, ABDC and ICS filed an Answer and Affirmative Defenses to the Complaint. On January 23, 2024, the Court entered a Scheduling Order setting the fact discovery deadline as January 9, 2026 and the expert discovery deadline as September 18, 2026. The Company denies the allegations in the Complaint and intends to defend itself vigorously in the litigation.

Shareholder Securities Litigation

On October 11, 2019, Teamsters Local 443 Health Services & Insurance Plan, St. Paul Electrical Construction Pension Plan, St. Paul Electrical Construction Workers Supplemental Pension Plan (2014 Restatement), Retirement Medical Funding Plan for the St. Paul Electrical Workers, and San Antonio Fire & Police Pension Fund filed a complaint for a purported derivative action in the Delaware Court of Chancery against the Company and certain of its current and former officers and directors (collectively, “Defendants”). The complaint alleges that the Defendants breached their fiduciary duties by failing to oversee the compliance by certain of the Company’s subsidiaries (including the Company’s former subsidiary Medical Initiatives, Inc. ("MII")) with federal regulations, allegedly resulting in the payment of fines and penalties in connection with the settlements with the USAO-EDNY in fiscal 2017 and 2018 that resolved claims arising from MII's pre-filled syringe program. In December 2019, Defendants filed a motion to dismiss the complaint. After briefing and oral argument, on August 24, 2020 the Delaware Court of Chancery denied Defendants' motion to dismiss. On September 24, 2020, the Company's Board of Directors established a Special Litigation Committee to conduct an investigation concerning the plaintiffs’ allegations, and on November 10, 2020, the Delaware Court of Chancery granted the Special Litigation Committee’s motion to stay the litigation pending its investigation. On September 22, 2021, the Special Litigation Committee filed its report under seal and moved to dismiss the case. The Delaware Court of Chancery granted the Special Litigation Committee's motion to dismiss on November 17, 2023, and entered an Order and Final Judgement on December 8, 2023. On January 5, 2024, the plaintiffs filed a notice of appeal to the Delaware Supreme Court from the Delaware Court of Chancery's November 17, 2023 decision granting the motion to dismiss and December 8, 2023 Order and Final Judgement. The appeal has been fully briefed and is scheduled for oral argument before the Delaware Supreme Court on September 11, 2024.

On December 30, 2021, Lebanon County Employees' Retirement Fund and Teamsters Local 443 Health Services & Insurance Plan filed a complaint for a purported derivative action in the Delaware Court of Chancery against the Company and certain of its current officers and directors. The complaint alleges claims for breach of fiduciary duty allegedly arising from the

Board’s and certain officers' oversight of the Company’s controlled substance diversion control programs. The defendants moved to dismiss the complaint on March 29, 2022. On December 22, 2022, the Delaware Court of Chancery granted the motion to dismiss. On January 9, 2023, the Plaintiffs filed a Motion for Relief from Judgment and Order Pursuant to Rule 60(b) from the Delaware Chancery Court’s judgment. On January 20, 2023, the Plaintiffs also appealed the ruling to the Delaware Supreme Court. On March 21, 2023 the Delaware Court of Chancery denied the Plaintiffs' Motion for Relief from Judgement and Order Pursuant to Rule 60(b). On December 18, 2023, the Delaware Supreme Court reversed the dismissal and remanded the case to the Delaware Court of Chancery for further proceedings. On January 12, 2024, the Company's Board of Directors established a Special Litigation Committee ("SLC") and delegated to the SLC the Board's full authority with respect to the litigation. On March 4, 2024, the Delaware Court of Chancery granted the SLC’s consented-to motion to stay the action pending its investigation of the allegations of the complaint.

Subpoenas, Ongoing Investigations, and Other Contingencies

From time to time, the Company receives subpoenas or requests for information from various government agencies relating to the Company’s business or to the business of a customer, supplier, or other industry participant. The Company’s responses often require time and effort and can result in considerable costs being incurred. Most of these matters are resolved without incident; however, such subpoenas or requests can lead to the assertion of claims or the commencement of civil or criminal legal proceedings against the Company and other members of the healthcare industry, as well as to substantial settlements.

In January 2017, U.S. Bioservices Corporation, a former subsidiary of the Company, received a subpoena for information from the USAO-EDNY relating to its activities in connection with billing for products and making returns of potential overpayments to government payers. A filed qui tam complaint related to the investigation was unsealed in April 2019 and the relator filed an amended complaint under seal in the U.S. District Court for the Eastern District of New York. In December 2019, the government filed a notice that it was declining to intervene. The court ordered that the relator's complaint against the Company and other defendants, including AmerisourceBergen Specialty Group, LLC, be unsealed. The relator's complaint alleged violations of the federal False Claims Act and the false claims acts of various states. The relator filed a second amended complaint, removing one state false claims act count. The Company filed a motion to dismiss the second amended complaint and all briefs on the motion were filed with the court on October 9, 2020. The motion to dismiss was granted on December 22, 2022. The False Claims Act claims were dismissed with prejudice, and the state claims were dismissed without prejudice. On January 24, 2023, the relator filed Motions to Reconsider Dismissal and For Leave to Amend the Complaint. Response briefs on those motions were filed by the Company and all briefing was completed on February 15, 2023.

In December 2019, Reliable Pharmacy, together with other retail pharmacies and North Sunflower Medical Center, filed a civil antitrust complaint against multiple generic drug manufacturers, and also included claims against ABDC and H.D. Smith, and other drug distributors and industry participants. The case is filed as a putative class action and plaintiffs purport to represent a class of drug purchasers including other retail pharmacies and healthcare providers. The case has been consolidated for multidistrict litigation proceedings before the United States District Court for the Eastern District of Pennsylvania. The complaint alleges that ABDC, H.D. Smith, and others in the industry participated in a conspiracy to fix prices, allocate markets and rig bids regarding generic drugs. In March 2020, the plaintiffs filed a further amended complaint. On July 15, 2020, the defendants filed a motion to dismiss the complaint. On May 25, 2022, the Court granted the motion to dismiss without prejudice. On July 1, 2022, the plaintiffs filed an amended complaint, again including claims against ABDC, H.D. Smith, and other drug distributors and industry participants. On August 21, 2022, the Company and other industry participants filed a motion to dismiss the amended complaint. All briefs on the motion were filed with the court on November 22, 2022.

On March 3, 2022, the United States Attorney’s Office for the Western District of Virginia notified the Company of the existence of a criminal investigation into MWI Veterinary Supply Co., the Company’s animal health subsidiary, in connection with grand jury subpoenas relating to compliance with state and federal regulatory requirements governing wholesale shipments of animal health products to customers. The Company is cooperating with the investigation.

Note 11. Antitrust Settlements

Numerous lawsuits have been filed against certain brand pharmaceutical manufacturers alleging that the manufacturer, by itself or in concert with others, took improper actions to delay or prevent generic drugs from entering the market. These lawsuits are generally brought as class actions. The Company has not been named as a plaintiff in these lawsuits, but has been a member of the direct purchasers' class (i.e., those purchasers who purchase directly from these pharmaceutical manufacturers). None of the lawsuits has gone to trial, but some have settled in the past with the Company receiving proceeds from the settlement funds. The Company recognized gains related to these lawsuits of $51.6 million and $118.6 million in the three months ended June 30, 2024 and 2023, respectively. The Company recognized gains related to these lawsuits of $108.6 million and $168.5 million in the nine months ended June 30, 2024 and 2023, respectively. These gains, which are net of attorney fees

and estimated payments due to other parties, were recorded as reductions to cost of goods sold in the Company’s Consolidated Statements of Operations.

Note 12. Fair Value of Financial Instruments

The recorded amounts of the Company's cash and cash equivalents, accounts receivable, and accounts payable as of June 30, 2024 and September 30, 2023 approximate fair value based upon the relatively short-term nature of these financial instruments. Within Cash and Cash Equivalents, the Company had $1,532.0 million investments in money market accounts as of June 30, 2024 and had $1,489.0 million of investments in money market accounts as of September 30, 2023. The fair value of the money market accounts was determined based upon unadjusted quoted prices in active markets for identical assets, otherwise known as Level 1 inputs.

The recorded amount of long-term debt (see Note 6) and the corresponding fair value as of June 30, 2024 were $4,165.9 million and $3,781.3 million, respectively. The recorded amount of long-term debt and the corresponding fair value as of September 30, 2023 were $4,146.1 million and $3,572.6 million, respectively. The fair value of long-term debt was determined based upon inputs other than quoted prices, otherwise known as Level 2 inputs.

Note 13. Business Segment Information

The Company is organized geographically based upon the products and services it provides to its customers and reports its results under two reportable segments: U.S. Healthcare Solutions and International Healthcare Solutions.

The following illustrates reportable and operating segment disaggregated revenue as required by Accounting Standards Codification 606, "Revenue from Contracts with Customer," for the periods indicated:

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
U.S. Healthcare Solutions:
Human Health						$	65,821,863					$	58,583,385					$	189,704,387					$	169,113,962
Animal Health						1,369,735						1,316,814						3,963,910						3,716,272
Total U.S. Healthcare Solutions						67,191,598						59,900,199						193,668,297						172,830,234
International Healthcare Solutions:
Alliance Healthcare						5,641,912						5,698,635						17,122,456						16,720,262
Other Healthcare Solutions						1,409,964						1,349,142						4,123,032						3,703,728
Total International Healthcare Solutions						7,051,876						7,047,777						21,245,488						20,423,990
Intersegment eliminations						(2,121)						(933)						(5,292)						(3,144)
Revenue						$	74,241,353					$	66,947,043					$	214,908,493					$	193,251,080

The following illustrates reportable segment operating income information for the periods indicated:

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
U.S. Healthcare Solutions						$	698,305					$	635,176					$	2,237,493					$	1,963,729
International Healthcare Solutions						179,391						187,132						559,706						524,405
Total segment operating income						$	877,696					$	822,308					$	2,797,199					$	2,488,134

The following reconciles total segment operating income to income before income taxes for the periods indicated:

						Three months ended June 30,												Nine months ended June 30,
(in thousands)						2024						2023						2024						2023
Total segment operating income						$	877,696					$	822,308					$	2,797,199					$	2,488,134
Gains from antitrust litigation settlements						51,605						118,611						108,567						168,510
LIFO (expense) credit						(6,839)						(34,952)						64,441						(114,272)
Turkey highly inflationary impact						(3,636)						(50,580)						(43,915)						(59,019)
Acquisition-related intangibles amortization						(163,850)						(169,154)						(494,373)						(381,146)
Litigation and opioid-related (expenses) credit, net						(14,485)						67,102						(161,553)						38,583
Acquisition-related deal and integration expenses						(25,758)						(19,283)						(69,431)						(99,392)
Restructuring and other expenses						(42,257)						(63,924)						(152,325)						(177,608)
Operating income						672,476						670,128						2,048,610						1,863,790
Other loss (income), net						12,814						3,436						33,790						(18,612)
Interest expense, net						31,328						57,864						136,022						167,989
Income before income taxes						$	628,334					$	608,828					$	1,878,798					$	1,714,413

Segment operating income is evaluated by the Chief Operating Decision Maker of the Company before gains from antitrust litigation settlements; LIFO (expense) credit; Turkey highly inflationary impact; acquisition-related intangibles amortization; litigation and opioid-related (expenses) credit, net; acquisition-related deal and integration expenses; and restructuring and other expenses. All corporate office expenses are allocated to the operating segment level.

Litigation and opioid-related (expenses) credit, net in the nine months ended June 30, 2024 includes a $214.0 million litigation accrual for ongoing litigation related to the distribution of prescription opioid medications (see Note 10). The nine-month period ended June 30, 2024 also includes a net $92.2 million opioid litigation settlement accrual reduction primarily as a result of the Company's prepayment of the net present value of a future obligation as permitted under its settlement agreements.

Litigation and opioid-related (expenses) credit, net in the three and nine months ended June 30, 2023 includes the receipt of $83.4 million from the H.D. Smith opioid litigation indemnity escrow.