Cencora 10-Q 2024-12-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED December 31, 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 January 31, 2025 was 193,917,082.

CENCORA, INC.

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Repo

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In reviewing this Management’s Discussion and Analysis of Financial Condition and Results of Operations, please note that we face many uncertainties and risks related to various economic, political and regulatory environments in which we operate, both within the U.S. and internationally. Refer to the headings “Item 1A. Risk Factors” in Part I of our Annual Report on Form 10-K for the year ended September 30, 2024, as well as the heading “Cautionary Note Regarding Forward-Looking Statements” above for additional information related to our present business environment.

Recent Development

As previously disclosed, we entered into a definitive agreement to acquire Retina Consultants of America ("RCA"), a leading management services organization of retina specialists. On January 2, 2025, we acquired an interest in RCA of approximately 85%, with certain RCA physicians and members of the management team retaining a minority interest in RCA. Our cash outlay at closing was $4.4 billion, which included a cash capitalization from us to RCA of $350 million and the payment of certain transaction costs. The purchase price is subject to a customary post-closing adjustment. The agreement also provides for the potential payment of up to $500 million in aggregate contingent consideration in fiscal 2027 and fiscal 2028, subject to the successful completion of certain predefined business objectives. RCA's future operating results will be consolidated as a component of the U.S. Healthcare Solutions reportable segment.

Executive Summary

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

• Revenue increased by $9.2 billion, or 12.8%, from the prior year quarter primarily due to growth in the U.S. Healthcare Solutions segment. The U.S. Healthcare Solutions segment grew its revenue by $8.8 billion, or 13.6%, from the prior year quarter primarily due to overall market growth that was largely driven by unit volume growth, including increased sales of $3.2 billion, or 53.0%, of products labeled for diabetes and/or weight loss in the GLP-1 class and increased sales of specialty products to physician practices and health systems. International Healthcare Solutions' revenue increased by $0.4 billion, or 5.5%, from the prior year quarter primarily due to increased sales at our European distribution business and increased sales at our Canadian business.

• Gross profit increased by $89.2 million, or 3.6%, from the prior year quarter primarily due to the increases in gross profit in both reportable segments, offset in part by a decrease in the last-in, first-out ("LIFO") credit and lower gains from antitrust litigation settlements compared to the prior year quarter. U.S. Healthcare Solutions' gross profit increased by $113.8 million, or 7.2%, from the prior year quarter primarily due to increased sales. Gross profit in International Healthcare Solutions increased by $33.0 million, or 4.0%, from the prior year quarter primarily due to our European distribution business, offset in part by a decline in gross profit at our global specialty logistics business.

• Total operating expenses increased by $205.8 million, or 12.5%, from the prior year quarter primarily due to litigation and opioid-related expenses, which was a credit in the prior year quarter due to a net $92.2 million opioid litigation settlement accrual reduction, and an increase in distribution, selling, and administrative expenses to support the growth in our business.

• Total segment operating income increased $63.6 million, or 7.2%, from the prior year quarter. U.S. Healthcare Solutions' operating income increased by $69.2 million, or 9.9%, from the prior year quarter, and International Healthcare Solutions' operating income decreased $5.5 million, or 2.9%, from the prior year quarter

• Our effective tax rates were 20.4% and 23.0% for the three months ended December 31, 2024 and 2023, respectively. The effective tax rate for the three months ended December 31, 2024 was lower than the U.S. statutory rate primarily due to the benefit of income taxed at rates lower than the U.S. statutory rate and benefits associated with equity compensation, offset in part by U.S. state income taxes. The effective tax rate for the three months ended December 31, 2023 was higher than the U.S. statutory rate primarily due to U.S. state income taxes and discrete tax expense, offset in part by the benefit of income taxed at rates lower than the U.S. statutory rate and tax benefits associated with equity compensation.

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 $9.2 billion, or 12.8%, from the prior year quarter primarily due to growth in the U.S. Healthcare Solutions segment.

The U.S. Healthcare Solutions segment grew its revenue by $8.8 billion, or 13.6%, from the prior year quarter primarily due to overall market growth primarily driven by unit volume growth, including increased sales of $3.2 billion, or 53.0%, of products labeled for diabetes and/or weight loss in the GLP-1 class and increased sales of specialty products to physician practices and health systems. Sales, including GLP-1 products, to our two largest customers increased by $3.3 billion from the prior year quarter.

International Healthcare Solutions' revenue increased by $0.4 billion, or 5.5%, from the prior year quarter primarily due to increased sales of $0.3 billion at our European distribution business and increased sales of $0.1 billion at 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 key customer if an existing contract with such customer expires without being extended, renewed, or replaced. During the three months ended December 31, 2024, no key contracts expired. Additionally, from time to time, key 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. As previously disclosed, we anticipate a potential June 2025 loss of an oncology customer following its pending acquisition.

Gross Profit

Gross profit increased by $89.2 million, or 3.6%, from the prior year quarter primarily due to the increases in gross profit in both reportable segments, offset in part by a decrease in the LIFO credit and lower gains from antitrust litigation settlements compared to the prior year quarter.

U.S. Healthcare Solutions' gross profit increased by $113.8 million, or 7.2%, from the prior year quarter primarily due to increased sales. As a percentage of revenue, U.S. Healthcare Solutions' gross profit margin was 2.28% in the current year quarter, a decline of 13 basis points from the prior year quarter primarily due to higher sales of GLP-1 products, which have lower gross profit margins, and lower sales of COVID vaccines, which have higher gross profit margins.

Gross profit in International Healthcare Solutions increased by $33.0 million, or 4.0%, from the prior year quarter primarily due our European distribution business, offset in part by a decline in gross profit at our global specialty logistics business.

We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $22.9 million and $48.2 million in the three months ended December 31, 2024 and 2023, respectively. The gains were recorded as reductions to Cost of Goods Sold (see Note 10 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 decrease in the LIFO credit in the current year quarter is primarily due to higher brand pharmaceutical inflation.

We recognized expense in Cost of Goods Sold of $7.2 million and $17.2 million in the three months ended December 31, 2024 and 2023, respectively, related to the impact of Turkey highly inflationary accounting driven by the continued weakening of the Turkish Lira.

Operating Expenses

Distribution, selling, and administrative expenses increased by $73.3 million, or 5.2%, compared to prior year quarter primarily to support our revenue growth. As a percentage of revenue, distribution, selling, and administrative expenses were 1.81% in the current year quarter, a decline of 13 basis points compared to the prior year quarter primarily due to our improved operating leverage from our 12.8% revenue growth.

Depreciation expense increased 8.2% and amortization expense decreased 0.4% from the prior year quarter.

Litigation and opioid-related expenses in the three months ended December 31, 2024 included legal fees in connection with opioid lawsuits and investigations. Litigation and opioid-related credit in the three months ended December 31, 2023 included a net $92.2 million opioid litigation settlement accrual reduction primarily as a result of our commitment, which we made in December 2023, to prepay the net present value of a future obligation as permitted under our opioid settlement agreements and $13.3 million of legal fees in connection with opioid lawsuits and investigations.

Acquisition-related deal and integration expenses in the three months ended December 31, 2024 primarily included costs related to the acquisition of RCA and the continued integration of PharmaLex. Acquisition-related deal and integration expenses in the three months ended December 31, 2023 primarily related to the integration of Alliance Healthcare and PharmaLex.

Restructuring and other expenses are comprised of the following:

Restructuring and employee severance costs in the three months ended December 31, 2024 primarily included workforce reductions in both of our reportable segments. Restructuring and employee severance costs in the three months ended December 31, 2023 primarily included expenses incurred related to facility closures in connection with our office optimization plan and workforce reductions in both of our reportable segments.

Business transformation efforts in the three months ended December 31, 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.

Operating Income

U.S. Healthcare Solutions' operating income increased by $69.2 million, or 9.9%, from the prior year quarter primarily due to the increase in gross profit, as noted above, and was offset in part by the increase in operating expenses. As a percentage of revenue, U.S. Healthcare Solutions' operating income margin was 1.04% in the current year quarter, a decline of 3 basis points from the prior year quarter due to a decline in the gross profit margin, as described above in the Gross Profit section, and was offset in part by a decline in the operating expense margin.

International Healthcare Solutions' operating income decreased $5.5 million, or 2.9%, from the prior year quarter primarily due to lower operating income at our global specialty logistics business, which was offset in part by the increase at our European distribution business.

Other Loss (Income), Net

We recorded a $35.5 million loss on the divestiture of non-core businesses in the three months ended December 31, 2024.

Interest Expense, Net

Interest expense, net and the respective weighted average interest rates are as follows:

Interest expense, net decreased by $12.6 million, or 31.1%, from the prior year quarter due to the increase in interest income, offset in part by an increase in interest expense. The increase in interest income was driven by higher average investment cash balances and higher investment interest rates outside the United States in the current year quarter in comparison to the prior year quarter. The increase in interest expense was primarily due to the issuance of our $1.8 billion of senior notes in December 2024 to finance a portion of the RCA acquisition and increased revolving credit facility borrowings to cover seasonal short-term working capital needs, offset in part by a decrease in foreign subsidiary borrowings. We expect interest expense, net to increase through the remainder of fiscal 2025 primarily as a result of the incremental debt incurred to finance a portion of the RCA acquisition.

Income Tax Expense

Our effective tax rates were 20.4% and 23.0% for the three months ended December 31, 2024 and 2023, respectively. The effective tax rate for the three months ended December 31, 2024 was lower than the U.S. statutory rate primarily due to the benefit of income taxed at rates lower than the U.S. statutory rate and benefits associated with equity compensation, offset in part by U.S. state income taxes. The effective tax rate for the three months ended December 31, 2023 was higher than the U.S. statutory rate primarily due to U.S. state income taxes and discrete tax expense, offset in part by the benefit of income taxed at rates lower than the U.S. statutory rate, as well as tax benefits associated with equity compensation.

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 December 31, 2024 and September 30, 2024, our cash and cash equivalents held by foreign subsidiaries were $967.0 million and $851.3 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 three months ended December 31, 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 three months ended December 31, 2024 and 2023 was $2.1 billion and

$0.6 billion, respectively. We had $13.4 billion and $11.1 billion of cumulative intra-period borrowings that were repaid under our credit facilities during the three months ended December 31, 2024 and 2023, respectively.

We used $2.7 billion of cash in our operations during the three months ended December 31, 2024 compared to $0.9 billion of cash provided by operations during the three months ended December 31, 2023, a decrease of $3.6 billion. The timing of cash receipts and disbursements can significantly impact our working capital. In the three months ended December 31, 2024, the growth of our accounts receivable and inventories and the decrease in accounts payable balances resulted in a $3.3 billion use of cash from operations compared to cash provided by operations of $0.2 billion in the three months ended December 31, 2023. The use of cash in the three months ended December 31, 2024 was negatively impacted by the timing of scheduled payments to our suppliers at the end of the current period.

During the three months ended December 31, 2024, our operating activities used cash of $2.7 billion and was principally the result of the following:

• An increase in inventories of $1.7 billion to support the increase in business volume and due to seasonal needs;

• An increase in accounts receivable of $974.3 million primarily due to an increase in sales and the timing of scheduled payments from our customers; and

• A decrease in accounts payable of $654.2 million primarily due to the timing of scheduled payments to our suppliers.

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

• Net income of $493.7 million; and

• Positive non-cash items of $390.1 million, which is primarily comprised of amortization expense of $167.8 million and depreciation expense of $113.6 million.

During the three months ended December 31, 2023, our operating activities provided cash of $885.2 million and was principally the result of the following:

• An increase in accounts payable of $1.8 billion primarily due to the increase in our inventory balances and the timing of scheduled payments to our suppliers;

• Net income of $603.0 million; and

• Positive non-cash items of $336.5 million, which is primarily comprised of amortization expense of $168.3 million and depreciation expense of $110.1 million.

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

• An increase in inventories of $1.1 billion to support the increase in business volume and due to seasonal needs;

• An increase in accounts receivable of $504.1 million primarily due to an increase in sales and the timing of scheduled payments from our customers; and

• A decrease in accrued expenses of $239.0 million primarily due to the payment of accrual liabilities that were on our Consolidated Balance Sheet as of September 30, 2023.

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. Any changes to payment terms with a key customer or manufacturer supplier could have a material impact to our cash flows from operations. The addition of any new customer or the loss of an existing customer could have a material impact on our cash flows from operations.

Operating cash flows during the three months ended December 31, 2024 included $48.8 million of interest payments and $29.5 million of income tax payments, net of refunds. Operating cash flows during the three months ended December 31, 2023 included $65.6 million of interest payments and $62.4 million of income tax payments, net of refunds.

Capital expenditures in the three months ended December 31, 2024 and 2023 were $105.9 million and $74.2 million, respectively. Significant capital expenditures in the three months ended December 31, 2024 included investments relating to the expansion and enhancement of our distribution network and various technology initiatives. Significant capital expenditures in the three months ended December 31, 2023 included investments in various technology initiatives, including technology investments at Alliance Healthcare.

We currently expect to invest approximately $600 million for capital expenditures during fiscal 2025. Larger 2025 capital expenditures will include investments relating to the expansion and enhancement of our distribution network and various technology initiatives.

In addition to capital expenditures, net cash used in investing activities in the three months ended December 31, 2024 included $182.0 million for equity investments.

Net cash provided by financing activities in the three months ended December 31, 2024 principally resulted from the $2.0 billion of net borrowings under our revolving credit facilities to cover seasonal short-term working capital needs and the $1.8 billion issuance of senior notes to finance a portion of the acquisition of RCA, offset in part by $385.5 million in purchases of our common stock and $110.9 million in cash dividends paid on our common stock.

Net cash used in financing activities in the three months ended December 31, 2023 principally resulted from $385.5 million in purchases of our common stock and $105.7 million in cash dividends paid on our common stock.

Debt and Credit Facility Availability

The following table illustrates our debt structure as of December 31, 2024, including availability under the multi-currency revolving credit facility; the receivables securitization facility; the term loan facility; the 364-day revolving credit 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 2029. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based upon our debt rating. We 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 December 31, 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 $1,665.9 million of borrowings outstanding under the commercial paper program as of December 31, 2024 and none outstanding as of September 30, 2024.

We have a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which is scheduled to expire in October 2027. 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, monthly, 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 December 31, 2024. There were $350 million of borrowings outstanding under the Receivables Securitization Facility as of December 31, 2024 and none outstanding as of September 30, 2024.

In November 2024, we entered into an agreement pursuant to which we obtained a $1.5 billion senior unsecured term facility (“Term Loan Facility”). The Term Loan Facility became available to us and was drawn on January 2, 2025 to finance a portion of the acquisition of RCA. The Term Loan Facility matures in three years. The Term Loan Facility bears interest at a rate equal to either an adjusted SOFR plus an applicable margin or an alternate base rate plus an applicable margin. The margins are based on our public debt ratings. The Term Loan Facility contains similar covenants to the Multi-Currency Revolving Credit Facility. We have the right to prepay the borrowings under the Term Loan Facility at any time, in whole or in part and without premium or penalty.

In November 2024, we entered into an agreement pursuant to which we obtained a $1.0 billion senior unsecured revolving credit facility (the "364-Day Revolving Credit Facility") with a syndicate of lenders, which is scheduled to expire 364 days after the January 2, 2025 closing of the RCA acquisition, the date on which borrowings under this facility became available to us. Interest on borrowings under the 364-Day Revolving Credit Facility will accrue at a rate equal to either an adjusted SOFR plus an applicable margin or an alternate base rate plus an applicable margin, in each case based on our public debt ratings. We may choose to reduce our commitment under the 364-Revolving Credit Facility at any time. We also have the right to prepay borrowings under the 364-Revolving Credit Facility at any time, in whole or in part and without premium or penalty, provided that the amount of any such prepayment meets certain minimum thresholds.

We have an uncommitted, unsecured line of credit available to us pursuant to a money market credit agreement (the "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. On February 3, 2025, we entered into an amendment to the Money Market Facility pursuant to which we may request short-term unsecured revolving credit loans in a principal amount not to exceed $750 million until June 30, 2025, after which date the facility limit will revert to $100 million. The Money Market Facility may be decreased or terminated by the bank or us at any time without prior notice.

In December 2024, we issued $500 million of 4.625% senior notes due in December 2027 (the "2027 Notes"), $600 million of 4.850% senior notes due in December 2029 (the "2029 Notes"), and $700 million of 5.150% senior notes due in February 2035 (the "2035 Notes"). The 2027 Notes were sold at 99.815% of the principal amount with an effective yield of 4.634%. The 2029 Notes were sold at 99.968% of the principal amount with an effective yield of 4.852%. The 2035 Notes were sold at 99.945% of the principal amount with an effective yield of 5.153%. Interest on the 2027 Notes and the 2029 Notes is payable semi-annually in arrears on June 15 and December 15 beginning on June 15, 2025. Interest on the 2035 Notes is payable semi-annually in arrears on February 15 and August 15 beginning on February 15, 2025. We used the proceeds from the 2027 Notes, the 2029 Notes, and the 2035 Notes to finance a portion of the acquisition of RCA.

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 subsidiaries and is repaid solely from the Brazil subsidiaries' 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 subsidiaries.

Share Purchase Programs and Dividends

In March 2024, our Board of Directors authorized a 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 three months ended December 31, 2024, we purchased $385.4 million of our common stock. As of December 31, 2024, we had $932.2 million of availability under this program.

In November 2024, our Board of Directors increased the quarterly dividend paid on common stock by 8% from $0.51 per share to $0.55 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 9 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 December 31, 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 accrued litigation liability related to the Distributor Settlement Agreement and an estimate for non-participating government subsidiaries (with whom we have not reached a settlement agreement), as well as other opioid-related litigation for which we have reached settlement agreements on our Consolidated Balance Sheet as of December 31, 2024 is $4.8 billion and is expected to be paid over the next 14 years. We currently estimate that $509.3 million will be paid prior to December 31, 2025. 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 December 31, 2024:

The 2017 Tax Act requires a one-time transition tax to be recognized on historical foreign earnings and profits. As of December 31, 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 $553.2 million (including interest and penalties) as of December 31, 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 December 31, 2024 primarily includes an uncertain tax benefit related to the legal accrual for litigation related to the distribution of prescription opioid pain medications, as disclosed in Note 9 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 three months ended December 31, 2024 was approximately 9% 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 $2.1 billion of variable-rate debt outstanding as of December 31, 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 December 31, 2024.

We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had $3.2 billion in cash and cash equivalents as of December 31, 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 and higher borrowing costs 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.

We have no material changes to the disclosures on this matter made in our Annual Report on Form 10-K for the year ended September 30, 2024.

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 first quarter of fiscal 2025, 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 December 31, 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 9 (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, 2024 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 first fiscal quarter ended December 31, 2024. See Note 6, "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.

Executive Officer Trading Arrangements

During the three months ended December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, modified or terminated any contract, instruction, or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act (a “Rule 10b5-1 trading arrangement”) or any non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K), except as follows:

Robert P. Mauch, our President and Chief Executive Officer, adopted a Rule 10b5-1 trading arrangement on November 15, 2024, pursuant to which he may sell up to 34,783 shares of the Company's common stock, including shares to be received upon the exercise of vested stock options, prior to the earlier to occur of August 29, 2025 or completion of all sales under the plan.

Steven H. Collis, our Executive Chairman of the Board, adopted a Rule 10b5-1 trading arrangement on November 25, 2024, pursuant to which he may sell up to 196,099 shares of the Company's common stock, including shares to be received upon the exercise of vested stock options, prior to the earlier to occur of December 1, 2025 or completion of all sales under the plan.

Elizabeth S. Campbell, our Executive Vice President and Chief Legal Officer, adopted a Rule 10b5-1 trading arrangement on December 19, 2024, pursuant to which she may sell up to 6,013 shares of the Company's common stock, prior to the earlier to occur of December 15, 2025 or completion of all sales under the plan.

Each of the above Rule 10b5-1 trading arrangements only permits transactions upon expiration of the applicable mandatory cooling-off period under Rule 10b5-1(c) of the Exchange Act. The number of shares subject to the arrangements includes shares that may be withheld by the Company to satisfy income tax withholding and remittance obligations in connection with the net settlement of equity awards.

Money Market Facility Amendment

The information set forth below is included for the purpose of providing disclosure under "Item 1.01 - Entry into a Material Definitive Agreement" and "Item 2.03 - Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet Arrangement of a Registrant" of Form 8-K.

On February 3, 2025, the Company entered into Amendment No. 1 to the Uncommitted Money Market Line Credit Agreement to amend the Uncommitted Money Market Line Credit Agreement, dated as of June 10, 2022, between the Company and Société Générale, acting through its New York Branch, as the lender, pursuant to which the Company may request short-term unsecured revolving credit loans in a principal amount not to exceed $750 million until June 30, 2025, after which date the facility limit will revert to $100 million (as amended, the “Money Market Facility”).

Borrowings under the Money Market Facility may be used for general corporate purposes. The Company has the right to prepay borrowings under the Money Market Facility at any time without premium or penalty. The Money Market Facility contains certain representations, warranties, covenants and events of default.

Société Générale and its affiliates have various relationships with the Company and have in the past provided, and may in the future provide, banking and other financial services to the Company and its affiliates for which they have received and may continue to receive fees and commissions. In particular, SG Americas Securities, LLC, an affiliate of Société Générale, has served as a joint book-running manager and co-manager in connection with past senior note offerings by the Company, and such affiliates may serve similar roles in future securities offerings by the Company.

The foregoing description of the Money Market Facility is qualified in its entirety by reference to the Uncommitted Money Market Line Credit Agreement and Amendment No. 1 thereto, which are filed hereto as Exhibits 10.5 and 10.6 and incorporated herein by reference.

(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.