Full Press Release Details
| AmerisourceBergen Corporation | |
| P.O. Box 959 | |
| Valley Forge, PA 19482 |
AMERISOURCEBERGEN REPORTS
FISCAL 2019 FIRST QUARTER RESULTS
Revenues of $45.4 Billion for the First Quarter, a 12.2 Percent Increase Year-Over-Year
First Quarter GAAP Diluted EPS of $1.84 and Adjusted Diluted EPS of $1.60
Adjusted Diluted EPS Guidance Narrowed to $6.65 to $6.85 For Fiscal 2019
VALLEY FORGE, PA, January 31, 2019 - AmerisourceBergen Corporation (NYSE:ABC) today reported that in its fiscal year 2019 first quarter ended December 31, 2018, revenue increased 12.2 percent to $45.4 billion. On the basis of U.S. generally accepted accounting principles (GAAP), diluted earnings per share (EPS) was $1.84 for the December quarter of fiscal 2019, compared to $3.90 in the prior year quarter. Adjusted diluted EPS, which is a non-GAAP measure that excludes items described below, increased 3.2 percent to $1.60 in the fiscal first quarter.
The Company narrowed its adjusted diluted EPS guidance for fiscal 2019 to $6.65 to $6.85. The Company does not provide forward-looking guidance on a GAAP basis, as discussed below in Fiscal Year 2019 Expectations.
"We are pleased with the strong start in the first quarter of fiscal 2019. The overall strength and performance of AmerisourceBergen's portfolio of core Pharmaceutical Distribution businesses delivered outstanding results to help offset the headwind from PharMEDium. We are extremely proud and recognize that this would not have been possible without the execution by our dedicated associates," said Steven H. Collis, Chairman, President and Chief Executive Officer of AmerisourceBergen.
"Our fiscal 2019 outlook remains strong, even as we narrowed fiscal 2019 guidance to reflect the extended delay in the reopening of PharMEDium's Memphis facility. AmerisourceBergen's strategic partnerships, leadership in Specialty distribution and services, and strong balance sheet position the company to continue to deliver growth, while we actively work to resolve the challenges at PharMEDium," Mr. Collis continued. "We remain confident in our ability to execute, evolve and transform our business to meet the complex needs of our customers, drive long-term value for our shareholders and ultimately enable access for patients. More than ever, we are united in our responsibility to create healthier futures."
First Quarter Fiscal Year 2019 Summary Results
| GAAP | Adjusted (Non-GAAP) | |
| Revenue | $45.4B | $45.4B |
| Gross Profit | $1.3B | $1.2B |
| Operating Expenses | $820M | $731M |
| Operating Income | $478M | $472M |
| Interest Expense, Net | $42M | $42M |
| Effective Tax Rate | 9.4% | 19.9% |
| Net Income Attributable to ABC | $394M | $343M |
| Diluted Earnings Per Share | $1.84 | $1.60 |
| Diluted Shares Outstanding | 214M | 214M |
Below, AmerisourceBergen presents descriptive summaries of the Company's GAAP quarterly results as well as its adjusted (non-GAAP) quarterly results. In the tables that follow, GAAP results and GAAP to non-GAAP reconciliations are presented. For more information related to non-GAAP financial measures, including our fiscal year 2019 expectations, please refer to the Supplemental Information Regarding non-GAAP Financial Measures following the tables.
First Quarter GAAP Results
Definition of Adjusted (non-GAAP) Results
The comments below compare adjusted results, which exclude:
First Quarter Adjusted (non-GAAP) Results
H. D. Smith, and the January 2018 consolidation of Profarma, and was partially offset by a lower contribution from PharMEDium. Adjusted gross profit as a percentage of revenue was 2.65 percent, a decrease of 10 basis points from the prior year quarter.
The Company's operations are comprised of the Pharmaceutical Distribution Services reportable segment and other operating segments that are not significant enough to require separate reportable segment disclosure and, therefore, have been included in Other for the purpose of reportable segment presentation. Other consists of operating segments that focus on global commercialization services and animal health and includes AmerisourceBergen Consulting Services (ABCS), World Courier and MWI Animal Health (MWI).
Pharmaceutical Distribution Services Segment
Pharmaceutical Distribution Services revenue was $43.7 billion, an increase of 12.3 percent compared to the same quarter in the prior fiscal year. Segment operating income of $373.2 million in the December quarter of fiscal 2019 was down 3.9 percent compared to the same period in the previous fiscal year, due to a loss at PharMEDium compared to a significant contribution in the prior year period.
Revenue in Other was $1.7 billion in the first quarter of fiscal 2019, an increase of 8.2 percent compared to the same period in the prior fiscal year, primarily due to the January 2018 consolidation of the specialty joint venture in Brazil, growth at World Courier and ABCS's growth in its Canadian operations. Operating income in Other decreased 1.3 percent to $98.9 million in the first quarter of fiscal 2019. This decrease was primarily driven by a decline in operating income at MWI and the Lash consulting group within ABCS, and was partially offset by the increased contribution from World Courier.
Recent Company Highlights & Milestones
Fiscal Year 2019 Expectations
The Company does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. Please refer to the Supplemental Information Regarding Non-GAAP Financial Measures following the tables for additional information.
Fiscal Year 2019 Expectations on an Adjusted (non-GAAP) Basis
AmerisourceBergen has updated its fiscal year 2019 financial guidance based upon the Company's evaluation of business expectations at PharMEDium which reflect the assumption that its Memphis facility will not reopen in this fiscal year. Updated guidance also incorporates the higher than anticipated level of share repurchases in the first quarter of the fiscal year. The company now expects:
Additional expectations now include:
All other previously communicated aspects of the Company's fiscal year 2019 financial guidance and assumptions remain the same.
Conference Call & Slide Presentation
The Company will host a conference call to discuss the results at 8:30 a.m. ET on January 31, 2019. A slide presentation for investors has also been posted on the Company's website at investor.amerisourcebergen.com. Participating in the conference call will be:
Steven H. Collis, Chairman, President & Chief Executive Officer
James F. Cleary, Jr., Executive Vice President & Chief Financial Officer
The dial-in number for the live call will be (612) 234-9960. No access code is required. The live call will also be webcast via the Company's website at investor.amerisourcebergen.com. Users are encouraged to log on to the webcast approximately 10 minutes in advance of the scheduled start time of the call.
Replays of the call will be made available via telephone and webcast. A replay of the webcast will be posted on investor.amerisourcebergen.com approximately two hours after the completion of the call and will remain available for 30 days. The telephone replay will also be available approximately two hours after the completion of the call and will remain available for seven days. To access the telephone replay from within the U.S., dial (800) 475-6701. From outside the U.S., dial (320) 365-3844. The access code for the replay is 461495.
Upcoming Investor Events
AmerisourceBergen management will be attending the following investor conferences in the coming months:
CECP CEO Investor Forum, February 25, New York;
Barclays Global Healthcare Conference, March 12-14, Miami.
Please check the website for updates regarding the timing of the live presentation webcasts, if any, and for replay information.
About AmerisourceBergen
AmerisourceBergen provides pharmaceutical products, value-driving services and business solutions that improve access to care. Tens of thousands of healthcare providers, veterinary practices and livestock producers trust us as their partner in the pharmaceutical supply chain. Global manufacturers depend on us for services that drive commercial success for their products. Through our daily work-and powered by our 21,000 associates-we are united in our responsibility to create healthier futures. AmerisourceBergen is ranked #12 on the Fortune 500, with more than $160 billion in annual revenue. The company is headquartered in Valley Forge, Pa. and has a presence in 50+ countries. Learn more at investor.amerisourcebergen.com.
AmerisourceBergen's Cautionary Note Regarding Forward-Looking Statements
Certain of the statements contained in this press release are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Words such as "expect," "likely," "outlook," "forecast," "would," "could," "should," "can," "project," "intend," "plan," "continue," "sustain," "synergy," "on track," "believe," "seek," "estimate," "anticipate," "may," "possible," "assume," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and change in circumstances. These statements are not guarantees of future performance and are based on assumptions that could prove incorrect or could cause actual results to vary materially from those indicated. Among the factors that could cause actual results to differ materially from those projected, anticipated, or implied are the following: unfavorable trends in brand and generic pharmaceutical pricing, including in rate or frequency of price inflation or deflation; competition and industry consolidation of both customers and suppliers resulting in increasing pressure to reduce prices for our products and services; changes in pharmaceutical market growth rates; changes in the United States healthcare and regulatory environment, including changes that could impact prescription drug reimbursement under Medicare and Medicaid; increasing governmental regulations regarding the pharmaceutical supply channel and pharmaceutical compounding; declining reimbursement rates for pharmaceuticals; federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances; increased public concern over the abuse of opioid medications; prosecution or suit by federal, state and other governmental entities 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; material adverse resolution of pending legal proceedings; 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 payment terms; risks associated with the strategic, long-term relationship between Walgreens Boots Alliance, Inc. and the Company, including principally with respect to the pharmaceutical distribution agreement and/or the global generic purchasing services arrangement; 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; regulatory or enforcement action, including a consent decree, in connection with the production, labeling or packaging of products compounded by our compounded sterile preparations (CSP) business; suspension of production of CSPs, including continued suspension at our Memphis facility; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws and economic sanctions and import laws and regulations; financial market volatility and disruption; substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; the loss, bankruptcy or insolvency of a major supplier; changes to the customer or supplier mix; malfunction, failure or breach of sophisticated information systems to operate as designed; risks generally associated with data privacy regulation and the international transfer of personal data; natural disasters or other unexpected events that affect the Company's operations; the impairment of goodwill or other intangible assets (including with respect to foreign operations), resulting in a charge to earnings; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, including the integration of H. D. Smith and PharMEDium, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period; the effects of disruption from the transactions on the respective businesses of the Company and H. D. Smith and the fact that the transactions may make it more difficult to establish or maintain relationships with employees, suppliers, customers and other business partners; the Company's ability to manage and complete divestitures; the disruption of the Company's cash flow and ability to return value to its stockholders in accordance with its past practices; interest rate and foreign currency exchange rate fluctuations; declining economic conditions in the United States and abroad; and other economic, business, competitive, legal, tax, regulatory and/or operational factors affecting the Company's business generally. Certain additional factors that management believes could cause actual outcomes and results to differ materially from those described in forward-looking statements are set forth (i) in Item 1A (Risk Factors), in the Company's Annual Report on Form
10-K for the fiscal year ended September 30, 2018 and elsewhere in that report and (ii) in other reports filed by the Company pursuant to the Securities Exchange Act.
AMERISOURCEBERGEN CORPORATION
(In thousands, except per share data)
| Three Months Ended December 31, 2018 | % of Revenue | Three Months Ended December 31, 2017 | % of Revenue | % Change | ||||||||||
| Revenue | $ | 45,392,452 | $ | 40,466,332 | 12.2% | |||||||||
| Cost of goods sold | 44,094,872 | 39,353,680 | 12.0% | |||||||||||
| Gross profit 1 | 1,297,580 | 2.86% | 1,112,652 | 2.75% | 16.6% | |||||||||
| Operating expenses: | ||||||||||||||
| Distribution, selling, and administrative | 656,585 | 1.45% | 558,522 | 1.38% | 17.6% | |||||||||
| Depreciation and amortization | 122,500 | 0.27% | 105,136 | 0.26% | 16.5% | |||||||||
| Employee severance, litigation, and other 2 | 40,672 | 30,021 | ||||||||||||
| Total operating expenses | 819,757 | 1.81% | 693,679 | 1.71% | 18.2% | |||||||||
| Operating income | 477,823 | 1.05% | 418,973 | 1.04% | 14.0% | |||||||||
| Other loss | 3,097 | 324 | ||||||||||||
| Interest expense, net | 42,170 | 35,864 | 17.6% | |||||||||||
| Loss on early retirement of debt | - | 23,766 | ||||||||||||
| Income before income taxes | 432,556 | 0.95% | 359,019 | 0.89% | 20.5% | |||||||||
| Income tax expense (benefit) | 40,803 | (502,834 | ) | |||||||||||
| Net income | 391,753 | 0.86% | 861,853 | 2.13% | (54.5)% | |||||||||
| Net loss attributable to noncontrolling interest | 1,899 | - | ||||||||||||
| Net income attributable to AmerisourceBergen Corporation | $ | 393,652 | 0.87% | $ | 861,853 | 2.13% | (54.3)% | |||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | 1.86 | $ | 3.95 | (52.9)% | |||||||||
| Diluted | $ | 1.84 | $ | 3.90 | (52.8)% | |||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 212,054 | 218,323 | (2.9)% | |||||||||||
| Diluted | 213,969 | 220,822 | (3.1)% |
________________________________________
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
| Three Months Ended December 31, 2018 | |||||||||||||||||||||||||||||||||
| Gross Profit | Operating Expenses | Operating Income | Income Before Income Taxes | Income Tax Expense | Net Loss Attributable to Noncontrolling Interest | Net Income Attributable to ABC | Diluted Earnings Per Share | ||||||||||||||||||||||||||
| GAAP | $ | 1,297,580 | $ | 819,757 | $ | 477,823 | $ | 432,556 | $ | 40,803 | $ | 1,899 | $ | 393,652 | $ | 1.84 | |||||||||||||||||
| Gain from antitrust litigation settlements | (87,279 | ) | - | (87,279 | ) | (87,279 | ) | (18,470 | ) | - | (68,809 | ) | (0.32 | ) | |||||||||||||||||||
| LIFO credit | (3,029 | ) | - | (3,029 | ) | (3,029 | ) | (641 | ) | - | (2,388 | ) | (0.01 | ) | |||||||||||||||||||
| PharMEDium remediation costs | 17,911 | (2,584 | ) | 20,495 | 20,495 | 4,337 | - | 16,158 | 0.08 | ||||||||||||||||||||||||
| New York State Opioid Stewardship Act | (22,000 | ) | - | (22,000 | ) | (22,000 | ) | (4,656 | ) | - | (17,344 | ) | (0.08 | ) | |||||||||||||||||||
| Acquisition-related intangibles amortization | - | (45,152 | ) | 45,152 | 45,152 | 9,555 | (506 | ) | 35,091 | 0.16 | |||||||||||||||||||||||
| Employee severance, litigation, and other | - | (40,672 | ) | 40,672 | 40,672 | 16,980 | - | 23,692 | 0.11 | ||||||||||||||||||||||||
| Tax reform 1 | - | - | - | - | 36,997 | - | (36,997 | ) | (0.17 | ) | |||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 1,203,183 | $ | 731,349 | $ | 471,834 | $ | 426,567 | $ | 84,905 | $ | 1,393 | $ | 343,055 | $ | 1.60 | 2 | ||||||||||||||||
| Adjusted Non-GAAP % change vs. prior year period | 8.1 | % | 17.1 | % | (3.3 | )% | (5.6 | )% | (22.5 | )% | 0.2 | % | 3.2 | % |
| Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
| Gross profit | 2.86% | 2.65% | ||
| Operating expenses | 1.81% | 1.61% | ||
| Operating income | 1.05% | 1.04% |
Note: For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION
GAAP TO NON-GAAP RECONCILIATIONS
(in thousands, except per share data)
| Three Months Ended December 31, 2017 | ||||||||||||||||||||||||||||||||
| Gross Profit | Operating Expenses | Operating Income | Loss on Early Retirement of Debt | Income Before Income Taxes | Income Tax (Benefit) Expense | Net Income Attributable to ABC | Diluted Earnings Per Share | |||||||||||||||||||||||||
| GAAP | $ | 1,112,652 | $ | 693,679 | $ | 418,973 | $ | 23,766 | $ | 359,019 | $ | (502,834 | ) | $ | 861,853 | $ | 3.90 | |||||||||||||||
| Acquisition-related intangibles amortization | - | (39,056 | ) | 39,056 | - | 39,151 | 10,435 | 28,716 | 0.13 | |||||||||||||||||||||||
| Employee severance, litigation, and other | - | (30,021 | ) | 30,021 | - | 30,021 | 8,001 | 22,020 | 0.10 | |||||||||||||||||||||||
| Loss on early retirement of debt | - | - | - | (23,766 | ) | 23,766 | 6,334 | 17,432 | 0.08 | |||||||||||||||||||||||
| Tax Reform 1 | - | - | - | - | - | 587,595 | (587,595 | ) | (2.66 | ) | ||||||||||||||||||||||
| Adjusted Non-GAAP | $ | 1,112,652 | $ | 624,602 | $ | 488,050 | $ | - | $ | 451,957 | $ | 109,531 | $ | 342,426 | $ | 1.55 |
| Percentages of Revenue: | GAAP | Adjusted Non-GAAP | ||
| Gross profit | 2.75% | 2.75% | ||
| Operating expenses | 1.71% | 1.54% | ||
| Operating income | 1.04% | 1.21% |
________________________________________
Note: For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
| Three Months Ended December 31, | ||||||||||
| Revenue | 2018 | 2017 | % Change | |||||||
| Pharmaceutical Distribution Services | $ | 43,744,381 | $ | 38,937,698 | 12.3% | |||||
| Other | 1,670,938 | 1,544,951 | 8.2% | |||||||
| Intersegment eliminations | (22,867 | ) | (16,317 | ) | ||||||
| Revenue | $ | 45,392,452 | $ | 40,466,332 | 12.2% |
| Three Months Ended December 31, | ||||||||||
| Operating income | 2018 | 2017 | % Change | |||||||
| Pharmaceutical Distribution Services | $ | 373,207 | $ | 388,182 | (3.9)% | |||||
| Other | 98,934 | 100,275 | (1.3)% | |||||||
| Intersegment eliminations | (307 | ) | (407 | ) | ||||||
| Total segment operating income | 471,834 | 488,050 | (3.3)% | |||||||
| Gain from antitrust litigation settlements | 87,279 | - | ||||||||
| PharMEDium remediation costs | (20,495 | ) | - | |||||||
| LIFO credit | 3,029 | - | ||||||||
| New York State Opioid Stewardship Act | 22,000 | - | ||||||||
| Acquisition-related intangibles amortization | (45,152 | ) | (39,056 | ) | ||||||
| Employee severance, litigation, and other | (40,672 | ) | (30,021 | ) | ||||||
| Operating income | $ | 477,823 | $ | 418,973 | ||||||
| Percentages of revenue: | ||||||||||
| Pharmaceutical Distribution Services | ||||||||||
| Gross profit | 2.01% | 2.04% | ||||||||
| Operating expenses | 1.16% | 1.04% | ||||||||
| Operating income | 0.85% | 1.00% | ||||||||
| Other | ||||||||||
| Gross profit | 19.45% | 20.75% | ||||||||
| Operating expenses | 13.53% | 14.26% | ||||||||
| Operating income | 5.92% | 6.49% | ||||||||
| AmerisourceBergen Corporation (GAAP) | ||||||||||
| Gross profit | 2.86% | 2.75% | ||||||||
| Operating expenses | 1.81% | 1.71% | ||||||||
| Operating income | 1.05% | 1.04% | ||||||||
| AmerisourceBergen Corporation (Non-GAAP) | ||||||||||
| Adjusted gross profit | 2.65% | 2.75% | ||||||||
| Adjusted operating expenses | 1.61% | 1.54% | ||||||||
| Adjusted operating income | 1.04% | 1.21% |
Note: For more information related to non-GAAP financial measures, refer to the section titled "Supplemental Information Regarding Non-GAAP Financial Measures" of this release.
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31, | September 30, | ||||||
| 2018 | 2018 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 2,540,156 | $ | 2,492,516 | |||
| Accounts receivable, net | 11,979,382 | 11,314,226 | |||||
| Merchandise inventories | 11,800,185 | 11,918,508 | |||||
| Right to recover asset 1 | 973,837 | - | |||||
| Prepaid expenses and other | 182,647 | 169,122 | |||||
| Total current assets | 27,476,207 | 25,894,372 | |||||
| Property and equipment, net | 1,896,943 | 1,892,424 | |||||
| Goodwill and other intangible assets | 9,622,245 | 9,612,100 | |||||
| Other long-term assets | 272,428 | 270,942 | |||||
| Total assets | $ | 39,267,823 | $ | 37,669,838 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 28,336,293 | $ | 26,836,873 | |||
| Other current liabilities | 1,015,444 | 1,032,814 | |||||
| Total current liabilities | 29,351,737 | 27,869,687 | |||||
| Long-term debt | 4,165,400 | 4,158,532 | |||||
| Accrued income taxes | 269,906 | 299,600 | |||||
| Deferred income taxes | 1,879,532 | 1,829,410 | |||||
| Other long-term liabilities | 436,515 | 462,648 | |||||
| Total equity | 3,164,733 | 3,049,961 | |||||
| Total liabilities and equity | $ | 39,267,823 | $ | 37,669,838 |
1 Right to recover assets represents the estimated inventory value associated with the accrual for estimated customer sales returns.
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Three Months Ended December 31, | |||||||
| 2018 | 2017 | ||||||
| Operating Activities: | |||||||
| Net income | $ | 391,753 | $ | 861,853 | |||
| Adjustments to reconcile net income to net cash provided by operating activities 1 | 206,905 | (675,558 | ) | ||||
| Changes in operating assets and liabilities, excluding the effects of acquisitions: | |||||||
| Accounts receivable | (658,890 | ) | 91,624 | ||||
| Merchandise inventories | (898,775 | ) | (460,127 | ) | |||
| Accounts payable | 1,498,643 | (59,223 | ) | ||||
| Other 2 | (60,668 | ) | 251,757 | ||||
| Net cash provided by operating activities | 478,968 | 10,326 | |||||
| Investing Activities: | |||||||
| Capital expenditures | (79,233 | ) | (73,641 | ) | |||
| Cost of acquired companies, net of cash acquired | (52,398 | ) | (70,330 | ) | |||
| Other | 4,013 | 1,648 | |||||
| Net cash used in investing activities | (127,618 | ) | (142,323 | ) | |||
| Financing Activities: | |||||||
| Net borrowings 3 | 8,442 | 844,193 | |||||
| Purchases of common stock 4 | (239,008 | ) | (22,496 | ) | |||
| Payment of premium on early retirement of debt | - | (22,348 | ) | ||||
| Exercises of stock options | 22,400 | 29,574 | |||||
| Cash dividends on common stock | (85,535 | ) | (83,555 | ) | |||
| Other | (10,009 | ) | (10,739 | ) | |||
| Net cash (used in) provided by financing activities | (303,710 | ) | 734,629 | ||||
| Increase in cash and cash equivalents | 47,640 | 602,632 | |||||
| Cash and cash equivalents at beginning of period | 2,492,516 | 2,435,115 | |||||
| Cash and cash equivalents at end of period | $ | 2,540,156 | $ | 3,037,747 |
________________________________________
3 Net borrowings in the three months ended December 31, 2017 were primarily used to finance the acquisition of H.D. Smith, which was completed on January 2, 2018.
SUPPLEMENTAL INFORMATION REGARDING
NON-GAAP FINANCIAL MEASURES
To supplement the financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company uses the non-GAAP financial measures described below. The non-GAAP financial measures should be viewed in addition to, and not in lieu of, financial measures calculated in accordance with GAAP. These supplemental measures may vary from, and may not be comparable to, similarly titled measures by other companies.
The non-GAAP financial measures are presented because management uses non-GAAP financial measures to evaluate the Company's operating performance, to perform financial planning, and to determine incentive compensation. Therefore, the Company believes that the presentation of non-GAAP financial measures provides useful supplementary information to, and facilitates additional analysis by, investors. The presented non-GAAP financial measures exclude items that management does not believe reflect the Company's core operating performance because such items are outside the control of the Company or are inherently unusual, non-operating, unpredictable, non-recurring, or non-cash. We have included the following non-GAAP earnings-related financial measures in this release:
before income taxes. In addition, the one-time U.S. tax reform ("Tax Reform") adjustments are excluded from adjusted income tax expense. Tax Reform includes a benefit, and any measurement period adjustments, from applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities as of December 31, 2017, offset in part by a one-time transition tax on historical foreign earnings and profits through December 31, 2017. Management believes that this non-GAAP financial measure is useful to investors as a supplemental way to evaluate the Company's performance because the adjustments are unusual, non-operating, unpredictable, non-recurring or non-cash in nature.
In addition, the Company has provided non-GAAP fiscal year 2019 guidance for diluted earnings per share, operating expense, operating income, and effective income tax rate that excludes the same or similar items as those that are excluded from the historical non-GAAP financial measures, as well as significant items that are outside the control of the Company or inherently unusual, non-operating, unpredictable, non-recurring or non-cash in nature. In addition, it has provided fiscal year 2019 adjusted free cash flow guidance. For fiscal year 2019, we have defined the non-GAAP financial measure of adjusted free cash flow as net cash provided by operating activities, excluding other significant unpredictable or non-recurring cash payments or receipts relating to legal settlements, minus capital expenditures. The Company does not provide forward looking guidance on a GAAP basis for such metrics because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. For example, LIFO expense (credit) is largely dependent upon the future inflation or deflation of brand and generic pharmaceuticals, which is out of the Company's control, and acquisition-related intangibles amortization depends on the timing and amount of future acquisitions, which cannot be reasonably estimated. Similarly, the timing and amount of litigation settlements is unpredictable and non-recurring.
Contacts: Bennett S. Murphy
Vice President, Investor Relations