cor-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2024

☐ 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,

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 April 26, 2024 was 199,451,791.

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CENCORA, INC.

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			Page No.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets as of March 31, 2024 and September 30, 2023			4

Consolidated Statements of Operations for the three and six months ended March 31, 2024 and 2023			5

Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2024 and 2023			6

Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended March 31, 2024 and 2023			8

Consolidated Statements of Cash Flows for the six months ended March 31, 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

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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;

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•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.

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PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)	March 31, 2024		September 30, 2023
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,068,858	$	2,592,051
Accounts receivable, less allowances for returns and credit losses: $1,330,778 as of March 31, 2024 and $1,433,396 as of September 30, 2023	22,642,880		20,911,081
Inventories	17,630,985		17,454,768
Right to recover assets	1,194,915		1,314,857
Income tax receivable	111,375		77,120
Prepaid expenses and other	512,039		448,949
Total current assets	44,161,052		42,798,826

Property and equipment, net	2,089,497		2,135,171
Goodwill	9,619,024		9,574,117
Other intangible assets	4,175,587		4,431,783
Deferred income taxes	256,890		200,667
Other assets	3,565,996		3,418,182

TOTAL ASSETS	$	63,868,046	$	62,558,746

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	46,320,774	$	45,836,037
Accrued expenses and other	2,371,885		2,353,817
Short-term debt	1,069,152		641,344
Total current liabilities	49,761,811		48,831,198

Long-term debt	4,180,306		4,146,113
Accrued income taxes	315,559		310,676
Deferred income taxes	1,701,735		1,657,944
Accrued litigation liability	4,719,545		5,061,795
Other liabilities	1,962,068		1,884,733
Commitments and contingencies (Note 10)

Stockholders’ equity:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 295,905,875 shares, and 199,388,633 shares as of March 31, 2024, respectively, and 600,000,000 shares, 294,822,962 shares, and 200,814,804 shares as of September 30, 2023, respectively	2,959		2,948
Additional paid-in capital	5,953,642		5,844,578
Retained earnings	5,133,770		4,324,187
Accumulated other comprehensive loss	(1,260,288)		(1,402,607)
Treasury stock, at cost: 96,517,242 shares as of March 31, 2024 and 94,008,158 shares as of September 30, 2023	(8,746,941)		(8,247,103)
Total Cencora, Inc. stockholders' equity	1,083,142		522,003
Noncontrolling interest	143,880		144,284
Total stockholders' equity	1,227,022		666,287

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	63,868,046	$	62,558,746

See notes to consolidated financial statements.

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CENCORA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,				Six months ended March 31,
(in thousands, except per share data)	2024		2023		2024		2023
Revenue	$	68,414,307	$	63,457,205	$	140,667,140	$	126,304,037
Cost of goods sold	65,876,284		61,161,763		135,660,305		121,862,642
Gross profit	2,538,023		2,295,442		5,006,835		4,441,395
Operating expenses:
Distribution, selling, and administrative	1,388,810		1,321,087		2,787,557		2,612,015
Depreciation	106,230		100,681		210,408		200,223
Amortization	165,502		140,785		331,927		213,183
Litigation and opioid-related expenses, net	225,985		15,813		147,068		28,519
Acquisition-related deal and integration expenses	22,610		59,113		43,673		80,109
Restructuring and other expenses	75,627		97,444		110,068		113,684
Operating income	553,259		560,519		1,376,134		1,193,662
Other loss (income), net	22,063		(15,720)		20,976		(22,048)
Interest expense, net	64,130		64,109		104,694		110,125
Income before income taxes	467,066		512,130		1,250,464		1,105,585
Income tax expense	45,861		83,917		226,251		201,202
Net income	421,205		428,213		1,024,213		904,383
Net (income) loss attributable to noncontrolling interests	(430)		7,189		(1,938)		10,764
Net income attributable to Cencora, Inc.	$	420,775	$	435,402	$	1,022,275	$	915,147

Earnings per share:
Basic	$	2.11	$