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, ~~2020~~2021

☐ 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

AMERISOURCEBERGEN ~~CORPORATION~~CORPORATION

(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

~~1300 Morris Drive~~

~~Chesterbrook,~~

~~19087-5594~~

(Address of principal executive offices)

(Zip Code)

(~~610~~) (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	ABC	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 AmerisourceBergen Corporation outstanding as of ~~May 4, 2020~~April 30, 2021 was ~~203,402,770.~~

205,410,717.

Table of Contents

AMERISOURCEBERGEN CORPORATION

TABLE OF CONTENTS



			Page No.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Balance Sheets as of March 31, ~~2020~~2021 and September 30, ~~2019~~2020			2

Consolidated Statements of Operations for the three and six months ended March 31, ~~2020~~2021 and ~~2019~~2020			3

Consolidated Statements of Comprehensive Income for the three months and six months ended March 31, ~~2020~~2021 and ~~2019~~2020			4

Consolidated Statements of Changes in Stockholders' Equity for the three months and six months ended March 31, ~~2020~~2021 and ~~2019~~2020			5

Consolidated Statements of Cash Flows for the six months ended March 31, ~~2020~~2021 and ~~2019~~2020			7

Notes to Consolidated Financial Statements			8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2320

Item 3. Quantitative and Qualitative Disclosures About Market Risk			3634

Item 4. Controls and Procedures			3634

Part II. OTHER INFORMATION

Item 1. Legal Proceedings			3735

Item 1A. Risk Factors			3735

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3836

Item 3. Defaults Upon Senior Securities			3836

Item 4. Mine Safety Disclosures			3836

Item 5. Other Information			3836

Item 6. Exhibits			3937

SIGNATURES			4038

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(in thousands, except share and per share data)	March 31, 2020			September 30, 2019			(in thousands, except share and per share data)	March 31, 2021		September 30, 2020
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	3,691,938		$	3,374,194		Cash and cash equivalents	$	6,641,180	$	4,597,746
Accounts receivable, less allowances for returns and doubtful accounts: $1,389,812 as of March 31, 2020 and $1,222,906 as of September 30, 2019	14,210,170			12,386,879
Accounts receivable, less allowances for returns and credit losses: $1,318,643 as of March 31, 2021 and $1,417,308 as of September 30, 2020							Accounts receivable, less allowances for returns and credit losses: $1,318,643 as of March 31, 2021 and $1,417,308 as of September 30, 2020	14,134,326		13,846,301
Inventories	11,102,566			11,060,254			Inventories	12,954,676		12,589,278
Right to recover asset	1,301,108			1,147,483
Income tax receivable (Note 4)	699,494			5,859
Right to recover assets							Right to recover assets	1,217,032		1,344,649
Income tax receivable							Income tax receivable	331,291		488,428
Prepaid expenses and other	175,374			157,385			Prepaid expenses and other	190,644		189,300
Total current assets	31,180,650			28,132,054			Total current assets	35,469,149		33,055,702

Property and equipment, net	1,421,768			1,770,516			Property and equipment, net	1,482,753		1,484,808
Goodwill	6,704,133			6,705,507			Goodwill	6,709,821		6,706,719
Other intangible assets	1,935,448			2,294,836			Other intangible assets	1,839,085		1,886,107
Deferred income taxes							Deferred income taxes	302,554		361,640
Other assets	800,263			269,067			Other assets	1,199,888		779,854

TOTAL ASSETS	$	42,042,262		$	39,171,980		TOTAL ASSETS	$	47,003,250	$	44,274,830

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ DEFICIT							LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:							Current liabilities:
Accounts payable	$	30,719,987		$	28,385,074		Accounts payable	$	31,420,390	$	31,705,055
Accrued expenses and other	868,996			1,057,208			Accrued expenses and other	1,532,171		1,646,763
Short-term debt	522,807			139,012			Short-term debt	43,885		501,259
Total current liabilities	32,111,790			29,581,294			Total current liabilities	32,996,446		33,853,077

Long-term debt	3,622,387			4,033,880			Long-term debt	6,147,112		3,618,261
Long-term financing obligation (Note 1)	—			320,518
Accrued income taxes	279,403			284,075			Accrued income taxes	273,031		284,845
Deferred income taxes	1,843,910			1,860,195			Deferred income taxes	768,551		686,485
Accrued litigation liability							Accrued litigation liability	6,212,718		6,198,943
Other liabilities	479,659			98,812			Other liabilities	708,174		472,855
Commitments and contingencies (Note 10)							Commitments and contingencies (Note 10)	0		0

Stockholders’ equity:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 286,754,370 shares, and 203,351,729 shares as of March 31, 2020, respectively, and 600,000,000 shares, 285,295,170 shares, and 206,760,654 shares as of September 30, 2019, respectively	2,868			2,853
Stockholders’ deficit:							Stockholders’ deficit:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 289,959,239 shares, and 205,326,154 shares as of March 31, 2021, respectively, and 600,000,000 shares, 287,790,479 shares, and 204,226,465 shares as of September 30, 2020, respectively							Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 289,959,239 shares, and 205,326,154 shares as of March 31, 2021, respectively, and 600,000,000 shares, 287,790,479 shares, and 204,226,465 shares as of September 30, 2020, respectively	2,900		2,878
Additional paid-in capital	4,972,109			4,850,142			Additional paid-in capital	5,278,379		5,081,776
Retained earnings	5,248,005			4,235,491			Retained earnings	1,124,976		518,335
Accumulated other comprehensive loss	(132,808		)	(111,965		)	Accumulated other comprehensive loss	(69,248)		(108,830)
Treasury stock, at cost: 83,402,641 shares as of March 31, 2020 and 78,534,516 shares as of September 30, 2019	(6,499,584		)	(6,097,604		)
Total AmerisourceBergen Corporation stockholders' equity	3,590,590			2,878,917
Noncontrolling interest	114,523			114,289
Total equity	3,705,113			2,993,206
Treasury stock, at cost: 84,633,085 shares as of March 31, 2021 and 83,564,014 shares as of September 30, 2020							Treasury stock, at cost: 84,633,085 shares as of March 31, 2021 and 83,564,014 shares as of September 30, 2020	(6,618,763)		(6,513,083)
Total AmerisourceBergen Corporation stockholders' deficit							Total AmerisourceBergen Corporation stockholders' deficit	(281,756)		(1,018,924)
Noncontrolling interests							Noncontrolling interests	178,974		179,288
Total deficit							Total deficit	(102,782)		(839,636)

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	42,042,262		$	39,171,980
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT							TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	47,003,250	$	44,274,830

See notes to consolidated financial statements.

Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended March 31,						Six months ended March 31,							Three months ended March 31,				Six months ended March 31,
(in thousands, except per share data)	2020			2019			2020			2019			(in thousands, except per share data)	2021		2020		2021		2020
Revenue	$	47,417,639		$	43,319,602		$	95,282,381		$	88,712,054		Revenue	$	49,154,171	$	47,417,639	$	101,670,727	$	95,282,381
Cost of goods sold	46,029,532			41,894,846			92,663,060			85,989,718			Cost of goods sold	47,620,790		46,029,532		98,685,116		92,663,060
Gross profit	1,388,107			1,424,756			2,619,321			2,722,336			Gross profit	1,533,381		1,388,107		2,985,611		2,619,321
Operating expenses:													Operating expenses:
Distribution, selling, and administrative	693,413			628,036			1,379,366			1,284,621			Distribution, selling, and administrative	730,081		693,413		1,465,149		1,379,366
Depreciation	69,796			75,219			139,040			150,581			Depreciation	75,270		69,796		149,215		139,040
Amortization	23,999			48,547			59,270			95,685			Amortization	25,527		23,999		51,135		59,270
Employee severance, litigation, and other	67,732			55,389			107,041			96,061			Employee severance, litigation, and other	78,156		67,732		148,537		107,041
Impairment of PharMEDium assets (Note 5)	223,652			570,000			361,652			570,000
Impairment of PharMEDium assets													Impairment of PharMEDium assets	0		223,652		0		361,652
Operating income	309,515			47,565			572,952			525,388			Operating income	624,347		309,515		1,171,575		572,952
Other (income) loss	(1,109		)	(14,494		)	1,733			(11,397		)
Other loss (income), net													Other loss (income), net	23,310		(1,109)		9,042		1,733
Interest expense, net	34,421			43,275			65,428			85,445			Interest expense, net	34,526		34,421		68,140		65,428

Income before income taxes	276,203			18,784			505,791			451,340			Income before income taxes	566,511		276,203		1,094,393		505,791
Income tax (benefit) expense	(694,908		)	(9,289		)	(651,888		)	31,514
Income tax expense (benefit)													Income tax expense (benefit)	132,506		(694,908)		281,681		(651,888)
Net income	971,111			28,073			1,157,679			419,826			Net income	434,005		971,111		812,712		1,157,679
Net (income) loss attributable to noncontrolling interest	(10,834		)	(938		)	(9,762		)	961
Net loss (income) attributable to noncontrolling interests													Net loss (income) attributable to noncontrolling interests	1,262		(10,834)		(2,600)		(9,762)
Net income attributable to AmerisourceBergen Corporation	$	960,277		$	27,135		$	1,147,917		$	420,787		Net income attributable to AmerisourceBergen Corporation	$	435,267	$	960,277	$	810,112	$	1,147,917

Earnings per share:													Earnings per share:
Basic	$	4.68		$	0.13		$	5.58		$	1.99		Basic	$	2.12	$	4.68	$	3.96	$	5.58
Diluted	$	4.64		$	0.13		$	5.54		$	1.97		Diluted	$	2.10	$	4.64	$	3.91	$	5.54

Weighted average common shares outstanding:													Weighted average common shares outstanding:
Basic	205,370			210,934			205,693			211,503			Basic	204,916		205,370		204,804		205,693
Diluted	207,062			212,563			207,293			213,275			Diluted	207,315		207,062		207,063		207,293

Cash dividends declared per share of common stock	$	0.42		$	0.40		$	0.82		$	0.80		Cash dividends declared per share of common stock	$	0.44	$	0.42	$	0.88	$	0.82

See notes to consolidated financial statements.

Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three months ended March 31,						Six months ended March 31,							Three months ended March 31,			Six months ended March 31,
(in thousands)	2020			2019			2020			2019			(in thousands)		2021		2020		2021		2020
Net income	$	971,111		$	28,073		$	1,157,679		$	419,826		Net income		$	434,005	$	971,111	$	812,712	$	1,157,679
Other comprehensive (loss) income													Other comprehensive (loss) income
Foreign currency translation adjustments	(55,858		)	7,414			(30,405		)	(3,960		)	Foreign currency translation adjustments		(4,219)		(55,858)		39,939		(30,405)
Other	15			225			34			113			Other		0		15		0		34
Total other comprehensive (loss) income	(55,843		)	7,639			(30,371		)	(3,847		)	Total other comprehensive (loss) income		(4,219)		(55,843)		39,939		(30,371)
Total comprehensive income	915,268			35,712			1,127,308			415,979			Total comprehensive income		429,786		915,268		852,651		1,127,308
Comprehensive income attributable to noncontrolling interest	(68		)	(836		)	(234		)	(1,081		)
Comprehensive loss (income) attributable to noncontrolling interests													Comprehensive loss (income) attributable to noncontrolling interests		6,700		(68)		(2,957)		(234)
Comprehensive income attributable to AmerisourceBergen Corporation	$	915,200		$	34,876		$	1,127,074		$	414,898		Comprehensive income attributable to AmerisourceBergen Corporation		$	436,486	$	915,200	$	849,694	$	1,127,074

See notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY


(in thousands, except per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interests		Total
December 31, 2020	$	2,891	$	5,187,669	$	780,971	$	(70,467)	$	(6,598,286)	$	185,674	$	(511,548)
Net income (loss)	—		—		435,267		—		—		(1,262)		434,005
Other comprehensive income (loss)	—		—		—		1,219		—		(5,438)		(4,219)
Cash dividends, $0.44 per share	—		—		(91,262)		—		—		—		(91,262)
Exercises of stock options	8		72,102		—		—		—		—		72,110
Share-based compensation expense	—		18,793		—		—		—		—		18,793
Purchases of common stock	—		—		—		—		(20,196)		—		(20,196)
Employee tax withholdings related to restricted share vesting	—		—		—		—		(281)		—		(281)
Other	1		(185)		—		—		—		—		(184)
March 31, 2021	$	2,900	$	5,278,379	$	1,124,976	$	(69,248)	$	(6,618,763)	$	178,974	$	(102,782)


(in thousands, except per share data)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Loss		Treasury Stock		Noncontrolling Interests		Total
December 31, 2019	$	2,860	$	4,901,291	$	4,375,181	$	(87,731)	$	(6,236,975)	$	114,455	$	3,069,081

Net income	—		—		960,277		—		—		10,834		971,111
Other comprehensive loss	—		—		—		(45,077)		—		(10,766)		(55,843)
Cash dividends, $0.42 per share	—		—		(87,453)		—		—		—		(87,453)
Exercises of stock options	8		56,636		—		—		—		—		56,644
Share-based compensation expense	—		14,389		—		—		—		—		14,389
Purchases of common stock	—		—		—		—		(262,620)		—		(262,620)
Employee tax withholdings related to restricted share vesting	—		—		—		—		11		—		11
Other	0		(207)		—		—		—		—		(207)
March 31, 2020	$	2,868	$	4,972,109	$	5,248,005	$	(132,808)	$	(6,499,584)	$	114,523	$	3,705,113

(in thousands, except per share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest Total
December 31, 2019 $ 2,860
$ 4,901,291
$ 4,375,181
$ (87,731 ) $ (6,236,975 ) $ 114,455
$ 3,069,081
Net income —
—
960,277
—
—
10,834
971,111
Other comprehensive loss —
—
—
(45,077 ) —
(10,766 ) (55,843 )
Cash dividends, $0.42 per share —
—
(87,453 ) —
—
—
(87,453 )
Exercises of stock options 8
56,636
—
—
—
—
56,644
Share-based compensation expense —
14,389
—
—
—
—
14,389
Purchases of common stock —
—
—
—
(262,620 ) —
(262,620 )
Employee tax withholdings related to restricted share vesting —
—
—
—
11
—
11
Other —
(207 ) —
—
—
—
(207 )
March 31, 2020 $ 2,868
$ 4,972,109
$ 5,248,005
$ (132,808 ) $ (6,499,584 ) $ 114,523
$ 3,705,113

Table of Contents

(in thousands, except per share data) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock Noncontrolling Interest Total
December 31, 2018 $ 2,842
$ 4,769,595
$ 4,027,217
$ (92,883 ) $ (5,658,318 ) $ 116,280
$ 3,164,733
Net income —
—
27,135
—
—
938
28,073
Other comprehensive income (loss) —
—
—
7,741
—
(102 ) 7,639
Cash dividends, $0.40 per share —
—
(84,893 ) —
—
—
(84,893 )
Exercises of stock options 4
15,186
—
—
—
—
15,190
Share-based compensation expense —
6,101
—
—
—
—
6,101
Purchases of common stock —
—
—
—
(98,124 ) —
(98,124 )
Employee tax withholdings related to restricted share vesting —
—
—
—
(13 ) —
(13 )
Other —
(375 ) —
—
—
—
(375 )
March 31, 2019 $ 2,846
$ 4,790,507
$ 3,969,459
$ (85,142 ) $ (5,756,455 ) $ 117,116
$ 3,038,331

~~See notes to consolidated financial statements.~~

AMERISOURCEBERGEN CORPORATION 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 Interests		Total
September 30, 2020	$	2,878	$	5,081,776	$	518,335	$	(108,830)	$	(6,513,083)	$	179,288	$	(839,636)
Adoption of ASC 326, net of tax (Note 1)	—		—		(21,106)		—		—		(2,988)		(24,094)
Net income	—		—		810,112		—		—		2,600		812,712
Other comprehensive income	—		—		—		39,582		—		357		39,939
Cash dividends, $0.88 per share	—		—		(182,365)		—		—		—		(182,365)
Exercises of stock options	15		130,311		—		—		—		—		130,326
Share-based compensation expense	—		67,110		—		—		—		—		67,110
Purchases of common stock	—		—		—		—		(82,150)		—		(82,150)
Employee tax withholdings related to restricted share vesting	—		—		—		—		(23,530)		—		(23,530)
Other	7		(818)		—		—		—		(283)		(1,094)
March 31, 2021	$	2,900	$	5,278,379	$	1,124,976	$	(69,248)	$	(6,618,763)	$	178,974	$	(102,782)


(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, 2019	$	2,853	$	4,850,142	$	4,235,491	$	(111,965)	$	(6,097,604)	$	114,289	$	2,993,206
Adoption of ASC 842, net of tax	—		—		35,138		—		—		—		35,138
Net income	—		—		1,147,917		—		—		9,762		1,157,679
Other comprehensive loss	—		—		—		(20,843)		—		(9,528)		(30,371)
Cash dividends, $0.82 per share	—		—		(170,541)		—		—		—		(170,541)
Exercises of stock options	11		76,746		—		—		—		—		76,757
Share-based compensation expense	—		45,763		—		—		—		—		45,763
Purchases of common stock	—		—		—		—		(392,395)		—		(392,395)
Employee tax withholdings related to restricted share vesting	—		—		—		—		(9,585)		—		(9,585)
Other	4		(542)		—		—		—		—		(538)
March 31, 2020	$	2,868	$	4,972,109	$	5,248,005	$	(132,808)	$	(6,499,584)	$	114,523	$	3,705,113

(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, 2019 $ 2,853
$ 4,850,142
$ 4,235,491
$ (111,965 ) $ (6,097,604 ) $ 114,289
$ 2,993,206
Adoption of ASC 842, net of tax (Note 1) —
—
35,138
—
—
—
35,138
Net income —
—
1,147,917
—
—
9,762
1,157,679
Other comprehensive loss —
—
—
(20,843 ) —
(9,528 ) (30,371 )
Cash dividends, $0.82 per share —
—
(170,541 ) —
—
—
(170,541 )
Exercises of stock options 11
76,746
—
—
—
—
76,757
Share-based compensation expense —
45,763
—
—
—
—
45,763
Purchases of common stock —
—
—
—
(392,395 ) —
(392,395 )
Employee tax withholdings related to restricted share vesting —
—
—
—
(9,585 ) —
(9,585 )
Other 4
(542 ) —
—
—
—
(538 )
March 31, 2020 $ 2,868
$ 4,972,109
$ 5,248,005
$ (132,808 ) $ (6,499,584 ) $ 114,523
$ 3,705,113

(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, 2018 $ 2,836
$ 4,715,473
$ 3,720,582
$ (79,253 ) $ (5,426,814 ) $ 117,137
$ 3,049,961
Adoption of ASC 606 —
—
(1,482 ) —
—
(1,102 ) (2,584 )
Net income (loss) —
—
420,787
—
—
(961 ) 419,826
Other comprehensive (loss) income —
—
—
(5,889 ) —
2,042
(3,847 )
Cash dividends, $0.80 per share —
—
(170,428 ) —
—
—
(170,428 )
Exercises of stock options 8
37,582
—
—
—
—
37,590
Share-based compensation expense —
37,869
—
—
—
—
37,869
Purchases of common stock —
—
—
—
(323,974 ) —
(323,974 )
Employee tax withholdings related to restricted share vesting —
—
—
—
(5,667 ) —
(5,667 )
Other 2
(417 ) —
—
—
—
(415 )
March 31, 2019 $ 2,846
$ 4,790,507
$ 3,969,459
$ (85,142 ) $ (5,756,455 ) $ 117,116
$ 3,038,331

See notes to consolidated financial statements.

Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended March 31,							Six months ended March 31,
(in thousands)	2020			2019			(in thousands)	2021		2020
OPERATING ACTIVITIES							OPERATING ACTIVITIES
Net income	$	1,157,679		$	419,826		Net income	$	812,712	$	1,157,679
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, including amounts charged to cost of goods sold	143,604			171,789			Depreciation, including amounts charged to cost of goods sold	154,682		143,604
Amortization, including amounts charged to interest expense	66,564			100,040			Amortization, including amounts charged to interest expense	54,683		66,564
Provision for doubtful accounts	22,144			10,892
(Benefit) provision for deferred income taxes	(21,568		)	24,949
Provision for credit losses							Provision for credit losses	6,856		22,144
Provision (benefit) for deferred income taxes							Provision (benefit) for deferred income taxes	141,601		(21,568)
Share-based compensation	45,763			37,869			Share-based compensation	67,110		45,763
LIFO expense (credit)	37,134			(69,834		)
LIFO (credit) expense							LIFO (credit) expense	(46,645)		37,134
Impairment of PharMEDium assets	361,652			570,000			Impairment of PharMEDium assets	0		361,652
Gain on sale of an equity investment	—			(13,692		)
Other	(11,312		)	(11,610		)

Other, net							Other, net	36,872		(11,312)
Changes in operating assets and liabilities, excluding the effects of acquisitions:							Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	(2,052,216		)	(880,805		)	Accounts receivable	(193,770)		(2,052,216)
Inventories	(152,359		)	(420,190		)	Inventories	(314,294)		(152,359)
Income tax receivable	(693,635		)	522

Income taxes receivable							Income taxes receivable	157,136		(693,635)
Prepaid expenses and other assets	1,580			(17,436		)	Prepaid expenses and other assets	18,639		1,580
Accounts payable	2,395,847			1,350,728			Accounts payable	(292,555)		2,395,847
Accrued expenses, accrued income taxes, and other liabilities	(305,170		)	(169,716		)
Income taxes payable							Income taxes payable	(21,791)		(17,578)
Accrued expenses and other liabilities							Accrued expenses and other liabilities	(145,861)		(287,592)
Accrued litigation liability							Accrued litigation liability	13,775		0
NET CASH PROVIDED BY OPERATING ACTIVITIES	995,707			1,103,332			NET CASH PROVIDED BY OPERATING ACTIVITIES	449,150		995,707
INVESTING ACTIVITIES							INVESTING ACTIVITIES
Capital expenditures	(144,382		)	(161,488		)	Capital expenditures	(151,612)		(144,382)
Cost of acquired companies, net of cash acquired	—			(52,398		)

Cost of equity investments	(30,580		)	—			Cost of equity investments	(162,620)		(30,580)
Other	7,162			2,659
Other, net							Other, net	0		7,162
NET CASH USED IN INVESTING ACTIVITIES	(167,800		)	(211,227		)	NET CASH USED IN INVESTING ACTIVITIES	(314,232)		(167,800)
FINANCING ACTIVITIES							FINANCING ACTIVITIES
Senior notes and other loan borrowings	46,396			439,181			Senior notes and other loan borrowings	2,585,538		46,396
Senior notes and other loan repayments	(46,146		)	(456,591		)
Loan repayments							Loan repayments	(523,717)		(46,146)
Borrowings under revolving and securitization credit facilities	87,954			541,066			Borrowings under revolving and securitization credit facilities	39,083		87,954
Repayments under revolving and securitization credit facilities	(87,257		)	(539,673		)	Repayments under revolving and securitization credit facilities	(31,259)		(87,257)

Purchases of common stock	(407,152		)	(347,959		)	Purchases of common stock	(82,150)		(407,152)
Exercises of stock options	76,757			37,590			Exercises of stock options	130,326		76,757
Cash dividends on common stock	(170,541		)	(170,428		)	Cash dividends on common stock	(182,365)		(170,541)
Tax withholdings related to restricted share vesting	(9,585		)	(5,667		)	Tax withholdings related to restricted share vesting	(23,530)		(9,585)
Other	(589		)	(6,390		)	Other	(3,410)		(589)
NET CASH USED IN FINANCING ACTIVITIES	(510,163		)	(508,871		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES							NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	1,908,516		(510,163)
INCREASE IN CASH AND CASH EQUIVALENTS	317,744			383,234			INCREASE IN CASH AND CASH EQUIVALENTS	2,043,434		317,744
Cash and cash equivalents at beginning of period	3,374,194			2,492,516			Cash and cash equivalents at beginning of period	4,597,746		3,374,194
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,691,938		$	2,875,750		CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	6,641,180	$	3,691,938

See notes to consolidated financial statements.

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 AmerisourceBergen Corporation and its subsidiaries, including less-than-wholly-owned subsidiaries in which AmerisourceBergen Corporation 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, 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 March 31, ~~2020~~2021 and the results of operations and cash flows for the interim periods ended March 31, ~~2020~~2021 and ~~2019~~2020 have been included. Certain information and footnote 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, ~~2019.~~2020.

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. Certain reclassifications have been made to prior-period amounts in order to conform to the current year presentation.

In March 2020, the World Health Organization ("WHO") declared a global pandemic attributable to the outbreak and continued spread of COVID-19. In connection with the mitigation and containment procedures recommended by the WHO and imposed by federal, state, and local governmental authorities, the Company implemented measures designed to keep its employees safe and address business continuity issues at its distribution centers and other locations. The Company continues to evaluate and plan for the potential effects of a prolonged disruption and the related impacts on its revenue, results of operations, and cash flows. These items include, but are not limited to, the financial condition of its customers and the realization of accounts receivable, decreased availability and demand for its products and services, and delays related to current and future projects. While the Company's operational and financial performance may be significantly impacted by COVID-19, it is not possible for the Company to predict the duration or magnitude of the outbreak and whether it could have a material adverse impact on the Company's financial position, results of operations, or cash flows. See Part II. Other Information-Item 1A. Risk Factors of this Quarterly Report on Form 10-Q for additional information.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02" or "ASC 842"). ASU 2016-02 aims to increase transparency and comparability across organizations by requiring lease assets and lease liabilities to be recognized on the balance sheet as well as key information to be disclosed regarding lease arrangements. ASU 2016-02 was effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years.

The Company adopted ASC 842 as of October 1, 2019 and adopted it using the modified retrospective approach. The Company elected the transition package of practical expedients provided within the amended guidance, which eliminated the requirements to reassess lease identification, lease classification, and initial direct costs for leases that commenced before the effective date. The Company also elected to combine lease and non-lease components and to exclude short-term leases from its consolidated balance sheets. The Company did not elect the hindsight practical expedient in determining the lease term.

In connection with the adoption of ASC 842, the Company recognized operating lease liabilities of $562.1 million, right-of-use ("ROU") assets of $526.3 million, and a $35.1 million, net of tax of $9.6 million, cumulative adjustment to retained earnings. The Company's lease liabilities were based on the present value of the remaining minimum lease commitments using the Company's incremental borrowing rates as of October 1, 2019, and the Company's ROU assets were based upon the operating lease liabilities adjusted for prepaid and deferred rents. The cumulative adjustment to retained earnings was primarily the result of derecognizing assets of $266.0 million in Property and Equipment, Net and $324.8 million of financing obligations in Long-Term Financing Obligation and Accrued Expenses and Other, all of which was associated with leased assets where the Company was deemed the owner of the leased assets for accounting purposes. The Company finalized the impact that the amended lease guidance had on its systems, processes, and internal controls. The adoption of ASC 842 did not and will not have a material impact on its results of operations or cash flows.

~~For the Company's lease accounting policy and other required disclosures, refer to Note 2.~~

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). ASU 2016-13 requires financial assets measured at amortized cost to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amounts. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. ASU 2016-13 iswas effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years, and a modified retrospective approach iswas required, with a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance iswas effective. ~~Entities are permitted to adopt the standard early in fiscal years beginning after December 15, 2018.~~

The Company ~~is currently evaluating~~adopted ASU 2016-13 as of October 1, 2020. In connection with the ~~impact~~adoption of ~~adopting this new accounting guidance.~~ASU 2016-13, the Company recognized a $21.1 million, net of tax of $6.1 million, cumulative adjustment to retained earnings. The Company evaluates its receivables for risk of loss by grouping its receivables with similar risk characteristics. Expected losses are determined based on a combination of historical loss trends, current economic conditions, and forward-looking risk factors.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" ("ASU 2019-12"). ASU 2019-12 removes certain exceptions to the general principles in ASC 740 in order to reduce the cost and complexity of its application. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020, including interim periods within those fiscal years, with certain amendments applied on a modified retrospective basis, with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, and others prospectively. Early adoption of this guidance is permitted, including the adoption in any interim period for public companies for periods for which financial statements have not yet been issued. The Company is currently evaluating the impact of adopting this new accounting guidance.

As of March 31, ~~2020,~~2021, there were no other recently-issued accounting standards that may have a material impact on the Company’s financial position, results of operations, or cash flows upon their adoption.

Note 2. Recent Developments

~~At the inception of an arrangement,~~In January 2021, the Company ~~determines whether the arrangement is or contains~~entered into a ~~lease based on the facts and circumstances present. Leases are classified as either finance or operating,~~share purchase agreement with ~~classification affecting the pattern~~Walgreens Boots Alliance, Inc. ("WBA") pursuant to which it will acquire a majority of expense recognition in the income statement. At the lease commencement date, operating and finance lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and, as such, the Company uses its incremental borrowing rate to discount the lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment. Certain adjustments to the ROU asset may be requiredWBA’s Alliance Healthcare businesses ("Alliance Healthcare") for ~~items such as incentives received. The Company does not recognize on the balance sheet leases with terms of one year or less.~~

~~The Company has operating leases that are primarily~~approximately $6.5 billion, comprised of ~~buildings, office equipment, distribution center equipment,~~$6.275 billion in cash, subject to certain purchase price adjustments, and ~~vehicles. Some~~2 million shares of the Company's ~~leases include options~~common stock (the "Transaction"). WBA’s operations in China, Italy, and Germany are not part of this transaction. The Company will fund the cash purchase price through a combination of cash on hand and new debt financing. The Transaction is subject to ~~extend or early terminate~~ the ~~lease, which are included in~~satisfaction of customary closing conditions, including receipt of applicable regulatory approvals.

In connection with the lease term when it is reasonably certain to exercise and there is a significant economic incentive to exercise that option. Certain lease agreements contain provisions for future rent increases. Lease payments included in the measurementclosing of the ~~lease liability comprise fixed payments. The~~Transaction, the Company ~~combines lease~~ and ~~non-lease components~~WBA have agreed to a three-year extension (through 2029) of its existing pharmaceutical distribution agreement with WBA and the arrangement pursuant to which it has access to generic drugs and related pharmaceutical products through Walgreens Boots Alliance Development GmbH, as well as a ~~single component. Operating lease cost is recognized over~~distribution agreement pursuant to which it will supply branded and generic pharmaceutical products to WBA’s Boots UK Ltd. subsidiary (through 2031) following closing. In January 2021, the ~~expected lease term on~~Company also entered into an agreement with WBA to explore a ~~straight-line basis. Variable lease payments, which are primarily comprised~~series of ~~maintenance, taxes,~~strategic initiatives designed to create incremental growth and ~~other payments based on usage, are recognized when the expense is incurred. The Company's leases do not contain residual value guarantees.~~efficiencies in sourcing, logistics, and distribution.

~~The following illustrates the components of lease cost for the periods presented:~~

(in thousands) Three months ended March 31, 2020 Six months ended March 31, 2020
Operating lease cost $ 30,772
$ 60,707
Short-term lease cost 1,265
2,791
Variable lease cost 3,688
8,544
Total lease cost $ 35,725
$ 72,042

~~The Company recorded rental expense~~See Part II. Other Information-Item 1A. Risk Factors on page 35 of ~~$27.1 million and $53.9 million in the three and six months ended March 31, 2019, respectively.~~

~~The following summarizes balance sheet information related to operating leases:~~

(in thousands, except for lease term and discount rate) March 31, 2020
Right of use assets
Other assets $ 484,933

Lease liabilities
Accrued expenses and other $ 97,897
Other long-term liabilities 428,061
Total lease liabilities $ 525,958

Weighted-average remaining lease term 7.49 years
Weighted-average discount rate 3.64%

~~Other cash flow information related to operating leases is as follows:~~

(in thousands)
Six months ended
March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating lease cash payments $ 57,390

Right-of-use assets obtained in exchange for lease liabilities
New operating leases $ 32,539
Leases recognized upon adoption of ASC 842 $ 526,281

~~Future minimum rental payments under noncancellable operating leases were as follows:~~

Payments Due by Fiscal Year (in thousands) As of March 31, 2020
2020 $ 59,278
2021 114,431
2022 109,373
2023 99,508
2024 91,790
Thereafter 461,110
Total future undiscounted lease payments 935,490
Less: Future payments for leases that have not yet commenced ¹
(300,346 )
Less: Imputed interest (109,186 )
Total lease liabilities $ 525,958

¹ The Company has certain leases that it has executed for which it does not control the underlying assets; therefore, lease liabilities and ROU assets were not recorded on the Company's Consolidated Balance Sheet as of March 31, 2020. These future commitments primarily relate to the Company's new general corporate and administrative office.

~~As previously disclosed in the Company's fiscal 2019 Annual~~this Quarterly Report on Form ~~10-K under the prior accounting guidance, the future minimum rental payments under noncancellable operating leases and financing obligations as of September 30, 2019 were as follows:~~10-Q for additional risk factors related to our strategic transactions with WBA.

Payments Due by Fiscal Year (in thousands)
Operating
Leases

Financing Obligations ¹
Total
2020 $ 94,958
$ 22,468
$ 117,426
2021 84,002
29,790
113,792
2022 72,224
36,914
109,138
2023 63,507
35,950
99,457
2024 56,377
35,276
91,653
Thereafter 177,267
270,410
447,677
Total minimum lease payments $ 548,335
$ 430,808
$ 979,143

¹ Represents the portion of future minimum lease payments related to facility leases where the Company was determined to be the accounting owner (see Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 for a more detailed description of the Company's accounting for leases prior to the adoption of ASC 842). These payments were recognized as reductions to the financing obligation and as interest expense and excluded the future non-cash termination of the financing obligation.

Note 3.3. 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)	March 31, 2021		September 30, 2020
Cash and cash equivalents	$	57,364	$	96,983
Accounts receivables, net	137,170		120,486
Inventories	171,068		144,059
Prepaid expenses and other	64,055		52,885
Property and equipment, net	25,452		23,584
Goodwill	82,309		82,309
Other intangible assets	72,933		73,543
Other long-term assets	64,046		53,513
Total assets	$	674,397	$	647,362

Accounts payable	$	211,694	$	141,147
Accrued expenses and other	30,258		34,415
Short-term debt	32,078		98,399
Long-term debt	65,721		44,144
Deferred income taxes	37,712		38,854
Other long-term liabilities	51,545		43,413
Total liabilities	$	429,008	$	400,372

(in thousands) March 31,
2020 September 30,
2019
Cash and cash equivalents $ 15,589
$ 9,431
Accounts receivables, net 129,875
154,491
Inventories 164,998
185,602
Prepaid expenses and other 57,821
64,119
Property and equipment, net 24,700
30,961
Goodwill 82,309
82,309
Other intangible assets 75,655
74,429
Other long-term assets 53,381
9,169
Total assets $ 604,328
$ 610,511

Accounts payable $ 168,452
$ 165,053
Accrued expenses and other 34,141
49,191
Short-term debt 90,496
106,439
Long-term debt 47,768
60,973
Deferred income taxes 36,858
42,371
Other long-term liabilities 40,886
5,303
Total liabilities $ 418,601
$ 429,330

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

~~Note 4. Income Taxes~~

~~The Coronavirus Aid, Relief, and Economic Security Act~~Swiss Tax Reform

~~The Coronavirus Aid, Relief, and Economic Security ("CARES") Act became law on March 27, 2020. The CARES Act was a response~~ In November 2020, the Canton of Bern approved its Budget 2021, which called for lowering its corporate income tax rate applicable to the market volatility and instability resulting from the coronavirus pandemic and includes provisions to support businesses in the form of loans, grants, and tax changes, among other types of relief that were not previously available under the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act").Company’s Swiss operations effective October 1, 2020. As ~~it relates to~~a result, the Company ~~the CARES Act provides relief through adjustments~~recognized a deferred tax expense to ~~net operating loss rules and~~reduce its Swiss deferred tax asset for the ~~acceleration of available refunds for alternative minimum tax credit carryforwards.~~

As discussed in Note 5, the Company decided in January 2020 to shut down and permanently exit the PharMEDium Healthcare Holdings LLC ("PharMEDium") compounding business. Following the decision to exit PharMEDium and in connection with the permanent shutdown of this business, PharMEDium underwent a voluntary change in tax status, which resulted in the Company recognizing a worthless stock ordinary income tax deduction of approximately $2.5 billion and, in turn, yielded a tax benefit of approximately $675 million. The estimated tax benefit is higher than it would have been prior to the enactment of the CARES Act as the net operating losses resulting from the worthless stock deduction can now be carried back to years with higher statutory tax rates.rate.

In addition to the PharMEDium worthless stock deduction, the Company recognized other discrete tax benefits primarily resulting from the CARES Act. In the aggregate, the Company recognized discrete tax benefits of $741.0 million in the three and six months ended March 31, 2020.

~~The Company's March 31, 2020 Consolidated Balance Sheet has a net current income tax receivable balance of $699.5 million primarily resulting from the recognition of the above discrete tax benefits.~~

The Company files income tax returns in U.S. federal and state jurisdictions as well as various foreign jurisdictions. As of March 31, ~~2020,~~2021, 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 ~~$121.5~~$505.8 million ($~~88.7~~459.6 million, net of federal

benefit). If recognized, ~~$70.4~~$441.3 million of these tax benefits would have reduced income tax expense and the effective tax rate. Included in this amount is ~~$19.2~~$21.4 million of interest and penalties, which the Company records in Income Tax Expense in the Company's Consolidated Statements of Operations. In the six months ended March 31, ~~2020,~~2021, unrecognized tax benefits ~~decreased~~increased by ~~$2.8~~$7.5 million. Over the next 12 months, it is reasonably possible that tax authority audit resolutions and the expiration of statutes of limitations could result in a reduction of unrecognized tax benefits of approximately ~~$14.0~~$16.7 million.

The Company's effective tax rates were 23.4% and 25.7% for the three and six months ended March 31, 2021, respectively. The Company's effective tax rates were (251.6)% and (128.9)% for the three and six months ended March 31, 2020, respectively. The ~~Company's~~ effective tax rates ~~were (49.5)% and 7.0%~~ for the three and six months ended March 31, ~~2019, respectively.~~2021 were higher than the U.S. statutory rate primarily due to U.S. state income taxes. The Company's effective tax rate for the six months ended March 31, 2021 was also higher than the U.S. statutory rate due to discrete tax expense associated with the Swiss deferred tax asset, offset in part by discrete tax benefits resulting from the permanent shutdown of PharMEDium Healthcare Holdings, Inc. ("PharMEDium"). The effective tax rates infor the three and six months ended March 31, 2020 were lower than the U.S. statutory rate due to the tax benefits associated with the ~~discrete items described above~~worthless stock deduction in connection with the permanent shutdown of the PharMEDium compounding business and ~~due to~~the Coronavirus Aid, Relief, and Economic Security Act (the provisions of which adjusted the net operating loss carryback rules and accelerated available refunds for alternative minimum tax credit carryforwards) and a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the ~~impairment~~impairments of PharMEDium's assets (see Note 5) in the three and six months ended March 31, 2020. The effective tax rates in the three and six months ended March 31, 2019 were lower than the U.S. statutory rate due to a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the $570.0 million impairment of PharMEDium'sPharMEDium assets. The effective tax rate in the six months ended March 31, 2019 also benefited from a $37.0 million decrease to the Company's finalization of the estimated transition tax liability related to the 2017 Tax Act.

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 six months ended March 31, ~~2020:~~2021:


(in thousands)	Pharmaceutical Distribution Services		Other		Total
Goodwill as of September 30, 2020	$	4,852,775	$	1,853,944	$	6,706,719

Foreign currency translation	0		3,102		3,102
Goodwill as of March 31, 2021	$	4,852,775	$	1,857,046	$	6,709,821

(in thousands)
Pharmaceutical
Distribution
Services
Other Total
Goodwill as of September 30, 2019 $ 4,852,775
$ 1,852,732
$ 6,705,507
Foreign currency translation —
(1,374 ) (1,374 )
Goodwill as of March 31, 2020 $ 4,852,775
$ 1,851,358
$ 6,704,133

The following is a summary of other intangible assets:

March 31, 2020 September 30, 2019
(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 $ 685,198
$ —
$ 685,198
$ 685,324
$ —
$ 685,324
Finite-lived:
Customer relationships 14 years 1,670,249
(520,094 ) 1,150,155
1,931,212
(489,471 ) 1,441,741
Trade names and other 14 years 209,204
(109,109 ) 100,095
271,521
(103,750 ) 167,771
Total other intangible assets $ 2,564,651
$ (629,203 ) $ 1,935,448
$ 2,888,057
$ (593,221 ) $ 2,294,836


	March 31, 2021							September 30, 2020
(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		$	685,440	$	—	$	685,440	$	685,312	$	—	$	685,312
Finite-lived:
Customer relationships	13 years	1,675,462		(610,481)		1,064,981		1,671,888		(565,372)		1,106,516
Trade names and other	14 years	211,578		(122,914)		88,664		210,394		(116,115)		94,279
Total other intangible assets		$	2,572,480	$	(733,395)	$	1,839,085	$	2,567,594	$	(681,487)	$	1,886,107

Amortization expense for finite-lived intangible assets was ~~$24.0~~$25.5 million and ~~$48.5~~$24.0 million in the three months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Amortization expense for finite-lived intangible assets was ~~$59.3~~$51.1 million and ~~$95.7~~ $59.3

million in the six months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively. Amortization expense for finite-lived intangible assets is estimated to be ~~$111.1 million in fiscal 2020, $101.5~~$102.0 million in fiscal 2021, ~~$99.9~~$100.7 million in fiscal 2022, ~~$98.4~~$99.2 million in fiscal 2023, ~~$97.3~~$97.6 million in fiscal 2024, $96.7 million in fiscal 2025, and ~~$801.4~~$708.5 million thereafter.

As a result of the continued suspension of the production activities at PharMEDium's compounding facility located in Memphis, Tennessee, certain regulatory matters, ongoing operational challenges, and lower-than-expected operating results, the Company updated its recoverability assessment of PharMEDium’s long-lived assets as of December 31, 2019. The recoverability assessment was based upon comparing PharMEDium's forecasted undiscounted cash flows to the carrying value of its asset group. The PharMEDium asset group is included in the Pharmaceutical Distribution Services reportable segment. Using forecasted undiscounted cash flows that were based on the weighted average of multiple strategic alternatives, the Company concluded that the carrying value of the PharMEDium long-lived asset group was not recoverable as of December 31, 2019. The forecasted undiscounted cash flows as of December 31, 2019 were lower than the forecasted undiscounted cash flows as of September 30, 2019 due to a change in weighting of multiple strategic alternatives and lower operating results in the three months ended December 31, 2019 compared to expectations. The Company then performed an impairment test by comparing the PharMEDium asset group's

fair value of $145 million to its carrying value, which resulted in a $138.0 million impairment loss in the three months ended December 31, 2019. Significant assumptions used in estimating the fair value of PharMEDium's asset group included (i) a 17% discount rate, which contemplated a higher risk at PharMEDium; (ii) the period in which PharMEDium will resume production at or near capacity; and (iii) the estimated EBITDA (earnings before interest, taxes, depreciation, and amortization) margins when considering the likelihood of higher operating and compliance costs. The Company believed that its fair value assumptions were representative of market participant assumptions; however, the forecasted cash flows used to estimate fair value and measure the related impairment were inherently uncertain and included assumptions that differed from actual results in future periods (see below). This represented a Level 3 nonrecurring fair value measurement. The Company allocated $123.2 million of the impairment to finite-lived intangibles, $11.6 million of the impairment to property and equipment, and $3.2 million to ROU assets.

In January 2020, the Company decided to permanently exit the PharMEDium compounding business, and, as a result, the Company will cease all commercial and administrative operations related to this business in fiscal 2020. The decision to permanently exit the PharMEDium business was due to a number of factors including, but not limited to, ongoing operational, regulatory, and commercial challenges, such as PharMEDium's decision in January 2020 to suspend production at the compounding facility in New Jersey pending facility upgrades related to the air handling and filtration systems. In connection with the decision to exit the PharMEDium business, the Company recorded an impairment of PharMEDium's assets of $223.7 million in the three months ended March 31, 2020, which included impairments of the remaining finite-lived intangible assets and the majority of the remaining tangible assets.

Debt consisted of the following:

(in thousands) March 31,
2020 September 30,
2019
Revolving credit note $ —
$ —
Term loan due in 2020 399,873
399,778
Overdraft facility due 2021 (£30,000) 32,438
32,573
Receivables securitization facility due 2022 350,000
350,000
Multi-currency revolving credit facility due 2024 —
—
$500,000, 3.50% senior notes due 2021 499,165
498,908
$500,000, 3.40% senior notes due 2024 497,988
497,744
$500,000, 3.25% senior notes due 2025 496,650
496,311
$750,000, 3.45% senior notes due 2027 743,520
743,099
$500,000, 4.25% senior notes due 2045 494,622
494,514
$500,000, 4.30% senior notes due 2047 492,622
492,488
Nonrecourse debt 138,316
167,477
Total debt 4,145,194
4,172,892
Less AmerisourceBergen Corporation current portion 432,311
32,573
Less nonrecourse current portion 90,496
106,439
Total, net of current portion $ 3,622,387
$ 4,033,880


(in thousands)	March 31, 2021		September 30, 2020
Revolving credit note	$	0	$	0
Term loans due in October 2020	0		399,982
Receivables securitization facility due 2022	350,000		350,000
364-day revolving credit facility	0		0
Term loan due in February 2023	0		0
Overdraft facility due 2024 (£10,000)	7,860		0
Multi-currency revolving credit facility due 2024	0		0
$1,525,000, 0.737% senior notes due 2023	1,518,228		0
$500,000, 3.400% senior notes due 2024	498,478		498,232
$500,000, 3.250% senior notes due 2025	497,329		496,990
$750,000, 3.450% senior notes due 2027	744,361		743,940
$500,000, 2.800% senior notes due 2030	494,354		494,045
$1,000,000, 2.700% senior notes due 2031	990,447		0
$500,000, 4.250% senior notes due 2045	494,838		494,730
$500,000, 4.300% senior notes due 2047	492,888		492,755
Nonrecourse debt	102,214		148,846
Total debt	6,190,997		4,119,520
Less AmerisourceBergen Corporation current portion	7,860		399,982
Less nonrecourse current portion	36,025		101,277
Total, net of current portion	$	6,147,112	$	3,618,261

Multi-Currency Revolving Credit Facility

The Company has a $1.4 billion multi-currency senior unsecured revolving credit facility ("Multi-Currency Revolving Credit Facility"), which is scheduled to expire in September 2024, with a syndicate of lenders. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based on the Company’s debt rating and ranges from 70 basis points to 112.5 basis points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee, as applicable (91 basis points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee as of March 31, ~~2020)~~2021) and from 0 basis points to 12.5 basis points over the alternate base rate and Canadian prime rate,, as applicable. The Company pays facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on its debt rating, ranging from 5 basis points to 12.5 basis points, annually, of the total commitment (9 basis points as of March 31, ~~2020)~~2021). 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 March 31, ~~2020.~~2021.

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 $1.4 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 0 borrowings outstanding under the commercial paper program as of March 31, ~~2020.~~2021.

Receivables Securitization Facility

The Company has a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which is scheduled to expire in September 2022. 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 LIBOR, 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 March 31, ~~2020.~~2021.

364-Day Revolving Credit Facility

In February 2021, the Company entered into an agreement pursuant to which it obtained a $1.0 billion senior secured revolving credit facility ("364-Day Revolving Credit Facility") with a syndicate of lenders, which is scheduled to expire 364 days after the closing of the acquisition of a majority of WBA's Alliance Healthcare businesses, the date on which borrowings under this facility are available to the Company. Interest on borrowings under the 364-Day Revolving Credit Facility accrues at specified rates based on the Company's debt rating and ranges from 83.5 basis points to 125 basis points over LIBOR and from 0 basis points to 25 basis points over the alternate base rate. The Company pays facility fees to maintain availability under the 364-Day Revolving Credit Facility at specified rates based on its debt rating, ranging from 4 basis points to 12.5 basis points, annually, of the total commitment. The Company may choose to repay or reduce its commitments under the 364-Day Revolving Credit Facility at any time. The 364-Day Revolving Credit Facility contains a feature whereby the Company has the option to convert to a term loan the outstanding borrowings under this facility. The 364-Day 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 March 31, 2021.

Revolving Credit Note and Overdraft Facility

The Company has an uncommitted, unsecured line of credit available to it pursuant to a revolving credit note ("Revolving Credit Note"). The Revolving Credit Note 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 $75 million. The Revolving Credit Note may be decreased or terminated by the bank or the Company at any time without prior notice. The Company also has ~~a £30 million~~an uncommitted U.K. overdraft facility ("Overdraft Facility")~~, which expires in February 2021,~~ to fund short-term normal trading cycle fluctuations related to its MWI business. In February 2021, the Company extended the Overdraft Facility to February 2024 and reduced the borrowing capacity from £30 million to £10 million.

The $400 million October 2018 Term Loan matured and was repaid in October 2020.

In February 2021, the Company entered into a $1.0 billion variable-rate term loan (“February 2021 Term Loan”), which is available to be drawn on the closing date of the acquisition of a majority of WBA's Alliance Healthcare businesses. In April 2021, the Company reduced its commitment under the February 2021 Term Loan to $500 million. The February 2021 Term Loan matures two years from the date on which it is drawn. The February 2021 Term Loan bears interest at a rate equal either to a base rate plus a margin, or LIBOR, plus a margin. The margin is based on the public debt ratings of the Company and ranges from 87.5 basis points to 137.5 basis points over LIBOR and 0 basis points to 37.5 basis points over a base rate. The February 2021 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which the Company was compliant as of March 31, 2021. The Company expects to borrow $500 million under the February 2021 Term Loan to finance a portion of the acquisition of a majority of WBA's Alliance Healthcare businesses.

In March 2021, the Company issued $1,525 million of 0.737% senior notes due March 15, 2023 (the "2023 Notes"). The 2023 Notes were sold at 100.00% of the principal amount. Interest on the 2023 Notes is payable semi-annually in arrears, commencing on September 15, 2021. In March 2021, the Company issued $1,000 million of 2.700% senior notes due March 15, 2031 (the "2031 Notes"). The 2031 Notes were sold at 99.79% of the principal amount and have an effective yield of 2.706%. Interest on the 2031 Notes is payable semi-annually in arrears, commencing on September 15, 2021. The 2023 Notes and 2031 Notes rank pari passu to the Company's other senior notes, the Multi-Currency Revolving Credit Facility, the Revolving Credit Note, the Overdraft Facility, and the 364-Day Revolving Credit Facility. The Company will use the proceeds from the 2023 Notes and the 2031 Notes to finance a portion of the acquisition of a majority of WBA's Alliance Healthcare businesses.

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.

Note 7. Stockholders’ Equity and Earnings per Share

~~In January 2020, the Company's board of directors increased the quarterly cash dividend by 5% from $0.40 per share to $0.42 per share.~~

In October 2018, 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 six months ended March 31, ~~2020,~~2021, the Company purchased ~~4.8~~0.6 million shares of its common stock for a total of ~~$392.3~~$55.5 million ~~which excluded $14.8 million of September 2019 purchases that cash settled in October 2019. As of March 31, 2020, the Company had $68.8 million of availability remaining~~to complete its authorization under this program.

In May 2020, the Company's board of directors authorized a ~~new~~ share repurchase program allowing the Company to purchase up to $500 million of its outstanding shares of common stock, subject to market conditions. During the six months ended March 31, 2021, the Company purchased 0.3 million shares of its common stock for a total of $26.6 million. As of March 31, 2021, the Company had $473.4 million of availability remaining under this program.

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

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

Three months ended
March 31, Six months ended
March 31,
(in thousands) 2020 2019 2020 2019
Weighted average common shares outstanding - basic 205,370
210,934
205,693
211,503
Dilutive effect of stock options and restricted stock units 1,692
1,629
1,600
1,772
Weighted average common shares outstanding - diluted 207,062
212,563

207,293

213,275


	Three months ended March 31,		Six months ended March 31,
(in thousands)	2021	2020	2021	2020
Weighted average common shares outstanding - basic	204,916	205,370	204,804	205,693
Dilutive effect of stock options and restricted stock units	2,399	1,692	2,259	1,600
Weighted average common shares outstanding - diluted	207,315	207,062	207,063	207,293

The potentially dilutive stock options and restricted stock units that were antidilutive for the three and six months ended March 31, 2021 were NaN and 0.2 million, respectively. The potentially dilutive stock options and restricted stock units that were antidilutive for the three and six months ended March 31, 2020 were 4.1 million and 4.2 million, respectively. ~~The potentially dilutive stock options and restricted stock units that were antidilutive for the three and six months ended March 31, 2019 were 5.4 million and 4.6 million, respectively.~~

Note 8. Related Party Transactions

~~Walgreens Boots Alliance, Inc. ("WBA")~~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 of these agreements expire in 2026. In connection with the closing of the announced acquisition by the Company of a majority of WBA's Alliance Healthcare businesses, the Company and WBA have agreed to extend the aforementioned agreements through 2029.

Revenue from the various agreements and arrangements with WBA was $15.7 billion and $32.4 billion in the three and six months ended March 31, 2021, respectively. Revenue from the various agreements and arrangements with WBA was $16.3 billion and $31.9 billion in the three and six months ended March 31, 2020, respectively. ~~Revenue from the various agreements and arrangements with WBA was $14.6 billion and $29.9 billion in the three and six months ended March 31, 2019, respectively.~~ The Company’s receivable from WBA, net of incentives, was ~~$7.4~~$6.5 billion and ~~$6.1~~$6.6 billion as of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, respectively.

Note 9. Employee Severance, Litigation, and Other

The following illustrates the charges incurred by the Company relating to Employee Severance, Litigation, and Other for the periods indicated:


	Three months ended March 31,			Six months ended March 31,
(in thousands)		2021		2020		2021		2020
Employee severance		$	0	$	25,006	$	0	$	25,845
Litigation and opioid-related costs		41,988		30,815		74,050		55,481
Acquisition-related deal and integration costs		23,551		348		42,475		803
Business transformation efforts		10,642		9,034		23,084		17,494
Other restructuring initiatives		1,975		2,529		8,928		7,418
Total employee severance, litigation, and other		$	78,156	$	67,732	$	148,537	$	107,041

Three months ended
March 31, Six months ended
March 31,
(in thousands) 2020 2019 2020 2019
Employee severance $ 25,006
$ 14,021
$ 25,845
$ 18,806
Litigation and opioid-related costs 30,815
13,822
55,481
28,361
Acquisition-related deal and integration costs 348
11,456
803
22,045
Business transformation efforts 9,034
9,873
17,494
16,852
Other restructuring initiatives 2,529
6,217
7,418
9,997
Total employee severance, litigation, and other $ 67,732
$ 55,389
$ 107,041
$ 96,061

Employee severance in the three and six months ended March 31, 2020 included costs primarily related to position eliminations resulting from the Company's decision to permanently exit the PharMEDium compounding business. Employee severance in the three and six months ended March 31, 2019 included costs primarily related to PharMEDium restructuring activities, position eliminations resulting from the Company's business transformation efforts and the integration of H.D. Smith, and restructuring activities related to its consulting business.

Litigation and opioid-related costs in the three and six months ended March 31, ~~2020~~2021 and ~~2019~~2020 related to legal fees in connection with opioid lawsuits and investigations. The three and six months ended March 31, 2021 also included a $17.1 million accrual related to injunctive relief terms associated with the Company's Multidistrict Litigation opioid settlement discussions.

Acquisition-related deal and integration costs in the three and six months ended March 31, ~~2019~~2021 primarily related to the ~~integration~~announced acquisition of ~~H.D. Smith. Integration costs primarily included costs to transition servicing legacy H.D. Smith customers to existing Company distribution facilities and operating systems.~~a majority of WBA’s Alliance Healthcare businesses.

Business transformation efforts in the three and six ~~months~~ ended March 31, ~~2020~~2021 and ~~2019~~2020 primarily related to costs associated with reorganizing the Company to further align the organization to its customers' needs. The majority of these costs related to services provided by third-party consultants, including certain technology initiatives.

Note 10.10. 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 ~~several~~numerous states and tribes, have 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), pharmaceutical manufacturers, retail chains, medical practices, and physicians relating to the distribution of prescription opioid pain medications. Other lawsuits regarding the distribution of prescription opioid pain medications have been filed by: third-party payors and similar entities; hospitals; hospital groups; and individuals, including

cases styled as putative class actions. The lawsuits, which have been and continue to be filed in federal, state, and other courts, generally allege violations of controlled substance laws and various other statutes as well as common law claims, including negligence, public nuisance, and unjust enrichment, and seek equitable relief and monetary damages. An initial group of cases was consolidated for Multidistrict Litigation ("MDL") proceedings before the United States District Court for the Northern District of Ohio (the "Court") in December 2017. Additional cases have been, and will likely continue to be, transferred to the MDL. Further, in June 2018, the Court granted a motion permitting the United States, through the ~~DOJ,~~Department of Justice ("DOJ"), to participate in settlement discussions and as a friend of the Court by providing information to facilitate non-monetary remedies.

In April 2018, the Court issued an order creating a litigation track, which includes dispositive motion practice, discovery, and trials in certain bellwether jurisdictions. OnIn December ~~31,~~ 2018, the Court issued an order selecting two additional cases for a second bellwether discovery and trial track. In November 2019 and January 2020, the Court filed Suggestions of Remand with the Judicial Panel on Multidistrict Litigation that identified ~~four~~4 cases filed against the Company, including the two additional bellwether cases, for potential transfer from the MDL back to federal courts in California, Oklahoma, and West Virginia for the completion of discovery, motion practice, and trial. All four cases have now been remanded to those federal district ~~courts. For the~~courts and discovery has commenced. The two consolidated cases in West Virginia ~~the current~~commenced trial on May 3, 2021. No trial date is August 31, 2020. On April 17, 2020, the Company and certain other defendants filed a motion to change the trial date to December 1, 2020, which remains pending before the court. The California court has ~~set forth a limited schedule for certain pretrial motions and some limited discovery, which ABDC and other defendants have asked the court to reconsider.~~ ~~The timing of discovery, motion practice, and trials~~been established for the Oklahoma case, ~~has not yet been determined.~~in which the plaintiff is the Cherokee Nation

. On ~~October 21, 2019,~~January 26, 2021, the California case was stayed as to the Company ~~announced an agreement in principle with two Ohio counties, Cuyahoga~~ and Summit, to settle all claims brought by the two counties against the Company in the first track of the MDL. All claims against the Company were dismissed with prejudice pursuant to the settlement. Pursuant to this settlement, the Company made a payment of $66.7 million in December 2019. The Company had previously recorded a charge of $66.7 million in the fourth quarter of the fiscal yearseveral other defendants. As such, there is no applicable trial date for that case.

~~ended September 30, 2019 within Employee Severance, Litigation and Other in its Statement of Operations and in Accrued Expenses and Other on the Company’s Consolidated Balance Sheet.~~

~~The Court has continued to oversee court-ordered settlement discussions with attorneys for the plaintiffs and certain states that it instituted at the beginning of the MDL proceedings.~~ On October 21, 2019, the Attorneys General for North Carolina, Pennsylvania, Tennessee, and Texas announced certain proposed settlement terms intended to provide a potential framework for a global resolution of the state and local government entity lawsuits in the MDL and ~~other related~~in state ~~court litigation,~~courts, including cases currently filed and that could be filed. The attorneys general's announcement outlined that the 3 largest U.S. pharmaceutical distributors would be expected to pay an aggregate amount of up to $18.0 billion over 18 years, of which the Company's portion would be 31.0%, in addition to the development and participation in a program for free or rebated distribution of opioid-abuse medications for a period of 10 years and the implementation of industry-wide changes to be specified to controlled substance anti-diversion programs. ~~The~~Since that time, the Company ~~is currently~~has engaged in discussions that include the four attorneys general, as well as other attorneys general, plaintiffs' lawyers representing local governments, and other parties with the objective of reaching potential terms for a global resolution.

The Company is ~~also engaged~~currently in ~~related~~advanced discussions with ~~plaintiffs' lawyers representing~~the Attorneys General of multiple states and various plaintiffs’ representatives in an effort to reach a global settlement of the MDL and related state-court litigation brought by certain state and local ~~governments~~governmental entities, which would provide for payments by the 3 largest U.S. pharmaceutical distributors of $21.0 billion over 18 years. The Company’s payment would be $6.5 billion assuming all parties participate.A portion of this amount relating to plaintiff attorney fees would be payable over a shorter time period. The discussions also involve certain changes to the Company's anti-diversion programs. While a global settlement remains subject to contingencies that could impact whether the parties ultimately decide to move forward, the Company believes a global settlement is probable and its loss related thereto can be reasonably estimated. The Company recorded a charge of $6.6 billion in the fourth quarter of the fiscal year ended September 30, 2020 within Employee Severance, Litigation and Other in its Statement of Operations related to the global settlement as well as other ~~parties~~opioid-related litigation. The Company recorded an additional $17.1 million accrual in the quarter ended March 31, 2021 for estimated costs associated with the ~~same goal~~injunctive relief terms of ~~reaching~~the potential framework that is part of the advanced discussions to reach a global ~~resolution~~settlement of the MDL and related state-court litigation. The Company currently estimates that $411.3 million will be paid prior to March 31, 2022, which is recorded in Accrued Expenses and Other on the Company’s Consolidated Balance Sheet. The remaining liability of $6.2 billion is recorded in Accrued Litigation Liability on the Company's Consolidated Balance Sheet. While the Company has accrued its estimated liability for this matter, it is unable to estimate the range of possible loss associated with ~~all parties. If agreed,~~these opioid litigation matters. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the ~~potential terms for~~assessment is highly subjective and requires judgments about future events. The Company will regularly review these opioid litigation matters to determine whether its accrual is adequate. The amount of ultimate loss may differ materially from the $6.6 billion accrual. Until such time as a plaintiff participates in a global resolution would then need to be presented to numerous other states and local governments, and a significant number of such jurisdictions would need to accept the proposed terms in order to achieve an agreement in principle that would provide the finality thatsettlement or otherwise resolves its lawsuit, the Company requires from a global resolution. Given the large number of parties involved, the complexity and difficulty of the underlying issues, and the resulting uncertainty of achieving a potential global resolution, the Company continueswill continue to litigate and prepare for trial in the cases pending in the MDL, those remanded from the MDL to federal district courts, as well as in state courts where lawsuits have been filed, and intends to continue to vigorously defend itself in all such cases. ~~A liability associated with a global resolution has not been recognized as of March 31, 2020, since~~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. Further, any final settlement among parties may differ materially from the Company's advanced discussions ~~with~~related to global resolution of the ~~states~~MDL and related state-court litigation involving certain state and local governments that will need to participate and, therefore, a global resolution cannot be considered probable. Furthermore, significant uncertainty remains with regard to whether such matters will proceed to trial, and, given the inherent uncertainty related to such litigation, the Company is not in a position to assess the likely outcome, and therefore unable to estimate the range of possible loss.governmental entities.

In June 2019, attorneys for some of the plaintiffs filed a motion proposing a procedure to certify a nationwide "negotiation class" of cities and counties for the purpose of negotiating and settling with defendants engaged in the nationwide manufacturing, sale, or distribution of opioids. The attorneys subsequently withdrew the motion and refiled an amended motion on July 9, 2019. The Court granted the motion on September 11, 2019 and certain defendants, including ABDC ~~are appealing.~~filed an appeal with the U.S. Court of Appeals for the Sixth Circuit. On September 24, 2020, the Sixth Circuit reversed the Court's prior order.

On October 8, 2020, certain of the plaintiffs filed a petition asking the Sixth Circuit to rehear the matter en banc, which the Sixth Circuit denied on December 29, 2020.

Notwithstanding the Company's accrual of $6.6 billion, several cases filed in various state courts have trial dates scheduled in 2021 and later, although all such dates are subject to change. A trial in New York state for cases brought by Nassau and Suffolk Counties and the New York Attorney General against a variety of defendants, including the Company, ~~was scheduled to begin on March 20, 2020.~~ ~~The trial~~which is not part of the MDL, ~~and has been~~was delayed due to ~~the COVID-19 outbreak.~~COVID-19. The court has ~~not yet~~ set a new trial ~~date.~~date of June 8, 2021. A trial in Ohio state court for a case brought by the Ohio Attorney General against ABDC and certain other pharmaceutical wholesale distributors is scheduled to begin on September 7, 2021. A trial in Washington state court for a case brought by the Washington Attorney General against ABDC and certain other pharmaceutical wholesale distributors has been postponed until September 7, 2021.

Aside from those parties that have already filed suit, other entities, including additional attorneys general’s offices, counties, and cities in multiple states, ~~have indicated their intent~~may continue to ~~sue.~~file additional lawsuits or enforcement proceedings. The Company is vigorously defending itself in the pending lawsuits and intends to vigorously defend itself against any threatened ~~lawsuits. The Company is not in a position to assess the likely outcome~~lawsuits or its exposure, if any, with respect to these matters. In addition, other pharmaceutical wholesale distributors have faced shareholder derivative suits alleging violations of fiduciary duties in connection with the oversight of the distribution of controlled substances.enforcement proceedings.

The Company has also received subpoenas, civil investigative demands, and other requests for information, requesting the production of documents regarding the distribution of prescription opioid pain medications from government agencies in other jurisdictions, including certain states. The Company ishas engaged in discussions with representatives from these government agencies regarding the requests and has been producing responsive documents. The Company cannot predict how these matters would be affected by a global settlement.

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 request 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 has been 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 ~~U.S. Attorney's Office for the District of New Jersey,~~USAO-NJ, and has been producing documents in response to the subpoenas.

~~Government Enforcement and Related Litigation Matters~~

As previously disclosed, in late January 2020 the Company decided to permanently exit the PharMEDium compounding business and as a result the Company will cease all commercial and administrative operations related to this business. Various government agencies, including the U.S. Food and Drug Administration ("FDA"), the Consumer Protection Branch of the Civil Division of the DOJ, and state boards of pharmacy, regulate the compounding of pharmaceutical products, including PharMEDium's Section 503B outsourcing facilities. The FDA and the DOJ have broad enforcement powers.

On May 17, 2019, PharMEDium reached an agreement on the terms of the Consent Decree with the FDA and the DOJ that was entered by the United States District Court for the Northern District of Illinois on May 22, 2019. PharMEDium remains subject to the terms of the Consent Decree while winding down its operations and continues to work with the FDA and the DOJ to comply with applicable laws and regulations during this process.

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, the Company's subsidiary U.S. Bioservices Corporation ("U.S. Bio") 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. ~~The Company engaged in discussions with the USAO-EDNY and produced documents in response~~A filed qui tam complaint related to the ~~subpoena. In~~investigation was unsealed in April 2019 and the ~~government informed the Company that it had~~relator filed ~~a notice with~~an amended complaint under seal in the U.S. District Court for the Eastern District of New York that it was declining to intervene in a filed qui tam action related to its investigation. The case was unsealed in April 2019 and counsel for the relator filed an amended complaint under seal with the USAO-EDNY.York. In December 2019, the government filed a notice that it was ~~again~~ declining to ~~intervene in the action.~~intervene. The ~~Court~~court ordered that the relator's complaint against the Company, including subsidiaries AmerisourceBergen Specialty Group, LLC and U.S. Bio, be unsealed. The relator’s complaint ~~alleges~~alleged violations of the federal False Claims Act and the false claims acts of various states. The ~~Company sought leave to file a motion to dismiss relator’s amended complaint and a hearing on the request to file the motion is scheduled for May 12, 2020. The~~ relator filed a second amended complaint, removing one state false claims act ~~count and the~~count. The Company ~~renewed its request for leave to file~~filed a motion to dismiss the second amended ~~complaint. This request is currently pending.~~complaint and all briefing on the motion was filed with the court on October 9, 2020.

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. OnIn December ~~20,~~ 2019, Defendants filed a motion to dismiss the complaint. ~~The motion is fully briefed~~After briefing and ~~remains pending before~~oral argument, on August 24, 2020 the Delaware Court of ~~Chancery.~~Chancery denied Defendants' motion to dismiss. On September 24, 2020, the Board of Directors of the Company established a Special Litigation Committee to conduct an investigation concerning the plaintiffs’ allegations. On October 28, 2020, the Special Litigation Committee filed a motion to stay the litigation pending completion of

its investigation. On ~~February 6,~~November 10, 2020, ~~another stockholder, Andrea Rosner,~~the Delaware Court of Chancery granted the Special Litigation Committee’s motion to stay the litigation until May 9, 2021.

On July 17, 2020, CCAR Investments, Inc. filed a complaint for a purported derivative action in the United States District Court for the District of Delaware against the Company and certain of its current and former officers and ~~directors.~~directors (“CCAR Defendants”). The complaint alleges claims for breach of fiduciary duty, corporate waste and unjust enrichment allegedly arising from the Company’s controlled substance diversion control programs and violation of Section 14(a) of the Securities Exchange Act of ~~1934. The defendants~~1934. On August 14, 2020, the CCAR Defendants answered the complaint and filed a motion for judgment on the pleadings. On October 29, 2020 the parties filed a stipulation permitting CCAR Investments, Inc. to ~~dismiss this matter~~file an amended complaint on ~~May 4,~~or before November 20, 2020. On ~~April 28,~~December 4, 2020, ~~a group of interested stockholders~~the parties filed a ~~motion~~stipulation staying the deadline for CCAR Investments, Inc. to ~~intervene and stay~~file an amended complaint pending the ~~proceedings filed by Ms. Rosner.~~Company’s production of certain documents to CCAR Investments, Inc. The Company’s ~~response to the motion to intervene is due by May 12, 2020.~~

New York State ("NYS") enacted the Opioid Stewardship Act ("OSA"), which went into effect on July 1, 2018. The OSA established an annual $100 million Opioid Stewardship Fund (the "Fund") and requires manufacturers, distributors, and importers licensed in NYS to ratably source the Fund. The ratable share of the assessment for each licenseeproduction was to be based upon opioids sold or distributed to or within NYS. In the fourth quarter of the fiscal year ended September 30, 2018, the Company accrued $22 million as an estimate of its liability under the OSA for opioids distributed from January 1, 2017 through September 30, 2018 and recognized this reserve in Cost of Goods Sold on its Consolidated Statement of Operations and in Accrued Expenses and Other

on its Consolidated Balance Sheet as of September 30, 2018. In December 2018, the OSA was ruled unconstitutional by the U.S. District Court for the Southern District of New York, and, as a result, the Company reversed the $22.0 million accrual in the quarter ended December 31, 2018. NYS filed an appeal of the court decisioncompleted on January ~~17, 2019; however,~~29, 2021 and the ~~Company does not believe a loss contingency is probable.~~case remains stayed while the plaintiff completes its review.

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 the Company, 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 the Company 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 which they served on~~complaint. On July 15, 2020, the ~~Company. The timing of discovery, motions practice,~~Company and other ~~court proceedings has not yet been determined.~~industry participants filed a motion to dismiss the complaint.The motion to dismiss is fully briefed and the parties are awaiting a ruling from the court.

Note 11. Litigation Settlements

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 is not typically 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 have gone to trial, but some have settled in the past with the Company receiving proceeds from the settlement funds. The Company recognized 0 gains during the three and six months ended March 31, 2021. The Company recognized gains of $0.1 million and $8.5 million during the three and six months ended March 31, 2020, ~~respectively, related to these lawsuits. The Company recognized gains of $52.0 million and $139.3 million during the three and six months ended March 31, 2019,~~ respectively, related to these lawsuits. 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 March 31, ~~2020~~2021 and September 30, ~~2019~~2020 approximate fair value based upon the relatively short-term nature of these financial instruments. Within Cash and Cash Equivalents, the Company had ~~$2,174.0~~$3,500.0 million of investments in money market accounts as of March 31, ~~2020~~2021 and had ~~$1,552.0~~$2,548.0 million of investments in money market accounts as of September 30, ~~2019.~~2020. 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)6) and the corresponding fair value as of March 31, ~~2020~~2021 were ~~$3,622.4~~$6,147.1 million and ~~$3,667.6~~$6,430.9 million, respectively. The recorded amount of long-term debt and the corresponding fair value as of September 30, ~~2019~~2020 were ~~$4,033.9~~$3,618.3 million and ~~$4,158.4~~$4,026.4 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 based upon the products and services it provides to its customers. 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 (MWI Animal Health). The operating segments that focus on global commercialization services include AmerisourceBergen Consulting Services and World Courier.

The following illustrates reportable and operating segment disaggregated revenue as required by Accounting Standards Codification 606 for the periods indicated:

Three months ended
March 31, Six months ended
March 31,
(in thousands) 2020 2019 2020 2019
Pharmaceutical Distribution Services $ 45,562,670
$ 41,676,164
$ 91,599,498
$ 85,420,545
Other:
MWI Animal Health 1,043,016
947,293
2,071,334
1,901,877
Global Commercialization Services 833,577
718,136
1,652,243
1,434,490
Total Other 1,876,593
1,665,429
3,723,577
3,336,367
Intersegment eliminations (21,624 ) (21,991 ) (40,694 ) (44,858 )
Revenue $ 47,417,639
$ 43,319,602
$ 95,282,381
$ 88,712,054


	Three months ended March 31,				Six months ended March 31,
(in thousands)	2021		2020		2021		2020
Pharmaceutical Distribution Services	$	47,101,331	$	45,562,670	$	97,593,841	$	91,599,498
Other:
MWI Animal Health	1,128,407		1,043,016		2,248,964		2,071,334
Global Commercialization Services	964,365		833,577		1,896,082		1,652,243
Total Other	2,092,772		1,876,593		4,145,046		3,723,577
Intersegment eliminations	(39,932)		(21,624)		(68,160)		(40,694)
Revenue	$	49,154,171	$	47,417,639	$	101,670,727	$	95,282,381

Intersegment eliminations primarily represent the elimination of certain Pharmaceutical Distribution Services reportable segment sales to ~~MWI.~~MWI Animal Health.

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

Three months ended
March 31, Six months ended
March 31,
(in thousands) 2020 2019 2020 2019
Pharmaceutical Distribution Services $ 563,097
$ 517,034
$ 954,791
$ 890,241
Other 108,260
99,879
212,739
198,813
Intersegment eliminations 328
(249 ) (579 ) (556 )
Total segment operating income $ 671,685
$ 616,664
$ 1,166,951
$ 1,088,498


	Three months ended March 31,				Six months ended March 31,
(in thousands)	2021		2020		2021		2020
Pharmaceutical Distribution Services	$	589,033	$	563,097	$	1,085,100	$	954,791
Other	123,180		108,260		244,827		212,739
Intersegment eliminations	(5,655)		328		(6,453)		(579)
Total segment operating income	$	706,558	$	671,685	$	1,323,474	$	1,166,951

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

Three months ended
March 31, Six months ended
March 31,
(in thousands) 2020 2019 2020 2019
Total segment operating income $ 671,685
$ 616,664
$ 1,166,951
$ 1,088,498
Gain from antitrust litigation settlements 54
51,976
8,546
139,255
LIFO (expense) credit (23,853 ) 66,805
(37,134 ) 69,834
PharMEDium remediation costs —
(15,897 ) (16,165 ) (36,392 )
PharMEDium shutdown costs (32,470 ) —
(32,470 ) —
New York State Opioid Stewardship Act —
—
—
22,000
Contingent consideration adjustment 12,153
—
12,153
—
Acquisition-related intangibles amortization (26,670 ) (46,594 ) (60,236 ) (91,746 )
Employee severance, litigation, and other (67,732 ) (55,389 ) (107,041 ) (96,061 )
Impairment of PharMEDium assets (223,652 ) (570,000 ) (361,652 ) (570,000 )
Operating income 309,515
47,565
572,952
525,388
Other (income) loss (1,109 ) (14,494 ) 1,733
(11,397 )
Interest expense, net 34,421
43,275
65,428
85,445
Income before income taxes $ 276,203
$ 18,784
$ 505,791
$ 451,340


	Three months ended March 31,				Six months ended March 31,
(in thousands)	2021		2020		2021		2020
Total segment operating income	$	706,558	$	671,685	$	1,323,474	$	1,166,951
Gain from antitrust litigation settlements	0		54		0		8,546
LIFO credit (expense)	20,918		(23,853)		46,645		(37,134)
PharMEDium remediation costs	0		0		0		(16,165)
PharMEDium shutdown costs	0		(32,470)		0		(32,470)

Contingent consideration adjustment	0		12,153		0		12,153
Acquisition-related intangibles amortization	(24,973)		(26,670)		(50,007)		(60,236)
Employee severance, litigation, and other	(78,156)		(67,732)		(148,537)		(107,041)
Impairment of PharMEDium assets	0		(223,652)		0		(361,652)
Operating income	624,347		309,515		1,171,575		572,952
Other loss (income), net	23,310		(1,109)		9,042		1,733
Interest expense, net	34,526		34,421		68,140		65,428


Income before income taxes	$	566,511	$	276,203	$	1,094,393	$	505,791

Segment operating income is evaluated by the chief operating decision maker ("CODM") of the Company before gain from antitrust litigation settlements; LIFO credit (expense) ~~credit;~~; PharMEDium remediation costs; PharMEDium shutdown costs; ~~New York State Opioid Stewardship Act;~~ contingent consideration adjustment; acquisition-related intangibles amortization; employee severance, litigation, and other; and impairment of PharMEDium assets. Segment measures were adjusted in fiscal 2020 to exclude PharMEDium shutdown costs and the contingent consideration adjustment as the CODM excludes all such items in the measurement of segment performance. All corporate office expenses are allocated to the operating segment level.

The Company incurred remediation costs in connection with the suspended production activities at PharMEDium ~~(see Note 5).~~in the six months ended March 31, 2020. These remediation costs are primarily classified in Cost of Goods Sold in the Consolidated Statements of Operations. The Company incurred costs in connection with exiting the PharMEDium compounding business ~~(see Note 5).~~three and six months ended March 31, 2020. These shutdown costs are primarily classified in Distribution, Selling, and Administrative expenses in the Consolidated Statements of Operations.

One of the Company's non-wholly-owned subsidiaries, Profarma, which the Company consolidates based on certain governance rights (see Note 3), adjusted its previous estimate of contingent consideration related to the purchase price of one of its prior business ~~acquisitions.~~

~~The Company recorded a $13.7 million gain on the sale of an equity investment in Other (Income) Loss in the Company's Consolidated Statements of Operations~~acquisitions in the three and six months ended March 31, ~~2019.~~2020.

The Company recorded foreign currency losses of $21.4 million and $7.3 million on the remeasurement of the deferred tax assets relating to Swiss tax reform in the three and six months ended March 31, 2021, respectively, in Other Loss (Income), Net in the Consolidated Statements of Operations.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and notes thereto contained herein and in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019.~~2020.

We are one of the largest global pharmaceutical sourcing and distribution services companies, helping both healthcare providers and pharmaceutical and biotech manufacturers improve patient access to products and enhance patient care. We deliver innovative programs and services designed to increase the effectiveness and efficiency of the pharmaceutical supply chain in both human and animal health. We are organized based upon the products and services we provide to our customers. Our 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 our reportable segment presentation.

Pharmaceutical Distribution Services Segment

The Pharmaceutical Distribution Services reportable segment distributes a comprehensive offering of brand-name, specialty brand-name and generic pharmaceuticals, over-the-counter healthcare products, home healthcare supplies and equipment, and related services to a wide variety of healthcare providers, including acute care hospitals and health systems, independent and chain retail pharmacies, mail order pharmacies, medical clinics, long-term care and alternate site pharmacies, and other customers. Through a number of operating businesses, the Pharmaceutical Distribution Services reportable segment provides pharmaceutical distribution (including plasma and other blood products, ~~injectible~~injectable pharmaceuticals, vaccines, and other specialty pharmaceutical products) and additional services to physicians who specialize in a variety of disease states, especially oncology, and to other healthcare providers, including hospitals and dialysis clinics. Additionally, the Pharmaceutical Distribution Services reportable segment provides data analytics, outcomes research, and additional services for biotechnology and pharmaceutical manufacturers. The Pharmaceutical Distribution Services reportable segment also provides pharmacy management, staffing and additional consulting services, and supply management software to a variety of retail and institutional healthcare providers. Additionally, it delivers packaging solutions to institutional and retail healthcare providers.

Other consists of operating segments that focus on global commercialization services and animal health (MWI Animal ~~Health)~~Health or "MWI"). The operating segments that focus on global commercialization services include AmerisourceBergen Consulting Services ("ABCS") and World Courier.

MWI ~~Animal Health ("MWI")~~ is a leading animal health distribution company in the United States and in the United Kingdom. MWI sells pharmaceuticals, vaccines, parasiticides, diagnostics, micro feed ingredients, and various other products to customers in both the companion animal and production animal markets. Additionally, MWI offers demand-creating sales force services to manufacturers. ABCS, through a number of operating businesses, provides a full suite of integrated manufacturer services that range from clinical trial support to product post-approval and commercialization support. World Courier, which operates in over 50 countries, is a leading global specialty transportation and logistics provider for the biopharmaceutical industry.

Recent ~~Development~~Developments

In ~~March 2020,~~January 2021, we entered into a share purchase agreement with Walgreens Boots Alliance, Inc. ("WBA") pursuant to which we will acquire a majority of WBA’s Alliance Healthcare businesses ("Alliance Healthcare") for approximately $6.5 billion, comprised of $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of our common stock (the "Transaction"). WBA’s operations in China, Italy, and Germany are not part of this transaction. We will fund the ~~World Health Organization ("WHO") declared~~cash purchase price through a ~~global pandemic attributable~~combination of cash on hand and new debt financing. The Transaction is subject to the ~~outbreak and continued spread~~satisfaction of ~~COVID-19.~~ customary closing conditions, including receipt of applicable regulatory approvals.

In connection with the ~~mitigation~~closing of the Transaction, we and ~~containment procedures recommended by~~WBA have agreed to a three-year extension (through 2029) of our existing pharmaceutical distribution agreement with WBA and the ~~WHO~~arrangement pursuant to which we have access to generic drugs and ~~imposed by federal, state,~~related pharmaceutical products through Walgreens Boots Alliance Development GmbH, as well as a distribution agreement pursuant to which we will supply branded and ~~local governmental authorities,~~generic pharmaceutical products to WBA’s Boots UK Ltd. subsidiary (through 2031) following closing. In January 2021, we ~~implemented measures~~also entered into an agreement with WBA to explore a series of strategic initiatives designed to ~~keep our employees safe~~create incremental growth and ~~address business continuity issues at our distribution centers~~efficiencies in sourcing, logistics, and other locations. We continue to evaluate and plan for the potential effects of a prolonged disruption and the related impacts on our revenue, results of operations, and cash flows (refer to our COVID-19 risk factor in Itemdistribution.

See Part II. Other Information-Item 1A. Risk Factors on page ~~37).~~35 of this Quarterly Report on Form 10-Q for additional risk factors related to our strategic transactions with WBA.

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

•Revenue increased by 3.7% and 6.7% from the prior year quarter and six-month period, respectively, primarily due to the revenue growth in our Pharmaceutical Distribution Services segment. The Pharmaceutical Distribution Services segment grew its revenue 3.4% and 6.5% from the prior year quarter and six-month period, respectively, primarily due to increased sales of specialty products (which generally have higher selling prices), including COVID-19 treatments and overall market growth principally driven by unit volume growth. In the fiscal quarter ended March 31, 2020, we experienced increased demand for pharmaceuticals as many of our customers increased ~~their~~ purchases due to the onset of the COVID-19 pandemic, which resulted in higher revenue. As such, our sales growth in the current year quarter was lower than our sales growth in the current year six-month period;

•Total gross profit increased 10.5%, or $145.3 million, from the prior year quarter and 14.0%, or $366.3 million, from the prior six-month period. Gross profit was favorably impacted by increases of gross profit in Pharmaceutical Distribution Services of 6.4% from the prior year quarter and 11.0% from the prior year six-month period, last-in, first-out ("LIFO") credits in the current year periods in comparison to a LIFO expense in the prior year periods, and increases in gross profit in Other of 9.5% from the prior year quarter and 9.9% from the prior year six-month period. Pharmaceutical Distribution Services' gross profit increased from the prior year periods primarily due to revenue ~~and gross profit. We also incurred operating expenses directly attributable~~growth, including an increase in specialty product sales, offset in part by increased demand for pharmaceuticals in the fiscal quarter ended March 31, 2020 as many of our customers increased purchases due to the onset of the COVID-19 and therefore, the impact to our operating income was not significant. As a result, while the impact of COVID-19 on us is evolving rapidly and its impacts are difficult to assess or predict, we expect our third quarter revenue to be proportionately lower as thepandemic. Gross profit in Other increased ~~second quarter revenue partially reflected purchases that would have otherwise been made after March 31, 2020.~~

~~Executive Summary~~

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

•Distribution, ~~Services segment;~~

Distribution, selling, and administrative expenses increased 10.4% compared to the prior year quarter and 7.4% compared to the prior year six-month period primarily due to an increase in costs to support revenue growth in Other primarily due to an increase in freight and warehousing costs and an increase in bad debt expense due to our current assessment of the collectibility of trade receivables as a result of the COVID-19 pandemic;

•Our effective tax rates were 23.4% and 25.7% for the three and six months ended March 31, 2020 (see Note 5 of the Notes to Consolidated Financial Statements) compared to the $570.0 million impairment of PharMEDium's assets in the three and six months ended March 31, 2019, the decline in total gross profit and the increase in distribution, selling, and administrative expenses, as noted above;

permanent shutdown of the PharMEDium Healthcare Holdings, Inc. ("PharMEDium") compounding business and the Coronavirus Aid, Relief, and Economic Security ~~("CARES")~~ Act (the provisions of which adjusted the net operating loss carryback rules and ~~other discrete items (see Note 4 of the Notes to Consolidated Financial Statements)~~accelerated available refunds for alternative minimum tax credit carryforwards) and ~~due to~~ a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the ~~impairment~~impairments of ~~PharMEDium's assets (see Note 5~~PharMEDium assets.

Table of the Notes to Consolidated Financial Statements) in the three and six months ended March 31, 2020. The effective tax rates in the three and six months ended March 31, 2019 were lower than the U.S. statutory rate due to a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the $570.0 million impairment of PharMEDium's assets. The effective tax rate in the six months ended March 31, 2019 also benefited from a $37.0 million decrease to our finalization of the estimated transition tax liability related to the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act"); andContents

Net income attributable to AmerisourceBergen and diluted earnings per share were significantly higher in the current year quarter and six months ended March 31, 2020 primarily due to the discrete income tax benefits recognized in the current year periods.

Results of Operations

Revenue


	Three months ended March 31,							Six months ended March 31,								Three months ended March 31,					Six months ended March 31,
(dollars in thousands)	2020			2019			Change	2020			2019			Change	(dollars in thousands)	2021		2020		Change	2021		2020		Change
Pharmaceutical Distribution Services	$	45,562,670		$	41,676,164		9.3%	$	91,599,498		$	85,420,545		7.2%	Pharmaceutical Distribution Services	$	47,101,331	$	45,562,670	3.4%	$	97,593,841	$	91,599,498	6.5%
Other:															Other:
MWI Animal Health	1,043,016			947,293			10.1%	2,071,334			1,901,877			8.9%	MWI Animal Health	1,128,407		1,043,016		8.2%	2,248,964		2,071,334		8.6%
Global Commercialization Services	833,577			718,136			16.1%	1,652,243			1,434,490			15.2%	Global Commercialization Services	964,365		833,577		15.7%	1,896,082		1,652,243		14.8%
Total Other	1,876,593			1,665,429			12.7%	3,723,577			3,336,367			11.6%	Total Other	2,092,772		1,876,593		11.5%	4,145,046		3,723,577		11.3%
Intersegment eliminations	(21,624		)	(21,991		)		(40,694		)	(44,858		)		Intersegment eliminations	(39,932)		(21,624)			(68,160)		(40,694)
Revenue	$	47,417,639		$	43,319,602		9.5%	$	95,282,381		$	88,712,054		7.4%	Revenue	$	49,154,171	$	47,417,639	3.7%	$	101,670,727	$	95,282,381	6.7%

We expect our revenue growth percentage to be in the ~~low to mid-single~~high-single digits in fiscal ~~2020.~~2021. Our future revenue growth will continue to be affected by various factors, such as industry growth trends, including drug utilization, the introduction of new, innovative brand therapies, ~~(including biosimilars),~~ 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, 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, changes in government rules and regulations, and the impact of the COVID-19 ~~pandemic (refer to our COVID-19 risk factor in Item 1A. Risk Factors on page 37).~~pandemic.

Revenue increased by ~~9.5%~~3.7% and ~~7.4%~~6.7% from the prior year quarter and six-month period, respectively, primarily due to the revenue growth in our Pharmaceutical Distribution Services segment.

The Pharmaceutical Distribution Services ~~segment's~~segment grew its revenue ~~grew~~ by ~~9.3%~~3.4%, or ~~$3.9 billion, and 7.2%, or $6.2~~$1.5 billion, from the prior year quarter and ~~six-month period, respectively, primarily due to the organic growth of some of its largest customers (sales to our largest customer, Walgreens, increased $1.7 billion and $2.0~~6.5%, or $6.0 billion, from the prior year ~~quarter and~~ six-month period ~~respectively)~~primarily due to increased sales of specialty ~~pharmaceutical product sales~~products (which generally have higher selling prices), including COVID-19 treatments and overall market growth principally driven by unit volume ~~growth and, to a lesser extent, inflationary increases in brand drugs.~~

~~Revenue in Other increased 12.7% and 11.6% from the prior year quarter and six-month period, respectively. The increase was due to growth at all three operating segments: MWI, ABCS, and World Courier.~~

growth. In the fiscal quarter ended March 31, 2020, we experienced increased demand for pharmaceuticals as many of our customers increased ~~their~~ purchases due to the onset of the COVID-19 pandemic, which resulted in higher revenue. As such, our sales growth in the current year quarter was lower than our sales growth in the current year six-month period.

More specifically, the increase in the Pharmaceutical Distribution Services segment revenue ~~and gross profit. We also incurred operating expenses directly~~was largely attributable to the ~~onset of COVID-19,~~following (in billions):


	Three-month Period	Six-month Period
(Decreased) increased sales to Walgreens, our largest customer	$(0.6)	$0.5
Increased sales to specialty physician practices	$0.4	$0.9
Increased sales to other customers, including COVID-19 treatments	$1.7	$4.6

Revenue in Other increased 11.5%, or $216.2 million, from the prior year quarter and ~~therefore,~~11.3%, or $421.5 million, from the ~~impact~~prior year six-month period due to ~~our~~growth at all three operating ~~income was not significant. As a result, while the impact of COVID-19 on us is evolving rapidly~~segments: MWI, ABCS, and its impacts are difficult to assess or predict, we expect our third quarter revenue to be proportionately lower as the increased second quarter revenue partially reflected purchases that would have otherwise been made after March 31, 2020.World Courier.

A number of our contracts with customers, including group purchasing organizations, are typically subject to expiration each year. We may lose a significant customer if an existing contract with such customer expires without being extended, renewed, or replaced. During the six months ended March 31, ~~2020,~~2021, no significant contracts expired. Over the next twelve months, there are no significant contracts scheduled to expire. Additionally, from time to time, significant contracts may be terminated in accordance with their terms or extended, renewed, or replaced prior to their expiration dates. If those contracts are extended, renewed, or replaced at less favorable terms, they may also negatively impact our revenue, results of operations, and cash flows.

Gross profit ~~decreased 2.6%~~increased 10.5%, or ~~$36.6~~$145.3 million, from the prior year quarter and ~~3.8%~~14.0%, or ~~$103.0~~$366.3 million, from the prior year six-month ~~period and was unfavorably impacted by LIFO expense in comparison to a LIFO credit~~period. Gross profit in the ~~prior~~current year periods ~~and significantly lower gains from antitrust litigation settlements, offset in part~~was favorably impacted by increases in gross profit in Pharmaceutical Distribution Services, ~~and Other and lower PharMEDium remediation costs. The six-month period was also unfavorably impacted by~~a LIFO credit in the current year periods in comparison to a LIFO expense in the prior year ~~reversal of a previously-estimated assessment related to the New York State Opioid Stewardship Act.~~periods, and increases in gross profit in Other.

Pharmaceutical Distribution Services' gross profit increased ~~6.6%~~6.4%, or ~~$65.0~~$67.3 million, from the prior year quarter and ~~4.2%~~11.0%, or ~~$79.5~~$214.3 million, from the prior year six-month period primarily due to revenue growth, including an increase in specialty product sales, offset in part by increased demand for pharmaceuticals in the fiscal quarter ended March 31, 2020 as many of our customers increased purchases due to the ~~increase in revenue largely due to strong specialty product sales.~~onset of the COVID-19 pandemic. As a percentage of revenue, Pharmaceutical Distribution Services' gross profit ~~margins of 2.32%~~margin was 2.39% and ~~2.13%~~2.22% in the current year quarter and six-month period, respectively, decreased 6 basis points from the prior year periods. The decreases in gross profit margin from the prior year periods was primarily due to increased sales to our larger customers, which typically have lower gross profit margins.

~~Gross profit in Other increased 10.1%, or $33.0 million,~~a 7-basis point increase from the prior year quarter ~~primarily due to growth at MWI~~ and ~~World Courier. Gross profit in Other increased 9.1%, or $59.1 million,~~a 9-basis point increase from the prior year six-month period primarily due to increases in specialty product sales.

Gross profit in Other increased 9.5%, or $34.2 million from the prior year quarter and 9.9%, or $70.5 million, from the prior six-month period primarily due to the revenue growth at ~~MWI,~~ World Courier and ~~the Lash consulting group within ABCS.~~MWI. As a percentage of revenue, gross profit margin in Other of ~~19.15%~~18.81% in the ~~three months ended March 31, 2020~~current year quarter decreased from ~~19.60%~~19.15% in the prior year quarter. As a percentage of revenue, gross profit margin in Other of ~~19.08%~~18.84% in the ~~six months ended March 31, 2020~~current year six-month period decreased from ~~19.53%~~19.08% in the prior year six-month period.

We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $0.1 million and ~~$52.0~~$8.5 million during the three ~~months ended March 31, 2020~~ and ~~2019, respectively. We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $8.5 million and $139.3 million during the~~ six months ended March 31, 2020, ~~and 2019,~~ respectively. The gains were recorded as reductions to Cost of Goods Sold (see Note 11 of the Notes to Consolidated Financial Statements).

Our cost of goods sold for interim periods includes a LIFO provision that is recorded ratably on a quarterly basis and is based on our estimated annual LIFO provision. The annual LIFO provision, which we estimate on a quarterly basis, is affected by manufacturer pricing practices, which may be impacted by market and other external influences, expected changes in inventory quantities, and product mix, many of which are difficult to predict. Changes to any of the above factors may have a material impact to our annual LIFO provision.

New York State ("NYS") enacted the Opioid Stewardship Act ("OSA"), which initially went into effect on July 1, 2018. The OSA established an annual $100 million Opioid Stewardship Fund (the "Fund") and required manufacturers, distributors, and importers licensed in NYS to ratably source the Fund. The ratable share

Table of the assessment for each licensee was to be based upon opioids sold or distributed to or within NYS. In September 2018, we accrued $22.0 million as an estimate of our liability under the OSA for the period from January 1, 2017 through September 30, 2018. In December 2018, the OSA was ruled unconstitutional by the U.S. District Court for the Southern District of New York, and, as a result, we reversed the $22.0 million accrual in the quarter ended December 31, 2018.Contents

Operating Expenses


	Three months ended March 31,					Six months ended March 31,						Three months ended March 31,					Six months ended March 31,
(dollars in thousands)	2020		2019		Change	2020		2019		Change	(dollars in thousands)	2021		2020		Change	2021		2020		Change
Distribution, selling, and administrative	$	693,413	$	628,036	10.4%	$	1,379,366	$	1,284,621	7.4%	Distribution, selling, and administrative	$	730,081	$	693,413	5.3%	$	1,465,149	$	1,379,366	6.2%
Depreciation and amortization	93,795		123,766		(24.2)%	198,310		246,266		(19.5)%	Depreciation and amortization	100,797		93,795		7.5%	200,350		198,310		1.0%
Employee severance, litigation, and other	67,732		55,389			107,041		96,061			Employee severance, litigation, and other	78,156		67,732			148,537		107,041
Impairment of PharMEDium assets	223,652		570,000			361,652		570,000			Impairment of PharMEDium assets	—		223,652			—		361,652
Total operating expenses	$	1,078,592	$	1,377,191	(21.7)%	$	2,046,369	$	2,196,948	(6.9)%	Total operating expenses	$	909,034	$	1,078,592	(15.7)%	$	1,814,036	$	2,046,369	(11.4)%

Distribution, selling, and administrative expenses increased ~~10.4%~~5.3%, or ~~$65.4~~$36.7 million, compared to the prior year quarter and ~~7.4%~~6.2%, or ~~$94.7~~$85.8 million, compared to the prior year six-month period primarily due to ~~an increase~~increases in payroll-related operating costs to support current and future revenue growth, offset in ~~Other primarily due to an increase in freight and warehousing costs, an increase~~part by decreases in bad debt expense. The prior year periods included bad debt expense ~~due~~related to our ~~current~~ assessment of ~~the~~ collectibility of trade receivables ~~as a result~~at the onset of the COVID-19 pandemic, and costs incurred in connection with permanently exiting the PharMEDium compounding business, such as contract termination fees, offset in part by operational synergies realized from the integration of H.D. Smith within Pharmaceutical Distribution Services.pandemic. As a percentage of revenue, distribution, selling, and administrative expenses were ~~1.46%~~1.49% and ~~1.45%~~1.44% in the current year quarter and six-month period, respectively, a ~~1 basis~~3-basis point increase compared to ~~the~~ prior year quarter and ~~flat~~a 1-basis point decline compared to the prior year six-month period.

Depreciation expense ~~decreased 7.2%~~increased 7.8% and ~~7.7%~~7.3% from the prior year quarter and six-month period, respectively, primarily due to ~~the reduction of H.D. Smith depreciable assets~~an increase in ~~connection with the integration of its operations.~~capital projects being depreciated. Amortization expense ~~decreased 50.6% and 38.1% from~~increased 6.4% compared to the prior year quarter and decreased 13.7% from the prior year six-month period. The decrease from the prior year six-month period ~~respectively,~~was primarily due to the fiscal 2020 ~~and 2019~~ impairments of PharMEDium intangible assets.

Employee severance, litigation, and other in the three months ended March 31, 2021 included $24.9 million of litigation costs related to legal fees in connection with opioid lawsuits and investigations, a $17.1 million accrual related to injunctive relief terms associated with our Multidistrict Litigation opioid settlement discussions, $23.6 million of acquisition-related deal and integration costs primarily related to the announced acquisition of a majority of Walgreens Boots Alliance, Inc.'s ("WBA") Alliance Healthcare businesses, $10.6 million related to our business transformation efforts, and $2.0 million of other restructuring initiatives. Employee severance, litigation, and other in the three months ended March 31, 2020 included $30.8 million of litigation costs ~~that~~ related to legal fees in connection with opioid lawsuits and investigations, $25.0 million of severance costs primarily related to position eliminations resulting from our decision to permanently exit the PharMEDium compounding business, $9.0 million related to our business transformation efforts, $2.5 million of other restructuring initiatives, and $0.3 million of acquisition-related deal and integration costs.

Employee severance, litigation, and other in the ~~three~~six months ended March 31, ~~2019~~2021 included $14.0 million of severance costs primarily related to PharMEDium restructuring activities, position eliminations resulting from our business transformation efforts and the integration of H.D. Smith, and restructuring activities related to our consulting business, $13.8$56.9 million of litigation costs ~~that~~ related to legal fees in connection with opioid lawsuits and investigations, ~~$11.5~~a $17.1 million accrual related to injunctive relief terms associated with our Multidistrict Litigation opioid settlement discussions, $42.5 million of acquisition-related deal and integration costs ~~(primarily~~primarily related to the ~~integration~~announced acquisition of ~~H.D. Smith), $9.9~~a majority of WBA's Alliance Healthcare businesses, $23.1 million related to our business transformation efforts, and ~~$6.2~~$8.9 million of other restructuring initiatives.

Employee severance, litigation, and other in the six months ended March 31, 2020 included $55.5 million of litigation costs ~~that~~ related to legal fees in connection with opioid lawsuits and investigations, $25.8 million of severance costs primarily related to position eliminations resulting from our decision to permanently exit the PharMEDium compounding business, $17.5 million related to our business transformation efforts, $7.4 million of other restructuring initiatives, and $0.8 million of acquisition-related deal and integration costs. ~~Employee severance, litigation, and other in the six month period ended March 31, 2019 included $28.4 million~~

Table of litigation costs that related to legal fees in connection with opioid lawsuits and investigations, $22.0 million of acquisition-related deal and integration costs (primarily related to the integration of H.D. Smith), $18.8 million of severance costs primarily related to PharMEDium restructuring activities, position eliminations resulting from our business transformation efforts and restructuring activities related to our consulting business and the integration of H.D. Smith, $16.9 million related to our business transformation efforts, and $10.0 million of other restructuring initiatives.Contents

We recorded impairments of PharMEDium's assets of $223.7 million and $361.7 million in the three and six months ended March 31, 2020, respectively (see Note 5 of the Notes to Consolidated Financial Statements). We recorded an impairment of PharMEDium's assets of $570.0 million in the three and six months ended March 31, 2019.

Operating Income


	Three months ended March 31,					Six months ended March 31,
(dollars in thousands)	2021		2020		Change	2021		2020		Change
Pharmaceutical Distribution Services	$	589,033	$	563,097	4.6%	$	1,085,100	$	954,791	13.6%
Other	123,180		108,260		13.8%	244,827		212,739		15.1%
Intersegment eliminations	(5,655)		328			(6,453)		(579)
Total segment operating income	706,558		671,685		5.2%	1,323,474		1,166,951		13.4%

Gain from antitrust litigation settlements	—		54			—		8,546
LIFO credit (expense)	20,918		(23,853)			46,645		(37,134)
PharMEDium remediation costs	—		—			—		(16,165)
PharMEDium shutdown costs	—		(32,470)			—		(32,470)

Contingent consideration adjustment	—		12,153			—		12,153
Acquisition-related intangibles amortization	(24,973)		(26,670)			(50,007)		(60,236)
Employee severance, litigation, and other	(78,156)		(67,732)			(148,537)		(107,041)
Impairment of PharMEDium assets	—		(223,652)			—		(361,652)
Operating income	$	624,347	$	309,515	101.7%	$	1,171,575	$	572,952	104.5%

Three months ended
March 31, Six months ended
March 31,
(dollars in thousands) 2020 2019 Change 2020 2019 Change
Pharmaceutical Distribution Services $ 563,097
$ 517,034
8.9% $ 954,791
$ 890,241
7.3%
Other 108,260
99,879
8.4% 212,739
198,813
7.0%
Intersegment eliminations 328
(249 ) (579 ) (556 )
Total segment operating income 671,685
616,664
8.9% 1,166,951
1,088,498
7.2%

Gain from antitrust litigation settlements 54
51,976
8,546
139,255

LIFO (expense) credit (23,853 ) 66,805
(37,134 ) 69,834

PharMEDium remediation costs —
(15,897 ) (16,165 ) (36,392 )
PharMEDium shutdown costs (32,470 ) —
(32,470 ) —

New York State Opioid Stewardship Act —
—
—
22,000

Contingent consideration adjustment 12,153
—
12,153
—

Acquisition-related intangibles amortization (26,670 ) (46,594 ) (60,236 ) (91,746 )
Employee severance, litigation, and other (67,732 ) (55,389 ) (107,041 ) (96,061 )
Impairment of PharMEDium assets (223,652 ) (570,000 ) (361,652 ) (570,000 )
Operating income $ 309,515
$ 47,565
550.7% $ 572,952
$ 525,388
9.1%

Segment operating income is evaluated before gain from antitrust litigation settlements; LIFO credit (expense) ~~credit;~~; PharMEDium remediation costs; PharMEDium shutdown costs; ~~New York State Opioid Stewardship Act;~~ contingent consideration adjustment; acquisition-related intangibles amortization; employee severance, litigation, and other; and impairment of PharMEDium assets.

Pharmaceutical Distribution Services' operating income increased ~~8.9%~~4.6%, or ~~$46.1~~$25.9 million, from the prior year quarter and ~~7.3%~~13.6%, or ~~$64.6~~$130.3 million, from the prior year six-month period primarily due to the increases in gross profit, as noted above, and were offset in part by increases in operating expenses. As a percentage of revenue, Pharmaceutical Distribution Services' operating income margins were ~~1.24%~~1.25% and ~~1.04%~~1.11% in the quarter and six-month period ended March 31, ~~2020,~~2021, respectively, and ~~were flat~~represented increases of 1 basis point and 7 basis points compared to the prior year ~~periods.~~quarter and six-month period, respectively. The increase from the prior year six-month period was primarily due to the increase in specialty product sales.

Operating income in Other increased ~~8.4%~~13.8%, or ~~$8.4~~$14.9 million, from the prior quarter and 15.1%, or $32.1 million, from the prior year ~~quarter and 7.0%, or $13.9 million, from the period year~~ six-month period ~~primarily~~ due to the increases in gross profit, as noted above, and was offset in part by increases in operating expenses.

Table of Contents

Interest expense, net and the respective weighted average interest rates in the ~~quarter~~three months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	2021			2020
(dollars in thousands)	Amount		Weighted Average Interest Rate	Amount	Weighted Average Interest Rate
Interest expense	$	35,184	3.39%	41,982	3.57%
Interest income	(658)		0.10%	(7,561)	1.06%
Interest expense, net	$	34,526		34,421

2020 2019
(dollars in thousands) Amount
Weighted Average
Interest Rate
Amount
Weighted Average
Interest Rate
Interest expense $ 41,982
3.57% $ 49,882
3.76%
Interest income (7,561 ) 1.06% (6,607 ) 1.86%
Interest expense, net $ 34,421
$ 43,275

Interest expense, net and the respective weighted average interest rates in the six months ended March 31, ~~2020~~2021 and ~~2019~~2020 were as follows:


	2021			2020
(dollars in thousands)	Amount		Weighted Average Interest Rate	Amount		Weighted Average Interest Rate
Interest expense	$	69,762	3.35%	$	83,584	3.58%
Interest income	(1,622)		0.10%	(18,156)		1.23%
Interest expense, net	$	68,140		$	65,428

2020 2019
(dollars in thousands) Amount
Weighted Average
Interest Rate
Amount
Weighted Average
Interest Rate
Interest expense $ 83,584
3.58% $ 99,118
3.75%
Interest income (18,156 ) 1.23% (13,673 ) 1.81%
Interest expense, net $ 65,428
$ 85,445

Interest expense, net ~~decreased 20.5%~~increased 0.3%, or ~~$8.9~~$0.1 million, from ~~the~~ prior year quarter, and ~~23.4%~~4.1%, or ~~$20.0~~$2.7 million, from the prior year six-month period due to decreases in interest income primarily resulting from a ~~decrease~~decline in investment interest rates. The decreases in interest income were offset in part by the decreases in interest expense, which were driven primarily ~~due~~by lower interest rates and the repayment of our $400 million term loan upon maturity in October 2020. Interest expense, net is expected to increase beginning in the ~~adoption~~fiscal quarter ending June 30, 2021 as a result of the ~~new lease accounting standard~~recent issuance of our $1,525 million of 0.737% senior notes, $1,000 million of 2.700% senior notes, and the $500 million variable-rate term loan to finance the acquisition of a majority of WBA's Alliance Healthcare businesses. We expect to borrow $500 million under the variable-rate term loan upon the closing of this acquisition (see Note 16 of the Notes to Consolidated Financial Statements) as of October 1, 2019, which resulted in the derecognition of financing obligations related to lease construction assets. Prior to October 1, 2019, we recognized interest expense associated with these financing obligations. Upon adoption of the new lease standard, we began recognizing rent expense related to these leases in Distribution, Selling, and Administrative expenses in our Consolidated Statements of Operations. Interest expense, net also decreased due to the increase in interest income due to a $1.4 billion increase in our average invested cash balances compared to the prior year quarter and six-month period, offset in part by a decline in investment interest rates. In response to the COVID-19 pandemic's impact on the U.S. economy, the federal government lowered Treasury interest rates. If rates remain at their current levels, we would expect our interest income to decrease in the future..

Our effective tax rates were 23.4% and 25.7% for the three and six months ended March 31, 2021, respectively. Our effective tax rates were (251.6)% and (128.9)% for the three and six months ended March 31, 2020, respectively. ~~Our~~The effective tax rates ~~were (49.5)% and 7.0%~~ for the three and six months ended March 31, ~~2019, respectively.~~2021 were higher than the U.S. statutory rate primarily due to U.S. state income taxes. Our effective tax rate for the six months ended March 31, 2021 was also higher than the U.S. statutory rate due to discrete tax expense associated with the Swiss deferred tax asset, offset in part by discrete tax benefits resulting from the permanent shutdown of PharMEDium. The effective tax rates infor the three and six ~~months~~ ended March 31, 2020 were lower than the U.S. statutory rate due to the tax benefits associated with ~~our decision to permanently exit~~the worthless stock deduction in connection with the permanent shutdown of the PharMEDium compounding business and the ~~CARES~~Coronavirus Aid, Relief, and Economic Security Act (the provisions of which adjusted the net operating loss carryback rules and ~~other discrete items (see Note 4 of the Notes to Consolidated Financial Statements)~~accelerated available refunds for alternative minimum tax credit carryforwards) and ~~due to~~ a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the ~~impairment~~impairments of ~~PharMEDium's assets (see Note 5~~PharMEDium assets.

Liquidity and Capital Resources

The following table illustrates our debt structure as of March 31, ~~2020,~~2021, including availability under the multi-currency revolving credit facility, the receivables securitization facility, the revolving credit note, and the overdraft facility:


(in thousands)	Outstanding Balance		Additional Availability		(in thousands)	Outstanding Balance		Additional Availability
Fixed-Rate Debt:					Fixed-Rate Debt:
$500,000, 3.50% senior notes due 2021	$	499,165	$	—
$500,000, 3.40% senior notes due 2024	497,988		—
$500,000, 3.25% senior notes due 2025	496,650		—
$750,000, 3.45% senior notes due 2027	743,520		—
$500,000, 4.25% senior notes due 2045	494,622		—
$500,000, 4.30% senior notes due 2047	492,622		—
$1,525,000, 0.737% senior notes due 2023					$1,525,000, 0.737% senior notes due 2023	$	1,518,228	$	—
$500,000, 3.400% senior notes due 2024					$500,000, 3.400% senior notes due 2024	498,478		—
$500,000, 3.250% senior notes due 2025					$500,000, 3.250% senior notes due 2025	497,329		—
$750,000, 3.450% senior notes due 2027					$750,000, 3.450% senior notes due 2027	744,361		—
$500,000, 2.800% senior notes due 2030					$500,000, 2.800% senior notes due 2030	494,354		—
$1,000,000, 2.700% senior notes due 2031					$1,000,000, 2.700% senior notes due 2031	990,447		—
$500,000, 4.250% senior notes due 2045					$500,000, 4.250% senior notes due 2045	494,838		—
$500,000, 4.300% senior notes due 2047					$500,000, 4.300% senior notes due 2047	492,888		—
Nonrecourse debt	69,197		—		Nonrecourse debt	25,636		—
Total fixed-rate debt	3,293,764		—		Total fixed-rate debt	5,756,559		—

Variable-Rate Debt:					Variable-Rate Debt:
Revolving credit note	—		75,000		Revolving credit note	—		75,000
Term loan due 2020	399,873		—
Overdraft facility due 2021 (£30,000)	32,438		4,801
Receivables securitization facility due 2022	350,000		1,100,000		Receivables securitization facility due 2022	350,000		1,100,000
364-day revolving credit facility					364-day revolving credit facility	—		—
Term loan due in February 2023					Term loan due in February 2023	—		—
Overdraft facility due 2024 (£10,000)					Overdraft facility due 2024 (£10,000)	7,860		5,923
Multi-currency revolving credit facility due 2024	—		1,400,000		Multi-currency revolving credit facility due 2024	—		1,400,000
Nonrecourse debt	69,119		—		Nonrecourse debt	76,578		—
Total variable-rate debt	851,430		2,579,801		Total variable-rate debt	434,438		2,580,923
Total debt	$	4,145,194	$	2,579,801	Total debt	$	6,190,997	$	2,580,923

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 purchases of our common stock, fund the payment of dividends, finance acquisitions, and fund capital expenditures and routine growth and expansion through new business opportunities. We intend to finance the acquisition of Alliance Healthcare using a combination of cash and new debt, as discussed below in further detail. Future cash flows from operations and borrowings are expected to be sufficient to fund our ongoing cash ~~requirements.~~requirements, including the opioid litigation payments that are expected to be made over 18 years (see below).

As discussed in Note 10 of the Notes to Consolidated Financial Statements, in the fourth quarter of fiscal 2020, with regard to litigation relating to the distribution of prescription opioid pain medications, we recorded a $6.6 billion liability ($5.5 billion, net of income tax benefit). We are in advanced discussions, which are ongoing, to reach a ~~party to discussions with the objective of reaching potential terms of a broad resolution~~global settlement of the ~~remaining opioid-litigation~~Multidistrict Litigation and ~~claims. Although we are~~related state-court litigation brought by certain state and local governmental entities in which our payment would be over 18 years to resolve cases currently filed and that could be filed by states, counties, municipalities, and other government entities. A portion of this amount relating to plaintiff attorney fees would be payable over a shorter time period. The aforementioned litigation liability has not ~~able~~and is not expected to ~~predict the outcome or reasonably estimate a range of possible losses in these matters,~~have an ~~adverse judgment or negotiated resolution in any of these matters could have a material adverse~~ impact on our ~~financial position, cash flows~~compliance with our debt covenants or ~~liquidity.~~our ability to pay dividends.

As of March 31, ~~2020~~2021 and September 30, ~~2019,~~2020, our cash and cash equivalents held by foreign subsidiaries were ~~$434.5~~$532.1 million and ~~$826.8~~$675.9 million, respectively, and are generally based in U.S. dollar denominated holdings. 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 MWI U.K.'s

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cash ~~balance~~balances in the six months ended March 31, ~~2020~~2021 and ~~2019~~2020 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 six months ended March 31, 2021 and 2020 ~~and 2019~~ was ~~$39.6~~$12.1 million and ~~$240.6~~$39.6 million, respectively. We had ~~$54.7~~$31.3 million and ~~$526.4~~$54.7 million of cumulative intra-period borrowings that were repaid under our credit facilities during the six months ended March 31, ~~2020~~2021 and ~~2019,~~2020, respectively.

We have a $1.4 billion multi-currency senior unsecured revolving credit facility ("Multi-Currency Revolving Credit Facility"), which is scheduled to expire in September 2024, with a syndicate of lenders. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based on our debt rating and ranges from 70 basis points to 112.5

basis points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee, as applicable (91 basis points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee as of March 31, ~~2020)~~2021) and from 0 basis points to 12.5 basis points over the alternate base rate and Canadian prime rate,, as applicable. We pay facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on our debt rating, ranging from 5 basis points to 12.5 basis points, annually, of the total commitment (9 basis points as of March 31, ~~2020)~~2021). 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 March 31, ~~2020.~~2021.

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 $1.4 billion at any one time. Amounts available under the program may be borrowed, repaid, and re-borrowed from time to time. The maturities on the notes will vary, but may not exceed 365 days from the date of issuance. The notes will bear interest, if interest bearing, or will be sold at a discount from their face amounts. The commercial paper program does not increase our borrowing capacity as it is fully backed by our Multi-Currency Revolving Credit Facility. There were no borrowings outstanding under our commercial paper program as of March 31, ~~2020.~~2021.

We have a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which is scheduled to expire in September 2022. 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 LIBOR plus a program fee. We pay a customary unused fee at prevailing market rates, annually, to maintain the availability under the Receivables Securitization Facility. The Receivables Securitization Facility contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of March 31, ~~2020.~~2021.

In February 2021, we entered into an agreement pursuant to which we obtained a $1.0 billion senior secured revolving credit facility ("364-Day Revolving Credit Facility") with a syndicate of lenders, which is scheduled to expire 364 days after the closing of the acquisition of a majority of Walgreens Boots Alliance, Inc.'s ("WBA") Alliance Healthcare businesses, the date on which borrowings under this facility are available to us. Interest on borrowings under the 364-Day Revolving Credit Facility accrues at specified rates based on our debt rating and ranges from 83.5 basis points to 125 basis points over LIBOR and from 0 basis points to 25 basis points over the alternate base rate. We pay facility fees to maintain availability under the 364-Day Revolving Credit Facility at specified rates based on its debt rating, ranging from 4 basis points to 12.5 basis points, annually, of the total commitment. We may choose to repay or reduce our commitments under the 364-Day Revolving Credit Facility at any time. The 364-Day Revolving Credit Facility contains a feature whereby we have the option to convert to a term loan the outstanding borrowings under this facility. The 364-Day 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 March 31, 2021.

We have an uncommitted, unsecured line of credit available to us pursuant to a revolving credit note ("Revolving Credit Note"). The Revolving Credit Note provides us with the ability to request short-term unsecured revolving credit loans from time to time in a principal amount not to exceed $75 million. The Revolving Credit Note may be decreased or terminated by the bank or us at any time without prior notice. We also have ~~a £30 million~~an uncommitted U.K. overdraft facility ("Overdraft Facility")~~, which expires in February 2021,~~ to fund ~~short term~~short-term normal trading cycle fluctuations related to ~~our~~its MWI business. In February 2021, we extended the Overdraft Facility to February 2024 and reduced the borrowing capacity from £30 million to £10 million.

Our $400 million Term Loan matured and was repaid in October 2020.

In February 2021, we entered into a $1.0 billion variable-rate term loan (“February 2021 Term Loan”), which is available to be drawn on the closing date of the acquisition of a majority of WBA's Alliance Healthcare businesses. In April 2021, we reduced our commitment under the February 2021 Term Loan to $500 million. The February 2021 Term Loan matures two years from the date on which it is drawn. The February 2021 Term Loan bears interest at a rate equal either to a base rate plus a margin, or LIBOR, plus a margin. The margin is based on the public debt ratings of us and ranges from 87.5

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basis points to 137.5 basis points over LIBOR and 0 basis points to 37.5 basis points over a base rate. The February 2021 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of March 31, 2021. We expect to borrow $500 million under the February 2021 Term Loan to finance a portion of the acquisition of a majority of WBA's Alliance Healthcare businesses.

In March 2021, we issued $1,525 million of 0.737% senior notes due March 15, 2023 (the "2023 Notes"). The 2023 Notes were sold at 100.00% of the principal amount. Interest on the 2023 Notes is payable semi-annually in arrears, commencing on September 15, 2021. In March 2021, we issued $1,000 million of 2.700% senior notes due March 15, 2031 (the "2031 Notes"). The 2023 Notes were sold at 99.79% of the principal amount and have an effective yield of 2.706%. Interest on the 2031 Notes is payable semi-annually in arrears, commencing on September 15, 2021. We will use the proceeds from the 2023 Notes and the 2031 Notes to finance a portion of the acquisition of a majority of WBA's Alliance Healthcare businesses.

In October 2018, our board of directors authorized a share repurchase program allowing us to purchase up to $1.0 billion of outstanding shares of our common stock, subject to market conditions. During the six months ended March 31, ~~2020,~~2021, we purchased ~~$392.3~~$55.5 million of our common stock ~~which excluded $14.8 million of September 2019 purchases that cash settled in October 2019. As of March 31, 2020, we had $68.8 million of availability remaining~~to complete our authorization under this program.

In May 2020, our board of directors authorized a ~~new~~ share repurchase program allowing us to purchase up to $500 million of our outstanding shares of common stock, subject to market conditions. During the six months ended March 31, 2021, we purchased $26.6 million of our common stock. As of March 31, 2021, we had $473.4 million of availability remaining under this program.

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 ~~$851.4~~$434.4 million of variable-rate debt outstanding as of March 31, ~~2020.~~2021. 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 March 31, ~~2020.~~2021.

We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had ~~$3,691.9~~$6,641.2 million in cash and cash equivalents as of March 31, ~~2020.~~2021. 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.

We have minimal 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 Brazilian Real, the Euro, the U.K. Pound Sterling, and the Canadian Dollar. Revenue from our foreign operations is less than two percent of our consolidated revenue. We may utilize foreign currency

denominated forward contracts to hedge against changes in foreign exchange rates. We may use derivative instruments to hedge our foreign currency exposure, but not for speculative or trading purposes.

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 March 31, ~~2020:~~2021:


Payments Due by Period (in thousands)	Debt, Including Interest Payments		Operating Leases		Other Commitments		Total
Within 1 year	$	189,796	$	121,410	$	127,985	$	439,191
1-3 years	2,221,151		218,182		113,297		2,552,630
4-5 years	1,260,121		180,096		105,823		1,546,040
After 5 years	4,378,401		367,240		—		4,745,641
Total	$	8,049,469	$	886,928	$	347,105	$	9,283,502

Payments Due by Period (in thousands) Debt, Including Interest Payments
Operating
Leases
Other Commitments Total
Within 1 year $ 672,106
$ 114,388
$ 102,559
$ 889,053
1-3 years 1,134,280
218,144
63,099
1,415,523
4-5 years 1,201,038
183,033
83,485
1,467,556
After 5 years 2,747,125
419,925
58,283
3,225,333
Total $ 5,754,549
$ 935,490
$ 307,426
$ 6,997,465

The 2017 Tax Act requires a one-time transition tax to be recognized on historical foreign earnings and profits. We expect to pay ~~$182.6~~$175.6 million, net of overpayments and tax credits, related to the transition tax as of March 31, ~~2020,~~2021, which is payable in installments over a six-year period, ~~commencing~~which commenced in January 2021. The transition tax commitment is included in "Other Commitments" in the above table.

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Our liability for uncertain tax positions was ~~$121.5~~$505.8 million (including interest and penalties) as of March 31, ~~2020.~~2021. 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.

During the six months ended March 31, 2021, our operating activities provided cash of $449.2 million in comparison to $995.7 million in the prior year period. Cash provided by operations during the six months ended March 31, 2021 was principally the result of net income of $812.7 million and non-cash items of $415.2 million, offset in part by an increase in inventories of $314.3 million, a decrease in accounts payable of $292.6 million, and an increase in accounts receivable of $193.8 million. Non-cash items were primarily comprised of depreciation expense of $154.7 million and the provision for deferred income taxes of $141.6 million. The increase in inventories reflects the increase in business volume and, consistent with prior years, due to seasonal needs. The decrease in accounts payable was primarily driven by the timing of scheduled payments to suppliers, offset in part by an increase in our inventories. The increase in accounts receivable was the result of increased sales and the timing of payments from our customers.

During the six months ended March 31, 2020, our operating activities provided cash of $995.7 ~~million in comparison to $1,103.3 million in the prior year period.~~million. Cash provided by operations during the six months ended March 31, 2020 was principally the result of an increase in accounts payable of $2,395.8 million, net income of $1,157.7 million, and non-cash items of $644.0 million, offset in part by increases in accounts receivable of $2,052.2 million and income taxes receivable of $693.6 million. The increase in accounts payable was primarily driven by the timing of scheduled payments to suppliers. The non-cash items were comprised primarily of a $361.7 million impairment of PharMEDium's assets, ~~(see Note 5 of the Notes to Consolidated Financial Statements),~~ $143.6 million of depreciation expense, and $66.6 million of amortization expense. The increase in accounts receivable was the result of our revenue growth and the timing of payments from our customers. The increase in income taxes receivable was the result of a benefit recorded in connection with certain discrete ~~items (see Note 4 of the Notes to Consolidated Financial Statements).~~items.

During the six months ended March 31, 2019, our operating activities provided $1,103.3 million of cash. Cash provided by operations during the six months ended March 31, 2019 was principally the result of an increase in accounts payable of $1,350.7 million, non-cash items of $820.4 million, and net income of $419.8 million, offset in part by increases in accounts receivable of $880.8 million and inventories of $420.2 million. The increase in accounts payable was primarily driven by the increase in inventories and the timing of scheduled payments to suppliers. The non-cash items were comprised primarily of a $570.0 million impairment of PharMEDium's assets, $171.8 million of depreciation expense, and $100.0 million of amortization expense. The increase in accounts receivable was the result of our revenue growth and the timing of payments from our customers. The increase in our inventories as of March 31, 2019 reflects the increase in business volume.

We use days sales outstanding, days inventory on hand, and days payable outstanding to evaluate our working capital performance. The below financial metrics are calculated based upon a quarterly average and can be impacted by the timing of cash receipts and disbursements, which can vary significantly depending upon the day of the week on which the month ends.

Three months ended
March 31, Six months ended
March 31,
2020 2019 2020 2019
Days sales outstanding 24.9 25.8 24.6 25.2
Days inventory on hand 28.4 29.9 28.2 28.9
Days payable outstanding 58.5 59.3 57.5 58.2


	Three months ended March 31,		Six months ended March 31,
	2021	2020	2021	2020
Days sales outstanding	26.2	24.3	25.8	24.3
Days inventory on hand	30.4	28.5	29.0	28.1
Days payable outstanding	60.0	57.9	58.4	57.1

Our cash flows from operating activities can vary significantly from period to period based upon fluctuations in our period-end working capital account balances. Additionally, any changes to payment terms with a significant customer or manufacturer supplier could have a material impact to our cash flows from operations. Operating cash flows during the six months ended March 31, 2021 included $66.9 million of interest payments and $16.6 million of income tax payments, net of refunds. Operating cash flows during the six months ended March 31, 2020 included $76.2 million of interest payments and $101.9 million of income tax payments, net of refunds.

~~Operating cash flows during~~Capital expenditures in the six months ended March 31, ~~2019 included $84.6 million of interest payments~~2021 and ~~$69.7 million of income tax payments, net of refunds.~~

~~Capital expenditures for the six months ended March 31,~~ 2020 ~~and 2019~~ were ~~$144.4~~$151.6 million and ~~$161.5~~$144.4 million, respectively. Significant capital expenditures in the six months ended March 31, ~~2020~~2021 and ~~2019~~2020 included costs associated with facility expansions, various technology initiatives, including costs related to enhancing and upgrading our primary information technology operating systems. We currently expect to invest approximately $400 million for capital expenditures during fiscal ~~2020.~~2021.

Net cash used in investing activities in the six months ended March 31, 2021 included $162.6 million of costs for equity investments.

Net cash provided by financing activities in the six months ended March 31, 2021 principally resulted from proceeds from the issuance of senior notes (see above) and $130.3 million of exercises of stock options, offset in part by the repayment of the $400 million Term Loan, $182.4 million in cash dividends paid on our common stock, and $82.2 million in purchases of our common stock. Net cash used in financing activities in the six months ended March 31, 2020 principally resulted from $407.2 million in purchases of our common stock and $170.5 million in cash dividends paid on our common stock. ~~Net cash used in financing activities in the six months ended March~~

31 ~~2019 principally resulted from $348.0 million in purchases~~

Table of ~~our common stock and $170.4 million in cash dividends paid on our common stock.~~Contents

In ~~January~~November 2020, our board of directors increased the quarterly dividend paid on common stock by 5% from ~~$0.40~~$0.42 per share to ~~$0.42~~$0.44 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.

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Cautionary Note Regarding Forward-Looking Statements

Certain of the statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report are "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.~~1934, as amended (the "Securities Exchange Act"). 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 changes in circumstances and speak only as of the date hereof. These statements are not guarantees of future performance and are based on assumptions and estimates 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 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;~~channel; declining reimbursement rates for pharmaceuticals; 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, state and other governmental entities of alleged violations of laws and regulations regarding controlled substances, including due to failure to achieve a global resolution of the multi-district opioid litigation and other related state court litigation, 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; failure to comply with the Corporate Integrity Agreement; 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, including as a result of the COVID-19 impact on such payment terms; the Company’s ability to consummate the proposed acquisition of WBA's Alliance Healthcare businesses and related strategic transactions; the regulatory approvals required for the proposed acquisition and related strategic transactions not being obtained on the terms expected or on the anticipated schedule or at all; the integration of the Alliance Healthcare businesses into the Company being more difficult, time consuming or costly than expected; the Company’s or Alliance Healthcare’s failure to achieve expected or targeted future financial and operating performance and results; the effects of disruption from the proposed acquisition and related strategic transactions on the respective businesses of the Company and Alliance Healthcare and the fact that the announcement or pendency of the proposed acquisition and related strategic transactions may make it more difficult to establish or maintain relationships with employees, suppliers and other business partners; the acquisition of businesses, including the proposed acquisition of the Alliance Healthcare businesses and related strategic transactions, that do not perform as expected, or that are difficult to integrate or control, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period; risks associated with the strategic, long-term relationship between ~~Walgreens Boots Alliance, Inc.~~WBA and the Company, including ~~principally~~ with respect to the pharmaceutical distribution agreement and/or the global generic purchasing services arrangement; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws, economic sanctions and import laws and regulations; financial market volatility and disruption; 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 in connection with our former compounded sterile preparations (CSP) business or the related consent decree; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws, economic sanctions and import laws and regulations; financial market volatility and disruption; the loss, bankruptcy or insolvency of a major supplier, including as a result of COVID-19; substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer, including as a result of COVID-19; the loss, bankruptcy or insolvency of a major supplier, including as a result of COVID-19; financial and other impacts of COVID-19 on our operations or business continuity; 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, such as additional 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; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, or the inability to capture all of the anticipated synergies related thereto or to capture the anticipated synergies within the expected time period; 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) elsewhere in this report (including in Item 1A (Risk Factors)), (ii) in Item 1A (Risk Factors), in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, ~~2019~~2020 and elsewhere in that report and (iii) in other reports filed by the Company pursuant to the Securities Exchange Act. The Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by the federal securities laws.

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The Company’s most significant market risks are the effects of changing interest rates, foreign currency risk, and changes in the price and volatility of the Company’s common stock. See the discussion under "Liquidity and Capital Resources" in Item 2 on page ~~31.~~28.

ITEM 4. Controls and Procedures

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 second quarter of fiscal ~~2020,~~2021, there was no change in AmerisourceBergen Corporation’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 March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

See Note 10 (Legal Matters and Contingencies) of the Notes to Consolidated Financial Statements set forth under Item 1 of Part I of this report for the Company’s current description of legal proceedings.

ITEM 1A. Risk Factors

Except as supplemented by the additional risk ~~factor~~factors disclosed below, our significant business risks are described in Item 1A to Form 10-K for the fiscal year ended September 30, ~~2019~~2020 to which reference is made herein.

Risks Related to Our Strategic Transactions with Walgreens Boots Alliance, Inc. ("WBA")

We ~~face risks~~may not complete the strategic transactions with WBA within the time frame we anticipate, or at all.

In January 2021, we entered into several strategic agreements with WBA, including an agreement to acquire a majority of WBA's Alliance Healthcare businesses for approximately $6.5 billion, comprised of $6.275 billion in cash, subject to certain purchase price adjustments, and 2 million shares of our common stock, three-year extensions of our existing distribution agreement with WBA and our access to generic drugs and related pharmaceutical products through Walgreens Boots Alliance Development GmbH, and an agreement to ~~health epidemics~~explore a series of strategic initiatives with WBA designed to create incremental growth and ~~pandemics,~~efficiencies in sourcing, logistics and distribution.

The completion of our acquisition of the ~~continued spread~~majority of ~~COVID-19~~WBA's Alliance Healthcare businesses is ~~adversely affecting~~subject to a number of customary closing conditions, including receipt of applicable regulatory approvals. We previously announced that we expect to close the acquisition by September 30, 2021. Failure to satisfy all required closing conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring. Our ability to expand our ~~business.~~

~~We face risks related~~strategic relationship with WBA to ~~health epidemics~~create incremental growth and pandemics, including risks related to any responses thereto by the federal or state governments as well as customers and suppliers. The global coronavirus ("COVID-19") pandemic is adversely affecting, and is expected to continue to adversely affect, our operations, supply chainsefficiencies in sourcing, logistics and distribution ~~network, and~~is subject to the inherent uncertainty of exploring new strategic initiatives, so it may not be entered into within the time frame expected, or at all. A delay in completing the acquisition or expanding our strategic initiatives with WBA could cause us to realize some or all of the benefits later than we ~~have experienced and expect to continue to experience unpredictable reductions~~expect.Any such delay could result in supply and demand for certain of our products and services. Further, it is possible that the manufacturers that produce the products that we distribute may experience delays or shutdowns due to COVID-19, such as from disruptions in their supply chainsadditional costs or in ~~a suspension of production at their own facilities. Accordingly, we expect the continued spread of COVID-19 to adversely affect the supply of products and/or potentially disrupt~~other negative effects associated with uncertainty about our ability to ~~deliver products~~complete the acquisition or expand our strategic initiatives with WBA in sourcing, logistics and distribution.

The combined business may underperform our expectations or may cause our financial results to ~~customers. Any extended disruption~~differ from those expectations.

We believe that our acquisition of the majority of WBA's Alliance Healthcare businesses, as one of the largest pharmaceutical wholesalers in Europe, will extend our core wholesale, distribution and related solutions capabilities, enhance our existing global platform of manufacturer services, and further our ability to ~~service~~support global patient access to pharmaceutical products. However, our ~~customers could have a material adverse effect on our revenue, results of operations, and cash flows.~~

We also face risks related to our employees' health and the impact it may have on operations. Certain of our employees have contracted COVID-19 which resulted in our decision to temporarily close, and subsequently reopen, three of our distribution centers in accordance with our internal protocols. We have implemented measures designed to keep our employees safe and have protocols in place to address business continuity issues at our distribution centers and other locations, but a widespread or sustained outbreak of COVID-19 at one or more locations could disrupt our ability to service our customers.

Beginning in April 2020, COVID-19 has adversely impacted and may continue to adversely impact our revenue, results of operations, and cash flows. For instance, we have recently experienced lower revenues in certain of our specialty businesses due to lower patient volumes, which we believe is caused by delays in treatment. Further, demand for certain animal health products in our MWI business declined in the early weeksintegration of the ~~COVID-19 pandemic, and we believe that this trend~~acquired Alliance Healthcare businesses may ~~continue as customers reduce~~be more difficult, time consuming or ~~postpone purchases viewed as discretionary. We also face risks related~~costly than expected, especially with respect to a downturn in our customers' respective businesses, including the operations of our retail pharmacy and health systems customers. An economic slowdown or recession related to COVID-19 may affect our customers' ability to obtain credit to finance their business on acceptable terms, which could result in reduced spending on our products and services.

~~Certain enterprise-wide initiatives intended to improve our operational efficiency and financial performance, such as technology~~ initiatives related to enhancing and upgrading our information technology ~~systems,~~and security systems. We may ~~take longer than originally~~also not be able to retain or integrate the Alliance Healthcare employees necessary to efficiently manage the combined company or we may suffer customer loss and business disruption.We may fail to achieve expected or targeted future financial and operating performance and results, and the combined company may fail to complete as we focus on COVID-19-related issues. Additionally, a large portion of our employees are working remotely. An extended period of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity risks,achieve expected benefits, synergies and ~~impair our ability to manage our business.~~

~~The impacts~~operating efficiencies following the closing of the ~~continued spread~~acquisition within the expected timeframes or at all.

The acquisition will expand our core wholesale and specialty distribution business from the US, Canada and Brazil to Europe and additional countries with the addition of ~~COVID-19~~Alliance Healthcare's wholesale and pre-wholesale business in 13 countries. These international operations may be adversely affected by laws and regulations reducing reimbursement rates for pharmaceuticals and/or medical treatments or services.In addition, we will encounter increased risks relating to compliance with domestic laws relating to foreign corrupt practices and foreign laws and regulations relating to labor and employment, pharmacy, licensing, tax, trade, intellectual property, privacy and data protection and other matters, and if we fail to comply with such laws and regulations, we could ~~also cause other unpredictable events, each~~be subject to civil and criminal penalties.

Table of which could adversely affect our business, revenue, results of operations, cash flows or financial condition. For example, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets. A sustained or prolonged outbreak could exacerbate the adverse impact of such events, and the impact of COVID-19 may also exacerbate other risks discussed in Item 1A to our Form 10-K, any of which could have a material adverse effect on us.Contents

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 second quarter ended March 31, ~~2020.~~2021. See Note 7. Stockholders' Equity and Earnings per Share contained in "Notes to Condensed Consolidated Financial Statements" in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs		Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Programs
January 1 to January 31	193,502	$	84.48	193,502	$	315,037,604	January 1 to January 31	208,326	$	96.93	208,326	$	473,380,878
February 1 to February 29	352,025	$	82.84	352,025	$	285,874,551
February 1 to February 28							February 1 to February 28	165	$	105.87	—	$	473,380,878
March 1 to March 31	2,643,138	$	82.12	2,643,138	$	68,813,634	March 1 to March 31	2,490	$	105.76	—	$	473,380,878
Total	3,188,665			3,188,665			Total	210,981			208,326

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Mine Safety Disclosures

Not applicable.

ITEM 5. Other Information

None.

Table of Contents

ITEM 6. Exhibits

(a) Exhibits:


Exhibit Number			Description

~~Exhibit Number~~			~~Description~~
2.1			Share Purchase Agreement, by and between Walgreens Boots Alliance, Inc. and AmerisourceBergen Corporation, dated as of January 6, 2021 (incorporated by reference to Exhibit 2.1 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on January 8, 2021).
~~10.1~~
4.1			Tenth Supplemental Indenture, dated March 30, 2021, by and between AmerisourceBergen Corporation ~~Compensation Policy for Non-Employee Directors, effective~~and U.S. Bank National Association (including Form of 0.737% Senior Note due 2023) (incorporated by reference to Exhibit 4.1 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on April 1, 2021).

4.2			Eleventh Supplemental Indenture, dated March 30, 2021, by and between AmerisourceBergen Corporation and U.S. Bank National Association (including Form of 2.700% Senior Note due 2031) (incorporated by reference to Exhibit 4.2 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on April 1, 2021).

10.1			Form of Amended and Restated AmerisourceBergen Shareholders Agreement, between AmerisourceBergen Corporation and Walgreens Boots Alliance, Inc. (incorporated by reference to Exhibit 10.1 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on January 8, 2021).

10.2			Term Credit Agreement, dated as of ~~March 5, 2020.~~February 17, 2021, among AmerisourceBergen Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on February 18, 2021).

~~31.1~~10.3			Credit Agreement, dated as of February 17, 2021, among AmerisourceBergen Corporation, the lenders party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to AmerisourceBergen Corporation's Current Report on Form 8-K filed on February 18, 2021).

31.1			Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2			Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32			Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.

101			Financial statements from the Quarterly Report on Form 10-Q of AmerisourceBergen Corporation for the quarter ended March 31, ~~2020,~~2021, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.

104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Table of Contents

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.



			AMERISOURCEBERGEN CORPORATION

May ~~7, 2020~~5, 2021			/s/ Steven H. Collis
			Steven H. Collis
			Chairman, President & Chief Executive Officer

May ~~7, 2020~~5, 2021			/s/ James F. Cleary
			James F. Cleary
			Executive Vice President & Chief Financial Officer

4038



(in thousands)	Three months ended March 31, 2020		Six months ended March 31, 2020
Operating lease cost	$	30,772	$	60,707
Short-term lease cost	1,265		2,791
Variable lease cost	3,688		8,544
Total lease cost	$	35,725	$	72,042



(in thousands, except for lease term and discount rate)	March 31, 2020
Right of use assets
Other assets	$	484,933

Lease liabilities
Accrued expenses and other	$	97,897
Other long-term liabilities	428,061
Total lease liabilities	$	525,958

Weighted-average remaining lease term	7.49 years
Weighted-average discount rate	3.64%



(in thousands)	Six months ended March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating lease cash payments	$	57,390

Right-of-use assets obtained in exchange for lease liabilities
New operating leases	$	32,539
Leases recognized upon adoption of ASC 842	$	526,281



Payments Due by Fiscal Year (in thousands)	As of March 31, 2020
2020	$	59,278
2021	114,431
2022	109,373
2023	99,508
2024	91,790
Thereafter	461,110
Total future undiscounted lease payments	935,490
Less: Future payments for leases that have not yet commenced ¹	(300,346		)
Less: Imputed interest	(109,186		)
Total lease liabilities	$	525,958

¹ The Company has certain leases that it has executed for which it does not control the underlying assets; therefore, lease liabilities and ROU assets were not recorded on the Company's Consolidated Balance Sheet as of March 31, 2020. These future commitments primarily relate to the Company's new general corporate and administrative office.



Payments Due by Fiscal Year (in thousands)	Operating Leases		Financing Obligations ¹		Total
2020	$	94,958	$	22,468	$	117,426
2021	84,002		29,790		113,792
2022	72,224		36,914		109,138
2023	63,507		35,950		99,457
2024	56,377		35,276		91,653
Thereafter	177,267		270,410		447,677
Total minimum lease payments	$	548,335	$	430,808	$	979,143

¹ Represents the portion of future minimum lease payments related to facility leases where the Company was determined to be the accounting owner (see Note 1 of the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended September 30, 2019 for a more detailed description of the Company's accounting for leases prior to the adoption of ASC 842). These payments were recognized as reductions to the financing obligation and as interest expense and excluded the future non-cash termination of the financing obligation.