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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
ý      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED December 31, 2017
 
OR
 
o         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
(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.)
 
 
 
1300 Morris Drive, Chesterbrook, PA
 
19087-5594
(Address of principal executive offices)
 
(Zip Code)
 (610) 727-7000
(Registrant’s telephone number, including area code)
 
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 and posted on its corporate Web site, if any, 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 and post 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 o

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 o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o   No  ý
 
The number of shares of common stock of AmerisourceBergen Corporation outstanding as of January 31, 2018 was 219,669,091.
 



Table of Contents

AMERISOURCEBERGEN CORPORATION
 
TABLE OF CONTENTS
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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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)
 
December 31,
2017
 
September 30,
2017
 
 
(Unaudited)
 
 
ASSETS
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
3,037,747

 
$
2,435,115

Accounts receivable, less allowances for returns and doubtful accounts:
$1,137,332 at December 31, 2017 and $1,050,361 at September 30, 2017
 
10,127,783

 
10,303,324

Merchandise inventories
 
12,020,660

 
11,461,428

Prepaid expenses and other
 
110,242

 
103,432

Total current assets
 
25,296,432

 
24,303,299

 
 
 
 
 
Property and equipment, at cost:
 
 

 
 

Land
 
40,305

 
40,302

Buildings and improvements
 
1,055,871

 
979,589

Machinery, equipment, and other
 
2,094,022

 
2,071,314

Total property and equipment
 
3,190,198

 
3,091,205

Less accumulated depreciation
 
(1,361,081
)
 
(1,293,260
)
Property and equipment, net
 
1,829,117

 
1,797,945

 
 
 
 
 
Goodwill
 
6,076,110

 
6,044,281

Other intangible assets
 
2,825,035

 
2,833,281

Other assets
 
334,816

 
337,664

 
 
 
 
 
TOTAL ASSETS
 
$
36,361,510

 
$
35,316,470

 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
25,346,694

 
$
25,404,042

Accrued expenses and other
 
1,373,536

 
1,402,002

Short-term debt
 
20,061

 
12,121

Total current liabilities
 
26,740,291

 
26,818,165

 
 
 
 
 
Long-term debt
 
4,266,757

 
3,429,934

Long-term financing obligation
 
350,502

 
351,635

Accrued income taxes
 
391,107

 
84,257

Deferred income taxes
 
1,659,619

 
2,492,612

Other liabilities
 
78,652

 
75,406

 
 
 
 
 
Stockholders’ equity:
 
 
 
 

Common stock, $0.01 par value - authorized, issued, and outstanding:
600,000,000 shares, 281,436,890 shares, and 218,500,798 shares at December 31, 2017, respectively, and 600,000,000 shares, 280,584,076 shares, and 217,993,598 shares at September 30, 2017, respectively
 
2,814

 
2,806

Additional paid-in capital
 
4,579,809

 
4,517,635

Retained earnings
 
3,173,516

 
2,395,218

Accumulated other comprehensive loss
 
(96,338
)
 
(95,850
)
Treasury stock, at cost: 62,936,092 shares at December 31, 2017 and 62,590,478 shares at September 30, 2017
 
(4,785,219
)
 
(4,755,348
)
Total stockholders’ equity
 
2,874,582

 
2,064,461

 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
36,361,510

 
$
35,316,470

See notes to consolidated financial statements.

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Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
 
Three months ended
December 31,
(in thousands, except per share data)
 
2017
 
2016
Revenue
 
$
40,466,332

 
$
38,169,265

Cost of goods sold
 
39,353,680

 
37,131,585

Gross profit
 
1,112,652

 
1,037,680

Operating expenses:
 


 
 

Distribution, selling, and administrative
 
558,522

 
520,547

Depreciation
 
64,907

 
55,854

Amortization
 
40,229

 
40,226

Employee severance, litigation, and other
 
30,021

 
21,066

Operating income
 
418,973

 
399,987

Other loss (income)
 
324

 
(123
)
Interest expense, net
 
35,864

 
36,972

Loss on early retirement of debt
 
23,766

 

Income before income taxes
 
359,019

 
363,138

Income tax (benefit) expense
 
(502,834
)
 
115,892

Net income
 
$
861,853

 
$
247,246

 
 
 
 
 
Earnings per share:
 
 

 
 

Basic
 
$
3.95

 
$
1.13

Diluted
 
$
3.90

 
$
1.11

 
 
 
 
 
Weighted average common shares outstanding:
 
 

 
 

Basic
 
218,323

 
218,661

Diluted
 
220,822

 
221,979

 
 
 
 
 
Cash dividends declared per share of common stock
 
$
0.380

 
$
0.365

 See notes to consolidated financial statements.


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Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited) 
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Net income
 
$
861,853

 
$
247,246

Other comprehensive loss
 


 


Net change in foreign currency translation adjustments
 
(406
)
 
(27,557
)
Other
 
(82
)
 
14

Total other comprehensive loss
 
(488
)
 
(27,543
)
Total comprehensive income
 
$
861,365

 
$
219,703

See notes to consolidated financial statements.


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Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 

Three months ended
December 31,
(in thousands)

2017

2016
OPERATING ACTIVITIES

 



Net income

$
861,853


$
247,246

Adjustments to reconcile net income to net cash provided by (used in) operating activities:






Depreciation, including amounts charged to cost of goods sold

69,476


63,180

Amortization, including amounts charged to interest expense

42,248


43,071

(Benefit) provision for doubtful accounts

(3,388
)

312

(Benefit) provision for deferred income taxes

(840,479
)

49,491

Share-based compensation

32,608


29,192

LIFO expense
 

 
28,308

Loss on early retirement of debt
 
23,766

 

Other

211


(13,152
)
Changes in operating assets and liabilities, excluding the effects of acquisitions:






Accounts receivable

91,624


(536,937
)
Merchandise inventories

(460,127
)

(713,553
)
Prepaid expenses and other assets

(8,518
)

57,046

Accounts payable

(59,223
)

247,814

Income taxes payable
 
318,673

 
65,039

Accrued expenses and other liabilities
 
(58,398
)
 
2,588

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

10,326


(430,355
)
INVESTING ACTIVITIES

 


 

Capital expenditures

(73,641
)

(137,282
)
Cost of acquired companies, net of cash acquired

(70,330
)

(1,497
)
Proceeds from sales of investment securities available-for-sale



13,921

Purchases of investment securities available-for-sale



(33,879
)
Other

1,648


1,880

NET CASH USED IN INVESTING ACTIVITIES

(142,323
)

(156,857
)
FINANCING ACTIVITIES

 


 

Senior notes borrowings

1,236,483



Senior notes and term loans repayments
 
(400,000
)
 
(50,000
)
Borrowings under revolving and securitization credit facilities

2,577,124


65,362

Repayments under revolving and securitization credit facilities

(2,569,414
)

(67,491
)
Payment of premium on early retirement of debt
 
(22,348
)
 

Purchases of common stock

(22,496
)

(229,928
)
Exercises of stock options

29,574


10,229

Cash dividends on common stock

(83,555
)

(80,169
)
Tax withholdings related to restricted share vesting
 
(7,375
)
 
(8,938
)
Other

(3,364
)

(2,551
)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

734,629


(363,486
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

602,632


(950,698
)
Cash and cash equivalents at beginning of period

2,435,115


2,741,832

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$
3,037,747


$
1,791,134

 See notes to consolidated financial statements.

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Table of Contents

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 1.  Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying financial statements present the consolidated financial position, results of operations, and cash flows of AmerisourceBergen Corporation and its wholly-owned subsidiaries (the "Company") as of the dates and for the periods indicated.  All 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 December 31, 2017 and the results of operations and cash flows for the interim periods ended December 31, 2017 and 2016 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, 2017.
 
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.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"). ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification 605 - "Revenue Recognition" and most industry-specific guidance throughout the Codification. ASU 2014-09 outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard's core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 was originally scheduled to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within those reporting periods. In July 2015, the FASB deferred the effective date of ASU 2014-09 by one year.
In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606) - Principal versus Agent Considerations" ("ASU 2016-08"), which clarifies the implementation guidance for principal versus agent considerations in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10, "Revenue from Contracts with Customers (Topic 606) - Identifying Performance Obligations and Licensing" ("ASU 2016-10"), which amends the guidance in ASU 2014-09 related to identifying performance obligations and accounting for licenses of intellectual property. The Company must adopt ASU 2016-08 and ASU 2016-10 with ASU 2014-09. Entities are permitted to adopt the standards as early as the original public entity effective date of ASU 2014-09, and either full or modified retrospective application is required.
The Company continues to evaluate the impact of adopting ASU 2016-08, ASU 2016-10, and ASU 2014-09. It has conducted a preliminary assessment of the Pharmaceutical Distribution Services reportable segment and the operating segments in Other and does not expect adoption of the new standard to have a material impact on its consolidated financial statements. For example, the majority of the Pharmaceutical Distribution Services reportable segment's revenue is generated from sales of pharmaceutical products, which will continue to be recognized when control of goods is transferred to the customer. This preliminary assessment is subject to change prior to adoption. Additionally, the Company expects to adopt this standard in the first quarter of fiscal 2019, and it is still evaluating the method of adoption.
 In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" ("ASU 2016-02"). 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 is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those fiscal years. Entities are permitted to adopt the standard early, and a modified retrospective application is required. The Company anticipates that the adoption of this new accounting standard will have a material impact on the Company's Consolidated Balance Sheets. However, the Company is continuing to

6


evaluate the impact of adopting this new accounting guidance and, therefore, cannot reasonably estimate the impact on the results of operations or cash flows at this time.
As of December 31, 2017, 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.  Acquisitions

NEVSCO

In December 2017, the Company acquired Northeast Veterinary Supply Company ("NEVSCO") for $70.0 million in cash, subject to a final working capital adjustment. NEVSCO is an independent, regional distributor of veterinary pharmaceuticals and medical supplies serving primarily the northeast region of the United States and is expected to strengthen MWI Animal Health's ("MWI") support of independent veterinary practices and provide even greater value and care to current and future animal health customers. NEVSCO has been included within the MWI operating segment.

The purchase price has been preliminarily allocated to the underlying assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The preliminary allocation is pending the finalization of the appraisals of intangible assets and the finalization of working capital account balances. There can be no assurance that the estimated amounts recorded will represent the final purchase price allocation. The purchase price currently exceeds the estimated fair value of the net tangible and intangible assets acquired by $30.4 million, which was allocated to goodwill. The estimated fair value of accounts receivable, inventory, and accounts payable and accrued expenses acquired was $7.9 million, $6.7 million, and $4.7 million, respectively. The estimated fair value of the intangible assets acquired of $29.8 million primarily consisted of customer relationships, which the Company is amortizing over the estimated useful life of 15 years. Goodwill and intangibles resulting from the acquisition are expected to be deductible for income tax purposes.

H.D. Smith
As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2017, the Company entered into a definitive agreement on November 20, 2017 to acquire H.D. Smith Holding Company ("H.D. Smith"), the largest independent pharmaceutical wholesaler in the United States. On January 2, 2018, the Company completed the acquisition of H.D. Smith for $815.0 million in cash, subject to a final working capital adjustment. The Company funded the acquisition through the issuance of new long-term debt (see Note 5).
H.D. Smith is the largest privately held national wholesaler, which provides full-line distribution of brand, generic, and specialty drugs, as well as high-value services and solutions for manufacturers and healthcare providers. H.D. Smith customers include retail pharmacies, specialty pharmacies, long-term care facilities, institutional/hospital systems, and independent physicians and clinics.
The acquisition strengthens the Company's core business, expands and enhances its strategic scale in pharmaceutical distribution, and expands the Company's support for independent community pharmacies.
Profarma and Specialty Joint Venture
As previously disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2017, the Company held a minority ownership interest in Profarma Distribuidora de Produtos Farmacêuticos S.A. ("Profarma"), a leading pharmaceutical wholesaler in Brazil, and an ownership interest in a joint venture with Profarma to provide specialty distribution and services to the Brazilian marketplace. The Company has accounted for these interests as equity method investments, which have been reported in Other Assets on the Company's Consolidated Balance Sheets. In January 2018, the Company invested an additional $62.5 million in Profarma and an additional $15.6 million in the joint venture to increase its ownership interests. The additional investments give the Company controlling ownership interests in Profarma and the joint venture. The Company will consolidate the financial results of these investments in future reporting periods.
Note 3.  Income Taxes

Tax Cuts and Jobs Act
    
On December 22, 2017, the Tax Cuts and Jobs Act (the "2017 Tax Act") was signed into law. The 2017 Tax Act includes a broad range of tax reform provisions affecting businesses, including lower corporate tax rates, changes in business deductions, and international tax provisions. In response to the 2017 Tax Act, the U.S. Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations where a registrant does not have

7


the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act. SAB 118 provides that the measurement period is complete when a company's accounting is complete and that measurement period shall not extend beyond one year from the enactment date. SAB 118 provides guidance for registrants under three scenarios: (i) measurement of certain income tax effects is complete, (ii) measurement of certain income tax effects can be reasonably estimated, and (iii) measurement of certain income tax effects cannot be reasonably estimated. The Company has analyzed the income tax effects of the 2017 Tax Act and determined that measurement of the income tax effects can be reasonably estimated, and, as such, provisional amounts have been recorded. For the three months ended December 31, 2017, the Company recognized discrete income tax benefits of $587.6 million in Income Tax Benefit on the Company's Consolidated Statement of Operations related to effects of the 2017 Tax Act, which are comprised of the following:
    
(a) in accordance with Accounting Standards Codification No. 740, which requires deferred taxes to be remeasured in the year of an income tax rate change, the Company recorded a discrete deferred income tax benefit of $897.6 million in the three months ended December 31, 2017 as a result of applying a lower U.S. federal income tax rate to the Company's net deferred tax liabilities; and

(b) the 2017 Tax Act also requires a one-time transition tax to be recognized on historical foreign earnings and profits. In the three months ended December 31, 2017, the Company recorded a discrete current income tax expense of $310.0 million on historical foreign earnings and profits through December 31, 2017.

The measurement of income tax effects of the 2017 Tax Act cannot be completed until the end of the Company's current fiscal year due to the effective date of certain aspects of the 2017 Tax Act. Accordingly, the Company has recognized provisional amounts for the impact of the 2017 Tax Act within the accompanying interim unaudited consolidated financial statements as of and for the three months ended December 31, 2017 and expects to finalize the measurement of all amounts related to the 2017 Tax Act as of September 30, 2018.

Other Information    

The Company files income tax returns in U.S. federal and state jurisdictions as well as various foreign jurisdictions. As of December 31, 2017, 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 $249.0 million ($223.9 million, net of federal benefit). If recognized, $205.6 million of these tax benefits would reduce income tax expense and the effective tax rate. Included in this amount is $15.4 million of interest and penalties, which the Company records in income tax expense. In the three months ended December 31, 2017, unrecognized tax benefits decreased by $89.4 million primarily due to the impact of the 2017 Tax Act. Over the next 12 months, it is reasonably possible that state tax audit resolutions and the expiration of statutes of limitations could result in a reduction of unrecognized tax benefits by approximately $5.3 million.

The Company's effective tax rates were (140.1)% and 31.9% in the three months ended December 31, 2017 and 2016, respectively. The effective tax rate in the three months ended December 31, 2017 was primarily impacted by the effect of the 2017 Tax Act. The effective tax rate in the three months ended December 31, 2016 was favorably impacted by growth of the Company's international businesses in Switzerland and Ireland, which have significantly lower income tax rates, and the benefit from stock option exercises and restricted stock vesting.
 
Note 4.  Goodwill and Other Intangible Assets
 
The following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the three months ended December 31, 2017:
(in thousands)
 
Pharmaceutical
Distribution
Services
 
Other
 
Total
Goodwill at September 30, 2017
 
$
4,270,550

 
$
1,773,731

 
$
6,044,281

Goodwill recognized in connection with acquisitions
 

 
31,730

 
31,730

Foreign currency translation
 

 
99

 
99

Goodwill at December 31, 2017
 
$
4,270,550

 
$
1,805,560

 
$
6,076,110



8


The following is a summary of other intangible assets:
 
 
December 31, 2017
 
September 30, 2017
(in thousands)
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Indefinite-lived trade names
 
$
685,072

 
$

 
$
685,072

 
$
685,088

 
$

 
$
685,088

Finite-lived:
 
 
 
 
 
 
 
 
 
 
 
 
   Customer relationships
 
2,360,751

 
(442,360
)
 
1,918,391

 
2,329,665

 
(408,636
)
 
1,921,029

   Trade names and other
 
326,493

 
(104,921
)
 
221,572

 
325,353

 
(98,189
)
 
227,164

Total other intangible assets
 
$
3,372,316

 
$
(547,281
)
 
$
2,825,035

 
$
3,340,106

 
$
(506,825
)
 
$
2,833,281

 
Amortization expense for finite-lived intangible assets was $40.2 million in the three months ended December 31, 2017 and 2016. Amortization expense for finite-lived intangible assets is estimated to be $163.3 million in fiscal 2018, $159.5 million in fiscal 2019, $155.1 million in fiscal 2020, $152.9 million in fiscal 2021, $152.2 million in fiscal 2022, and $1,397.2 million thereafter.
 
Note 5.  Debt
 
Debt consisted of the following:
(in thousands)
 
December 31,
2017
 
September 30,
2017
Revolving credit note
 
$

 
$

Receivables securitization facility due 2019
 
500,000

 
500,000

Term loans due in 2020
 
548,061

 
547,860

Multi-currency revolving credit facility due 2021
 

 

Overdraft facility due 2021
 
20,061

 
12,121

$400,000, 4.875% senior notes due 2019
 

 
398,399

$500,000, 3.50% senior notes due 2021
 
498,006

 
497,877

$500,000, 3.40% senior notes due 2024
 
496,888

 
496,766

$500,000, 3.25% senior notes due 2025
 
495,121

 
494,950

$750,000, 3.45% senior notes due 2027
 
742,150

 

$500,000, 4.25% senior notes due 2045
 
494,136

 
494,082

$500,000, 4.30% senior notes due 2047
 
492,395

 

Total debt
 
4,286,818

 
3,442,055

Less current portion
 
20,061

 
12,121

Total, net of current portion
 
$
4,266,757

 
$
3,429,934

 
Senior Notes
    
In December 2017, the Company issued $750 million of 3.45% senior notes due December 15, 2027 (the "2027 Notes") and $500 million of 4.30% senior notes due December 15, 2047 (the "2047 Notes"). The 2027 Notes were sold at 99.76% of the principal amount and have an effective yield of 3.48%. The 2047 Notes were sold at 99.51% of the principal amount and have an effective yield of 4.33%. Interest on the 2027 Notes and the 2047 Notes is payable semi-annually in arrears, commencing on June 15, 2018. The 2027 and 2047 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 Term Loans.

The Company used the proceeds from the 2027 Notes and the 2047 Notes to finance the early retirement of the $400 million of 4.875% senior notes that were due in 2019, including the payment of a $22.3 million prepayment premium, and to finance the acquisition of H.D. Smith, which was completed on January 2, 2018 (see Note 2).

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 expires in November 2021, 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 110 basis points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee, as applicable (91 basis points over CDOR/LIBOR/

9


EURIBOR/Bankers Acceptance Stamping Fee as of December 31, 2017) and from 0 basis points to 10 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 15 basis points, annually, of the total commitment (9 basis points as of December 31, 2017). 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 December 31, 2017.

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 no borrowings outstanding under the commercial paper program as of December 31, 2017.

Receivables Securitization Facility

The Company has a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which expires in November 2019. 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 December 31, 2017.

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 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.

Term Loans

In February 2015, the Company entered into a $1.0 billion variable-rate term loan ("February 2015 Term Loan"), which matures in 2020. Through December 31, 2017, the Company elected to make principal payments, prior to the scheduled repayment dates, of $775 million on the February 2015 Term Loan, and as a result, the Company’s next required principal payment is due upon maturity. The February 2015 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 75 basis points to 125 basis points over LIBOR (100 basis points as of December 31, 2017) and 0 basis points to 25 basis points over a base rate. The February 2015 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which the Company was compliant as of December 31, 2017.
 
In November 2015, the Company entered into a $1.0 billion variable-rate term loan ("November 2015 Term Loan"), which matures in 2020. Through December 31, 2017, the Company made a scheduled principal payment, as well as other principal payments prior to the scheduled repayment dates totaling $675 million on the November 2015 Term Loan, and as a result, the Company's next required principal payment is due upon maturity. The November 2015 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 75 basis points to 125 basis points over LIBOR (100 basis points as of December 31, 2017) and 0 basis points to 25 basis points over a base rate. The November 2015 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which the Company was compliant as of December 31, 2017.
 

10


Note 6.  Stockholders’ Equity and Earnings per Share
 
In November 2017, the Company’s board of directors increased the quarterly cash dividend by 4% from $0.365 per share to $0.380 per share.
 
In November 2016, 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 three months ended December 31, 2017, the Company purchased 0.3 million shares of its common stock for a total of $22.5 million. As of December 31, 2017, the Company had $766.4 million of availability remaining under the November 2016 share repurchase program.
 
Basic earnings per share is computed by dividing net income 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 by the weighted average number of shares of common stock outstanding, plus the dilutive effect of stock options, restricted stock, and restricted stock units during the periods presented.
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Weighted average common shares outstanding - basic
 
218,323

 
218,661

Dilutive effect of stock options, restricted stock, and restricted stock units
 
2,499

 
3,318

Weighted average common shares outstanding - diluted
 
220,822


221,979

 
The potentially dilutive stock options, restricted stock, and restricted stock units that were antidilutive for the three months ended December 31, 2017 and 2016 were 4.6 million and 5.3 million, respectively.
 
Note 7. Related Party Transactions
 
Walgreens Boots Alliance, Inc. ("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.
 
Revenue from the various agreements and arrangements with WBA was $12.2 billion and $11.2 billion in the three months ended December 31, 2017 and 2016, respectively. The Company’s receivable from WBA, net of incentives, was $5.3 billion and $5.0 billion as of December 31, 2017 and September 30, 2017, respectively.
 
Note 8. Employee Severance, Litigation, and Other

The following table illustrates the charges incurred by the Company relating to Employee Severance, Litigation, and Other:
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Employee severance and other costs
 
$
23,068

 
$
4,532

Deal-related transaction costs
 
4,144

 
534

Litigation costs
 
2,809

 
16,000

    Total employee severance, litigation, and other
 
$
30,021

 
$
21,066


For the three months ended December 31, 2017, the Company incurred $23.1 million of employee severance and other costs, $4.1 million of deal-related transaction costs (primarily related to the acquisition of H.D. Smith as further discussed in Note 2), and $2.8 million of litigation costs. The Company continues its transformation efforts, which will further align the organization to its customers' needs in a more seamless and unified way, while supporting corporate strategy and accelerating growth, and as a result, numerous positions were eliminated in fiscal 2017 and during the three months ended December 31, 2017. Other costs in the three months ended December 31, 2017 include $8.3 million of certain fixed costs and scrapped non-usable inventory related to one of the Company's 503B outsourcing facilities, which voluntarily suspended production in December 2017 pending execution of certain remedial measures. The litigation costs incurred in the three months ended December 31, 2017 were legal fees primarily

11


related to opioid lawsuits and investigations. For the three months ended December 31, 2016, the Company incurred $4.5 million of employee severance and other costs, $16.0 million for a litigation settlement, and $0.5 million of deal-related transaction costs.

Employees receive their severance benefits over a period of time, generally not in excess of 12 months, or in the form of a lump-sum payment.

Note 9. Legal Matters and Contingencies
In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings, government subpoenas, government investigations, and other disputes, including antitrust, commercial, environmental, 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. With respect to the specific legal proceedings and claims described below, except as 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.
 
Government Enforcement and Related Litigation Matters
 
The Company is involved in government investigations and litigation arising from the marketing, promotion, sale, and dispensing of pharmaceutical products in the United States. Some of these investigations originate through what are known as qui tam complaints of the Federal False Claims Act. The qui tam provisions of the Federal Civil False Claims Act and various state and local civil False Claims Acts permit a private person, known as a "relator" or whistleblower, to file civil actions under these statutes on behalf of the federal, state, and local governments. Qui tam complaints are initially filed by the relator under seal (or on a confidential basis) and the filing of the complaint imposes obligations on government authorities to investigate the allegations in the complaint and to determine whether or not to intervene in the action. Qui tam complaints remain sealed until the court in which the case was filed orders otherwise.

Under the Federal False Claims Act, the government (or relators who pursue the claims without the participation of the government in the case) may seek to recover up to three times the amount of damages in addition to a civil penalty for each allegedly false claim submitted to the government for payment. Generally speaking, these cases take several years for the investigation to be completed and, ultimately, to be resolved (either through litigation or settlement) after the complaint is unsealed. In addition, some states have pursued investigations under state false claims statutes or consumer protection laws, either in conjunction with a government investigation or separately. There is often collateral litigation that arises from public disclosures of government investigations, including the filing of class action lawsuits by third party payors or by shareholders alleging violations of the securities laws.

The Company has learned that there are filings in one or more federal district courts, including a qui tam complaint filed by one of its former employees, that are under seal and may involve allegations against the Company (and/or subsidiaries or businesses of the Company, including its group purchasing organization for oncologists and its oncology distribution business) relating to its distribution of certain pharmaceutical products to providers.

Subpoenas and Ongoing Investigations
 
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 generally responds to such subpoenas and requests in a cooperative manner. These responses often require time and effort and can result in considerable costs being incurred by the Company. 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.
 
Since fiscal 2012, the Company and its subsidiary AmerisourceBergen Specialty Group ("ABSG") have been responding to subpoenas from the U.S. Attorney's Office for the Eastern District of New York ("USAO-EDNY") requesting production of documents and information relating to the pre-filled syringe program of ABSG’s subsidiary Medical Initiatives, Inc., ABSG's oncology distribution center, its group purchasing organization for oncologists, and intercompany transfers of certain oncology products. Medical Initiatives, Inc. voluntarily ceased operations in early 2014. The Company has produced documents and witnesses and has engaged in ongoing dialogue with the USAO-EDNY since 2012. As previously disclosed, in fiscal 2017 ABSG resolved

12


the federal criminal investigation related to the failure of Medical Initiatives, Inc. to duly register with the United States Food and Drug Administration.
The USAO-EDNY has also indicated that it intends to pursue alleged civil claims under the False Claims Act. As previously disclosed, ABSG reached an agreement in principle with the USAO-EDNY during the quarter ended December 31, 2017, which the Company understands will resolve the alleged civil claims in their entirety. The agreement in principle is subject to negotiation of final terms, approval by the parties, execution of definitive documents, obtaining the satisfactory resolution of related issues with certain other interested parties, including the resolution of any potential administrative action by the Office of Inspector General of the U.S. Department of Health and Human Services, and approval by the Court. Under the terms of the agreement in principle with the USAO-EDNY, ABSG will pay $625.0 million. In connection with the agreement in principle, the Company accrued a $625.0 million reserve in the fiscal year ended September 30, 2017. This amount remains unpaid and is included in Accrued Expenses and Other on the Company's Consolidated Balance Sheet as of December 31, 2017.
 
In fiscal 2012, the Company's subsidiary AmerisourceBergen Drug Corporation ("ABDC") received a subpoena from the U.S. Attorney's Office for the District of New Jersey ("USAO-NJ") in connection with a grand jury proceeding requesting documents concerning ABDC's program for controlling and monitoring diversion of controlled substances into channels other than for legitimate medical, scientific, and industrial purposes. ABDC also received a subpoena from the Drug Enforcement Administration ("DEA") in connection with the matter. Since fiscal 2012, ABDC has received and responded to a number of subpoenas from both the USAO-NJ and DEA requesting grand jury testimony and additional information related to electronically stored information, documents concerning specific customers' purchases of controlled substances, and DEA audits. In July 2017, the USAO-NJ and DEA served an administrative subpoena requesting documents relating to ABDC’s diversion control programs from 2013 to the present. The Company is responding to the 2017 subpoena and continues to engage in dialogue with the USAO-NJ.
 
Since fiscal 2013, the Company has received subpoenas from the U.S. Attorney's Office for the Northern District of Ohio and ABDC has received subpoenas from the U.S. Attorney's Office for the District of Kansas in connection with grand jury proceedings requesting documents concerning ABDC's program for controlling and monitoring diversion of controlled substances into channels other than for legitimate medical, scientific, and industrial purposes. As in the USAO-NJ matter described above, in addition to requesting information on ABDC's diversion control program generally, the subpoenas have also requested documents concerning specific customers' purchases of controlled substances. The Company has responded to the subpoenas and requests for information.

During the quarter ended December 31, 2017, the Company’s subsidiary U.S. Bioservices Corporation ("U.S. Bio") settled claims with the United States Attorney’s Office for the Southern District of New York ("USAO-SDNY") and with various states arising from the previously disclosed matter involving the dispensing of one product and U.S. Bio’s relationship with the manufacturer of that product. In accordance with the settlement agreements, the United States’ complaint against U.S. Bio was dismissed and the participating states agreed not to bring, and to dismiss with prejudice, any state law claims that they had the authority to bring against U.S. Bio. The Company paid the United States $10.7 million in fiscal 2017 and paid the participating states $2.8 million in the quarter ended December 31, 2017, which together constitute the previously-disclosed $13.4 million settlement. During the fiscal year ended September 30, 2017, the Company recognized the $13.4 million settlement in Employee Severance, Litigation, and Other on the Company's Consolidated Statements of Operations.

In January 2017, U.S. Bio received a subpoena for information from the USAO-EDNY relating to U.S. Bio’s activities in connection with billing for products and making returns of potential overpayments to government payers. The Company is engaged in discussions with the USAO-EDNY and has been producing documents in response to the subpoena.

In November 2017, the Company’s subsidiary PharMEDium received a grand jury subpoena for documents from the U.S. Attorney's Office for the Western District of Tennessee ("USAO-WDTN") seeking various documents, including information generally related to the laboratory testing procedures of PharMEDium's products, and more specifically, for PharMEDium products packaged in a certain type of syringe at its Memphis, Tennessee facility. The Company is engaged in discussions with the USAO-WDTN and has begun producing documents responsive to the subpoena.

For those matters for which the Company has not recognized a liability, the Company cannot predict the outcome of ongoing investigations or 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 obligations, and/or other civil and criminal penalties.


13


Opioid Lawsuits and Investigations
 
A significant number of counties and municipalities in a majority of U.S. states and Puerto Rico, as well as the states of Delaware and New Mexico and several tribes, have filed lawsuits in various federal, state and other courts against pharmaceutical wholesale distributors (including the Company and ABDC), pharmaceutical manufacturers and retail chains 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 and hospital groups; individuals; and a public child protective services agency. The lawsuits, which have been filed in various 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. All such cases remain at the pleading stage.

On September 25, 2017, the plaintiffs in several of these lawsuits filed a motion before the Judicial Panel on Multidistrict Litigation (“JPML”) to have all federal complaints transferred to a single federal court for consolidated and coordinated pretrial proceedings. After a hearing before the JPML on November 30, 2017, an initial group of cases was consolidated for Multidistrict Litigation (“MDL”) proceedings before the United States District Court for the Northern District of Ohio. Additional cases have been, and will likely continue to be, transferred to the MDL. The MDL is in the earliest stages. Following an initial telephonic conference and several hearings, the court has been engaged in preliminary matters. Other entities, including additional attorneys general’s offices, counties, and cities in multiple states, have indicated their intent to sue. 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 or its exposure, if any, with respect to these matters.
In addition, on September 18, 2017, the Company received a request for documents and information on behalf of attorneys general from a coalition of states who are investigating a number of manufacturers and distributors (including ABDC) regarding the distribution of prescription opioid pain medications. The Company is engaged in discussions with the representatives of the attorneys general regarding this request and has begun producing responsive documents. 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 U.S. states. The Company is engaged in discussions with representatives from these government agencies regarding the requests, and has begun producing, or intends to begin producing, responsive documents.

Other Litigation

On September 10, 2014, PharMerica Corp., Pharmacy Corporation of America and Chem Rx Pharmacy Services, LLC (collectively, "PMC"), customers of ABDC until March 3, 2015, filed a complaint in Jefferson Circuit Court in Louisville, Kentucky against ABDC. The original complaint alleged that ABDC failed to pay in excess of $8 million in rebates pursuant to a prime vendor agreement between PMC and ABDC under which ABDC distributed pharmaceuticals and other products to PMC. PMC subsequently amended its complaint three times.

ABDC answered all of the complaints, denied PMC’s allegations, and filed counterclaims alleging, among other things, that PMC failed to pay nearly $50 million in invoices related to pharmaceutical products it received from ABDC. On April 1, 2016, the Jefferson Circuit Court granted ABDC’s motion for partial summary judgment on one counterclaim and entered judgment in the amount of $48.6 million against PMC. Effective December 7, 2017, ABDC and PMC entered into an agreement to resolve all claims in the litigation, including the pending judgment against PMC, for a one-time payment from PMC to ABDC of $3.1 million. On December 11, 2017, the Jefferson Circuit Court entered an Agreed Order of Dismissal that dismissed all claims in the litigation with prejudice. As a result of the agreement to settle the litigation, there was no impact to its consolidated results of operations.

Note 10.  Fair Value of Financial Instruments
 
The recorded amounts of the Company’s cash and cash equivalents, accounts receivable, and accounts payable as of December 31, 2017 and September 30, 2017 approximate fair value based upon the relatively short-term nature of these financial instruments. Within Cash and Cash Equivalents, the Company had no investments in money market accounts as of December 31, 2017 and had $800.0 million of investments in money market accounts as of September 30, 2017. 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 5) and the corresponding fair value as of December 31, 2017 were $4,266.8 million and $4,334.9 million, respectively. The recorded amount of long-term debt and the corresponding fair value as

14


of September 30, 2017 were $3,429.9 million and $3,522.5 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 11.  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 and includes AmerisourceBergen Consulting Services ("ABCS"), World Courier, and MWI.

The following illustrates reportable segment revenue information for the periods indicated:
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Pharmaceutical Distribution Services
 
$
38,937,698

 
$
36,798,289

Other
 
1,544,951

 
1,384,490

Intersegment eliminations
 
(16,317
)
 
(13,514
)
Revenue
 
$
40,466,332

 
$
38,169,265

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

The following illustrates reportable segment operating income information for the periods indicated:
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Pharmaceutical Distribution Services
 
$
388,182

 
$
379,060

Other
 
100,275

 
107,148

Intersegment eliminations
 
(407
)
 
(13
)
Total segment operating income
 
$
488,050

 
$
486,195

 
The following reconciles total segment operating income to income before income taxes for the periods indicated:
 
 
Three months ended
December 31,
(in thousands)
 
2017
 
2016
Total segment operating income
 
$
488,050

 
$
486,195

Gain from antitrust litigation settlements
 

 
1,395

LIFO expense
 

 
(28,308
)
Acquisition-related intangibles amortization
 
(39,056
)
 
(38,229
)
Employee severance, litigation, and other
 
(30,021
)
 
(21,066
)
Operating income
 
418,973

 
399,987

Other loss (income)
 
324

 
(123
)
Interest expense, net
 
35,864

 
36,972

Loss on early retirement of debt
 
23,766

 

Income before income taxes
 
$
359,019

 
$
363,138

 
Segment operating income is evaluated by the chief operating decision maker of the Company before gain from antitrust litigation settlements; LIFO expense; acquisition-related intangibles amortization; employee severance, litigation, and other; other loss (income); interest expense, net, and loss on early retirement of debt. All corporate office expenses are allocated to each operating segment.


15

Table of Contents

ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
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, 2017.
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, outsourced compounded sterile preparations, 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 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
Other consists of operating segments that focus on global commercialization services and animal health and includes AmerisourceBergen Consulting Services ("ABCS"), World Courier, and MWI Animal Health ("MWI").
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. 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.
    

16

Table of Contents

Recent Developments

On December 22, 2017, the Tax Cuts and Jobs Act (the "2017 Tax Act") was signed into law. The 2017 Tax Act includes a broad range of tax reform provisions affecting businesses, including lower corporate tax rates, changes in business deductions, and international tax provisions (see Note 3 of the Notes to Consolidated Financial Statements for additional information on the 2017 Tax Act's impacts).

As previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, we entered into a definitive agreement on November 20, 2017 to acquire H.D. Smith Holding Company ("H.D. Smith"), the largest independent pharmaceutical wholesaler in the United States. On January 2, 2018, we completed the acquisition of H.D. Smith for $815.0 million in cash, subject to a final working capital adjustment. We funded the acquisition through the issuance of new long-term debt (see Note 5 of the Notes to Consolidated Financial Statements). The acquisition strengthens our core business, expands and enhances our strategic scale in pharmaceutical distribution, and expands our support for independent pharmacies.

After recent U.S. Food and Drug Administration inspections of our 503B outsourcing facilities, we voluntarily suspended production activities in December 2017 at our largest 503B outsourcing facility located in Memphis pending execution of certain remedial measures. For the quarter ended December 31, 2017, our Memphis facility incurred certain fixed costs and scrapped non-usable inventory. These costs totaled $8.3 million and were recorded as other costs within Employee Severance, Litigation, and Other on our Consolidated Statement of Operations. Additionally, the revenue and gross profit contribution from our pharmaceutical compounding operations were significantly lower as that business shipped fewer units due to the Memphis facility not being operational in the month of December 2017. We currently anticipate that the Memphis operations will resume in the March 2018 quarter. Our results of operations will continue to be adversely impacted until the Memphis facility is fully operational.
Executive Summary
 
This executive summary provides highlights from the results of operations that follow:
 
Revenue increased 6.0% from the prior year quarter primarily due to the revenue growth of our Pharmaceutical Distribution Services segment;

Total gross profit increased 7.2% in the current year quarter primarily due to increase in gross profit in Pharmaceutical Distribution Services and a reduction of last-in, first-out ("LIFO") expense of $28.3 million. The increase in Pharmaceutical Distribution's gross profit was primarily due to the increase in revenue, offset in part by a lower contribution from our pharmaceutical compounding operations as it shipped fewer units as we voluntarily suspended production in December 2017 at our Memphis facility pending execution of certain remedial measures;
Distribution, selling, and administrative expenses increased 7.3%, from the prior year quarter as Pharmaceutical Distribution Services' increased by 6.3% primarily due to operating additional distribution centers in the current year quarter and duplicate costs resulting from the implementation of new information technology systems. In fiscal 2017, we opened new distribution centers to support our revenue growth. Additionally, distribution, selling, and administrative expenses in Other increased by 9.1% in the current year quarter primarily to support our revenue growth and due to duplicate costs resulting from the implementation of new information technology systems. As a percentage of revenue, distribution, selling, and administrative expenses were 1.38% in the current year quarter and represents an increase of 2 basis points compared to the prior year quarter;
Operating income increased 4.7% in the current year quarter primarily due to an increase in gross profit, offset in part by the increase in operating expenses;
Our effective tax rates were (140.1)% and 31.9% in the quarters ended December 31, 2017 and 2016, respectively. The effective tax rate in the quarter ended December 31, 2017 was primarily impacted by the effect of the 2017 Tax Act. Our total income tax benefit of $502.8 million in the current year quarter reflects $587.6 million of discrete tax benefits recognized and a reduction in the U.S. federal income tax rate from 35% to 21%, both resulting from the 2017 Tax Act. We expect that the federal corporate tax rate reduction as a result of the 2017 Tax Act will continue to favorably impact our effective tax rate compared to prior periods through fiscal 2019; and
Net income and earnings per share were significantly higher in the current year quarter primarily due to the 2017 Tax Act.

17

Table of Contents

Results of Operations
 
Revenue
 
 
Three months ended
December 31,
 
 
(dollars in thousands)
 
2017
 
2016
 
Change
Pharmaceutical Distribution Services
 
$
38,937,698

 
$
36,798,289

 
5.8%
Other
 
1,544,951

 
1,384,490

 
11.6%
Intersegment eliminations
 
(16,317
)
 
(13,514
)
 

Revenue
 
$
40,466,332

 
$
38,169,265

 
6.0%
 
Revenue increased by 6.0% from the prior year quarter. See discussions below for commentary regarding our revenue growth.
 
We currently expect our revenue in fiscal 2018 to increase between 8% and 11%. 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 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, price increases 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, and changes in federal government rules and regulations.

The Pharmaceutical Distribution Services segment grew its revenue by 5.8% from the prior year quarter primarily due to the growth of some its largest customers, overall market growth, and especially strong oncology product sales.
 
Revenue in Other increased 11.6% from the prior year quarter primarily due to increased revenue from MWI due to strong growth in its companion animal business and ABCS's growth in its Canadian operations.

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 any existing contract with such customer expires without being extended, renewed, or replaced. During the three months ended December 31, 2017, no significant contracts expired. Over the next twelve months, there are no significant contracts scheduled to expire. Additionally, from time to time, other significant contracts may be renewed prior to their expiration dates. If those contracts are renewed at less favorable terms, they may also negatively impact our revenue, results of operations, and cash flows.
 
Gross Profit
 
 
Three months ended
December 31,
 
 
(dollars in thousands)
 
2017
 
2016
 
Change
Pharmaceutical Distribution Services
 
$
792,539

 
$
754,974

 
5.0%
Other
 
320,520

 
309,632

 
3.5%
Intersegment eliminations
 
(407
)
 
(13
)
 
 
Gain from antitrust litigation settlements
 

 
1,395

 
 
LIFO expense
 

 
(28,308
)
 
 
Gross profit
 
$
1,112,652

 
$
1,037,680

 
7.2%
 
Gross profit increased 7.2%, or $75.0 million, from the prior year quarter. The increase in gross profit from the prior year quarter was primarily due to the increase in gross profit in Pharmaceutical Distribution Services and the decrease in LIFO expense of $28.3 million.

Our cost of goods sold for interim periods includes a LIFO provision that is based on our estimated annual LIFO provision. The annual LIFO provision, which we estimate on a quarterly basis, is affected by expected changes in inventory quantities, product mix, and manufacturer pricing practices, which may be impacted by market and other external influences, many of which are difficult to predict. Changes to any of the above factors may have a material impact to our annual LIFO provision.
 
Pharmaceutical Distribution Services' gross profit increased 5.0%, or $37.6 million, from the prior year quarter. Gross profit in the current year quarter increased primarily due to the increase in revenue, offset in part by a lower contribution from our

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pharmaceutical compounding operations as it shipped fewer units as we voluntarily suspended production in December 2017 at our Memphis facility pending execution of certain remedial measures. As a percentage of revenue, Pharmaceutical Distribution Services' gross profit margin of 2.04% in the quarter ended December 31, 2017, decreased 1 basis point from the prior year quarter.
 
Gross profit in Other increased 3.5%, or $10.9 million, from the prior year quarter. The increase was primarily due to our World Courier operations, offset in part by lower gross profit at ABCS. As a percentage of revenue, gross profit margin in Other of 20.75% in the quarter ended December 31, 2017 decreased from 22.36% in the prior year quarter.
 
Operating Expenses
 
 
Three months ended
December 31,
 
 
(dollars in thousands)
 
2017
 
2016
 
Change
Distribution, selling, and administrative
 
$
558,522

 
$
520,547

 
7.3%
Depreciation and amortization
 
105,136

 
96,080

 
9.4%
Employee severance, litigation, and other
 
30,021

 
21,066

 
 
Total operating expenses
 
$
693,679

 
$
637,693

 
8.8%
 
Distribution, selling, and administrative expenses increased 7.3%, or $38.0 million, from the prior year quarter as Pharmaceutical Distribution Services' increased by 6.3% primarily due to operating additional distribution centers in the current year quarter and duplicate costs resulting from the implementation of new information technology systems. In fiscal 2017, we opened new distribution centers to support our revenue growth. Additionally, distribution, selling, and administrative expenses in Other increased by 9.1% in the current year quarter primarily to support our revenue growth and due to duplicate costs resulting from the implementation of new information technology systems. As a percentage of revenue, distribution, selling, and administrative expenses were 1.38% in the current year quarter and represents an increase of 2 basis points compared to the prior year quarter.
 
Depreciation expense increased 16.2% from the prior year quarter due to an increase in the amount of property and equipment placed in service relating to our distribution infrastructure and various technology assets. Amortization expense was comparable to the prior year quarter.
 
Employee severance, litigation, and other for the quarter ended December 31, 2017 included $23.1 million of employee severance and other costs, $4.1 million of deal-related transaction costs (primarily related to the acquisition of H.D. Smith as further discussed in Note 2 of the Notes to Consolidated Financial Statements), and $2.8 million of litigation costs. We continue our transformation efforts, which will further align our organization to our customers' needs in a more seamless and unified way, while supporting corporate strategy and accelerating growth, and as a result, numerous positions were eliminated in fiscal 2017 and during the quarter ended December 31, 2017. Other costs in the quarter ended December 31, 2017 include $8.3 million of certain fixed costs and scrapped non-usable inventory related to one of our 503B outsourcing facilities, which voluntarily suspended production in December 2017 pending execution of certain remedial measures. The litigation costs incurred in the quarter ended December 31, 2017 were legal fees primarily related to opioid lawsuits and investigations. For the quarter ended December 31, 2016, employee severance, litigation, and other included $4.5 million of employee severance and other costs, $16.0 million for a litigation settlement, and $0.5 million of deal-related transaction costs.
 
Operating Income
 
 
Three months ended
December 31,
 
 
(dollars in thousands)
 
2017
 
2016
 
Change
Pharmaceutical Distribution Services
 
$
388,182

 
$
379,060

 
2.4%
Other
 
100,275

 
107,148

 
(6.4)%
Intersegment eliminations
 
(407
)
 
(13
)
 
 
Total segment operating income
 
488,050

 
486,195

 
0.4%
 
 
 
 
 
 
 
Gain from antitrust litigation settlements
 

 
1,395

 
 
LIFO expense
 

 
(28,308
)
 
 
Acquisition-related intangibles amortization
 
(39,056
)
 
(38,229
)
 
 
Employee severance, litigation, and other
 
(30,021
)
 
(21,066
)
 
 
Operating income
 
$
418,973

 
$
399,987

 
 
 

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Segment operating income is evaluated before gain from antitrust litigation settlements; LIFO expense; acquisition-related intangibles amortization; and employee severance, litigation, and other.
 
Pharmaceutical Distribution Services' operating income increased 2.4%, or $9.1 million, from the prior year quarter primarily due to the increase in gross profit, offset in part by an increase in operating expenses of 7.6%. As a percentage of revenue, Pharmaceutical Distribution Services' operating income margin decreased 3 basis points from the prior year quarter.
 
Operating income in Other decreased 6.4%, or $6.9 million, from the prior year quarter primarily due to an increase in operating expenses in our animal health business primarily to support its revenue growth, offset in part by the gross profit increase of World Courier.
 
Interest expense, net and the respective weighted average interest rates in the quarters ended December 31, 2017 and 2016 were as follows:
 
 
2017
 
2016
(dollars in thousands)
 
Amount
 
Weighted Average
Interest Rate
 
Amount
 
Weighted Average
Interest Rate
Interest expense
 
$
37,383

 
3.36%
 
$
37,987

 
2.81%
Interest income
 
(1,519
)
 
0.75%
 
(1,015
)
 
0.40%
Interest expense, net
 
$
35,864

 
 
 
$
36,972

 
 

Interest expense, net decreased 3.0%, or $1.1 million, from the prior year quarter. The decrease was primarily due to lower average borrowings due to principal payments made on our term loans and the repayment of our $600 million of 1.15% senior notes in May 2017, and an increase in interest income. We expect interest expense to increase in fiscal 2018 compared to the prior year due to the December 2017 issuance of senior notes in connection with our acquisition of H.D. Smith.

For the three months ended December 31, 2017, we recorded a $23.8 million loss on the early retirement of our $400 million of 4.875% senior notes that were due in 2019 (see Note 5 of the Notes to Consolidated Financial Statements). The loss on the early retirement of the debt included a $22.3 million prepayment premium and $1.5 million of an unamortized debt discount and unamortized debt issuance costs.
 
Our effective tax rates were (140.1)% and 31.9% in the quarters ended December 31, 2017 and 2016, respectively. The effective tax rate in the quarter ended December 31, 2017 was primarily impacted by the effect of the 2017 Tax Act. Our total income tax benefit of $502.8 million in the current year quarter reflects $587.6 million of discrete tax benefits recognized and a reduction in the U.S. federal income tax rate from 35% to 21%, both resulting from the 2017 Tax Act. We expect that the federal corporate tax rate reduction as a result of the 2017 Tax Act will continue to favorably impact our effective tax rate compared to prior periods through fiscal 2019. The effective tax rate in the quarter ended December 31, 2016 was favorably impacted by growth of our international businesses in Switzerland and Ireland, which have significantly lower income tax rates, and the benefit from stock option exercises and restricted stock vesting.
 
Net income and earnings per share were significantly higher in the current year quarter primarily due to the 2017 Tax Act.


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Liquidity and Capital Resources
 
The following table illustrates our debt structure as of December 31, 2017, 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
Fixed-Rate Debt:
 
 

 
 

$500,000, 3.50% senior notes due 2021
 
$
498,006

 
$

$500,000, 3.40% senior notes due 2024
 
496,888

 

$500,000, 3.25% senior notes due 2025
 
495,121

 

$750,000, 3.45% senior notes due 2027
 
742,150

 

$500,000, 4.25% senior notes due 2045
 
494,136

 

$500,000, 4.30% senior notes due 2047
 
492,395

 

Total fixed-rate debt
 
3,218,696

 

 
 
 
 
 
Variable-Rate Debt:
 
 

 
 

Revolving credit note
 

 
75,000

Receivables securitization facility due 2019
 
500,000

 
950,000

Term loans due 2020
 
548,061

 

Multi-currency revolving credit facility due 2021
 

 
1,400,000

Overdraft facility due 2021 (£30,000)
 
20,061

 
20,463

Total variable-rate debt
 
1,068,122

 
2,445,463

Total debt
 
$
4,286,818

 
$
2,445,463

 
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 repurchases 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 repurchases of our common stock, fund the payment of dividends, finance acquisitions, and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund our ongoing cash requirements.
 
As of December 31, 2017 and September 30, 2017, our cash and cash equivalents held by foreign subsidiaries were $1,133.2 million and $995.7 million, respectively, and are generally based in U.S. dollar denominated holdings. We expect that our cash and cash equivalents held by foreign subsidiaries may continue to grow. Amounts held outside of the United States are generally used to support non-U.S. liquidity needs, including future acquisitions of non-U.S. entities, although a portion of these amounts are from time to time subject to short-term intercompany loans to U.S. subsidiaries. While we do not have any current plans to repatriate these amounts to the United States, we will continue to evaluate our options on utilizing cash and cash equivalents that are held by our foreign subsidiaries. In accordance with the 2017 Tax Act (see Note 3 of the Notes to Consolidated Financial Statements), historical foreign earnings and profits are now subject to a one-time transition tax, which we currently estimate to be $310.0 million.
 
We have increased seasonal needs related to our inventory build during the December and March quarters that, depending on our cash balance, may require the use of our credit facilities to fund short-term capital needs. Our cash balance in the three months ended December 31, 2017 and 2016 needed to be supplemented by intra-period credit facility borrowings to cover short-term working capital needs. The largest amount of intra-period borrowings under our revolving and securitization credit facilities that was outstanding at any one time during the three months ended December 31, 2017 and 2016 was $411.1 million and $21.5 million, respectively. We had $2,557.3 million and $65.4 million of cumulative intra-period borrowings that were repaid under our credit facilities during the three months ended December 31, 2017 and 2016, respectively.

In December 2017, we issued $750 million of 3.45% senior notes due December 15, 2027 (the "2027 Notes") and $500 million of 4.30% senior notes due December 15, 2047 (the "2047 Notes"). The 2027 Notes were sold at 99.76% of the principal amount and have an effective yield of 3.48%. The 2047 Notes were sold at 99.51% of the principal amount and have an effective yield of 4.33%. Interest on the 2027 Notes and the 2047 Notes is payable semi-annually in arrears, commencing on June 15, 2018.


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We used the proceeds from the 2027 Notes and the 2047 Notes to finance the early retirement of our $400 million of 4.875% senior notes that were due in 2019, including the payment of a $22.3 million prepayment premium, and to finance the acquisition of H.D. Smith, which was completed on January 2, 2018.

We have a $1.4 billion multi-currency senior unsecured revolving credit facility ("Multi-Currency Revolving Credit Facility"), which expires in November 2021, 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 110 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 December 31, 2017) and from 0 basis points to 10 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 15 basis points, annually, of the total commitment (9 basis points as of December 31, 2017). We may choose to repay or reduce our commitments under the Multi-Currency Revolving Credit Facility at any time. The Multi-Currency Revolving Credit Facility contains covenants, including compliance with a financial leverage ratio test, as well as others that impose limitations on, among other things, indebtedness of subsidiaries and asset sales, with which we were compliant as of December 31, 2017.
 
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 December 31, 2017.
 
We have a $1,450 million receivables securitization facility ("Receivables Securitization Facility"), which expires in November 2019. 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 December 31, 2017.
 
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 uncommitted U.K. overdraft facility ("Overdraft Facility"), which expires in February 2021, to fund short term normal trading cycle fluctuations related to our MWI business.
 
In February 2015, we entered into a $1.0 billion variable-rate term loan ("February 2015 Term Loan"), which matures in 2020. Through December 31, 2017, we elected to make principal payments, prior to the scheduled repayment dates, of $775 million on the February 2015 Term Loan, and as a result, our next required principal payment is due upon maturity. The February 2015 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 our public debt ratings and ranges from 75 basis points to 125 basis points over LIBOR (100 basis points as of December 31, 2017) and 0 basis points to 25 basis points over a base rate. The February 2015 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of December 31, 2017.
 
In November 2015, we entered into a $1.0 billion variable-rate term loan (the "November 2015 Term Loan"), which matures in 2020. Through December 31, 2017, we made a scheduled principal payment, as well as other principal payments prior to the scheduled repayment dates totaling $675 million on the November 2015 Term Loan, and as a result, our next scheduled principal payment is due upon maturity. The November 2015 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 our public debt ratings and ranges from 75 basis points to 125 basis points over LIBOR (100 basis points as of December 31, 2017) and 0 basis points to 25 basis points over a base rate. The November 2015 Term Loan contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of December 31, 2017.
 
In November 2016, our board of directors authorized a share repurchase program allowing us to purchase up to $1.0 billion in shares of our common stock, subject to market conditions. During the three months ended December 31, 2017, we purchased $22.5 million of our common stock under this program. As of December 31, 2017, we had $766.4 million of availability remaining under this program.
 

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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 $1.1 billion of variable-rate debt outstanding as of December 31, 2017. We periodically evaluate financial instruments to manage our exposure to fixed and variable interest rates. However, there are no assurances that such instruments will be available in the combinations we want and/or on terms acceptable to us. There were no such financial instruments in effect as of December 31, 2017.
 
We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had $3,037.7 million in cash and cash equivalents as of December 31, 2017. 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 Euro, the U.K. Pound Sterling, the Canadian Dollar, and the Brazilian Real. Revenue from our foreign operations is less than one 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. As of December 31, 2017, we had one foreign currency denominated contract outstanding that hedges the foreign currency exchange risk of a C$25.1 million outstanding note.

The following is a summary of our contractual obligations for future principal and interest payments on our debt, minimum rental payments on our noncancelable operating leases and financing obligations, and minimum payments on our other commitments as of December 31, 2017:
Payments Due by Period (in thousands)
 
Debt, Including Interest Payments
 
Operating
Leases
 
Financing Obligations 1
 
Other Commitments
 
Total
Within 1 year
 
$
163,260

 
$
59,244

 
$
30,540

 
$
41,230

 
$
294,274

1-3 years
 
1,322,075

 
94,508

 
63,714

 
99,919

 
1,580,216

4-5 years
 
721,250

 
60,071

 
59,510

 
67,853

 
908,684

After 5 years
 
3,961,125

 
69,019

 
157,982

 
210,800

 
4,398,926

Total
 
$
6,167,710

 
$
282,842

 
$
311,746

 
$
419,802

 
$
7,182,100

 
 
 
 
 
 
 
 
 
 
 
1 Represents the portion of future minimum lease payments relating to facility leases where we were 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, 2017 for a more detailed description   of our accounting for leases). These payments are recognized as reductions to the financing obligation and as interest expense and exclude the future non-cash   termination of the financing obligation.

The 2017 Tax Act requires a one-time transition tax to be recognized on historical foreign earnings and profits. We currently estimate that our liability related to the transition tax is approximately $310.0 million as of December 31, 2017, which is payable in installments over an eight-year period commencing in January 2019. The transition tax commitment is included in "Other Commitments" in the above table.

We outsource to IBM Global Services a significant portion of our data center operations. The remaining commitment under our arrangement, which expires in January 2021, is approximately $57.3 million as of December 31, 2017, $28.3 million of which represents our commitment over the next twelve months, and is included in "Other Commitments" in the above table.

Our liability for uncertain tax positions was $249.0 million (including interest and penalties) as of December 31, 2017. 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 three months ended December 31, 2017, our operating activities provided $10.3 million of cash in comparison to cash used of $430.4 million in the prior year period. Cash provided by operations during the three months ended December 31, 2017 was principally the result of net income of $861.9 million and an increase in income taxes payable of $318.7 million, offset in part by non-cash items of $675.6 million and an increase in merchandise inventories of $460.1 million. The non-cash items were comprised primarily of an $840.5 million deferred income tax benefit, $69.5 million depreciation expense, and $42.2 million of amortization expense. The deferred income tax benefit was primarily the result of applying a lower U.S. federal income tax rate to net deferred tax liabilities as of December 31, 2017 in connection with tax reform. The increase in income taxes payable was primarily driven by a one-time transition tax on historical foreign earnings and profits through December 31, 2017 in connection

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with tax reform. We increased our merchandise inventories as of December 31, 2017 to support the increase in business volume and, consistent with prior years, due to seasonal needs.
 
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 in which the month ends.
 
Three months ended
December 31,
 
2017
 
2016
Days sales outstanding
24.4
 
22.7
Days inventory on hand
29.8
 
30.2
Days payable outstanding
56.7
 
56.5
 
The increase in days sales outstanding from the prior year period was the result of a gradual change in payment terms with our largest customer that occurred between May 2016 and February 2017.
 
Our cash flows from operating activities can vary significantly from period to period based on fluctuations in our period end working capital. 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 three months ended December 31, 2017 included $36.2 million of interest payments and $10.5 million of income tax payments, net of refunds. Operating cash flows during the three months ended December 31, 2016 included $37.0 million of interest payments and $87.6 million of income tax refunds, net of payments.

During the three months ended December 31, 2016, our operating activities used $430.4 million of cash. Cash used in operations during the three months ended December 31, 2016 was principally the result of an increase in merchandise inventories of $713.6 million and an increase in accounts receivable of $536.9 million, offset in part by an increase in accounts payable of $247.8 million, net income of $247.2 million, and non-cash items of $200.4 million. We increased our merchandise inventories as of December 31, 2016 to support the increase in business volume and, consistent with prior years, due to seasonal needs. The increase in accounts receivable was the result of our revenue growth and a gradual change in payment terms with our largest customer that occurred between May 2016 and February 2017 as part of a contract amendment that, among other things, extended the term of our relationship with the customer. The increase in accounts payable was primarily driven by the increase in merchandise inventories and the timing of scheduled payments to our suppliers. The non-cash items were comprised primarily of $63.2 million of depreciation expense, $49.5 million of deferred income tax expense, and $43.1 million of amortization expense.
 
Capital expenditures for the three months ended December 31, 2017 and 2016 were $73.6 million and $137.3 million, respectively. Significant capital expenditures in the three months ended December 31, 2017 included technology initiatives, including costs related to enhancing and upgrading our enterprise resource planning ("ERP") systems and costs associated with expanding distribution capacity. We currently expect to invest approximately $325 million for capital expenditures during fiscal 2018. Significant capital expenditures in the three months ended December 31, 2016 included costs associated with expanding distribution capacity and technology initiatives, including costs related to enhancing and upgrading our ERP systems.

In the three months ended December 31, 2017, we acquired a northeast regional animal health distributor for $70.0 million to expand our animal health business (see Note 2 of the Notes to Consolidated Financial Statements).

Net cash provided by financing activities in the three months ended December 31, 2017 principally included the issuance of $750 million of 3.45% senior notes and $500 million of 4.30% senior notes, offset in part by the early retirement of the $400 million of 4.875% senior notes. Net cash used in financing activities in the three months ended December 31, 2016 principally included $229.9 million in purchases of our common stock.

In November 2017, our board of directors increased the quarterly cash dividend by 4% from $0.365 per share to $0.380 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 our 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 and Section 21E of the Securities Exchange Act of 1934. Words such as "expect," "likely," "outlook," "forecast," "would," "could," "should," "can," "will," "project," "intend," "plan," "continue," "sustain," "synergy," "on track," "believe," "seek," "estimate," "anticipate," "may," "possible," "assume," variations of such words, and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and change in circumstances. These statements are not guarantees of future performance and are based on assumptions that could prove incorrect or could cause actual results to vary materially from those indicated. Among the factors that could cause actual results to differ materially from those projected, anticipated, or implied are the following: unfavorable trends in brand and generic pharmaceutical pricing, including in rate or frequency of price inflation or deflation; competition and industry consolidation of both customers and suppliers resulting in increasing pressure to reduce prices for our products and services; changes in pharmaceutical market growth rates; changes in the United States healthcare and regulatory environment, including changes that could impact prescription drug reimbursement under Medicare and Medicaid; increasing governmental regulations regarding the pharmaceutical supply channel and pharmaceutical compounding; declining reimbursement rates for pharmaceuticals; federal and state government enforcement initiatives to detect and prevent suspicious orders of controlled substances and the diversion of controlled substances; increased public concern over the abuse of opioid medications; prosecution or suit by federal, state and other governmental entities of alleged violations of laws and regulations regarding controlled substances, and any related disputes, including shareholder derivative lawsuits; increased federal scrutiny and litigation, including qui tam litigation, for alleged violations of laws and regulations governing the marketing, sale, purchase and/or dispensing of pharmaceutical products or services, and associated reserves and costs, including the reserve recorded in connection with the proceedings with the United States Attorney’s Office for the Eastern District of New York; material adverse resolution of pending legal proceedings; the retention of key customer or supplier relationships under less favorable economics or the adverse resolution of any contract or other dispute with customers or suppliers; changes to customer or supplier payment terms; risks associated with the strategic, long-term relationship between Walgreens Boots Alliance, Inc. and the Company, including principally with respect to the pharmaceutical distribution agreement and/or the global generic purchasing services arrangement; changes in tax laws or legislative initiatives that could adversely affect the Company's tax positions and/or the Company's tax liabilities or adverse resolution of challenges to the Company's tax positions; regulatory action in connection with the production, labeling or packaging of products compounded by our compounded sterile preparations (CSP) business; suspension of production of CSPs, including a prolonged suspension at our Memphis 503B outsourcing facility; failure to realize the expected benefits from our reorganization and other business process initiatives; the acquisition of businesses that do not perform as expected, or that are difficult to integrate or control, including the integration of H. D. Smith and PharMEDium, or the inability to capture all of the anticipated synergies related thereto; managing foreign expansion, including non-compliance with the U.S. Foreign Corrupt Practices Act, anti-bribery laws and economic sanctions and import laws and regulations; declining economic conditions in the United States and abroad; financial market volatility and disruption; substantial defaults in payment, material reduction in purchases by or the loss, bankruptcy or insolvency of a major customer; the loss, bankruptcy or insolvency of a major supplier; changes to the customer or supplier mix; malfunction, failure or breach of sophisticated information systems to operate as designed; risks generally associated with data privacy regulation and the international transfer of personal data; natural disasters or other unexpected events that affect the Company’s operations; the impairment of goodwill or other intangible assets, resulting in a charge to earnings; 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; 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, (ii) in Item 1A (Risk Factors), in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017 and elsewhere in that report and (iii) in other reports filed by the Company pursuant to the Securities Exchange Act.


25

Table of Contents

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 21.
 
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 first quarter of fiscal 2018, there was no change in AmerisourceBergen Corporation’s internal control over financial reporting that materially affected, or is reasonably likely to materially affect, internal control over financial reporting.


26

Table of Contents

PART II.  OTHER INFORMATION
 
ITEM 1.  Legal Proceedings
 
See Note 9 (Legal Matters and Contingencies) of the Notes to the 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
 
Our significant business risks are described in Item 1A to Form 10-K for the year ended September 30, 2017 to which reference is made herein.
 
ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds
 
(c) Issuer Purchases of Equity Securities
 
The following table sets forth the number of shares purchased, the average price paid per share, the total number of shares purchased as part of publicly announced programs, and the approximate dollar value of shares that may yet be purchased under the programs during each month in the fiscal quarter ended December 31, 2017.
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
October 1 to October 31
 

 
$

 

 
$
788,906,335

November 1 to November 30
 
93,799

 
$
78.58

 

 
$
788,906,335

December 1 to December 31
 
251,815

 
$
89.33

 
251,786

 
$
766,413,737

Total
 
345,614

 
 

 
251,786

 
 

 
ITEM 3.  Defaults Upon Senior Securities
 
None.
 
ITEM 4.  Mine Safety Disclosures
 
Not applicable.
 
ITEM 5.  Other Information
 
None.


27

Table of Contents

ITEM 6.  Exhibits
 
(a)         Exhibits:
Exhibit Number
Description
4.1
 
 
4.2
 
 
10.1
 
 
10.2
 
 
10.3
 
 
31.1
 
 
31.2
 
 
32
 
 
101
Financial statements from the Quarterly Report on Form 10-Q of AmerisourceBergen Corporation for the quarter ended December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, and (v) the Notes to Consolidated Statements.


28

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
 
 
February 6, 2018
/s/ Steven H. Collis
 
Steven H. Collis
 
Chairman, President & Chief Executive Officer
 
 
February 6, 2018
/s/ Tim G. Guttman
 
Tim G. Guttman
 
Executive Vice President & Chief Financial Officer
 
 

29
exhibit101
Exhibit 10.1 EXECUTION VERSION AMENDMENT NO. 1 dated as of December 18, 2017 (this “Amendment”) to (i) the Credit Agreement dated as of March 18, 2011, as amended and restated as of November 18, 2016 (the “Revolving Credit Agreement”), among AmerisourceBergen Corporation, a Delaware corporation (the “Company”), the borrowing subsidiaries from time to time party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, (ii) the Term Loan Credit Agreement dated as of November 13, 2015, as amended and restated as of November 18, 2016 (the “November Term Loan Agreement”), among the Company, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as administrative agent, and (iii) the Term Loan Credit Agreement dated as of February 9, 2015, as amended and restated as of November 18, 2016 (the “February Term Loan Agreement”, and together with the Revolving Credit Agreement and the November Term Loan Agreement, the “Credit Agreements”), among the Company, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent. WHEREAS, the Company has requested that the Credit Agreements be amended as set forth herein; and WHEREAS, JPMorgan Chase Bank, N.A., as Administrative Agent under the Revolving Credit Agreement and the November Term Loan Agreement, and Bank of America, N.A., as Administrative Agent under the February Term Loan Agreement (in such capacities, the “Administrative Agents”), and each Person executing this Amendment as a Lender under one or more of the Credit Agreements, are willing to amend the Credit Agreements to which they are party on the terms set forth herein; NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Defined Terms. Capitalized terms herein, insofar as they are used in respect of any Credit Agreement or the parties thereto and are not otherwise defined herein, have the meanings assigned to them in such Credit Agreement. This Amendment shall constitute a “Loan Document” for all purposes under the Credit Agreements. SECTION 2. Amendments. Each of the parties hereto agrees that, effective on the Amendment No. 1 Effective Date, each Credit Agreement to which it is a party is amended as follows: (a) The following new definitions are inserted in Section 1.01 in their appropriate alphabetical positions: “FCA Reserve” means the US$625,000,000 reserve taken during the fiscal quarter ended September 30, 2017, related to a payment expected to be made by the Company or a Subsidiary of the Company of US$625,000,000 pursuant to an agreement in principle with the United States Attorney's Office of the Eastern District of New York to resolve civil claims under the Federal False Claims Act, as more fully described in the Report on Form 10-K filed by the


 
2 Company with the United States Securities and Exchange Commission on November 21, 2017, subject to negotiation of final terms. “FDCA Reserve” means the US$260,000,000 reserve taken during the fiscal quarter ended June 30, 2017, related to the payment by the Company, during the fiscal year ended September 30, 2017, of US$260,000,000 pursuant to a plea agreement with the U.S. Attorney's Office of the Eastern District of New York for a misdemeanor violation of the Federal Food, Drug, and Cosmetic Act, as more fully described in the Report on Form 10-K filed by the Company with the United States Securities and Exchange Commission on November 21, 2017. (b) The definition of “Consolidated EBITDA” in Section 1.01 is amended in its entirety to read as follows: “Consolidated EBITDA” means, for any period, Consolidated Net Income for such period plus (a) without duplication and to the extent deducted in determining such Consolidated Net Income, the sum, without duplication, of (i) consolidated interest expense for such period, (ii) consolidated income tax expense for such period, (iii) all amounts attributable to depreciation and amortization for such period, (iv) any special one-time or extraordinary charges or extraordinary losses for such period, in each case to the extent not involving cash payments by the Company or any Subsidiary in such period or any future period, (v) any LIFO adjustment (if negative) or charge for such period, (vi) non- cash expenses and charges associated with derivatives transactions, including such non-cash expenses and charges attributed to warrants issued and any associated hedging transactions, and (vii) all amounts for such period attributable to (A) the FCA Reserve and (B) the FDCA Reserve and minus (b) without duplication and to the extent included in determining such Consolidated Net Income, (i) any special one-time or extraordinary non-cash gains for such period and any LIFO adjustment (if positive) or credit, and (ii) any non-cash gains associated with derivatives transactions, including non-cash gains attributed to warrants issued and any associated hedging transactions, all determined on a consolidated basis in accordance with GAAP. In the event that the Company or any Subsidiary shall have completed a Material Acquisition or a Material Disposition since the beginning of the relevant period, Consolidated EBITDA shall be determined for such period on a pro forma basis as if such Material Acquisition or Material Disposition, and any related incurrence or repayment of Indebtedness, had occurred at the beginning of such period. SECTION 3. Representations and Warranties. The Company represents and warrants to the Lenders and the Administrative Agent under each Credit Agreement, and each Loan Party under and as defined in each Credit Agreement represents and warrants to the Lenders and the Administrative Agent under such Credit Agreement, that: (a) the execution, delivery and performance of this Amendment are within its corporate, partnership or other applicable powers and have been duly authorized by all necessary corporate, partnership and, if required, stockholder or other equityholder action; (b) this Amendment has been duly executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’


 
3 rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law; (c) no Default has occurred and is continuing under any Credit Agreement to which it is party; and (d) the representations and warranties contained in each Credit Agreement to which it is party and in the other Loan Documents referred to therein are true and correct in all material respects on and as of the date hereof, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such earlier date. SECTION 4. Effectiveness. This Amendment shall become effective on the date (the “Amendment No. 1 Effective Date”) when the Administrative Agents shall have received from the Company and each other Loan Party under each Credit Agreement, and from the Required Lenders under each Credit Agreement (i) counterparts of this Amendment signed on behalf of such parties or (ii) written evidence reasonably satisfactory to the Administrative Agents (which may include transmissions by facsimile or other electronic imaging of signed signature pages of this Amendment) that such parties have signed counterparts of this Amendment. SECTION 5. Expenses. The Company agrees to reimburse the Administrative Agents for their reasonable out-of-pocket expenses in connection with this Amendment, including the reasonable fees, charges and disbursements of counsel for the Administrative Agents. SECTION 6. Notices. All notices hereunder shall be given in accordance with the provisions of (i) Section 11.01 of the Revolving Credit Agreement, (ii) Section 9.01 of the November Term Loan Agreement and (iii) Section 11.01 of the February Term Loan Agreement, as applicable. SECTION 7. Counterparts. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed signature page of this Amendment by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof. SECTION 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York without regard to the conflicts of law principles thereto and to the extent that such principles would direct a matter to another jurisdiction. SECTION 9. Incorporation by Reference. Sections 11.07, 11.09(b), 11.09(c), 11.09(d), 11.09(e), 11.10 and 11.11 of the Revolving Credit Agreement, Sections 9.07, 9.09(b), 9.09(c), 9.09(d), 9.10 and 9.11 of the November Term Loan Agreement and Sections 11.07, 11.09(b), 11.09(c), 11.09(d), 11.10 and 11.11 of the February Term Loan Agreement are hereby incorporated by reference herein, mutatis mutandis, with the sections so incorporated from each Credit Agreement applying to this Amendment insofar as it relates to such Credit Agreement or the parties thereto. [signature pages follow]


 
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their authorized officers as of the date first above written. AMERISOURCEBERGEN CORPORATION, INNOMAR STRATEGIES INC., By: /s/ J.F. Quinn Name: J. F. Quinn Title: Vice President & Corporate Treasurer for each of the foregoing parties BP PHARMACEUTICALS LABORATORIES UNLIMITED COMPANY, By: /s/ J.F. Quinn Name: J.F. Quinn Title: Treasurer CENTAUR SERVICES LIMITED, By: /s/ J.F. Quinn Name: J.F. Quinn Title: Treasurer [Signature Page to Amendment No. 1]


 
JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent under the Revolving Credit Agreement and the November Term Loan Agreement, By: /s/ Dawn Lee Lum Name: Dawn Lee Lum Title: Executive Director [Signature Page to Amendment No. 1]


 
BANK OF AMERICA, N.A., individually and as Administrative Agent under the February Term Loan Agreement, By: /s/ Darren Merten Name: Darren Merten Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Bank of America, N.A. By /s/ Darren Merten Name: Darren Merten Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Bank of China, New York Branch By /s/ Raymond Qiao Name: Raymond Qiao Title: Managing Director [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: THE BANK OF NOVA SCOTIA By /s/ Michelle C. Phillips Name: Michelle C. Phillips Title: Execution Head & Director [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. By /s/ Brian McNany Name: Brian McNany Title: Director [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: BRANCH BANKING AND TRUST COMPANY By /s/ Andrey Rudnitsky Name: Andrey Rudnitsky Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: The Chiba Bank, Ltd., New York Branch By /s/ Atsushi Imai Name: Atsushi Imai Title: General Manager [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Citibank N.A. By /s/ Marni McManus Name: Marni McManus Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Citizens Bank of Pennsylvania By /s/ William J. O’Meara Name: William J. O’Meara Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH By /s/ Christopher Day Name: Christopher Day Title: Authorized Signatory By /s/ Brady Bingham Name: Brady Bingham Title: Authorized Signatory [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: KEYBANK NATIONAL ASSOCIATION By /s/ Douglas Gardner Name: Douglas Garnder Title: Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: LIBERTY BANK By /s/ Carla Balesano Name: Carla Balesano Title: Senior Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Mizuho Bank, Ltd. By /s/ Bertram H. Tang Name: Bertram H. Tang Title: Authorized Signatory [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: Mizuho Bank (USA) By /s/ Bertram H. Tang Name: Bertram H. Tang Title: Director & Team Leader [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: MORGAN STANLEY BANK, N.A. By /s/ Alice Lee Name: Alice Lee Title: Authorized Signatory [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: PNC BANK, NATIONAL ASSOCIATION By /s/ Timothy J. Hornickle Name: Timothy J. Nornickle Title: Senior Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: T. D. Bank, N.A. By /s/ Shivani Agarwal Name: Shivani Agarwal Title: Senior Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: U.S. BANK NATIONAL ASSOCIATION By /s/ Thomas M. Priedeman Name: Thomas M. Priedeman Title: Assistant Vice President [Signature Page to Amendment No. 1]


 
LENDER SIGNATURE PAGE TO AMERISOURCEBERGEN CORPORATION AMENDMENT NO. 1 TO (check all that apply): RESTATED REVOLVING CREDIT AGREEMENT NOVEMBER TERM LOAN AGREEMENT FEBRUARY TERM LOAN AGREEMENT Name of Lender: WELLS FARGO BANK, NATIONAL ASSOCIATION By /s/ Andrea S. Chen Name: Andrea S. Chen Title: Managing Director [Signature Page to Amendment No. 1]


 
exhibit102withexa
Exhibit 10.2 EXECUTION VERSION TWELFTH AMENDMENT TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT THIS TWELFTH AMENDMENT TO AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of December 18, 2017 (this “Amendment”) is entered into among AMERISOURCE RECEIVABLES FINANCIAL CORPORATION, a Delaware corporation (in such capacity, the “Seller”), AMERISOURCEBERGEN DRUG CORPORATION, a Delaware corporation, as the initial Servicer (in such capacity, the “Servicer”), the PURCHASER AGENTS and PURCHASERS listed on the signature pages hereto, and THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. (“BTMU”), as administrator (in such capacity, the “Administrator”). R E C I T A L S The Seller, Servicer, the Purchaser Groups, and the Administrator are parties to that certain Amended and Restated Receivables Purchase Agreement, dated as of April 29, 2010 (as amended, supplemented or otherwise modified from time to time, the “Agreement”). The parties hereto desire to amend the Agreement as hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Defined Terms. Capitalized terms used but not defined herein shall have the meanings set forth for such terms in Exhibit I to the Agreement. 2. Amendments to the Agreement. As of the Effective Date (as defined below), the Agreement is hereby amended as follows: (a) The Agreement is hereby amended to incorporate the changes shown on the marked pages of the Agreement attached hereto as Exhibit A. (b) Each instance of the phrase “New York Branch” in the Agreement is hereby deleted. (c) The definition of “Credit Agreement” set forth in Exhibit I to the Agreement is hereby replaced in its entirety with the following: “Credit Agreement” shall mean the Credit Agreement, dated as of March 18, 2011, as amended and restated as of November 18, 2016, as amended by Amendment No. 1 thereto dated as of December 18, 2017, among AmerisourceBergen, the borrowing subsidiaries party thereto, the lenders named therein, JPMorgan Chase Bank, N.A., as administrative agent, and the other parties thereto (without giving effect to any other amendment, waiver, termination, supplement or other modification thereof thereafter unless consented to by the Required Purchaser Agents). 726149251 03128405


 
3. Representations and Warranties; Covenants. Each of the Seller and the Servicer (on behalf of the Seller) hereby certifies, represents and warrants to the Administrator, each Purchaser Agent and each Purchaser that on and as of the date hereof: (a) each of its representations and warranties contained in Article V of the Agreement is true and correct, in all material respects, as if made on and as of the Effective Date; (b) no event has occurred and is continuing, or would result from this Amendment or any of the transactions contemplated herein, that constitutes an Amortization Event or Unmatured Amortization Event; and (c) the Facility Termination Date for all Purchaser Groups has not occurred. 4. Effect of Amendment. Except as expressly amended and modified by this Amendment, all provisions of the Agreement shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement and each of the other Transaction Documents to “this Agreement”, “hereof”, “herein”, or words of similar effect referring to the Agreement shall be deemed to be references to the Agreement, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Agreement (or any related document or agreement) other than as expressly set forth herein. 5. Effectiveness. This Amendment shall become effective on the date hereof (the “Effective Date”) upon satisfaction of each of the following conditions: (a) receipt by the Administrator and each Purchaser Agent of counterparts of (i) this Amendment and (ii) that certain Second Amendment to Amended and Restated Performance Undertaking, dated as of the date hereof, by and among the Seller, the Performance Guarantor, the Administrator and each Purchaser Agent (the “Performance Undertaking Amendment”); and (b) receipt by each Purchaser Agent of such other documents and instruments as a Purchaser Agent may reasonably request, in form and substance satisfactory to such Purchaser Agent. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Counterparts of this Amendment may be delivered by facsimile transmission or other electronic transmission, and such counterparts shall be as effective as if original counterparts had been physically delivered, and thereafter shall be binding on the parties hereto and their respective successors and assigns. 7. Governing Law. This Amendment shall be governed by, and construed in accordance with the law of the State of New York without regard to any otherwise applicable principles of conflicts of law (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law). 726149251 03128405 2


 
8. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment, the Agreement or any other Transaction Document or any provision hereof or thereof. 9. Transaction Document. This Amendment shall constitute a Transaction Document under the Agreement. 10. Severability. Each provision of this Amendment shall be severable from every other provision of this Amendment for the purpose of determining the legal enforceability of any provision hereof, and the unenforceability of one or more provisions of this Amendment in one jurisdiction shall not have the effect of rendering such provision or provisions unenforceable in any other jurisdiction. 11. Ratification. After giving effect to this Amendment, the Performance Undertaking Amendment and the transactions contemplated hereby and thereby, all of the provisions of the Performance Undertaking shall remain in full force and effect and the Performance Guarantor hereby ratifies and affirms the Performance Undertaking and acknowledges that the Performance Undertaking has continued and shall continue in full force and effect in accordance with its terms. [signature pages begin on next page] 726149251 03128405 3


 
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. AMERISOURCE RECEIVABLES FINANCIAL CORPORATION, as Seller By: /s/ J.F. Quinn Name: J.F. Quinn Title: Vice President & Corporate Treasurer AMERISOURCEBERGEN DRUG CORPORATION, as initial Servicer By: /s/ J.F. Quinn Name: J.F. Quinn Title: Vice President & Corporate Treasurer Acknowledged and Agreed AMERISOURCEBERGEN CORPORATION By: /s/ J.F. Quinn Name: J.F. Quinn Title: Vice President & Corporate Treasurer 726149251 03128405 S-1 Twelfth Amendment to RPA (ARFC)


 
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Administrator By: /s/ Luna Mills Name: Luna Mills Title: Managing Director VICTORY RECEIVABLES CORPORATION, as an Uncommitted Purchaser By: /s/ David V. DeAngelis Name: David V. DeAngelis Title: Vice President THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Purchaser Agent for Victory Receivables Corporation By: /s/ Luna Mills Name: Luna Mills Title: Managing Director THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Related Committed Purchaser for Victory Receivables Corporation By: /s/ Luna Mills Name: Luna Mills Title: Managing Director 726149251 03128405 S-2 Twelfth Amendment to RPA (ARFC)


 
WELLS FARGO BANK, NATIONAL ASSOCIATION, as an Uncommitted Purchaser By: /s/ Eero Maki Name: Eero Maki Title: Managing Director WELLS FARGO BANK, NATIONAL ASSOCIATION, as Purchaser Agent and Related Committed Purchaser for Wells Fargo Bank, National Association By: /s/ Eero Maki Name: Eero Maki Title: Managing Director 726149251 03128405 S-3 Twelfth Amendment to RPA (ARFC)


 
LIBERTY STREET FUNDING LLC, as an Uncommitted Purchaser By: /s/ Jill A. Russo Name: Jill A. Russo Title: Vice President THE BANK OF NOVA SCOTIA, as Purchaser Agent and Related Committed Purchaser for Liberty Street Funding LLC By: /s/ Michelle C. Phillips Name: Michelle C. Phillips Title: Execution Head & Director 726149251 03128405 S-4 Twelfth Amendment to RPA (ARFC)


 
PNC BANK, NATIONAL ASSOCIATION, as a Purchaser Agent, Uncommitted Purchaser and Related Committed Purchaser By: /s/ Eric Bruno Name: Eric Bruno Title: Senior Vice President 726149251 03128405 S-5 Twelfth Amendment to RPA (ARFC)


 
MIZUHO BANK, LTD., as a Purchaser Agent, Uncommitted Purchaser and Related Committed Purchaser By: /s/ Bertram H. Tang Name: Bertram H. Tang Title: Authorized Signatory 726149251 03128405 S-6 Twelfth Amendment to RPA (ARFC)


 
EXHIBIT A (ATTACHED) 726149251 03128405 Exhibit A-1 Twelfth Amendment to RPA (ARFC)


 
CONFORMED COPY includes First Amendment dated 4/28/11 Second Amendment dated 10/28/11 Third Amendment dated 11/16/12 Fourth Amendment dated 1/16/13 Fifth Amendment dated 6/28/13 Sixth Amendment dated 10/7/13 Seventh Amendment dated 7/17/14 Eighth Amendment dated 12/5/14 Omnibus Amendment dated 11/4/15 Tenth Amendment dated 6/21/16 Eleventh Amendment 11/18/16 Twelfth Amendment 12/18/17 AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT DATED AS OF APRIL 29, 2010 AMONG AMERISOURCE RECEIVABLES FINANCIAL CORPORATION, AS SELLER, AMERISOURCEBERGEN DRUG CORPORATION, AS INITIAL SERVICER, THE VARIOUS PURCHASERS GROUPS FROM TIME TO TIME PARTY HERETO AND THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., NEW YORK BRANCH, AS ADMINISTRATOR 726249534 03128405


 
WORKING CAPITAL MANAGEMENT CO., LP, as an Uncommitted Purchaser By:______________________________________ Name: Title: Address for notice: Working Capital Management Co., LP c/o Mizuho Bank, Ltd. 1251 Avenue of the Americas New York, NY 10020 Attention: Conduit Management Group ADVANTAGE ASSET SECURITIZATION CORP., as an Uncommitted Purchaser By:______________________________________ Name: Title: Address for notice: Advantage Asset Securitization Corp. c/o Mizuho Bank 1251 Avenue of the Americas New York, NY 10020 Attention: Conduit Management GroupMIZUHO BANK, LTD., as Purchaser Agent, Uncommitted Purchaser and Related Committed Purchaser for Working Capital Management Co., LP and Advantage Asset Securitization Corp. By:______________________________________ Name: Title: Address for notice: Mizuho Bank, Ltd. 1251 Avenue of the Americas New York, NY 10020 Attention: Corporate Finance Division Commitment: $345,000,000 726249534 03128405 S- 9 Amended and Restated Receivables Purchase Agreement (ARFC)


 
EXHIBIT I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): “Accordion Confirmation” has the meaning set forth in Section 1.1(b)(vi). “Accordion Group Commitment” means with respect to any Purchaser Group, the aggregate amount of any increase in such Purchaser Group’s Group Commitment pursuant to Section 1.1(b) consented to by the Purchaser Agent on behalf of the Purchasers in such Purchaser Group. “Accordion Invested Amount” means, with respect to any Purchaser and its related Invested Amount, the portion, if any, of such Invested Amount being funded or maintained by such Purchaser under its Purchaser Group’s Accordion Group Commitment. “Accordion Period” has the meaning set forth in Section 1.1(b). “Accordion Purchase Limit” means the aggregate of the amount of any increase to the Purchase Limit pursuant to Section 1.1(b) consented to by the Increasing Purchaser Groups (and as such amount may be decreased in connection with any Exiting Purchaser); provided, that the Accordion Purchase Limit shall in no event exceed $250,000,000 without the consent of all Purchaser Agents. “Accordion Ratable Share” means, for each Purchaser Group (other than those comprised of Exiting Purchasers), such Purchaser Group’s Accordion Group Commitment divided by the aggregate Accordion Group Commitments of all Purchaser Groups (other than those comprised of Exiting Purchasers). “Account Disclosure Letter” means that certain letter from the Seller and the Servicer to the Administrator and each Purchaser Agent, setting forth each Lock-Box and Collection Account to which Collections are remitted. “Adjusted Dilution Ratio” means, at any time, the rolling average of the Dilution Ratio for the 12 Calculation Periods then most recently ended. “Administrator” has the meaning set forth in the preamble to this Agreement. “Advantage Asset” means Advantage Asset Securitization Corp., and its successors. “Affiliate” shall mean, with respect to a Person, any other Person, which directly or indirectly controls, is controlled by or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 726249534 03128405 I- 1


 
“Independent Director” shall mean a member of the Board of Directors of Seller who is not at such time, and has not been at any time during the preceding five (5) years: (A) a director, officer, employee or affiliate of Performance Guarantor, any Originator or any of their respective Subsidiaries or Affiliates (other than Seller), or (B) the beneficial owner (at the time of such individual’s appointment as an Independent Director or at any time thereafter while serving as an Independent Director) of any of the outstanding common shares of Seller, any Originator, or any of their respective Subsidiaries or Affiliates, having general voting rights. “Interest Period” means with respect to any Receivable Interest funded through a Bank Rate Funding: (a) the period commencing on the date of the initial funding of such Receivable Interest through a Bank Rate Funding and including on, but excluding, the Business Day immediately preceding the next following Settlement Date; and (b) thereafter, each period commencing on, and including, the Business Day immediately preceding a Settlement Date and ending on, but excluding, the Business Day immediately preceding the next following Settlement Date. “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor thereto, and the regulations promulgated and rulings issued thereunder. “Invested Amount” of any Receivable Interest means, at any time, (A) the Purchase Price of such Receivable Interest paid by the Purchasers, minus (B) the sum of the aggregate amount of Collections and other payments received by the applicable Purchaser Agent which in each case are applied to reduce such Invested Amount in accordance with the terms and conditions of this Agreement; provided that such Invested Amount shall be restored (in accordance with Section 2.5) in the amount of any Collections or other payments so received and applied if at any time the distribution of such Collections or payments are rescinded, returned or refunded for any reason. “Invoice Payment Terms” means, with respect to any Receivable, the number of days following the date of the related original invoice by which such Receivable is required to be paid in full, as set forth in such original invoice. “Law” shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. “LIBO Rate” means, on any date of determination: (a) in the case of Wells Fargo, Advantage AssetMizuho and PNC, the LIBOR Market Index Rate; (b) in the case of any Purchaser other than Wells Fargo, Advantage AssetMizuho and PNC, a rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) determined by dividing (x) the Daily Eurodollar Rate for such date of determination, by (y) 1 minus the Reserve Percentage for such date of determination; and 726249534 03128405 I- 15


 
bridge loan agreement or other voluntary advance facility) of all or any portion of, or any undivided interest in, a Receivable Interest. “Liquidity Provider” means each bank or other financial institution that provides liquidity support to any Conduit Purchaser pursuant to the terms of a Liquidity Agreement. “Location” shall mean, with respect to the Seller, any Originator or the Servicer, the place where the Seller, such Originator or the Servicer, as the case may be, is “located” (within the meaning of Section 9-307, or any analogous provision, of the UCC, in effect in the jurisdiction whose Law governs the perfection of the Administrator’s (for the benefit of the Secured Parties) interests in any Purchased Assets). “Lock-Box” means each locked postal box with respect to which a bank who has executed a Collection Account Agreement has been granted exclusive access for the purpose of retrieving and processing payments made on the Receivables and which is listed on Exhibit I to the Account Disclosure Letter. “Loss Reserve” means, for any Calculation Period, the product (expressed as a percentage) of (a) 2.25, times (b) the highest three-month rolling average Default Ratio during the 12 Calculation Periods ending on the immediately preceding Cut-Off Date, times (c) the Default Horizon Ratio as of the immediately preceding Cut-Off Date. “Mizuho” means Mizuho Bank, Ltd., and its successors. “Moody’s” means Moody’s Investors Service, Inc. “Multiemployer Plan” means a “multiemployer plan”, within the meaning of Section 4001 (a) (3) of ERISA, to which Performance Guarantor or any ERISA Affiliate makes, is making, or is obligated to make contributions or, during the preceding three calendar years, has made, or been obligated to make, contributions. “Net Pool Balance” means, at any time, the aggregate Outstanding Balance of all Eligible Receivables at such time reduced by (i) the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds the Obligor Concentration Limit for such Obligor, (ii) the Rebate Reserve, (iii) the Government Receivable Excess and (iv) sales tax, excise tax or other similar tax or charge, arising with respect to such Eligible Receivables in connection with their creation and satisfaction. “Non-Accordion Purchase Limit” means the Purchase Limit without giving effect to any increases or decreases pursuant to Section 1.1(b) of the Agreement. “Obligor” shall mean, for any Receivable, each and every Person who purchased goods or services on credit under a Contract and who is obligated to make payments to an Originator or the Seller as assignee thereof pursuant to such Contract. “Obligor Concentration Limit” means, at any time, in relation to the aggregate Outstanding Balance of Eligible Receivables owed by any single Obligor and its Affiliates (if any), the applicable concentration limit determined as follows for Obligors who have short term 726249534 03128405 I- 17


 
outstanding amount of Aggregate Invested Amount determined as of the date of the most recent Settlement Report, without taking into account such proposed Incremental Purchase. “Purchased Assets” means all of Seller’s right, title and interest, whether now owned and existing or hereafter arising in and to all of the Receivables, the Related Security, the Collections and all proceeds of the foregoing. “Purchaser” means each Uncommitted Purchaser and/or each Related Committed Purchaser, as applicable. “Purchaser Agent” means each Person acting as agent on behalf of a Purchaser Group and designated as a Purchaser Agent for such Purchaser Group on the signature pages to the Agreement or any other Person who becomes a party to this Agreement as a Purchaser Agent pursuant to an Assumption Agreement or a Transfer Supplement. “Purchaser Group” means, for each Uncommitted Purchaser (or Purchaser Agent), such Uncommitted Purchaser, its Related Committed Purchasers (if any) and its related Purchaser Agent (and, to the extent applicable, its related Funding Sources and Indemnified Parties); provided, however, that the Purchaser Group that includes Working Capital Management Co., LP shall additionally include Advantage Asset and Advantage Asset shall not constitute a Purchaser Group separate from the Working Capital Management Co., LP Purchaser Group. “Purchasers’ Portion” means, on any date of determination, the sum of the percentages represented by the Receivable Interests of the Purchasers (other than any Exiting Purchasers). “Ratable Share” means, for each Purchaser Group (other than those comprised of Exiting Purchasers), such Purchaser Group’s Group Commitments (excluding any Accordion Group Commitment) divided by the aggregate Group Commitments (excluding any Accordion Group Commitments) of all Purchaser Groups (other than those comprised of Exiting Purchasers). “Rating Agency Condition” means that each Conduit Purchaser has received written notice from the rating agencies then rating its Commercial Paper that an amendment, a change or a waiver will not result in a withdrawal or downgrade of the then current ratings of such Commercial Paper; provided that, if the applicable Purchaser Agent notifies the Seller, the Servicer and the Administrator that such Conduit Purchaser is not required to obtain such notice prior to the effectiveness of such amendment, change or waiver, the “Rating Agency Condition” with respect to such Conduit Purchaser shall mean the consent of such Purchaser Agent (which consent shall only be withheld if such Purchaser Agent reasonably believes that such amendment, change or waiver would result in a withdrawal or downgrade of the then current ratings of such Commercial Paper). “Rebate Reserve” means an amount equal to the accounting reserve for rebates on the Receivables determined in the ordinary course of business in accordance with GAAP according to policies consistently applied (and consistent with the Originators’ practices in effect on the date hereof) and reported on the Settlement Report related to, or in anticipation of, rebates affecting the Receivables. 726249534 03128405 I- 20


 
Purchaser Group’s Group Invested Amount shall exceed its Group Commitment, and (iii) the aggregate of the Receivable Interests shall not exceed 100%. 2. The [Servicer, on behalf of the] Seller hereby requests that the Purchasers make a Purchase on ___________, 20__ (the “Purchase Date”) as follows: (a) Purchase Price: $_____________ (b) (X) Ratable Share1: (i) Liberty Street Funding LLC’s Purchaser Group: $_____________ (ii) PNC Bank, National Association’s Purchaser Group: $_____________ (iii) Victory Receivables Corporation’s Purchaser Group: $_____________ (iv) Wells Fargo Bank, National Association’s Purchaser Group: $_____________ (v) Working Capital Management Co., LPMizuho Bank, Ltd.’s Purchaser Group: $_____________ 1 For Purchases based on the Ratable Share. 726249534 03128405 II- 2


 
(Y) Accordion Ratable Share2: (i) Liberty Street Funding LLC’s Purchaser Group: $_____________ (ii) PNC Bank, National Association’s Purchaser Group: $_____________ (iii) Victory Receivables Corporation’s Purchaser Group: $_____________ (iv) Wells Fargo Bank, National Association’s Purchaser Group: $_____________ (v) Working Capital Management Co., LPMizuho Bank, Ltd.’s Purchaser Group: $_____________ 3. Please disburse the proceeds of the Purchase as follows: [Apply $________ to payment of Aggregate Unpaids due on the Purchase Date]. [Wire transfer $________ to the Facility Account.] 2 For Purchases based on the Accordion Ratable Share. 726249534 03128405 II- 3


 
(iv) Wells Fargo Bank, National Association’s Purchaser Group: $_____________ (v) Working Capital Management Co., LPMizuho Bank, Ltd.’s Purchaser Group: $_____________ (X) Accordion Ratable Share5: (i) Liberty Street Funding LLC’s Purchaser Group: $_____________ (ii) PNC Bank, National Association’s Purchaser Group: $_____________ (iii) Victory Receivables Corporation’s Purchaser Group: $_____________ (iv) Wells Fargo Bank, National Association’s Purchaser Group: $_____________ (v) Working Capital Management Co., LPMizuho Bank, Ltd.’s Purchaser Group: $_____________ 5 For reductions based on the Accordion Ratable Share. 726249534 03128405 XI- 2


 
EXHIBIT XIV FORM OF PURCHASE LIMIT INCREASE REQUEST ___________ , _____ The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020 Attention: Luna Mills Telephone: (212) 782-6959 Facsimile: (212) 782-6998 [Address to each Purchaser Agent] Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of April 29, 2010 (as heretofore amended or supplemented, the “Receivables Purchase Agreement”), among Amerisource Receivables Finance Corporation, as Seller, AmerisourceBergen Drug Corporation, as Servicer, the various purchaser groups from time to time party thereto, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as Administrator. Capitalized terms used in this Purchase Limit Increase Request and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. This letter constitutes a Purchase Limit Increase Request pursuant to Section 1.1(b) of the Receivables Purchase Agreement. The Seller desires to increase the Purchase Limit and respective Commitments of each Purchaser Group on _____, ____6 to the following amounts: (a) Purchase Limit: $__________________ (b) Ratable Share of Each Purchaser Group: (i) Liberty Street Funding LLC: $___________________ (ii) PNC Bank, National Association: $__________________ (iii) Victory Receivables Corporation: $_________________ (iv) Wells Fargo Bank, National Association: $___________________ (v) Working Capital Management Co., LP: $__________________Mizuho Bank, Ltd.: $__________________ 6 Notice must be given at least 15 Business Days prior to the requested increase, and must be in a minimum amount of $50,000,000. 726249534 03128405 Exhibit XIV- 1


 
EXHIBIT XV FORM OF PURCHASE LIMIT DECREASE NOTICE ___________ , _____ The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch 1251 Avenue of the Americas New York, NY 10020 Attention: Luna Mills Telephone: (212) 782-6959 Facsimile: (212) 782-6998 [Address to each Purchaser Agent] – [PURCHASER AGENTS TO PROVIDE] Ladies and Gentlemen: Reference is hereby made to the Amended and Restated Receivables Purchase Agreement, dated as of April 29, 2010 (as heretofore amended or supplemented, the “Receivables Purchase Agreement”), among Amerisource Receivables Finance Corporation, as Seller, AmerisourceBergen Drug Corporation, as Servicer, the various purchaser groups from time to time party thereto, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., New York Branch, as Administrator. Capitalized terms used in this Purchase Limit Decrease Notice and not otherwise defined herein shall have the meanings assigned thereto in the Receivables Purchase Agreement. This letter constitutes a Purchase Limit Decrease Notice pursuant to Section 1.1(b) of the Receivables Purchase Agreement. The Seller desires to decrease the Purchase Limit and respective Commitments of each Purchaser Group on _____, ____7 to the following amounts: (a) Purchase Limit: $__________________ (b) Ratable Share of Each Purchaser Group: (i) Liberty Street Funding LLC: $___________________ (ii) PNC Bank, National Association: $__________________ (iii) Victory Receivables Corporation: $_________________ (iv) Wells Fargo Bank, National Association: $___________________ (v) Working Capital Management Co., LP: $__________________Mizuho Bank, Ltd.: $__________________ 7 Notice must be given at least ten Business Days prior to the requested decrease, and must be in a minimum amount of $50,000,000. 726249534 03128405 Exhibit XV- 1


 
(a) Group Commitments Purchaser Group Non-Accordion Group Commitment Accordion Group Commitment Group Commitment Liberty Street Funding LLC $ $ PNC Bank, National Association $ $ Victory Receivables Corporation $ $ Wells Fargo Bank, National Association $ $ Working Capital Management Co.Mizuho Bank, LPLtd. $ $ (b) Ratable Share and Accordion Ratable Share of Each Purchaser Group, expressed as a percentage: Purchaser Group Ratable Share Accordion Ratable Share Liberty Street Funding LLC PNC Bank, National Association Victory Receivables Corporation Wells Fargo Bank, National Association Working Capital Management Co.Mizuho Bank, LPLtd. 726249534 03128405 XVI- 2


 
exhibit103
Exhibit 10.3 EXECUTION VERSION SECOND AMENDMENT TO AMENDED AND RESTATED PERFORMANCE UNDERTAKING THIS SECOND AMENDMENT TO AMENDED AND RESTATED PERFORMANCE UNDERTAKING, dated as of December 18, 2017 (this “Amendment”) is executed by AMERISOURCEBERGEN CORPORATION, a Delaware corporation (the “Performance Guarantor”). R E C I T A L S A. The Performance Guarantor executed in favor of Amerisource Receivables Financial Corporation that certain Amended and Restated Performance Undertaking Agreement, dated as of December 2, 2004 (as amended, restated, supplemented or otherwise modified from time to time, the “Undertaking”). B. The Performance Guarantor desire to enter into this Amendment to amend the Undertaking. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Performance Guarantor: 1. Certain Defined Terms. Capitalized terms used but not defined herein shall have the meanings set forth for such terms in the Undertaking, including by reference therein. 2. Amendment to the Undertaking. The Undertaking is hereby amended as follows: 2.1 Clause (b)(i) of the definition of “Guaranteed Obligations” as set forth in Section 1 of the Undertaking is hereby replaced in its entirety with the following: “(i) as Servicer under the Amended and Restated Receivables Purchase Agreement, dated as of April 29, 2010, by and among Recipient, as Seller, AmerisourceBergen Drug Corporation, as Servicer, the various Purchaser Groups from time to time party thereto, and The Bank of Tokyo- Mitsubishi UFJ, Ltd., as Administrator (as amended, restated or otherwise modified, the “Receivables Purchase Agreement” and, together with the Sale Agreement, the “Agreements”) or” 2.2 Section 6(g) of the Undertaking is hereby replaced in its entirety with the following: “(g) Financial Covenants. Performance Guarantor shall comply at all times with the covenants set forth in Sections 6.09 and 6.10 of the Credit Agreement (without giving effect to any amendment, waiver, termination, supplement or other modification thereof unless consented to by the Administrator and the Required Purchaser Agents).” 726152227 03128405


 
3. Representations and Warranties. The Performance Guarantor represents and warrants that: (a) Representations and Warranties. Each representation and warranty made by it in the Undertaking, as amended by this Amendment, and in the other Transaction Documents are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations and warranties were true as of such earlier date). (b) Enforceability. The execution and delivery by it of this Amendment, and the performance of its obligations under this Amendment and the Undertaking (as amended hereby) are within its corporate powers and have been duly authorized by all necessary corporate action on its part. Each of this Amendment and the Undertaking (as amended hereby) is its valid and legally binding obligations, enforceable in accordance with its respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. 4. Effect of Amendment. All provisions of the Undertaking, as expressly amended and modified by this Amendment, shall remain in full force and effect. After this Amendment becomes effective, all references in the Undertaking to “this Undertaking”, “hereof”, “herein”, or words of similar effect referring to the Undertaking shall be deemed to be references to the Undertaking, as amended by this Amendment. This Amendment shall not be deemed to expressly or impliedly waive, amend or supplement any provision of the Undertaking (or any related document or agreement) other than as set forth herein. 5. Effectiveness. This Amendment shall become effective on the date hereof (the “Effective Date”) subject to the condition precedent each Purchaser Agent shall have received, on or before the Effective Date, each of the following, each in form and substance satisfactory to each Purchaser Agent: (a) counterparts of this Amendment, duly executed by the parties hereto; and (b) such other documents and instruments as a Purchaser may reasonably request. 6. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. Counterparts of this Amendment may be delivered by facsimile transmission or other electronic transmission, and such counterparts shall be as effective as if original counterparts had been physically delivered, and thereafter shall be binding on the parties hereto and their respective successors and assigns. 7. GOVERNING LAW. THIS UNDERTAKING SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK. 2 726152227 03128405


 
8. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or any other Transaction Document or any provision hereof or thereof. [signature pages on next page] 3 726152227 03128405


 
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. AMERISOURCEBERGEN CORPORATION By: /s/ J.F. Quinn Name: J.F. Quinn Title: Vice President & Corporate Treasurer Acknowledged and Agreed to: AMERISOURCE RECEIVABLES FINANCIAL CORPORATION By: /s/ J.F. Quinn Name: J.F. Quinn Title: Vice President & Corporate Treasurer S-1 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Administrator and as Purchaser Agent for the Victory Receivables Corporation Purchaser Group By: /s/ Luna Mills Name: Luna Mills Title: Managing Director S-2 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
THE BANK OF NOVA SCOTIA, as Purchaser Agent for the Liberty Street Funding LLC Purchaser Group By: /s/ Michelle C. Phillips Name: Michelle C. Phillips Title: Execution Head & Director S-3 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
PNC BANK, NATIONAL ASSOCIATION, as a Purchaser Agent By: /s/ Eric Bruno Name: Eric Bruno Title: Senior Vice President S-4 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Purchaser Agent for the Wells Fargo Bank, National Association Purchaser Group By: /s/ Eero Maki Name: Eero Maki Title: Managing Director S-5 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
MIZUHO BANK, LTD., as a Purchaser Agent By: /s/ Bertram H. Tang Name: Bertram H. Tang Title: Authorized Signatory S-6 SECOND AMENDMENT TO PERFORMANCE UNDERTAKING 726152227 03128405


 
Exhibit


Exhibit 31.1
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
 
I, Steven H. Collis, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
 
4.
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)
Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
 
5.
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


Date: February 6, 2018

/s/ Steven H. Collis
Steven H. Collis
Chairman, President & Chief Executive Officer



Exhibit


Exhibit 31.2
 
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
 
I, Tim G. Guttman, certify that:
 
1.
I have reviewed this Quarterly Report on Form 10-Q (the “Report”) of AmerisourceBergen Corporation (the “Registrant”);

2.
Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this Report;
 
4.
The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

(d)
Disclosed in this Report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
 
5.
The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors:

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.


Date: February 6, 2018

/s/ Tim G. Guttman
Tim G. Guttman
Executive Vice President & Chief Financial Officer



Exhibit


Exhibit 32
 
Section 1350 Certification of Chief Executive Officer
 
In connection with the Quarterly Report of AmerisourceBergen Corporation (the “Company”) on Form 10-Q for the quarter ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven H. Collis, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Steven H. Collis
Steven H. Collis
Chairman, President & Chief Executive Officer

February 6, 2018

Section 1350 Certification of Chief Financial Officer
 
In connection with the Quarterly Report of AmerisourceBergen Corporation (the “Company”) on Form 10-Q for the quarter ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tim G. Guttman, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Tim G. Guttman
Tim G. Guttman
Executive Vice President & Chief Financial Officer

February 6, 2018