Cencora Inc.
05/06/2026 | Press release | Distributed by Public on 05/06/2026 12:42
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
In reviewing this Management's Discussion and Analysis of Financial Condition and Results of Operations, please note that we face many uncertainties and risks related to various economic, political and regulatory environments in which we operate, both within the U.S. and internationally. Refer to the headings "Item 1A. Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended September 30, 2025, as well as the heading "Cautionary Note Regarding Forward-Looking Statements" above for additional information related to our present business environment.
Recent Development
On February 2, 2026, we acquired the majority of the outstanding equity interests that we did not previously own in OneOncology, a physician-led national platform empowering independent medical specialty practices rooted in oncology, for total fair value consideration of $7,387.1 million, which included cash consideration of $4,648.7 million, $1,934.2 million of fair value of our previously held equity method investment, $752.1 million of estimated contingent consideration for certain OneOncology physicians and members of management that retained an 8% interest in OneOncology, and $52.0 million for the settlement of a receivable resulting from a pre-existing commercial arrangement between us and OneOncology. We funded the transaction through a combination of new debt financing (see Note 7 of the Notes to Consolidated Financial Statements) and cash on-hand. We believe the acquisition of OneOncology allows us to broaden our relationships with community oncology providers and to build on our leadership in specialty pharmaceuticals within our U.S. Healthcare Solutions reportable segment.
Executive Summary
This executive summary provides highlights from the results of operations that follow:
•Revenue increased by $2.9 billion, or 3.8%, and $7.3 billion, or 4.7%, from the prior year quarter and six-month period, respectively, primarily due to growth in both reportable segments. U.S. Healthcare Solutions' revenue increased by $1.9 billion, or 2.9%, and $5.6 billion, or 4.0%, from the prior year quarter and six-month period, respectively, primarily due to overall market growth largely driven by unit volume growth, including increased sales of specialty products to health systems and physician practices and products labeled for diabetes and/or weight loss in the GLP-1 class of $1.9 billion, or 23.0%, and $2.9 billion, or 16.7% from the prior year quarter and six-month period, respectively, offset in part by a decline in manufacturer prices related to certain brand pharmaceutical products, a decrease in sales due to losses of an oncology customer and a grocery customer, and lower sales to our large mail order customer as a result of brand conversions. International Healthcare Solutions' revenue increased by $0.9 billion, or 13.0%, and $1.5 billion, or 11.2%, from the prior year quarter and six-month period, respectively, primarily due to increased sales at our European distribution business.
•Gross profit increased by $528.5 million, or 17.3%, and $1,042.6 million, or 18.6%, from the prior year quarter and six-month period, respectively, primarily due to the increases in gross profit in both reportable segments and LIFO credits in the current year periods in comparison to LIFO expense in the prior year periods, offset in part by lower gains from antitrust litigation settlements in the current year periods in comparison to the prior year periods. U.S. Healthcare Solutions' gross profit increased by $370.9 million, or 19.7%, and $799.7 million, or 24.0%, from the prior year quarter and six-month period, respectively. The increase from the prior year quarter is primarily due to the February 2026 acquisition of OneOncology and increased sales. The increase from the prior year six-month period is primarily due to the January 2025 acquisition of RCA, the February 2026 acquisition of OneOncology, and increased sales. International Healthcare Solutions' gross profit increased by $98.0 million, or 13.7%, and $123.2 million, or 8.3%, from the prior year quarter and six-month period, respectively, primarily due to increases in gross profit at our European distribution business and our global specialty logistics business.
•Total operating expenses increased by $422.1 million, or 20.9%, and $882.0 million, or 22.8%, from the prior year quarter and six-month period, respectively. The increase from the prior year quarter is primarily due to the February 2026 acquisition of OneOncology, and the increase from the prior year six-month period is primarily due to the January 2025 acquisition of RCA, the February 2026 acquisition of OneOncology, and an impairment of assets of our U.S. Consulting Services business that is held for sale.
•Total segment operating income increased by $71.1 million, or 6.0%, and $184.5 million, or 8.6%, from the prior year quarter and six-month period. U.S. Healthcare Solutions' operating income increased by $53.3 million, or 5.6%, and $197.7 million, or 12.1%, from the prior year quarter and six month-period. The increase from the prior year quarter is primarily due to the February 2026 acquisition of OneOncology and overall growth, and the increase from the prior year six-month period is primarily due to the January 2025 acquisition of RCA, the February 2026 acquisition of OneOncology, and overall growth. International Healthcare Solutions' operating income increased by $21.2 million, or 13.7%, from the prior year quarter and
decreased $1.8 million, or 0.6%, from the prior year six-month period. The increase from the prior year quarter is primarily due to increased operating income at our European distribution business and our global specialty logistics business.
•Our effective tax rates were 22.0% and 21.5% for the three and six months ended March 31, 2026, respectively. Our effective tax rates were 22.7% and 21.8% for the three and six months ended March 31, 2025, respectively. The effective tax rates for the three and six months ended March 31, 2026 and 2025 were higher than the U.S. statutory rate primarily due to U.S. state income taxes, offset in part by the benefit of income taxed at rates lower than the U.S. statutory rate and tax benefits associated with equity compensation.
Results of Operations
Revenue
|
Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | Change | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| U.S. Healthcare Solutions | $ | 68,765,078 | $ | 66,819,265 | 2.9% | $ | 144,976,903 | $ | 139,374,559 | 4.0% | ||||||||||||||||||||||||||||
| International Healthcare Solutions: | ||||||||||||||||||||||||||||||||||||||
| Alliance Healthcare | 6,516,466 | 5,771,991 | 12.9% | 13,047,163 | 11,771,191 | 10.8% | ||||||||||||||||||||||||||||||||
| Other Healthcare Solutions | 1,049,283 | 924,788 | 13.5% | 2,142,559 | 1,884,483 | 13.7% | ||||||||||||||||||||||||||||||||
| Total International Healthcare Solutions | 7,565,749 | 6,696,779 | 13.0% | 15,189,722 | 13,655,674 | 11.2% | ||||||||||||||||||||||||||||||||
| Other: | ||||||||||||||||||||||||||||||||||||||
| Animal Health | 1,435,789 | 1,363,032 | 5.3% | 2,907,106 | 2,743,017 | 6.0% | ||||||||||||||||||||||||||||||||
| Other non-strategic businesses | 619,782 | 593,375 | 4.5% | 1,277,412 | 1,215,845 | 5.1% | ||||||||||||||||||||||||||||||||
| Total Other | 2,055,571 | 1,956,407 | 5.1% | 4,184,518 | 3,958,862 | 5.7% | ||||||||||||||||||||||||||||||||
| Intersegment eliminations | (30,482) | (18,778) | 62.3% | (63,211) | (48,362) | |||||||||||||||||||||||||||||||||
| Revenue | $ | 78,355,916 | $ | 75,453,673 | 3.8% | $ | 164,287,932 | $ | 156,940,733 | 4.7% | ||||||||||||||||||||||||||||
Our future revenue growth will continue to be affected by various factors, such as industry growth trends, including drug utilization (e.g., products labeled for diabetes and/or weight loss in the GLP-1 class), the introduction of new, innovative brand therapies and vaccines, the likely increase in the number of generic drugs and biosimilars that will be available over the next few years as a result of the expiration of certain drug patents held by brand-name pharmaceutical manufacturers and the rate of conversion from brand products to those generic drugs and biosimilars, price inflation and price deflation, general economic conditions in the United States and Europe, currency exchange rates, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third-party reimbursement rates to our customers, and changes in government rules and regulations.
Revenue increased by $2.9 billion, or 3.8%, and $7.3 billion, or 4.7%, from the prior year quarter and six-month period, respectively, primarily due to growth in both reportable segments.
U.S. Healthcare Solutions' revenue increased by $1.9 billion, or 2.9%, and $5.6 billion, or 4.0%, from the prior year quarter and six-month period, respectively, primarily due to overall market growth largely driven by unit volume growth, including increased sales of specialty products to health systems and physician practices and products labeled for diabetes and/or weight loss in the GLP-1 class of $1.9 billion, or 23.0%, and $2.9 billion, or 16.7% from the prior year quarter and six-month period, respectively, offset in part by a decline in manufacturer prices related to certain brand pharmaceutical products, a decrease in sales due to losses of an oncology customer and a grocery customer, and lower sales to our large mail order customer as a result of brand conversions.
International Healthcare Solutions' revenue increased by $0.9 billion, or 13.0%, and $1.5 billion, or 11.2%, from the prior year quarter and six-month period, respectively, primarily due to increased sales of $0.7 billion and $1.3 billion at our European distribution business from the prior year quarter and six-month period, respectively.
Revenue in Other increased by $0.1 billion, or 5.1%, and $0.2 billion, or 5.7%, from the prior year quarter and six-month period, respectively, due to increased sales at our less-than-wholly-owned Brazil distribution business and at our animal health business, offset in part by a decrease in sales at our consulting services businesses.
A number of our contracts with customers, including group purchasing organizations, are typically subject to expiration each year. We may lose a key customer if an existing contract with such customer expires without being extended, renewed, or replaced. Over the next twelve months, there are no key contracts scheduled to expire. Additionally, from time to time, key contracts may be terminated in accordance with their terms or extended, renewed, or replaced prior to their expiration dates. If those contracts are extended, renewed, or replaced at less favorable terms, they may also negatively impact our revenue, results of operations, and cash flows.
Gross Profit
|
Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | Change | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| U.S. Healthcare Solutions | $ | 2,252,273 | $ | 1,881,374 | 19.7% | $ | 4,135,836 | $ | 3,336,183 | 24.0% | ||||||||||||||||||||||||||||
| International Healthcare Solutions | 814,289 | 716,261 | 13.7% | 1,603,711 | 1,480,503 | 8.3% | ||||||||||||||||||||||||||||||||
| Other | 311,630 | 318,382 | (2.1)% | 636,111 | 636,054 | -% | ||||||||||||||||||||||||||||||||
| Intersegment eliminations | (4,268) | (906) | (8,488) | (2,630) | ||||||||||||||||||||||||||||||||||
| Gains from antitrust litigation settlements | 16,538 | 198,646 | 28,690 | 221,516 | ||||||||||||||||||||||||||||||||||
| LIFO credit (expense) | 210,030 | (39,469) | 287,592 | (32,145) | ||||||||||||||||||||||||||||||||||
|
Türkiye highly inflationary impact
|
(12,153) | (14,479) | (23,042) | (21,634) | ||||||||||||||||||||||||||||||||||
| Gross profit | $ | 3,588,339 | $ | 3,059,809 | 17.3% | $ | 6,660,410 | $ | 5,617,847 | 18.6% | ||||||||||||||||||||||||||||
Gross profit increased by $528.5 million, or 17.3%, and $1,042.6 million, or 18.6%, from the prior year quarter and six-month period, respectively, primarily due to the increases in gross profit in both reportable segments and LIFO credits in the current year periods in comparison to LIFO expense in the prior year periods, offset in part by lower gains from antitrust litigation settlements in the current year periods in comparison to the prior year periods.
U.S. Healthcare Solutions' gross profit increased by $370.9 million, or 19.7%, and $799.7 million, or 24.0%, from the prior year quarter and six-month period, respectively. The increase from the prior year quarter is primarily due to the February 2026 acquisition of OneOncology and increased sales. The increase from the prior year six-month period is primarily due to the January 2025 acquisition of RCA, the February 2026 acquisition of OneOncology, and increased sales. As a percentage of revenue, U.S. Healthcare Solutions' gross profit margin of 3.28% in the current year quarter increased 46 basis points from the prior year quarter primarily due to the February 2026 acquisition of OneOncology, offset in part by higher sales of GLP-1s, which have lower gross profit margins. As a percentage of revenue, U.S. Healthcare Solutions' gross profit margin of 2.85% in the current year six-month period increased 46 basis points from the prior year six-month period primarily due to the January 2025 acquisition of RCA and the February 2026 acquisition of OneOncology, offset in part by higher sales of GLP-1s, which have lower gross profit margins.
International Healthcare Solutions' gross profit increased by $98.0 million, or 13.7%, and $123.2 million, or 8.3%, from the prior year quarter and six-month period, respectively, primarily due to increases in gross profit at our European distribution business and our global specialty logistics business.
Gross profit in Other decreased by $6.8 million, or 2.1%, from the prior year quarter and was flat compared to the prior year six-month period.
We recognized gains from antitrust litigation settlements with pharmaceutical manufacturers of $16.5 million and $198.6 million in three months ended March 31, 2026 and 2025, respectively, and $28.7 million and $221.5 million in the six months ended March 31, 2026 and 2025, respectively. The gains were recorded as reductions to Cost of Goods Sold (see Note 11 of the Notes to Consolidated Financial Statements).
Our cost of goods sold for interim periods includes a LIFO provision that is recorded ratably on a quarterly basis and is based on our estimated annual LIFO provision. The annual LIFO provision, which we estimate on a quarterly basis, is affected by manufacturer pricing practices, which may be impacted by market and other external influences, expected changes in inventory quantities, and product mix, many of which are difficult to predict. Changes to any of the above factors may have a material impact on our annual LIFO provision. Based on estimates in our current fiscal year LIFO provision, the LIFO credit in the current year periods, in comparison to LIFO expense in the prior year periods, is primarily due to a decline in manufacturer prices related to certain brand pharmaceutical products.
We recognized expense in Cost of Goods Sold of $12.2 million and $14.5 million in the three months ended March 31, 2026 and 2025, respectively, and $23.0 million and $21.6 million in the six months ended March 31, 2026 and 2025, respectively, related to the impact of Türkiye highly inflationary accounting driven by the continued weakening of the Turkish Lira.
Operating Expenses
|
Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | Change | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Distribution, selling, and administrative | $ | 1,977,559 | $ | 1,600,040 | 23.6% | $ | 3,772,848 | $ | 3,072,095 | 22.8% | ||||||||||||||||||||||||||||
| Depreciation and amortization | 249,292 | 259,818 | (4.1)% | 509,693 | 538,310 | (5.3)% | ||||||||||||||||||||||||||||||||
| Litigation and opioid-related expenses (credit), net | 13,858 | 11,524 | (72,293) | 28,289 | ||||||||||||||||||||||||||||||||||
| Acquisition and divestiture-related deal and integration expenses | 164,164 | 99,380 | 242,583 | 138,092 | ||||||||||||||||||||||||||||||||||
| Restructuring and other expenses, net | 40,873 | 52,857 | 55,039 | 98,617 | ||||||||||||||||||||||||||||||||||
| Impairment of assets, including goodwill | - | - | 249,498 | - | ||||||||||||||||||||||||||||||||||
| Total operating expenses | $ | 2,445,746 | $ | 2,023,619 | 20.9% | $ | 4,757,368 | $ | 3,875,403 | 22.8% | ||||||||||||||||||||||||||||
Distribution, selling, and administrative expenses increased by $377.5 million, or 23.6%, and $700.8 million, or 22.8%, compared to the prior year quarter and six-month period, respectively. The increase from the prior year quarter is primarily due to the February 2026 acquisition of OneOncology. The increase from the prior year six-month period is primarily due to the January 2025 acquisition of RCA and the February 2026 acquisition of OneOncology. As a percentage of revenue, distribution, selling, and administrative expenses were 2.52% and 2.30% in the current year quarter and six-month period, respectively, and represent increases of 40 and 34 basis points compared to the prior year quarter and six-month period, respectively. The increase from the prior year quarter is primarily due to the acquisition of OneOncology, and the increase from the prior year six-month period is primarily due the January 2025 acquisition of RCA and February 2026 acquisition of OneOncology.
Depreciation expense increased 8.5% and 13.6% from the prior year quarter and six-month period, respectively. Amortization expense decreased 15.1% and 19.9% from the prior year quarter and six-month period, respectively, due to certain tradenames becoming fully amortized in connection with our company name change to Cencora and the gradual transition away from other tradenames used, which were acquired through prior acquisitions, offset in part by incremental amortization expense related to recently acquired intangible assets.
Litigation and opioid-related expenses (credit), net in the three and six months ended March 31, 2026 and 2025 include legal fees in connection with opioid lawsuits and investigations. Litigation and opioid-related expenses (credit), net in the six months ended March 31, 2026 also includes an $86.8 million credit related to a derivative lawsuit settlement (see Note 10 of the Consolidated Notes to Financial Statements).
Acquisition and divestiture-related deal and integration expenses in the three and six months ended March 31, 2026 primarily included expenses related to our acquisitions of OneOncology and RCA and costs associated with strategic alternatives of certain non-core businesses. Acquisition and divestiture-related deal and integration expenses in the three and six months ended March 31, 2025 primarily included expenses related to our acquisition of RCA and the integration of PharmaLex.
Restructuring and other expenses, net are comprised of the following:
|
Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||||||||||||
| (in thousands) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Restructuring and employee severance costs, net | $ | 27,828 | $ | 25,103 | $ | 31,506 | $ | 44,658 | ||||||||||||||||||
| Business transformation efforts | 12,450 | 26,046 | 22,576 | 51,120 | ||||||||||||||||||||||
| Other, net | 595 | 1,708 | 957 | 2,839 | ||||||||||||||||||||||
| Total restructuring and other expenses, net | $ | 40,873 | $ | 52,857 | $ | 55,039 | $ | 98,617 | ||||||||||||||||||
Restructuring and employee severance costs, net in the three and six months ended March 31, 2026 primarily included costs associated with workforce reductions. Restructuring and employee severance costs, net in the six months ended March 31, 2026 also included a gain on the sale of a facility. Restructuring and employee severance costs, net in the three and six months ended March 31, 2025 primarily included costs associated with workforce reductions.
Business transformation efforts in the three and six months ended March 31, 2026 and 2025 included non-recurring expenses related to significant strategic initiatives to improve operational efficiency, including certain technology initiatives. Business transformation efforts in the three and six months ended March 31, 2025 also included rebranding costs associated with our name change to Cencora. The majority of these costs are related to services provided by third-party consultants.
In the six months ended March 31, 2026, we recorded an impairment of assets of $249.5 million, including goodwill, related to our U.S. Consulting Services business that is held for sale.
Operating Income
|
Three months ended March 31, |
Six months ended March 31, |
|||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2026 | 2025 | Change | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| U.S. Healthcare Solutions | $ | 998,300 | $ | 944,969 | 5.6% | $ | 1,829,630 | $ | 1,631,894 | 12.1% | ||||||||||||||||||||||||||||
| International Healthcare Solutions | 175,797 | 154,598 | 13.7% | 317,953 | 319,778 | (0.6)% | ||||||||||||||||||||||||||||||||
| Other | 91,633 | 92,851 | (1.3)% | 183,050 | 190,180 | (3.7)% | ||||||||||||||||||||||||||||||||
| Intersegment eliminations | (2,381) | (154) | (4,570) | (280) | ||||||||||||||||||||||||||||||||||
| Total segment operating income | 1,263,349 | 1,192,264 | 6.0% | 2,326,063 | 2,141,572 | 8.6% | ||||||||||||||||||||||||||||||||
| Gains from antitrust litigation settlements | 16,538 | 198,646 | 28,690 | 221,516 | ||||||||||||||||||||||||||||||||||
| LIFO credit (expense) | 210,030 | (39,469) | 287,592 | (32,145) | ||||||||||||||||||||||||||||||||||
|
Türkiye highly inflationary impact
|
(12,153) | (14,479) | (23,042) | (21,634) | ||||||||||||||||||||||||||||||||||
| Acquisition-related intangibles amortization | (116,276) | (137,011) | (241,434) | (301,867) | ||||||||||||||||||||||||||||||||||
| Litigation and opioid-related (expenses) credit, net | (13,858) | (11,524) | 72,293 | (28,289) | ||||||||||||||||||||||||||||||||||
| Acquisition and divestiture-related deal and integration expenses | (164,164) | (99,380) | (242,583) | (138,092) | ||||||||||||||||||||||||||||||||||
| Restructuring and other expenses, net | (40,873) | (52,857) | (55,039) | (98,617) | ||||||||||||||||||||||||||||||||||
| Impairment of assets, including goodwill | - | - | (249,498) | - | ||||||||||||||||||||||||||||||||||
| Operating income | $ | 1,142,593 | $ | 1,036,190 | 10.3% | $ | 1,903,042 | $ | 1,742,444 | 9.2% | ||||||||||||||||||||||||||||
U.S. Healthcare Solutions' operating income increased by $53.3 million, or 5.6%, and $197.7 million, or 12.1%, from the prior year quarter and six month-period, respectively, primarily due to the increase in gross profit, as noted above, and was offset in part by the increase in operating expenses. As a percentage of revenue, U.S. Healthcare Solutions' operating income margin was 1.45% and 1.26% in the current year quarter and six-month period, respectively, and represent increases of 4 and 9 basis points from the prior year quarter and six-month period, respectively, due to the increases in gross profit margin, as described above in the Gross Profit section, offset in part by increases in the operating expense margin.
International Healthcare Solutions' operating income increased by $21.2 million, or 13.7%, from the prior year quarter and decreased $1.8 million, or 0.6%, from the prior year six-month period. The increase from the prior year quarter is primarily due to increased operating income at our European distribution business and our global specialty logistics business. The decrease from the prior year six-month period is primarily due to a decrease in operating income at our European distribution business and was largely offset by an increase in operating income at all other businesses.
Operating income in Other decreased by $1.2 million, or 1.3%, and $7.1 million, or 3.7%, from the prior year quarter and six-month period, respectively, primarily due to lower operating income at our consulting services businesses, offset in part by increases in operating income at our animal health business.
Other (Income) Loss, Net
In connection with the acquisition of OneOncology, we recorded a $1.1 billion gain on the remeasurement of our equity method investment and the extinguishment of the put option liability related to our previously held investment in OneOncology in other (income) loss, net in the three and six months ended March 31, 2026 (see Note 2 of the Notes to Consolidated Financial Statements). Other (income) loss, net in the six months ended March 31, 2025 includes a $35.5 million loss on the divestiture of non-core businesses.
Interest Expense, Net
Interest expense, net and the respective weighted average interest rates for the three months ended March 31, 2026 and 2025 are as follows:
| 2026 | 2025 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount |
Weighted Average Interest Rate |
Amount |
Weighted Average Interest Rate |
||||||||||||||||||||||
| Interest expense | $ | 154,341 | 4.16% | $ | 132,318 | 4.49% | ||||||||||||||||||||
| Interest income | (13,881) | 3.15% | (28,330) | 4.94% | ||||||||||||||||||||||
| Interest expense, net | $ | 140,460 | $ | 103,988 | ||||||||||||||||||||||
Interest expense, net increased by $36.5 million, or 35.1%, from the prior year quarter due to the increase in interest expense and a decrease in interest income.
The increase in interest expense was primarily due to the issuance of our $3.0 billion of senior notes and the $1.5 billion of variable-rate term loans in February 2026, which we borrowed to finance a portion of the OneOncology acquisition, the issuance of our €1.0 billion of senior notes in May 2025, and higher interest expense at our European distribution business, offset in part by the repayment of our $500 million of senior notes that matured in March 2025, and lower interest expense on the $0.8 billion balance remaining on the $1.5 billion variable-rate term loan, which we borrowed in January 2025 to finance a portion of the RCA acquisition.
The decrease in interest income was primarily driven by lower investment interest rates and lower average investment cash balances in the current year quarter in comparison to the prior year quarter.
Interest expense, net and the respective weighted average interest rates for the six months ended March 31, 2026 and 2025 are as follows:
| 2026 | 2025 | |||||||||||||||||||||||||
| (dollars in thousands) | Amount |
Weighted Average Interest Rate |
Amount |
Weighted Average Interest Rate |
||||||||||||||||||||||
| Interest expense | $ | 247,704 | 4.10% | $ | 193,499 | 4.28% | ||||||||||||||||||||
| Interest income | (34,835) | 3.39% | (61,578) | 5.20% | ||||||||||||||||||||||
| Interest expense, net | $ | 212,869 | $ | 131,921 | ||||||||||||||||||||||
Interest expense, net increased by $80.9 million, or 61.4% from the prior year six-month period due to the increase in interest expense and a decrease in interest income.
The increase in interest expense was primarily due to the issuance of our $1.8 billion of senior notes in December 2024 and the $0.8 billion balance remaining on the variable-rate term loan, which we borrowed in January 2025 to finance a portion of the RCA acquisition, the issuance of our €1.0 billion of senior notes in May 2025, the issuance of our $3.0 billion of senior notes and the $1.5 billion of variable-rate term loans in February 2026, which we borrowed to finance a portion of the OneOncology acquisition, and higher interest expense at our European distribution business, offset in part by the repayment of our $500 million of senior notes that matured in March 2025.
The decrease in interest income was primarily driven by lower investment interest rates and lower average investment cash balances in the current year six-month period in comparison to the prior year six-month period.
Income Tax Expense
Our effective tax rates were 22.0% and 21.5% for the three and six months ended March 31, 2026, respectively. Our effective tax rates were 22.7% and 21.8% for the three and six months ended March 31, 2025, respectively. The effective tax rates for the three and six months ended March 31, 2026 and 2025 were higher than the U.S. statutory rate primarily due to U.S.
state income taxes, offset in part by the benefit of income taxed at rates lower than the U.S. statutory rate and tax benefits associated with equity compensation.
Liquidity and Capital Resources
Our operating results have generated cash flows, which, together with availability under our debt agreements and credit terms from suppliers, have provided sufficient capital resources to finance working capital and cash operating requirements, and to fund capital expenditures, acquisitions, repayment of debt, the payment of interest on outstanding debt, dividends, and purchases of shares of our common stock.
Our primary ongoing cash requirements will be to finance working capital, fund the repayment of debt, fund the payment of interest on debt, fund the payment of dividends, fund purchases of our common stock, finance acquisitions, and fund capital expenditures and routine growth and expansion through new business opportunities. Future cash flows from operations and borrowings are expected to be sufficient to fund our ongoing cash requirements, including the opioid litigation payments that will be made over the next 13 years (see below).
As of March 31, 2026 and September 30, 2025, our cash and cash equivalents held by foreign subsidiaries were $807.8 million and $957.7 million, respectively. We have the ability to repatriate the majority of our cash and cash equivalents held by our foreign subsidiaries without incurring significant additional taxes upon repatriation.
Our cash balances in the six months ended March 31, 2026 and 2025 were supplemented by intra-period credit facility borrowings to cover short-term working capital needs. The largest amount of intra-period borrowings that was outstanding at any one time under our revolving and securitization credit facilities during the six months ended March 31, 2026 and 2025 was $6.8 billion and $5.1 billion, respectively. We had $70.9 billion and $42.9 billion of cumulative intra-period borrowings that were repaid under our credit facilities during the six months ended March 31, 2026 and 2025, respectively.
Cash Flows
We used $1.0 billion of cash in operations during the six months ended March 31, 2026 compared to $0.6 billion of cash generated from operations during the six months ended March 31, 2025, a $1.6 billion increase in cash used. The timing of cash receipts and disbursements and inventory purchases can significantly impact our working capital. In the six months ended March 31, 2026, the decrease in accounts payable and the increases in accounts receivable and inventories resulted in $2.6 billion of cash used in operations compared to $853.3 million of cash used in the six months ended March 31, 2025.
During the six months ended March 31, 2026, our operating activities used cash of $1.0 billion and was principally the result of the following:
•A decrease in accounts payable of $2.2 billion due to the timing of scheduled payments to our suppliers;
•An increase in accounts receivable of $308.7 million primarily due to an increase in sales and the timing of scheduled payments from our customers;
•A decrease in accrued expenses of $257.4 million primarily due to the payment of accrued liabilities that were on our Consolidated Balance Sheet as of September 30, 2025;
•Negative non-cash items of $244.2 million, which is primarily comprised of a $1.1 billion remeasurement gain related to the acquisition of OneOncology and a $287.6 million LIFO credit, offset in part by depreciation expense of $277.5 million, amortization expense of $249.7 million, and a $249.5 million impairment of assets, including goodwill; and
•An increase in inventories of $120.2 million to support the increase in business volume and due to seasonal needs;
The cash used in the above items was offset in part by net income of $2.2 billion.
During the six months ended March 31, 2025, our operating activities provided cash of $632.5 million and was principally the result of the following:
•Net income of $1.2 billion; and
•Positive non-cash items of $815.5 million, which is primarily comprised of amortization expense of $308.2 million and depreciation expense of $237.2 million.
The cash provided by the above items was offset in part by the following:
•A decrease in accounts payable of $669.5 million primarily due to the timing of scheduled payments to our suppliers;
•A decrease in accrued expenses of $489.5 million primarily due to the payment of accrual liabilities that were on our Consolidated Balance Sheet as of September 30, 2024, including $226.0 million of opioid litigation settlement payments; and
•An increase in accounts receivable of $218.0 million primarily due to an increase in sales and the timing of scheduled payments from our customers.
We use days sales outstanding, days inventory on hand, and days payable outstanding to evaluate our working capital performance. The below financial metrics are calculated based upon a quarterly average and can be impacted by the timing of cash receipts and disbursements, which can vary significantly depending upon the day of the week on which the period ends.
|
Three months ended March 31, |
Six months ended March 31, |
||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Days sales outstanding | 27.6 | 28.1 | 27.7 | 27.9 | |||||||||||||||||||
| Days inventory on hand | 29.6 | 28.6 | 28.7 | 27.3 | |||||||||||||||||||
| Days payable outstanding | 65.1 | 61.4 | 62.1 | 59.9 | |||||||||||||||||||
Our cash flows from operating activities can vary significantly from period to period based upon fluctuations in our period-end working capital account balances. Any changes to payment terms with a key customer or manufacturer supplier could have a material impact to our cash flows from operations. The addition of any new key customer or the loss of an existing key customer could have a material impact on our cash flows from operations.
Operating cash flows during the six months ended March 31, 2026 included $208.1 million of interest payments and $313.2 million of income tax payments, net of refunds. Operating cash flows during the six months ended March 31, 2025 included $153.7 million of interest payments and $294.9 million of income tax payments, net of refunds.
Capital expenditures in the six months ended March 31, 2026 and 2025 were $285.0 million and $235.0 million, respectively. Significant capital expenditures in the six months ended March 31, 2026 and 2025 included investments relating to the continued expansion and enhancement of our distribution network and various technology initiatives.
We currently expect to invest approximately $900 million in capital expenditures during fiscal 2026. Larger 2026 capital expenditures will include investments relating to the continued expansion and enhancement of our distribution network and various technology initiatives.
In addition to capital expenditures, net cash used in investing activities in the six months ended March 31, 2026 included $4.6 billion for the acquisition of OneOncology. In addition to capital expenditures, net cash used in investing activities in the six months ended March 31, 2025 included $3.9 billion for the acquisition of RCA and $192.6 million for equity investments.
Net cash provided by financing activities of $4.0 billion in the six months ended March 31, 2026 principally resulted from the $3.0 billion issuance of senior notes and $1.5 billion of term loan borrowings to finance a portion of the acquisition of OneOncology, offset in part by $244.0 million in cash dividends paid on our common stock, $200.0 million of repayment of a term loan, and $105.2 million in purchases of our common stock related to employee tax withholdings related to restricted share vesting.
Net cash provided by financing activities of $2.7 billion in the six months ended March 31, 2025 principally resulted from the $1.8 billion issuance of senior notes and $1.5 billion of term loan borrowings to finance a portion of the acquisition of RCA, as well as $683.4 million of net borrowings under our revolving credit facilities to cover seasonal short-term working capital needs. All of the above were offset in part by the repayment of our $500 million of senior notes that were due in March 2025, $435.5 million in purchases of our common stock, and $222.1 million in cash dividends paid on our common stock.
Debt and Credit Facility Availability
The following table illustrates our debt structure as of March 31, 2026, including availability under the multi-currency revolving credit facility, the receivables securitization facility, the money market facility, the working capital credit facility, and the Alliance Healthcare debt:
| (in thousands) |
Outstanding Balance |
Additional Availability |
||||||||||||
| Fixed-Rate Debt: | ||||||||||||||
| $750,000, 3.450% senior notes due 2027 | $ | 748,570 | $ | - | ||||||||||
| $500,000, 4.625% senior notes due 2027 | 497,921 | - | ||||||||||||
| €500,000, 2.875% senior notes due 2028 | 572,378 | - | ||||||||||||
| $500,000, 3.950% senior notes due 2029 | 496,984 | - | ||||||||||||
| $600,000, 4.850% senior notes due 2029 | 597,006 | - | ||||||||||||
| $500,000, 2.800% senior notes due 2030 | 497,480 | - | ||||||||||||
| $500,000, 4.250% senior notes due 2030 | 496,108 | - | ||||||||||||
| $1,000,000, 2.700% senior notes due 2031 | 994,398 | - | ||||||||||||
| €500,000, 3.625% senior notes due 2032 | 570,009 | - | ||||||||||||
| $500,000, 4.600% senior notes due 2033 | 496,502 | - | ||||||||||||
| $500,000, 5.125% senior notes due 2034 | 495,398 | - | ||||||||||||
| $700,000, 5.150% senior notes due 2035 | 695,186 | - | ||||||||||||
| $1,000,000, 4.900% senior notes due 2036 | 989,677 | - | ||||||||||||
| $500,000, 4.250% senior notes due 2045 | 495,901 | - | ||||||||||||
| $500,000, 4.300% senior notes due 2047 | 494,221 | - | ||||||||||||
| $500,000, 5.650% senior notes due 2056 | 491,643 | - | ||||||||||||
| OneOncology physician notes | 380,404 | - | ||||||||||||
| Nonrecourse debt | 92,642 | - | ||||||||||||
| Total fixed-rate debt | 10,102,428 | - | ||||||||||||
| Variable-Rate Debt: | ||||||||||||||
| Multi-currency revolving credit facility due in 2030 | 28,744 | 5,471,256 | ||||||||||||
| Receivables securitization facility due in 2028 | - | 1,500,000 | ||||||||||||
| Term loan due in 2027 | 799,300 | - | ||||||||||||
| Term loan due in 2028 | 299,630 | - | ||||||||||||
| Term loan due in 2029 | 999,076 | - | ||||||||||||
| Money market facility due in 2027 | - | 500,000 | ||||||||||||
| Working capital credit facility due in 2026 | - | 500,000 | ||||||||||||
| Alliance Healthcare debt | 48,643 | 698,300 | ||||||||||||
| Nonrecourse debt | 107,699 | - | ||||||||||||
| Total variable-rate debt | 2,283,092 | 8,669,556 | ||||||||||||
| Total debt | $ | 12,385,520 | $ | 8,669,556 | ||||||||||
We had a $4.5 billion multi-currency senior unsecured revolving credit facility (the "Multi-Currency Revolving Credit Facility") with a syndicate of lenders. In January 2026, we amended and restated the Multi-Currency Revolving Credit Facility to increase the aggregate amount of the commitments under this facility to $5.5 billion. The Multi-Currency Revolving Credit Facility is scheduled to expire in June 2030. Interest on borrowings under the Multi-Currency Revolving Credit Facility accrues at specified rates based upon our debt rating. We pay facility fees to maintain the availability under the Multi-Currency Revolving Credit Facility at specified rates based on our debt rating. We may choose to repay or reduce our commitments under the Multi-Currency Revolving Credit Facility at any time. The Multi-Currency Revolving Credit Facility contains covenants, including compliance with a financial leverage ratio test, as well as others that impose limitations on, among other things, indebtedness of subsidiaries and asset sales, with which we were compliant as of March 31, 2026. There were $28.7 million of borrowings outstanding under the Multi-Currency Revolving Credit Facility as of March 31, 2026 and none outstanding as of September 30, 2025.
We have a $4.5 billion commercial paper program. The commercial paper program does not increase our borrowing capacity, and it is fully backed by our Multi-Currency Revolving Credit Facility. We may, from time to time, issue short-term promissory notes in an aggregate amount of up to $4.5 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. There were no borrowings outstanding under the commercial paper program as of March 31, 2026 and September 30, 2025.
We have a $1.5 billion receivables securitization facility (the "Receivables Securitization Facility"), which is scheduled to expire in June 2028. The Receivables Securitization Facility has an accordion feature that allows us to increase the commitment on the Receivables Securitization Facility by up to $500 million, subject to lender approval. Interest rates are based on prevailing market rates for short-term commercial paper or 30-day Term SOFR, plus a program fee. We pay a customary unused fee at prevailing market rates, monthly, to maintain the availability under the Receivables Securitization Facility. The Receivables Securitization Facility contains similar covenants to the Multi-Currency Revolving Credit Facility, with which we were compliant as of March 31, 2026. There were no borrowings outstanding under the Receivables Securitization Facility as of March 31, 2026 and September 30, 2025.
In connection with the Receivables Securitization Facility, AmerisourceBergen Drug Corporation and a specialty distribution subsidiary sell on a revolving basis certain accounts receivable to Amerisource Receivables Financial Corporation, a wholly-owned special purpose entity, which in turn sells a percentage ownership interest in the receivables to financial institutions and commercial paper conduits sponsored by financial institutions. AmerisourceBergen Drug Corporation is the servicer of the accounts receivable under the Receivables Securitization Facility. As sold receivables are collected, additional receivables may be sold up to the maximum amount available under the facility. We use the facility as a financing vehicle because it generally offers an attractive interest rate relative to other financing sources. We securitize our trade accounts, which are generally non-interest bearing, in transactions that are accounted for as borrowings.
We have an uncommitted, unsecured line of credit available to us pursuant to a money market credit agreement (the "Money Market Facility") that allows us to request short-term unsecured revolving credit loans in a principal amount not to exceed $500 million on or after April 1 and before December 1 of any year and increases to $750 million on or after December 1 and before March 31 of any year. The Money Market Facility may be decreased or terminated by the bank or us at any time without prior notice. There were no borrowings outstanding under the Money Market Facility as of March 31, 2026 and September 30, 2025.
We have an uncommitted, unsecured line of credit to support our working capital needs (the "Working Capital Credit Facility"). The Working Capital Credit Facility provides us with the ability to request short-term, unsecured revolving credit loans from time to time in a principal amount not to exceed $500 million. The Working Capital Credit Facility expires in July 2026 and may be decreased or terminated by the bank or us at any time without prior notice. There were no borrowings outstanding under the Working Capital Credit Facility as of March 31, 2026 and September 30, 2025.
In January 2026, we entered into an agreement pursuant to which we obtained a $1.5 billion delayed draw multi-year senior unsecured term loan facility. In connection with this facility, in February 2026, we borrowed $500 million on a variable-rate term loan that matures in February 2028 (the "2028 Term Loan") and $1.0 billion on a variable-rate term loan that matures in February 2029 (the "2029 Term Loan") to finance a portion of the acquisition of OneOncology. We elected to make principal payments of $200.0 million in March 2026 and $300.0 million in April 2026 to repay the 2028 Term Loan.
The above term loans bear interest at a rate equal to either a Term SOFR rate or a Daily Simple SOFR rate, plus an applicable margin, or an alternate base rate, plus an applicable margin, in each case based on our public debt ratings. We have the right to prepay the term loans at any time, in whole or in part and without premium or penalty.
In February 2026, we borrowed $3.0 billion under a senior unsecured term loan facility (the "364-Day Term Loan Facility") with a syndicate of lenders. The 364-Day Term Loan Facility was used to finance a portion of the acquisition of OneOncology. In February 2026, we repaid the 364-Day Term Loan Facility with the issuance of senior notes (see below) and terminated the 364-Day Term Loan Facility.
In February 2026, we issued the following senior notes (in thousands except for interest rates):
| Description | Principal | Interest Rate | Maturity Date | Discount | Effective Yield | |||||||||||||||||||||||||||
| 2029 Notes | $ | 500,000 | 3.950% | February 2029 | 99.880% | 3.955% | ||||||||||||||||||||||||||
| 2030 Notes | $ | 500,000 | 4.250% | November 2030 | 99.810% | 4.258% | ||||||||||||||||||||||||||
| 2033 Notes | $ | 500,000 | 4.600% | February 2033 | 99.947% | 4.602% | ||||||||||||||||||||||||||
| 2036 Notes | $ | 1,000,000 | 4.900% | February 2036 | 99.664% | 4.917% | ||||||||||||||||||||||||||
| 2056 Notes | $ | 500,000 | 5.650% | February 2056 | 99.456% | 5.681% | ||||||||||||||||||||||||||
Interest on the 2029 Notes, the 2033 Notes, the 2036 Notes, and the 2056 Notes is payable semi-annually in arrears on August 13 and February 13 beginning on August 13, 2026. Interest on the 2030 Notes is payable semi-annually in arrears on May 15 and November 15 beginning on May 15, 2026. We used the proceeds from these notes to repay the 364-Day Term Loan Facility.
Alliance Healthcare debt is comprised of uncommitted revolving credit facilities in various currencies with various rates. All of the outstanding borrowings as of March 31, 2026 were held in Türkiye. These facilities are used to fund its working capital needs.
OneOncology has promissory notes outstanding with physician practices at various rates and maturities.
Nonrecourse debt is comprised of short-term and long-term debt belonging to the Brazil subsidiaries and is repaid solely from the Brazil subsidiaries' cash flows and such debt agreements provide that the repayment of the loans (and interest thereon) is secured solely by the capital stock, physical assets, contracts, and cash flows of the Brazil subsidiaries.
Share Purchase Programs and Dividends
In March 2024, our Board of Directors (the "Board") authorized a share repurchase program allowing us to purchase up to $2.0 billion of our outstanding shares of common stock, subject to market conditions. In the six months ended March 31, 2026, we did not purchase any shares of our common stock. As of March 31, 2026, we had $882.2 million of availability under this program.
In November 2025, our Board increased the quarterly dividend paid on common stock by 9% from $0.55 per share to $0.60 per share. We anticipate that we will continue to pay quarterly cash dividends in the future. However, the payment and amount of future dividends remains within the discretion of our Board of Directors and will depend upon future earnings, financial condition, capital requirements, and other factors.
Commitments and Obligations
As discussed and defined in Note 10 of the Notes to Consolidated Financial Statements, on July 21, 2021, it was announced that we and the two other national pharmaceutical distributors had negotiated a Distributor Settlement Agreement. The Distributor Settlement Agreement became effective on April 2, 2022, and as of March 31, 2026, it included 48 of 49 eligible states (the "Settling States") as well as 99% by population of the eligible political subdivisions in the Settling States. Our accrued litigation liability related to the Distributor Settlement Agreement and an estimate for non-participating government subdivisions (with whom we have not reached a settlement agreement), as well as other opioid-related litigation for which we have reached settlement agreements on our Consolidated Balance Sheet as of March 31, 2026 is $4.3 billion and is expected to be paid over the next 13 years. We currently estimate that $415.7 million will be paid prior to March 31, 2027. The payment of the aforementioned litigation liability has not and is not expected to have an impact on our ability to pay dividends.
The following is a summary of our contractual obligations for future principal and interest payments on our debt, minimum rental payments on our noncancellable operating leases, and minimum payments on our other commitments as of March 31, 2026:
| Payments Due by Period (in thousands) | Debt, Including Interest Payments |
Operating Leases |
Other Commitments | Total | ||||||||||||||||||||||
| Within 1 year | $ | 754,654 | $ | 420,628 | $ | 228,940 | $ | 1,404,222 | ||||||||||||||||||
| 1-3 years | 5,577,294 | 758,438 | 494,743 | 6,830,475 | ||||||||||||||||||||||
| 4-5 years | 3,410,827 | 579,164 | 362,643 | 4,352,634 | ||||||||||||||||||||||
| After 5 years | 6,757,345 | 948,361 | 347,362 | 8,053,068 | ||||||||||||||||||||||
| Total | $ | 16,500,120 | $ | 2,706,591 | $ | 1,433,688 | $ | 20,640,399 | ||||||||||||||||||
Included in "Other Commitments" in the above table is $669 million to support our U.S. Healthcare Solutions reportable segment's primary ERP system upgrade and $576 million for other digital transformation projects.
Our liability for uncertain tax positions was $680.5 million (including interest and penalties) as of March 31, 2026. This liability represents an estimate of tax positions that we have taken in our tax returns which may ultimately not be sustained upon examination by taxing authorities. Since the amount and timing of any future cash settlements cannot be predicted with reasonable certainty, the estimated liability has been excluded from the above contractual obligations table. Our liability for uncertain tax positions as of March 31, 2026 primarily includes an uncertain tax benefit related to the legal accrual for litigation related to the distribution of prescription opioid pain medications, as disclosed in Note 10 of the Notes to Consolidated Financial Statements.
Market and Risks
We have exposure to foreign currency and exchange rate risk from our non-U.S. operations. Our largest exposure to foreign exchange rates exists primarily with the U.K. Pound Sterling, the Euro, the Turkish Lira, the Brazilian Real, and the Canadian Dollar. We use forward contracts to hedge against the foreign currency exchange rate impact on certain intercompany receivable and payable balances. We use foreign currency denominated debt held at the parent level to offset a portion of our foreign currency exchange rate exposure on our net investments in Euro-denominated subsidiaries. We may use derivative instruments to hedge our foreign currency exposure, but not for speculative or trading purposes. Revenue from our foreign operations during the six months ended March 31, 2026 was approximately 10% of our consolidated revenue.
We have market risk exposure to interest rate fluctuations relating to our debt. We manage interest rate risk by using a combination of fixed-rate and variable-rate debt. The amount of variable-rate debt fluctuates during the year based on our working capital requirements. We had $2.3 billion of variable-rate debt outstanding as of March 31, 2026. We periodically evaluate financial instruments to manage our exposure to fixed and variable interest rates. However, there are no assurances that such instruments will be available in the combinations we want and/or on terms acceptable to us. There were no such financial instruments in effect as of March 31, 2026.
We also have market risk exposure to interest rate fluctuations relating to our cash and cash equivalents. We had $2.2 billion in cash and cash equivalents as of March 31, 2026. The unfavorable impact of a hypothetical decrease in interest rates on cash and cash equivalents would be partially offset by the favorable impact of such a decrease on variable-rate debt. For every $100 million of cash invested that is in excess of variable-rate debt, a 10-basis point decrease in interest rates would increase our annual net interest expense by $0.1 million.
Deterioration of general economic conditions, among other factors, could adversely affect the number of prescriptions that are filled and the amount of pharmaceutical products purchased by consumers and, therefore, could reduce purchases by our customers. In addition, volatility in financial markets and higher borrowing costs may also negatively impact our customers' ability to obtain credit to finance their businesses on acceptable terms. Reduced purchases by our customers or changes in the ability of our customers to remit payments to us could adversely affect our revenue growth, our profitability, and our cash flow from operations.
Inflation in the global and U.S. economies has impacted certain operating expenses, including fuel costs. If inflation persists or increases, our operations and financial results could be adversely affected, particularly in certain global markets.
We have risks from other geopolitical trends and events, such as rising nationalism, the conflict in Ukraine, and evolving conditions in the Middle East. Although the long-term implications of these conflicts are difficult to predict at this time, the financial impact of these conflicts has not been material to our financial results.
Cencora Inc. published this content on May 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 06, 2026 at 18:42 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]