UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2017

OR

oTRANSITION 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

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 April 30, 2017 was 218,356,117.

AMERISOURCEBERGEN CORPORATION

TABLE OF CONTENTS

	Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets, March 31, 2017 and September 30, 2016	2
Consolidated Statements of Operations for the three and six months ended March 31, 2017 and 2016	3
Consolidated Statements of Comprehensive Income for the three and six months ended March 31, 2017 and 2016	4
Consolidated Statements of Cash Flows for the six months ended March 31, 2017 and 2016	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	32
Part II. OTHER INFORMATION
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Mine Safety Disclosures	33
Item 5. Other Information	33
Item 6. Exhibits	34
SIGNATURES	35

1

PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)	March 31, 2017			September 30, 2016
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,404,433		$	2,741,832
Accounts receivable, less allowances for returns and doubtful accounts: $901,755 at March 31, 2017 and $905,345 at September 30, 2016	9,583,520			9,175,876
Merchandise inventories	11,335,816			10,723,920
Prepaid expenses and other	170,152			210,219
Total current assets	23,493,921			22,851,847
Property and equipment, at cost:
Land	40,279			40,290
Buildings and improvements	975,405			859,148
Machinery, equipment, and other	1,880,048			1,717,298
Total property and equipment	2,895,732			2,616,736
Less accumulated depreciation	(1,193,672		)	(1,086,054		)
Property and equipment, net	1,702,060			1,530,682
Goodwill	5,987,729			5,991,497
Other intangible assets	2,888,920			2,967,849
Other assets	324,383			295,626
TOTAL ASSETS	$	34,397,013		$	33,637,501
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	24,276,019		$	23,926,320
Accrued expenses and other	639,560			743,839
Short-term debt	615,847			610,210
Total current liabilities	25,531,426			25,280,369
Long-term debt	3,478,214			3,576,493
Long-term financing obligation	361,384			275,991
Deferred income taxes	2,332,051			2,214,774
Other liabilities	164,646			160,470
Stockholders’ equity:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 279,646,620 shares, and 218,314,621 shares at March 31, 2017, respectively, and 600,000,000 shares, 277,753,762 shares, and 220,050,502 shares at September 30, 2016, respectively	2,796			2,778
Additional paid-in capital	4,455,260			4,333,001
Retained earnings	2,849,630			2,303,941
Accumulated other comprehensive loss	(123,490		)	(114,308		)
Treasury stock, at cost: 61,331,999 shares at March 31, 2017 and 57,703,260 shares at September 30, 2016	(4,654,904		)	(4,396,008		)
Total stockholders’ equity	2,529,292			2,129,404
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	34,397,013		$	33,637,501

 See notes to consolidated financial statements.

2

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended March 31,						Six months ended March 31,
(in thousands, except per share data)	2017			2016			2017			2016
				(As Revised)						(As Revised)
Revenue	$	37,147,402		$	35,698,357		$	75,316,667		$	72,407,403
Cost of goods sold	35,890,975			34,623,026			73,022,560			70,367,195
Gross profit	1,256,427			1,075,331			2,294,107			2,040,208
Operating expenses:
Distribution, selling, and administrative	521,843			519,466			1,042,390			1,044,543
Depreciation	57,751			52,995			113,605			103,861
Amortization	39,918			39,841			80,144			71,937
Warrants	—			(503,946		)	—			(36,571		)
Employee severance, litigation, and other	11,934			17,617			33,000			36,485
Pension settlement	—			(1,124		)	—			47,607
Operating income	624,981			950,482			1,024,968			772,346
Other income	(5,233		)	(756		)	(5,356		)	(1,066		)
Interest expense, net	37,299			35,966			74,271			69,707
Income before income taxes	592,915			915,272			956,053			703,705
Income tax expense (benefit)	181,442			311,822			297,334			(229,384		)
Net income	$	411,473		$	603,450		$	658,719		$	933,089
Earnings per share:
Basic	$	1.89		$	2.90		$	3.02		$	4.51
Diluted	$	1.86		$	2.68		$	2.97		$	4.13
Weighted average common shares outstanding:
Basic	217,650			207,858			218,166			207,017
Diluted	221,221			225,450			221,611			226,082
Cash dividends declared per share of common stock	$	0.365		$	0.340		$	0.730		$	0.680

 See notes to consolidated financial statements.

3

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended March 31,						Six months ended March 31,
(in thousands)	2017			2016			2017			2016
				(As Revised)						(As Revised)
Net income	$	411,473		$	603,450		$	658,719		$	933,089
Other comprehensive income (loss)
Net change in foreign currency translation adjustments	18,545			13,911			(9,012		)	3,477
Pension plan adjustment, net of tax of $19,054	—			—			—			31,538
Other	(184		)	(281		)	(170		)	(866		)
Total other comprehensive income (loss)	18,361			13,630			(9,182		)	34,149
Total comprehensive income	$	429,834		$	617,080		$	649,537		$	967,238

See notes to consolidated financial statements.

4

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended March 31,
(in thousands)	2017			2016
OPERATING ACTIVITIES				(As Revised)
Net income	$	658,719		$	933,089
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, including amounts charged to cost of goods sold	127,184			112,844
Amortization, including amounts charged to interest expense	85,194			75,385
Provision for doubtful accounts	5,384			8,065
Provision (benefit) for deferred income taxes	159,397			(292,981		)
Warrants income	—			(36,571		)
Share-based compensation	41,250			39,787
LIFO (credit) expense	(58,196		)	193,941
Pension settlement	—			47,607
Other	(6,809		)	(193		)
Changes in operating assets and liabilities, excluding the effects of acquisitions and divestitures:
Accounts receivable	(417,705		)	(472,074		)
Merchandise inventories	(556,057		)	(1,047,018		)
Prepaid expenses and other assets	26,591			17,642
Accounts payable	350,960			2,070,716
Accrued expenses, income taxes, and other liabilities	(47,528		)	(18,219		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	368,384			1,632,020
INVESTING ACTIVITIES
Capital expenditures	(262,700		)	(180,012		)
Cost of acquired companies, net of cash acquired	(2,403		)	(2,731,356		)
Proceeds from sales of investment securities available-for-sale	36,128			88,829
Purchases of investment securities available-for-sale	(48,635		)	(41,136		)
Other	8,136			(10,878		)
NET CASH USED IN INVESTING ACTIVITIES	(269,474		)	(2,874,553		)
FINANCING ACTIVITIES
Term loan borrowings	—			1,000,000
Term loan repayments	(100,000		)	(25,000		)
Borrowings under revolving and securitization credit facilities	6,711,081			8,237,792
Repayments under revolving and securitization credit facilities	(6,705,964		)	(8,217,849		)
Purchases of common stock	(229,928		)	(436,804		)
Exercises of warrants	—			1,168,891
Exercises of stock options	61,383			37,285
Cash dividends on common stock	(160,093		)	(141,829		)
Tax withholdings related to restricted share vesting	(8,968		)	(18,233		)
Other	(3,820		)	(3,875		)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(436,309		)	1,600,378
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(337,399		)	357,845
Cash and cash equivalents at beginning of period	2,741,832			2,167,442
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,404,433		$	2,525,287

 See notes to consolidated financial statements.

5

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 March 31, 2017 and the results of operations and cash flows for the interim periods ended March 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, 2016.

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 Adopted Accounting Pronouncements

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" ("ASU 2015-03"). ASU 2015-03 specifies that debt issuance costs related to a debt liability shall be reported on the balance sheet as a direct reduction from the face amount of the debt liability. In August 2015, the FASB issued ASU No. 2015-15, "Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements" ("ASU 2015-15"). ASU 2015-15 specifies that debt issuance costs related to line-of-credit arrangements may be presented as an asset on the balance sheet and subsequently amortized ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. As of October 1, 2016, the Company adopted ASU 2015-03 and ASU 2015-15, which resulted in the reclassification of $18.7 million of debt issuance costs from Other Assets to Short-Term Debt of $0.9 million and to Long-Term Debt of $17.8 million on the Company's September 30, 2016 Consolidated Balance Sheet. The adoption had no impact on the Company’s results of operations or cash flows.

In March 2016, the FASB issued ASU No. 2016-09, "Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee's shares than it may currently for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016 and interim periods within those fiscal years. Entities are permitted to adopt the standard early in any interim or annual period. During the quarter ended December 31, 2016, the Company early adopted ASU 2016-09, which resulted in a cumulative adjustment to retained earnings and established a deferred tax asset as of October 1, 2016 of $47.1 million for previously unrecognized tax benefits. The Company elected to adopt the Statement of Cash Flows presentation of the excess tax benefits prospectively. During the three and six months ended March 31, 2017, the Company recognized tax benefits of $19.8 million and $24.0 million, respectively, in Income Tax Expense on the Company's Consolidated Statement of Operations. The tax benefits recognized in the three and six months ended March 31, 2017 are not necessarily indicative of amounts that may arise in future periods.

Recently Issued Accounting Pronouncements Not Yet Adopted

In May 2014, the 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

6

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 Financial Accounting Standards Board 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 has not yet selected an adoption date or a transition method for ASU 2014-09, 2016-08, and 2016-10 and is currently evaluating the impact of adopting this new accounting guidance and, therefore, cannot reasonably estimate the impact that the adoption of the above standards will have on its financial statements.

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 is currently evaluating the impact of adopting this new accounting guidance and, therefore, cannot reasonably estimate the impact that the adoption of this standard will have on its financial statements.

In August 2016, the FASB issued ASU No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"). ASU 2016-15 aims to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those fiscal years. Entities are permitted to adopt the standard early in any interim or annual period, and a retrospective application is required. The Company is currently evaluating the impact of adopting this new accounting guidance and, therefore, cannot reasonably estimate the impact that the adoption of this standard will have on its financial statements.

In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04"). ASU 2017-04 removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value. ASU 2017-04 is effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Entities are permitted to adopt the standard early for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not expect that the adoption of this standard will impact the Company's results of operations, cash flows, or financial position.

As of March 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. Revision of Previously Issued Financial Statements

In fiscal 2016, the Company engaged in a review of the accounting treatment of leases. As part of this review, the Company assessed its historical application of Accounting Standards Codification 840, "Leases," ("ASC 840") regarding lessee involvement in the construction of leased assets and identified corrections to be made in its accounting for these leases. In a number of its leases, the Company made payments for certain structural components included in the lessor's construction of the leased assets, which resulted in the Company being deemed the owner of the leased assets for accounting purposes. As a result, regardless of the significance of the payments, ASC 840 defines those payments as automatic indicators of ownership and requires the Company to capitalize the lessor's total project cost on the balance sheet with a corresponding financing obligation. In these situations, the Company had not historically accounted for the total project costs of the lessor as owned assets. Additionally, upon completion of the lessor's project, the Company must perform a sale-leaseback analysis pursuant to ASC 840 to determine if it can derecognize these assets and the related financing obligations from its consolidated balance sheet. In a substantial number of its leases, due to many of the same factors that require it to account for the total project costs as owned assets during the construction period (for example, the Company funding a portion of the construction costs), it was deemed to have "continuing involvement," which precluded the Company from derecognizing these leased assets when construction was complete. In such cases, the leased assets

7

and the related financing obligations remain on the consolidated balance sheet and are amortized over the life of the assets and the lease term, respectively.

The Company revised the prior year's financial statements. The corrections had no impact on diluted earnings per share in the three and six months ended March 31, 2016. The Company no longer reports rent expense for the leased facilities that are owned for accounting purposes. Instead, rental payments under the leases are recognized as a reduction of the financing obligation and as interest expense. Additionally, depreciation expense is recorded as construction assets are depreciated over their useful lives. These corrections had no impact on the net increase in cash and cash equivalents in the six months ended March 31, 2016.

The following illustrates the impact the aforementioned adjustments had on the Company's previously issued financial statements:

CONSOLIDATED STATEMENT OF OPERATIONS

	Three months ended March 31, 2016
(in thousands, except per share data)	As Previously Reported			Adjustments			As Revised
Revenue	$	35,698,357		$	—		$	35,698,357
Cost of goods sold	34,623,026			—			34,623,026
Gross profit	1,075,331			—			1,075,331
Operating expenses:
Distribution, selling, and administrative	522,760			(3,294		)	519,466
Depreciation	51,471			1,524			52,995
Amortization	39,841			—			39,841
Warrants	(503,946		)	—			(503,946		)
Employee severance, litigation, and other	17,617			—			17,617
Pension settlement	(1,124		)	—			(1,124		)
Operating income	948,712			1,770			950,482
Other income	(756		)	—			(756		)
Interest expense, net	33,113			2,853			35,966
Income before income taxes	916,355			(1,083		)	915,272
Income tax expense	312,220			(398		)	311,822
Net income	$	604,135		$	(685	)	$	603,450
Earnings per share:
Basic	$	2.91		$	(0.01	)	$	2.90
Diluted	$	2.68		$	—		$	2.68
Weighted average common shares outstanding:
Basic	207,858			—			207,858
Diluted	225,450			—			225,450

8

CONSOLIDATED STATEMENT OF OPERATIONS

	Six months ended March 31, 2016
(in thousands, except per share data)	As Previously Reported			Adjustments			As Revised
Revenue	$	72,407,403		$	—		$	72,407,403
Cost of goods sold	70,367,195			—			70,367,195
Gross profit	2,040,208			—			2,040,208
Operating expenses:
Distribution, selling, and administrative	1,051,056			(6,513		)	1,044,543
Depreciation	100,813			3,048			103,861
Amortization	71,937			—			71,937
Warrants	(36,571		)	—			(36,571		)
Employee severance, litigation, and other	36,485			—			36,485
Pension settlement	47,607			—			47,607
Operating income	768,881			3,465			772,346
Other income	(1,066		)	—			(1,066		)
Interest expense, net	63,992			5,715			69,707
Income before income taxes	705,955			(2,250		)	703,705
Income tax benefit	(228,557		)	(827		)	(229,384		)
Net income	$	934,512		$	(1,423	)	$	933,089
Earnings per share:
Basic	$	4.51		$	—		$	4.51
Diluted	$	4.13		$	—		$	4.13
Weighted average common shares outstanding:
Basic	207,017			—			207,017
Diluted	226,082			—			226,082

9

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three months ended March 31, 2016
(in thousands)	As Previously Reported			Adjustments			As Revised
Net income	$	604,135		$	(685	)	$	603,450
Other comprehensive income:
Net change in foreign currency translation adjustments	13,911			—			13,911
Other	(281		)	—			(281		)
Total other comprehensive income	13,630			—			13,630
Total comprehensive income	$	617,765		$	(685	)	$	617,080

	Six months ended March 31, 2016
(in thousands)	As Previously Reported			Adjustments			As Revised
Net income	$	934,512		$	(1,423	)	$	933,089
Other comprehensive income:
Net change in foreign currency translation adjustments	3,477			—			3,477
Pension plan adjustment, net of tax of $19,054	31,538			—			31,538
Other	(866		)	—			(866		)
Total other comprehensive income	34,149			—			34,149
Total comprehensive income	$	968,661		$	(1,423	)	$	967,238

10

CONSOLIDATED STATEMENT OF CASH FLOWS

	Six months ended March 31, 2016
(in thousands)	As Previously Reported			Adjustments			As Revised
OPERATING ACTIVITIES
Net income	$	934,512		$	(1,423	)	$	933,089
Adjustments to reconcile net income to net cash provided by operating    activities:
Depreciation, including amounts charged to cost of goods sold	109,796			3,048			112,844
Amortization, including amounts charged to interest expense	75,144			241			75,385
Provision for doubtful accounts	8,065			—			8,065
Benefit for deferred income taxes	(292,154		)	(827		)	(292,981		)
Warrants income	(36,571		)	—			(36,571		)
Share-based compensation	39,787			—			39,787
LIFO expense 1	193,941			—			193,941
Pension settlement	47,607			—			47,607
Other	(193		)	—			(193		)
Changes in operating assets and liabilities, excluding the effects of    acquisitions:
Accounts receivable	(472,074		)	—			(472,074		)
Merchandise inventories 1	(1,047,018		)	—			(1,047,018		)
Prepaid expenses and other assets	17,642			—			17,642
Accounts payable	2,070,716			—			2,070,716
Accrued expenses, income taxes, and other liabilities	(18,614		)	395			(18,219		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	1,630,586			1,434			1,632,020
INVESTING ACTIVITIES
Capital expenditures	(180,012		)	—			(180,012		)
Cost of acquired companies, net of cash acquired	(2,731,356		)	—			(2,731,356		)
Proceeds from sales of investment securities available-for-sale	88,829			—			88,829
Purchases of investment securities available-for-sale	(41,136		)	—			(41,136		)
Other	(10,878		)	—			(10,878		)
NET CASH USED IN INVESTING ACTIVITIES	(2,874,553		)	—			(2,874,553		)
FINANCING ACTIVITIES
Term loan borrowings	1,000,000			—			1,000,000
Term loan repayments	(25,000		)	—			(25,000		)
Borrowings under revolving and securitization credit facilities	8,237,792			—			8,237,792
Repayments under revolving and securitization credit facilities	(8,217,849		)	—			(8,217,849		)
Purchases of common stock	(436,804		)	—			(436,804		)
Exercises of warrants	1,168,891			—			1,168,891
Exercises of stock options	37,285			—			37,285
Cash dividends on common stock	(141,829		)	—			(141,829		)
Tax withholdings related to restricted share vesting	(18,233		)	—			(18,233		)
Other	(2,441		)	(1,434		)	(3,875		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,601,812			(1,434		)	1,600,378
INCREASE IN CASH AND CASH EQUIVALENTS	357,845			—			357,845
Cash and cash equivalents at beginning of period	2,167,442			—			2,167,442
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,525,287		$	—		$	2,525,287

¹ Amounts as previously reported have been revised to report LIFO Expense separately from the change in Merchandise Inventories.

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Note 3.  Income Taxes

The Company files income tax returns in U.S. federal and state jurisdictions as well as various foreign jurisdictions. As of March 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 $99.2 million ($71.1 million, net of federal benefit). If recognized, these tax benefits would reduce income tax expense and the effective tax rate.  Included in this amount is $14.0 million of interest and penalties, which the Company records in income tax expense. During the six months ended March 31, 2017, unrecognized tax benefits increased by $11.0 million. 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 $4.7 million.

The Company's effective tax rates were 30.6% and 31.1% in the three and six months ended March 31, 2017, respectively. The Company's effective tax rates were 34.1% and (32.6)% in the three and six months ended March 31, 2016, respectively. The effective tax rates in the three and six months ended March 31, 2017 were favorably impacted due to growth of the Company's international businesses and also benefited from stock option exercises and restricted stock vesting. Prior to fiscal 2017, tax benefits resulting from share-based compensation were recorded as adjustments to Additional Paid-In Capital within Stockholders' Equity. The effective tax rate in the six months ended March 31, 2016 benefited from the receipt of an Internal Revenue Service private letter ruling that entitled the Company to an income tax deduction equal to the fair value of the Warrants on the dates of exercise.

Note 4.  Goodwill and Other Intangible Assets

Following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the six months ended March 31, 2017:

(in thousands)	Pharmaceutical Distribution Services		Other			Total
Goodwill at September 30, 2016	$	4,264,485	$	1,727,012		$	5,991,497
Goodwill recognized in connection with acquisition	—		1,044			1,044
Goodwill disposed in connection with divestiture	—		(3,564		)	(3,564		)
Foreign currency translation	—		(1,248		)	(1,248		)
Goodwill at March 31, 2017	$	4,264,485	$	1,723,244		$	5,987,729

Following is a summary of other intangible assets:

	March 31, 2017							September 30, 2016
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Indefinite-lived trade names	$	684,965	$	—		$	684,965	$	684,991	$	—		$	684,991
Finite-lived:
Customer relationships	2,320,994		(340,662		)	1,980,332		2,322,404		(273,638		)	2,048,766
Trade names and other	308,473		(84,850		)	223,623		307,234		(73,142		)	234,092
Total other intangible assets	$	3,314,432	$	(425,512	)	$	2,888,920	$	3,314,629	$	(346,780	)	$	2,967,849

Amortization expense for finite-lived intangible assets was $40.2 million and $39.8 million in the three months ended March 31, 2017 and 2016, respectively. Amortization expense for finite-lived intangible assets was $80.4 million and $71.9 million in the six months ended March 31, 2017 and 2016, respectively. Amortization expense for finite-lived intangible assets is estimated to be $160.2 million in fiscal 2017, $158.1 million in fiscal 2018, $153.4 million in fiscal 2019, $149.2 million in fiscal 2020, $148.3 million in fiscal 2021, and $1,515.2 million thereafter.

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Note 5.  Debt

Debt consisted of the following:

(in thousands)	March 31, 2017		September 30, 2016
Revolving credit note	$	—	$	—
Receivables securitization facility due 2019	500,000		500,000
Term loans due in 2020	597,458		697,055
Multi-currency revolving credit facility due 2021	—		—
Overdraft facility due 2021	16,053		11,275
$600,000, 1.15% senior notes due 2017	599,794		598,935
$400,000, 4.875% senior notes due 2019	398,034		397,669
$500,000, 3.50% senior notes due 2021	497,619		497,361
$500,000, 3.40% senior notes due 2024	496,521		496,276
$500,000, 3.25% senior notes due 2025	494,608		494,266
$500,000, 4.25% senior notes due 2045	493,974		493,866
Total debt	4,094,061		4,186,703
Less current portion	615,847		610,210
Total, net of current portion	$	3,478,214	$	3,576,493

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/EURIBOR/Bankers Acceptance Stamping Fee at March 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 at March 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 March 31, 2017.

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 March 31, 2017.

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 March 31, 2017.

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 Animal Health ("MWI") business.

In February 2015, the Company entered into a $1.0 billion variable-rate term loan ("February 2015 Term Loan"), which matures in 2020. Through March 31, 2017, the Company elected to make principal payments, prior to the scheduled repayment dates, of $725 million on the February 2015 Term Loan, and as a result, the Company’s next required principal payment is due

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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 at March 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 March 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 March 31, 2017, the Company elected to make principal payments, prior to the scheduled repayment date, of $650 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 at March 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 March 31, 2017.

Note 6.  Stockholders’ Equity and Earnings per Share

In November 2016, the Company’s board of directors increased the quarterly cash dividend by 7% from $0.340 per share to $0.365 per share.

In May 2016, the Company's board of directors authorized a share repurchase program that, together with availability remaining under the previously approved August 2013 share repurchase program, permitted the Company to purchase up to $750 million of its outstanding shares of common stock, subject to market conditions. During the three months ended December 31, 2016, the Company purchased 2.1 million shares of its common stock (includes 0.5 million shares of common stock received as part of the settlement of the September 2016 accelerated share repurchase transaction) for a total of $118.8 million to complete its authorization under this program.

In November 2016, the Company's board of directors authorized a new share repurchase program allowing the Company to purchase up to $1.0 billion of its outstanding shares of common stock, subject to market conditions. During the six months ended March 31, 2017, the Company purchased 1.4 million shares of its common stock for a total of $111.1 million. As of March 31, 2017, the Company had $888.9 million of availability remaining under the November 2016 share repurchase program.

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented. Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the periods presented, plus the dilutive effect of stock options, restricted stock, restricted stock units, and Warrants.

	Three months ended March 31,		Six months ended March 31,
(in thousands)	2017	2016	2017	2016
Weighted average common shares outstanding - basic	217,650	207,858	218,166	207,017
Dilutive effect of stock options, restricted stock, and restricted stock units	3,571	3,421	3,445	3,639
Dilutive effect of Warrants	—	14,171	—	15,426
Weighted average common shares outstanding - diluted	221,221	225,450	221,611	226,082

The potentially dilutive stock options, restricted stock, and restricted stock units that were antidilutive for the three and six months ended March 31, 2017 were 3.8 million and 4.6 million, respectively. The potentially dilutive stock options, restricted stock, restricted stock units, and Warrants that were antidilutive for the three and six months ended March 31, 2016 were 2.3 million and 1.9 million, respectively.

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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 branded and generic pharmaceutical products to WBA, and an agreement that provides the Company the ability to access generics and related pharmaceutical products through a global sourcing arrangement with Walgreens Boots Alliance Development GmbH. Both of these agreements expire in 2026.

Revenue from the various agreements and arrangements with WBA was $11.0 billion and $22.2 billion in the three and six months ended March 31, 2017, respectively. Revenue from the various agreements and arrangements with WBA was $10.7 billion and $21.7 billion in the three and six months ended March 31, 2016, respectively. The Company’s receivable from WBA (after incentives owed to it) was $4.6 billion and $4.0 billion at March 31, 2017 and September 30, 2016, respectively.

Note 8. Legal Matters and Contingencies

In the ordinary course of its business, the Company becomes involved in lawsuits, administrative proceedings, government subpoenas, and government investigations, 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, 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 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 Federal Food, Drug, and Cosmetic Act ("FDCA") contains provisions relating to the sale and distribution of pharmaceutical products that are alleged to be adulterated or misbranded. The FDCA includes strict-liability criminal offenses that can be pursued by the government for violations of the FDCA and which can result in the imposition of substantial fines and penalties against corporations and individuals.

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.

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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 health care 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 United States Attorney's Office for the Eastern District of New York ("USAO-EDNY") requesting production of documents and information relating to ABSG's oncology distribution center and former pharmacy in Dothan, Alabama (including the practices and procedures of the former pharmacy's pre-filled syringe program), its group purchasing organization for oncologists, and intercompany transfers of certain oncology products, which the Company believes could be related in whole or in part to one or more of the qui tam actions that remain under seal. The Company has produced documents and has engaged in ongoing dialogue with the USAO-EDNY. The USAO-EDNY has expressed an intention to pursue potential civil and criminal charges based upon the FDCA and the False Claims Act. The Company is engaged in discussions with both the criminal and civil divisions of the USAO-EDNY to attempt to reach negotiated settlements of the potential charges. Any settlement or other resolution of these matters could have an adverse effect on our business, results of operations, or cash flows. No conclusion can be drawn at this time as to any likely outcome in these matters.

In fiscal 2012, the Company's subsidiary AmerisourceBergen Drug Corporation ("ABDC") received a subpoena from the United States 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. The Company continues to engage in dialogue with the USAO-NJ, including discussions to attempt to reach a negotiated settlement. No conclusion can be drawn at this time as to any likely outcome in this matter.

Since fiscal 2013, the Company or ABDC has received subpoenas from the United States Attorney's Office for the District of Kansas and the United States Attorney's Office for the Northern District of Ohio 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.

Since fiscal 2016, the Company’s subsidiary U.S. Bioservices ("US Bio") has received requests for information from the United States Attorney’s Office for the Southern District of New York ("USAO-SDNY"), on behalf of itself and a number of states, relating to US Bio’s dispensing of one product and US Bio’s relationship with the manufacturer of the product. The Company is engaged in discussions with the USAO-SDNY and representatives on behalf of a number of states. No conclusion can be drawn at this time as to any likely outcome in this matter.

In January 2017, US Bio received a subpoena for information from the USAO-EDNY relating to US 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 will be producing documents in response to the subpoena.

The Company cannot predict the outcome of these 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.

State Proceedings

In June 2012, the Attorney General of the State of West Virginia ("West Virginia AG") filed complaints, which were amended, in the Circuit Court of Boone County, West Virginia, against a number of pharmaceutical wholesale distributors, including the Company's subsidiary ABDC, alleging, among other claims, that the distributors failed to provide effective controls and

16

procedures to guard against diversion of controlled substances for illegitimate purposes in West Virginia, acted negligently by distributing controlled substances to pharmacies that serve individuals who abuse controlled substances, and failed to report suspicious orders of uncontrolled substances in accordance with state regulations. The West Virginia AG was seeking monetary damages and injunctive and other equitable relief. This matter was dismissed with prejudice on January 9, 2017 pursuant to a settlement agreement that provided for the payment of $16.0 million and express denial of the allegations in the complaints and any wrongdoing. During the six months ended March 31, 2017, the Company recognized the $16.0 million settlement in Employee Severance, Litigation, and Other on the Company's Consolidated Statement of Operations.

ABDC was sued in state court by McDowell County, West Virginia on December 23, 2016, with an Amended Complaint filed on February 24, 2017, asserting substantially similar claims to the West Virginia AG action, including for negligence, violation of the West Virginia Controlled Substances Act, unjust enrichment, public nuisance, and "Intentional Acts and Omissions." ABDC filed a notice of removal of this matter on January 26, 2017 and a motion to dismiss the Amended Complaint with prejudice on March 17, 2017. ABDC was sued in state court by the City of Huntington, West Virginia on January 20, 2017, with an Amended Complaint filed on January 26, 2017 but not served, asserting similar claims to the West Virginia AG and McDowell County actions, including for negligence, violation of the West Virginia Controlled Substances Act, and unjust enrichment. ABDC filed a notice of removal of this matter on February 23, 2017 and a motion to dismiss on March 2, 2017. Two additional cities, Kermit and Welch, have filed suit against ABDC asserting similar claims, but have not yet served their complaint on ABDC or any other defendant. Additionally, seven County Commissions (Boone, Cabell, Fayette, Kanawha, Logan, Wayne and Wyoming) have filed suit in Federal Court, each asserting a single claim for public nuisance. ABDC has filed a motion to dismiss each complaint for which a responsive pleading has been due and intends to file a motion to dismiss in each remaining case. Other jurisdictions, including West Virginia County Commissions, have indicated their intent to sue. ABDC intends to vigorously defend itself against the pending and 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.

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. PMC’s current complaint alleges unpaid-rebate claims in excess of $33 million and additional breaches and damages for unspecified amounts, which amounts may exceed $100 million.

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. The Court determined that its ruling will not be final and appealable until after the other issues in the case are resolved, so the $48.6 million judgment is not collectible at this time. Fact and expert discovery have ended and the parties are currently preparing dispositive motions, which are scheduled to be briefed and argued by the end of August 2017. Trial is currently scheduled for January 30, 2018. The Company is not in a position to assess the likely outcome or its exposure, if any, with respect to this matter.

Note 9.  Litigation Settlements

Antitrust Settlements

Numerous class action lawsuits have been filed against certain brand pharmaceutical manufacturers alleging that the manufacturer, by itself or in concert with others, took improper actions to delay or prevent generic drugs from entering the market. The Company has not been named a plaintiff in any of these class actions, but has been a member of the direct purchasers’ class (i.e., those purchasers who purchase directly from these pharmaceutical manufacturers). None of the class actions have gone to trial, but some have settled in the past with the Company receiving proceeds from the settlement funds. During the six months ended March 31, 2017 and 2016, the Company recognized gains of $1.4 million and $12.8 million, respectively, related to these class action lawsuits. These gains, which are net of attorney fees and estimated payments due to other parties, were recorded as reductions to cost of goods sold in the Company’s consolidated statements of operations.

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Note 10.  Fair Value of Financial Instruments

The recorded amounts of the Company’s cash and cash equivalents, accounts receivable, and accounts payable at March 31, 2017 and September 30, 2016 approximate fair value based upon the relatively short-term nature of these financial instruments. Within cash and cash equivalents, the Company had $1,000.0 million and $650.0 million of investments in money market accounts as of March 31, 2017 and September 30, 2016, respectively. The fair value of the money market accounts was determined based on unadjusted quoted prices in active markets for identical assets, otherwise known as Level 1 inputs.

The Company had $119.0 million of investment securities available-for-sale, $80.4 million of which were within cash and cash equivalents, at March 31, 2017. The amortized cost of the investments was $119.0 million at March 31, 2017. The Company had $39.1 million of investment securities available-for-sale, $13.0 million of which were within cash and cash equivalents, at September 30, 2016. The amortized cost of the investments was $39.1 million at September 30, 2016. The fair value of the investments was based on inputs other than quoted market prices, otherwise known as Level 2 inputs. The investments held as of March 31, 2017 consisted of fixed-income securities with maturities ranging from April 2017 to July 2017. 

The recorded amount of long-term debt (see Note 5) and the corresponding fair value as of March 31, 2017 were $3,478.2 million and $3,546.4 million, respectively. The recorded amount of long-term debt and the corresponding fair value as of September 30, 2016 were $3,576.5 million and $3,750.9 million, respectively. The fair value of long-term debt was determined based on Level 2 inputs, as defined above.

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. The Pharmaceutical Distribution Services reportable segment consists of the ABDC and ABSG operating segments. Other consists of operating segments that focus on manufacturer and other services and includes AmerisourceBergen Consulting Services ("ABCS"), World Courier, and MWI.

The following tables illustrate reportable segment information for the three and six months ended March 31, 2017 and 2016:

	Revenue
	Three months ended March 31,						Six months ended March 31,
(in thousands)	2017			2016			2017			2016
Pharmaceutical Distribution Services	$	35,518,955		$	34,165,733		$	72,094,922		$	69,360,412
Other	1,696,137			1,599,805			3,359,791			3,177,620
Intersegment eliminations	(67,690		)	(67,181		)	(138,046		)	(130,629		)
Revenue	$	37,147,402		$	35,698,357		$	75,316,667		$	72,407,403

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

	Segment Operating Income
	Three months ended March 31,					Six months ended March 31,
(in thousands)	2017			2016		2017			2016
				(As Revised)					(As Revised)
Pharmaceutical Distribution Services	$	482,265		$	500,165	$	856,267		$	881,419
Other	106,206			93,956		218,412			189,521
Intersegment eliminations	(1		)	—		$	(14	)	$	—
Total segment operating income	$	588,470		$	594,121	$	1,074,665		$	1,070,940

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The following table reconciles total segment operating income to income before income taxes:

	Income Before Income Taxes
	Three months ended March 31,						Six months ended March 31,
(in thousands)	2017			2016			2017			2016
				(As Revised)						(As Revised)
Total segment operating income	$	588,470		$	594,121		$	1,074,665		$	1,070,940
Gain from antitrust litigation settlements	—			7			1,395			12,798
LIFO credit (expense)	86,504			(92,379		)	58,196			(193,941		)
Acquisition-related intangibles amortization	(38,059		)	(38,720		)	(76,288		)	(69,930		)
Warrants income	—			503,946			—			36,571
Employee severance, litigation, and other	(11,934		)	(17,617		)	(33,000		)	(36,485		)
Pension settlement	—			1,124			—			(47,607		)
Operating income	624,981			950,482			1,024,968			772,346
Other income	(5,233		)	(756		)	(5,356		)	(1,066		)
Interest expense, net	37,299			35,966			74,271			69,707
Income before income taxes	$	592,915		$	915,272		$	956,053		$	703,705

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

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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, 2016.

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.

Pharmaceutical Distribution Services Segment

The Pharmaceutical Distribution Services reportable segment is comprised of two operating segments, which include the operations of AmerisourceBergen Drug Corporation ("ABDC") and AmerisourceBergen Specialty Group ("ABSG"). Servicing healthcare providers in the pharmaceutical supply channel, the Pharmaceutical Distribution Services segment's operations provide drug distribution and related services designed to reduce healthcare costs and improve patient outcomes.

ABDC distributes a comprehensive offering of brand-name and generic pharmaceuticals (including specialty pharmaceutical products), 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. ABDC also provides pharmacy management, staffing and additional consulting services, and supply management software to a variety of retail and institutional healthcare providers. Additionally, ABDC delivers packaging solutions to institutional and retail healthcare providers.

ABSG, through a number of operating businesses, provides pharmaceutical distribution 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. ABSG also distributes plasma and other blood products, injectible pharmaceuticals, vaccines, and other specialty products. Additionally, ABSG provides third party logistics, outcomes research, and additional services for biotechnology and pharmaceutical manufacturers.

Our use of the term "specialty" and "specialty pharmaceutical products" refers to drugs used to treat complex diseases, such as cancer, diabetes, and multiple sclerosis. Specialty pharmaceutical products are part of complex treatment regimens for serious conditions and diseases that generally require ongoing clinical monitoring. We believe the terms "specialty" and "specialty pharmaceutical products" are used consistently by industry participants and our competitors. However, we cannot be certain that other distributors of specialty products define these and other similar terms in exactly the same manner as we do.

Both ABDC and ABSG distribute specialty drugs to their customers, with the principal difference between these two operating segments being that ABSG operates distribution facilities that focus primarily on complex disease treatment regimens. Therefore, a product distributed from one of ABSG's distribution facilities results in revenue reported under ABSG, and a product distributed from one of ABDC's distribution centers results in revenue reported under ABDC. Essentially all of ABSG's sales consist of specialty pharmaceutical products.

Other

Other consists of operating segments that focus on manufacturer and other services and includes AmerisourceBergen Consulting Services ("ABCS"), World Courier, and MWI Animal Health ("MWI"). The results of operations of these operating segments 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.

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.

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Recent Development

Our contract with Express Scripts was scheduled to expire in September 2017. In April 2017, we signed a new five-year agreement with Express Scripts that expires in September 2022. The fiscal 2016 revenue from our current agreement with Express Scripts was approximately $23 billion.

Executive Summary

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

• Revenue increased4.1% and 4.0% from the prior year quarter and six month period, respectively, as a result of increased sales to some of ABDC's larger customers and the strong revenue growth of certain business units within ABSG;

• Pharmaceutical Distribution Services gross profit decreased1.5% and 1.8% from the prior year quarter and six month period, respectively. Gross profit in the current year quarter was adversely impacted by prior year contract renewals in the second half of fiscal 2016 at less favorable terms with a significant group purchasing organization ("GPO") customer and Kaiser Permanente ("Kaiser") and a lower contribution from PharMEDium as it shipped fewer units while we increased our investment in quality control and quality assurance systems to enhance product quality and patient safety and to meet all of PharMEDium's commitments to the U.S. Food and Drug Administration ("FDA") pursuant to the new federal requirements for outsourcing facilities. Gross profit growth in the current year six month period was adversely impacted by the above-mentioned contract renewals and lower price appreciation, offset in part by the incremental contribution from PharMEDium, which was acquired on November 6, 2015;

• Total gross profit increased16.8% in the current year quarter primarily due to the reduction of last-in, first-out ("LIFO") expense, which was a credit of $86.5 million in the current year quarter, in comparison to an expense charge of $92.4 million in the prior year quarter. Total gross profit increased12.4% in the current year six month period primarily due to the reduction of LIFO expense, which was a credit of $58.2 million in the current year six month period, in comparison to an expense charge of $193.9 million in the prior year six month period. The LIFO credit in the current year quarter and six month period was primarily driven by lower expected brand inflation and greater generic deflation for fiscal 2017 in comparison to those expectations at March 31, 2016 for the prior fiscal year;

• Distribution, selling, and administrative expenses were relatively flat compared to the prior year quarter and six month period. Distribution, selling, and administrative expenses as a percentage of revenue were 1.40% and 1.38% in the current year quarter and six month period, respectively, and represent a decrease of 6 basis points compared to the prior year periods. The decreases in expense as a percentage of revenue in comparison to the prior year periods were primarily due to initiatives taken in second half of fiscal 2016 to improve operating efficiency across many of our businesses and certain administrative functions;

• Total operating expenses increased $506.6 million from the prior year quarter, which included Warrants income of $503.9 million. There was no comparable income in the current year quarter;

• Total segment operating income decreased by 1.0% compared to the prior year quarter primarily due to the decline in ABDC's operating income due to the gross profit factors noted above and was partially offset by increased contributions from ABSG and our businesses in Other. Total segment operating income increased by 0.3% compared to the prior year six month period due to increased contributions from ABSG and our businesses in Other and was partially offset by the decline in ABDC's operating income due to the gross profit factors noted above, and;

• Our effective tax rates were 30.6% and 31.1% in the three and six months ended March 31, 2017, respectively. Our effective tax rates were 34.1% and (32.6)% in the three and six months ended March 31, 2016, respectively. Our effective tax rates in the three and six months ended March 31, 2017 were favorably impacted due to growth of our international businesses and also benefited from stock option exercises and restricted stock vesting. Prior to fiscal 2017, tax benefits resulting from share-based compensation were recorded as adjustments to Additional Paid-In Capital within Stockholders' Equity (see Note 1 of the Notes to Consolidated Financial Statements). Our effective tax rate in the six months ended March 31, 2016 benefited from the receipt of an Internal Revenue Service ("IRS") private letter ruling that entitled us to an income tax deduction equal to the fair value of the Warrants on the dates of exercise.

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Results of Operations

Revenue

	Three months ended March 31,							Six months ended March 31,
(dollars in thousands)	2017			2016			Change	2017			2016			Change
Pharmaceutical Distribution     Services	$	35,518,955		$	34,165,733		4.0%	$	72,094,922		$	69,360,412		3.9%
Other	1,696,137			1,599,805			6.0%	3,359,791			3,177,620			5.7%
Intersegment eliminations	(67,690		)	(67,181		)	0.8%	(138,046		)	(130,629		)	5.7%
Revenue	$	37,147,402		$	35,698,357		4.1%	$	75,316,667		$	72,407,403		4.0%

Revenue increased by 4.1% and 4.0% from the prior year quarter and six month period, respectively. See discussions below under "Pharmaceutical Distribution Services Segment" and "Other" for commentary regarding our revenue growth.

We currently expect our revenue in fiscal 2017 to increase between 5.5% and 6.5%. 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, 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.

Pharmaceutical Distribution Services Segment

The Pharmaceutical Distribution Services segment grew its revenue by 4.0% and 3.9% from the prior year quarter and six month period, respectively. Intrasegment revenue between ABDC and ABSG has been eliminated in the presentation of total Pharmaceutical Distribution Services revenue. Intrasegment revenue primarily consisted of ABSG sales directly to ABDC customer sites or ABSG sales to ABDC facilities. Intrasegment revenue was $2.2 billion and $1.8 billion in the quarters ended March 31, 2017 and 2016, respectively, and $4.4 billion and $3.5 billion in the six month periods ended March 31, 2017 and 2016, respectively.

ABDC’s revenue of $30.1 billion and $61.3 billion in the quarter and six months ended March 31, 2017increased3.6% from the prior year periods (before intrasegment eliminations). The increases in ABDC’s revenue were primarily due to the growth of some of ABDC's larger customers and due to overall market growth within the retail customer segment, offset in part by a decline in sales of products that treat Hepatitis C.

ABSG’s revenue of $7.6 billion and $15.1 billion in the quarter and six months ended March 31, 2017increased11.0% and 10.7%, respectively, from the prior year periods (before intrasegment eliminations). The increases in ABSG’s revenue were primarily due to strong overall performance, especially in the sale of oncology products, and increased sales in our third party logistics business.

A number of our contracts with customers, including GPOs, 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 six months ended March 31, 2017, no significant contracts expired. Our contract with Express Scripts was scheduled to expire in September 2017; however, in April 2017, we signed a new five-year agreement with Express Scripts that expires in September 2022. 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.

Other

Revenue in Other increased6.0% and 5.7% from the prior year quarter and six month period, respectively, primarily due to increased revenue from MWI primarily due to strong growth in its companion animal business and ABCS due to its growth in manufacturer service programs.

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Gross Profit

	Three months ended March 31,							Six months ended March 31,
(dollars in thousands)	2017			2016			Change	2017			2016			Change
Pharmaceutical Distribution     Services	$	868,847		882,209			(1.5)%	1,624,092			1,654,177			(1.8)%
Other	301,077			285,494			5.5%	610,438			567,174			7.6%
Intersegment eliminations	(1		)	—				(14		)	—
Gain from antitrust litigation settlements	—			7				1,395			12,798
LIFO credit (expense)	86,504			(92,379		)		58,196			(193,941		)
Gross profit	$	1,256,427		$	1,075,331		16.8%	$	2,294,107		$	2,040,208		12.4%

Gross profit increased16.8%, or $181.1 million, and 12.4%, or $253.9 million, from the prior year quarter and six month period, respectively. The increases were primarily due to the $178.9 million and $252.1 milliondecrease in LIFO expense from the prior year quarter and six month period, respectively. Additionally, increases in gross profit in Other were offset by decreases in gross profit of Pharmaceutical Distribution Services. The LIFO credit in the current year quarter and six month period was primarily driven by lower expected brand inflation and greater generic deflation for fiscal 2017 in comparison to those expectations at March 31, 2016 for the prior fiscal year.

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. The generic deflation rate used for estimating our LIFO provision is typically greater than our base generic deflation rate (currently at -7% to -9% for fiscal 2017) due to various factors, including but not limited to declining prices on new generic products and changes in generic volumes and/or mix of products. Changes to any of the above factors may have a material impact to our annual LIFO provision.

Pharmaceutical Distribution Services gross profit decreased1.5%, or $13.4 million, and 1.8%, or $30.1 million, from the prior year quarter and six month period, respectively. Gross profit in the current year quarter was adversely impacted by prior year contract renewals in the second half of fiscal 2016 at less favorable terms with a significant GPO customer and Kaiser and a lower contribution from PharMEDium as it shipped fewer units while we increased our investment in quality control and quality assurance systems to enhance product quality and patient safety and to meet all of PharMEDium's commitments to the FDA pursuant to the new federal requirements for outsourcing facilities. We expect a lower contribution from PharMEDium in the second half of fiscal 2017 until the aforementioned procedures have been fully implemented. Gross profit in the current year six month period was adversely impacted by the above-mentioned contract renewals and lower price appreciation, offset in part by the incremental contribution from PharMEDium, which was acquired on November 6, 2015. As a percentage of revenue, Pharmaceutical Distribution Services gross profit margin of 2.45% and 2.25% in the quarter and six months ended March 31, 2017, respectively, decreased13 basis points from the prior year periods primarily due to contract renewals at less favorable terms and increased sales to some of our larger customers that typically have a lower gross profit margin.

Gross profit in Other increased5.5%, or $15.6 million, and 7.6%, or $43.3 million, from the prior year quarter and six month period, respectively. The increases from the prior year periods were primarily due to revenue growth of ABCS and MWI. As a percentage of revenue, gross profit margin in Other of 17.75% in the quarter ended March 31, 2017decreased from 17.85% in the prior year quarter. As a percentage of revenue, gross profit margin in Other of 18.17% in the six months ended March 31, 2017increased from 17.85% in the prior year six month period primarily due to improved gross profit margin at ABCS and MWI.

No significant gains from antitrust litigation settlements with pharmaceutical manufacturers were recognized in the quarters ended March 31, 2017 and 2016. We recognized gains of $1.4 million and $12.8 million from antitrust litigation settlements with pharmaceutical manufacturers during the six months ended March 31, 2017 and 2016, respectively. The gains were recorded as reductions to cost of goods sold.

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Operating Expenses

	Three months ended March 31,						Six months ended March 31,
(dollars in thousands)	2017		2016			Change	2017		2016			Change
			(As Revised)						(As Revised)
Distribution, selling, and administrative	$	521,843	$	519,466		0.5%	$	1,042,390	$	1,044,543		(0.2)%
Depreciation and amortization	97,669		92,836			5.2%	193,749		175,798			10.2%
Warrants income	—		(503,946		)		—		(36,571		)
Employee severance, litigation, and other	11,934		17,617				33,000		36,485
Pension settlement charge	—		(1,124		)		—		47,607
Total operating expenses	$	631,446	$	124,849		405.8%	$	1,269,139	$	1,267,862		0.1%

Distribution, selling, and administrative expenses increased0.5%, or $2.4 million, from the prior year quarter. Distribution, selling, and administrative expenses decreased0.2%, or $2.2 million, from the prior year six month period. As a percentage of revenue, distribution, selling, and administrative expenses were 1.40% and 1.38% in the current year quarter and six month period, respectively, and represent a decrease of 6 basis points compared to the prior year periods. The decreases in expense as a percentage of revenue in comparison to the prior year periods were primarily due to initiatives taken in the second half of fiscal 2016 to improve operating efficiency across many of our businesses and certain administrative functions.

Depreciation expense increased9.0% and 9.4% from the prior year quarter and six month period, respectively, due to an increase in the amount of capital projects being depreciated. Amortization expense increased0.2% and 11.4% from the prior year quarter and prior year six month period, respectively. The increase in amortization expense from the prior year six month period was primarily due to the amortization of intangible assets originating from our November 6, 2015 acquisition of PharMEDium.

There was no Warrants income in the current fiscal year quarter as the Warrants were exercised in March 2016 and August 2016.

Employee severance, litigation, and other for the quarter ended March 31, 2017 included $7.6 million of costs primarily related to facility closures and certain acquisition-related integration costs, and $4.3 million of deal-related transaction costs. Employee severance, litigation, and other for the six months ended March 31, 2017 included a $16.0 million settlement of a state litigation proceeding (see Note 8 of the Notes to the Consolidated Financial Statements for further details), $12.2 million of costs primarily related to facility closures and certain acquisition-related integration costs, and $4.8 million of deal-related transaction costs. Employee severance, litigation, and other for the quarter ended March 31, 2016 included $13.0 million of costs related to customer contract extensions (primarily related to the settlement of certain disputed items), $2.6 million of employee severance and other costs, and $2.0 million of deal-related transaction costs. Employee severance, litigation, and other for the six months ended March 31, 2016 included $18.1 million of deal-related transaction costs (primarily related to professional fees with respect to the PharMEDium acquisition), $13.0 million of cost related to customer contract extensions, and $5.4 million of employee severance and other costs.

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Operating Income

	Three months ended March 31,							Six months ended March 31,
(dollars in thousands)	2017			2016			Change	2017			2016			Change
				(As Revised)							(As Revised)
Pharmaceutical Distribution     Services	$	482,265		$	500,165		(3.6)%	$	856,267		$	881,419		(2.9)%
Other	106,206			93,956			13.0%	218,412			189,521			15.2%
Intersegment eliminations	(1		)	—				(14		)	—
Total segment operating income	588,470			594,121			(1.0)%	1,074,665			1,070,940			0.3%
Gain from antitrust litigation settlements	—			7				1,395			12,798
LIFO credit (expense)	86,504			(92,379		)		58,196			(193,941		)
Acquisition-related intangibles amortization	(38,059		)	(38,720		)		(76,288		)	(69,930		)
Warrants income	—			503,946				—			36,571
Employee severance, litigation, and other	(11,934		)	(17,617		)		(33,000		)	(36,485		)
Pension settlement	—			1,124				—			(47,607		)
Operating income	$	624,981		$	950,482			$	1,024,968		$	772,346

Segment operating income is evaluated before gain from antitrust litigation settlements; LIFO credit (expense); acquisition-related intangibles amortization; Warrants income; employee severance, litigation, and other; and pension settlement.

Pharmaceutical Distribution Services operating income decreased3.6%, or $17.9 million, and 2.9%, or $25.2 million, from the prior year quarter and six month period, respectively, primarily due to the decrease in gross profit. As a percentage of revenue, Pharmaceutical Distribution Services operating income margin decreased10 basis points and 8 basis points from the prior year quarter and six month period, respectively, primarily due to the prior year contract renewals at less favorable terms and increased sales to some of our larger customers that typically have a lower gross profit margin, offset in part by our initiatives to improve operating efficiency.

Operating income in Other increased13.0%, or $12.3 million, and 15.2%, or $28.9 million, from the prior year quarter and six month period, respectively, primarily due to the gross profit increases of ABCS and MWI, offset in part by an increase in operating expenses.

Interest expense, net and the respective weighted average interest rates in the quarters ended March 31, 2017 and 2016 were as follows:

	2017				2016
(dollars in thousands)	Amount			Weighted Average Interest Rate	Amount			Weighted Average Interest Rate
					(As Revised)
Interest expense	$	37,885		2.84%	$	36,712		2.67%
Interest income	(586		)	0.41%	(746		)	0.80%
Interest expense, net	$	37,299			$	35,966

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Interest expense, net and the respective weighted average interest rates in the six months ended March 31, 2017 and 2016 were as follows:

	2017	2016
(dollars in thousands)	Amount