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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED March 31, 2020

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

FOR THE TRANSITION PERIOD FROM ___________ TO___________

Commission file number 1-16671

AMERISOURCEBERGEN CORPORATION

(Exact name of registrant as specified in its charter)



Delaware			23-3079390
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification No.)

1300 Morris Drive	Chesterbrook,	PA	19087-5594
(Address of principal executive offices)			(Zip Code)

(610) 727-7000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock	ABC	New York Stock Exchange	(NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The number of shares of common stock of AmerisourceBergen Corporation outstanding as of May 4, 2020 was 203,402,770.

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AMERISOURCEBERGEN CORPORATION

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	Page No.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

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

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

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

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

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

Notes to Consolidated Financial Statements	8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk	36

Item 4. Controls and Procedures	36

Part II. OTHER INFORMATION

Item 1. Legal Proceedings	37

Item 1A. Risk Factors	37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3. Defaults Upon Senior Securities	38

Item 4. Mine Safety Disclosures	38

Item 5. Other Information	38

Item 6. Exhibits	39

SIGNATURES	40

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PART I. FINANCIAL INFORMATION

ITEM I. Financial Statements (Unaudited)

AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



(in thousands, except share and per share data)	March 31, 2020			September 30, 2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,691,938		$	3,374,194
Accounts receivable, less allowances for returns and doubtful accounts: $1,389,812 as of March 31, 2020 and $1,222,906 as of September 30, 2019	14,210,170			12,386,879
Inventories	11,102,566			11,060,254
Right to recover asset	1,301,108			1,147,483
Income tax receivable (Note 4)	699,494			5,859
Prepaid expenses and other	175,374			157,385
Total current assets	31,180,650			28,132,054

Property and equipment, net	1,421,768			1,770,516
Goodwill	6,704,133			6,705,507
Other intangible assets	1,935,448			2,294,836
Other assets	800,263			269,067

TOTAL ASSETS	$	42,042,262		$	39,171,980

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	30,719,987		$	28,385,074
Accrued expenses and other	868,996			1,057,208
Short-term debt	522,807			139,012
Total current liabilities	32,111,790			29,581,294

Long-term debt	3,622,387			4,033,880
Long-term financing obligation (Note 1)	—			320,518
Accrued income taxes	279,403			284,075
Deferred income taxes	1,843,910			1,860,195
Other liabilities	479,659			98,812
Commitments and contingencies (Note 10)

Stockholders’ equity:
Common stock, $0.01 par value - authorized, issued, and outstanding: 600,000,000 shares, 286,754,370 shares, and 203,351,729 shares as of March 31, 2020, respectively, and 600,000,000 shares, 285,295,170 shares, and 206,760,654 shares as of September 30, 2019, respectively	2,868			2,853
Additional paid-in capital	4,972,109			4,850,142
Retained earnings	5,248,005			4,235,491
Accumulated other comprehensive loss	(132,808		)	(111,965		)
Treasury stock, at cost: 83,402,641 shares as of March 31, 2020 and 78,534,516 shares as of September 30, 2019	(6,499,584		)	(6,097,604		)
Total AmerisourceBergen Corporation stockholders' equity	3,590,590			2,878,917
Noncontrolling interest	114,523			114,289
Total equity	3,705,113			2,993,206

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	42,042,262		$	39,171,980

See notes to consolidated financial statements.

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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)	2020			2019			2020			2019
Revenue	$	47,417,639		$	43,319,602		$	95,282,381		$	88,712,054
Cost of goods sold	46,029,532			41,894,846			92,663,060			85,989,718
Gross profit	1,388,107			1,424,756			2,619,321			2,722,336
Operating expenses:
Distribution, selling, and administrative	693,413			628,036			1,379,366			1,284,621
Depreciation	69,796			75,219			139,040			150,581
Amortization	23,999			48,547			59,270			95,685
Employee severance, litigation, and other	67,732			55,389			107,041			96,061
Impairment of PharMEDium assets (Note 5)	223,652			570,000			361,652			570,000
Operating income	309,515			47,565			572,952			525,388
Other (income) loss	(1,109		)	(14,494		)	1,733			(11,397		)
Interest expense, net	34,421			43,275			65,428			85,445
Income before income taxes	276,203			18,784			505,791			451,340
Income tax (benefit) expense	(694,908		)	(9,289		)	(651,888		)	31,514
Net income	971,111			28,073			1,157,679			419,826
Net (income) loss attributable to noncontrolling interest	(10,834		)	(938		)	(9,762		)	961
Net income attributable to AmerisourceBergen Corporation	$	960,277		$	27,135		$	1,147,917		$	420,787

Earnings per share:
Basic	$	4.68		$	0.13		$	5.58		$	1.99
Diluted	$	4.64		$	0.13		$	5.54		$	1.97

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

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

See notes to consolidated financial statements.

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AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Three months ended March 31,						Six months ended March 31,
(in thousands)	2020			2019			2020			2019
Net income	$	971,111		$	28,073		$	1,157,679		$	419,826
Other comprehensive (loss) income
Foreign currency translation adjustments	(55,858		)	7,414			(30,405		)	(3,960		)
Other	15			225			34			113
Total other comprehensive (loss) income	(55,843		)	7,639			(30,371		)	(3,847		)
Total comprehensive income	915,268			35,712			1,127,308			415,979
Comprehensive income attributable to noncontrolling interest	(68		)	(836		)	(234		)	(1,081		)
Comprehensive income attributable to AmerisourceBergen Corporation	$	915,200		$	34,876		$	1,127,074		$	414,898

See notes to consolidated financial statements.

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AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)



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



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

See notes to consolidated financial statements.

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AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(Unaudited)



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



(in thousands, except per share data)	Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Noncontrolling Interest			Total
September 30, 2018	$	2,836	$	4,715,473		$	3,720,582		$	(79,253	)	$	(5,426,814	)	$	117,137		$	3,049,961
Adoption of ASC 606	—		—			(1,482		)	—			—			(1,102		)	(2,584		)
Net income (loss)	—		—			420,787			—			—			(961		)	419,826
Other comprehensive (loss) income	—		—			—			(5,889		)	—			2,042			(3,847		)
Cash dividends, $0.80 per share	—		—			(170,428		)	—			—			—			(170,428		)
Exercises of stock options	8		37,582			—			—			—			—			37,590
Share-based compensation expense	—		37,869			—			—			—			—			37,869
Purchases of common stock	—		—			—			—			(323,974		)	—			(323,974		)
Employee tax withholdings related to restricted share vesting	—		—			—			—			(5,667		)	—			(5,667		)
Other	2		(417		)	—			—			—			—			(415		)
March 31, 2019	$	2,846	$	4,790,507		$	3,969,459		$	(85,142	)	$	(5,756,455	)	$	117,116		$	3,038,331

See notes to consolidated financial statements.

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AMERISOURCEBERGEN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



	Six months ended March 31,
(in thousands)	2020			2019
OPERATING ACTIVITIES
Net income	$	1,157,679		$	419,826
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, including amounts charged to cost of goods sold	143,604			171,789
Amortization, including amounts charged to interest expense	66,564			100,040
Provision for doubtful accounts	22,144			10,892
(Benefit) provision for deferred income taxes	(21,568		)	24,949
Share-based compensation	45,763			37,869
LIFO expense (credit)	37,134			(69,834		)
Impairment of PharMEDium assets	361,652			570,000
Gain on sale of an equity investment	—			(13,692		)
Other	(11,312		)	(11,610		)
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable	(2,052,216		)	(880,805		)
Inventories	(152,359		)	(420,190		)
Income tax receivable	(693,635		)	522
Prepaid expenses and other assets	1,580			(17,436		)
Accounts payable	2,395,847			1,350,728
Accrued expenses, accrued income taxes, and other liabilities	(305,170		)	(169,716		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	995,707			1,103,332
INVESTING ACTIVITIES
Capital expenditures	(144,382		)	(161,488		)
Cost of acquired companies, net of cash acquired	—			(52,398		)
Cost of equity investments	(30,580		)	—
Other	7,162			2,659
NET CASH USED IN INVESTING ACTIVITIES	(167,800		)	(211,227		)
FINANCING ACTIVITIES
Senior notes and other loan borrowings	46,396			439,181
Senior notes and other loan repayments	(46,146		)	(456,591		)
Borrowings under revolving and securitization credit facilities	87,954			541,066
Repayments under revolving and securitization credit facilities	(87,257		)	(539,673		)
Purchases of common stock	(407,152		)	(347,959		)
Exercises of stock options	76,757			37,590
Cash dividends on common stock	(170,541		)	(170,428		)
Tax withholdings related to restricted share vesting	(9,585		)	(5,667		)
Other	(589		)	(6,390		)
NET CASH USED IN FINANCING ACTIVITIES	(510,163		)	(508,871		)
INCREASE IN CASH AND CASH EQUIVALENTS	317,744			383,234
Cash and cash equivalents at beginning of period	3,374,194			2,492,516
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,691,938		$	2,875,750

See notes to consolidated financial statements.

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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 subsidiaries, including less-than-wholly-owned subsidiaries in which AmerisourceBergen Corporation has a controlling financial interest (the "Company"), as of the dates and for the periods indicated. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles ("GAAP") for interim financial information, the instructions to Form 10-Q, and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments (consisting only of normal recurring accruals, except as otherwise disclosed herein) considered necessary to present fairly the financial position as of March 31, 2020 and the results of operations and cash flows for the interim periods ended March 31, 2020 and 2019 have been included. Certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP, but which are not required for interim reporting purposes, have been omitted. The accompanying unaudited consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect amounts reported in the financial statements and accompanying notes. Actual amounts could differ from these estimated amounts. Certain reclassifications have been made to prior-period amounts in order to conform to the current year presentation.

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

Recently Adopted Accounting Pronouncements

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

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

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

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

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

As of March 31, 2020, 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. Leases

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the facts and circumstances present. Leases are classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. At the lease commencement date, operating and finance lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and, as such, the Company uses its incremental borrowing rate to discount the lease liabilities, which is the rate incurred to borrow on a collateralized basis over a similar term in a similar economic environment. Certain adjustments to the ROU asset may be required for items such as incentives received. The Company does not recognize on the balance sheet leases with terms of one year or less.

The Company has operating leases that are primarily comprised of buildings, office equipment, distribution center equipment, and vehicles. Some of the Company's leases include options to extend or early terminate the lease, which are included in the lease term when it is reasonably certain to exercise and there is a significant economic incentive to exercise that option. Certain lease agreements contain provisions for future rent increases. Lease payments included in the measurement of the lease liability comprise fixed payments. The Company combines lease and non-lease components as a single component. Operating lease cost is recognized over the expected lease term on a straight-line basis. Variable lease payments, which are primarily comprised of maintenance, taxes, and other payments based on usage, are recognized when the expense is incurred. The Company's leases do not contain residual value guarantees.

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



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

The Company recorded rental expense of $27.1 million and $53.9 million in the three and six months ended March 31, 2019, respectively.

The following summarizes balance sheet information related to operating leases:



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

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

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

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



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

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

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



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

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

As previously disclosed in the Company's fiscal 2019 Annual Report on Form 10-K under the prior accounting guidance, the future minimum rental payments under noncancellable operating leases and financing obligations as of September 30, 2019 were as follows:



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

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

Note 3. Variable Interest Entity

The Company has substantial governance rights over Profarma Distribuidora de Produtos Farmacêuticos S.A. ("Profarma"), which allow it to direct the activities that significantly impact Profarma’s economic performance. As such, the Company consolidates the operating results of Profarma in its consolidated financial statements. The Company is not obligated to provide future financial support to Profarma.

The following assets and liabilities of Profarma are included in the Company's Consolidated Balance Sheets:



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

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

Profarma's assets can only be used to settle its obligations, and its creditors do not have recourse to the general credit of the Company.

Note 4. Income Taxes

The Coronavirus Aid, Relief, and Economic Security Act

The Coronavirus Aid, Relief, and Economic Security ("CARES") Act became law on March 27, 2020. The CARES Act was a response to the market volatility and instability resulting from the coronavirus pandemic and includes provisions to support businesses in the form of loans, grants, and tax changes, among other types of relief that were not previously available under the Tax Cuts and Jobs Act of 2017 (the "2017 Tax Act"). As it relates to the Company, the CARES Act provides relief through adjustments to net operating loss rules and the acceleration of available refunds for alternative minimum tax credit carryforwards.

PharMEDium

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

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

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

Other Information

The Company files income tax returns in U.S. federal and state jurisdictions as well as various foreign jurisdictions. As of March 31, 2020, the Company had unrecognized tax benefits, defined as the aggregate tax effect of differences between tax return positions and the benefits recognized in the Company’s financial statements, of $121.5 million ($88.7 million, net of federal

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

The Company's effective tax rates were (251.6)% and (128.9)% for the three and six months ended March 31, 2020, respectively. The Company's effective tax rates were (49.5)% and 7.0% for the three and six months ended March 31, 2019, respectively. The effective tax rates in the three and six months ended March 31, 2020 were lower than the U.S. statutory rate due to the tax benefits associated with the discrete items described above and due to a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the impairment of PharMEDium's assets (see Note 5) in the three and six months ended March 31, 2020. The effective tax rates in the three and six months ended March 31, 2019 were lower than the U.S. statutory rate due to a higher mix of foreign earnings at lower tax rates in Switzerland and Ireland since U.S. earnings were lower principally due to the $570.0 million impairment of PharMEDium's assets. The effective tax rate in the six months ended March 31, 2019 also benefited from a $37.0 million decrease to the Company's finalization of the estimated transition tax liability related to the 2017 Tax Act.

Note 5. Goodwill and Other Intangible Assets

The following is a summary of the changes in the carrying value of goodwill, by reportable segment, for the six months ended March 31, 2020:



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

The following is a summary of other intangible assets:



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

Amortization expense for finite-lived intangible assets was $24.0 million and $48.5 million in the three months ended March 31, 2020 and 2019, respectively. Amortization expense for finite-lived intangible assets was $59.3 million and $95.7 million in the six months ended March 31, 2020 and 2019, respectively. Amortization expense for finite-lived intangible assets is estimated to be $111.1 million in fiscal 2020, $101.5 million in fiscal 2021, $99.9 million in fiscal 2022, $98.4 million in fiscal 2023, $97.3 million in fiscal 2024, and $801.4 million thereafter.

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

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

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

Note 6. Debt

Debt consisted of the following:



(in thousands)	March 31, 2020		September 30, 2019
Revolving credit note	$	—	$	—
Term loan due in 2020	399,873		399,778
Overdraft facility due 2021 (£30,000)	32,438		32,573
Receivables securitization facility due 2022	350,000		350,000
Multi-currency revolving credit facility due 2024	—		—
$500,000, 3.50% senior notes due 2021	499,165		498,908
$500,000, 3.40% senior notes due 2024	497,988		497,744
$500,000, 3.25% senior notes due 2025	496,650		496,311
$750,000, 3.45% senior notes due 2027	743,520		743,099
$500,000, 4.25% senior notes due 2045	494,622		494,514
$500,000, 4.30% senior notes due 2047	492,622		492,488
Nonrecourse debt