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, 2021.

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 geographically based upon the products and services we provide
to our customers. At the beginning of fiscal 2022, we re-aligned our reporting
structure under two reportable segments: U.S. Healthcare Solutions and
International Healthcare Solutions. U.S. Healthcare Solutions consists of the
legacy Pharmaceutical Distribution Services reportable segment (excluding
Profarma Distribuidora de Produtos Farmacêuticos S.A. ("Profarma")), MWI Animal
Health ("MWI"), Xcenda, Lash Group, and ICS 3PL. International Healthcare
Solutions consists of Alliance Healthcare, World Courier, Innomar, Profarma, and
Profarma Specialty (until it was divested June 2022). Profarma had previously
been included in the Pharmaceutical Distribution Services reportable segment.
Our previously reported segment results have been revised to conform to our
re-aligned reporting structure.

U.S. Healthcare Solutions Segment



The U.S. Healthcare Solutions reportable segment distributes a comprehensive
offering of brand-name, specialty brand-name and generic pharmaceuticals,
over-the-counter healthcare products, home healthcare supplies and equipment,
and related services to a wide variety of healthcare providers, including acute
care hospitals and health systems, independent and chain retail pharmacies, mail
order pharmacies, medical clinics, long-term care and alternate site pharmacies,
and other customers. The U.S. Healthcare Solutions reportable segment also
provides pharmaceutical distribution (including plasma and other blood products,
injectable pharmaceuticals, vaccines, and other specialty pharmaceutical
products) and additional services to physicians who specialize in a variety of
disease states, especially oncology, and to other healthcare providers,
including hospitals and dialysis clinics. Additionally, the U.S. Healthcare
Solutions reportable segment provides data analytics, outcomes research, and
additional services for biotechnology and pharmaceutical manufacturers. The U.S.
Healthcare Solutions reportable segment also provides pharmacy management,
staffing and additional consulting services, and supply management software to a
variety of retail and institutional healthcare providers. It also provides a
full suite of integrated manufacturer services that ranges from clinical trial
support to product post-approval and commercialization support. Additionally, it
delivers packaging solutions to institutional and retail healthcare providers.
Through its MWI business, a leading animal health distribution company, the U.S.
Healthcare Solutions reportable segment sells pharmaceuticals, vaccines,
parasiticides, diagnostics, micro feed ingredients, and various other products
to customers in both the companion animal and production animal markets. MWI
also offers demand-creating sales force services to manufacturers.

International Healthcare Solutions Segment



The International Healthcare Solutions reportable segment consists of businesses
that focus on international pharmaceutical wholesale and related service
operations and global commercialization services. Alliance Healthcare supplies
pharmaceuticals, other healthcare products, and related services to healthcare
providers, including pharmacies, doctors, health centers and hospitals in 10
countries, primarily in Europe. World Courier, which operates in over 50
countries, is a leading global specialty transportation and logistics provider
for the biopharmaceutical industry. The segment's Canadian business drives
innovative partnerships with manufacturers, providers, and pharmacies to improve
product access and efficiency throughout the healthcare supply chain.









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Executive Summary

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



•Revenue increased by $6.7 billion, or 12.5%, from the prior year quarter and
$22.3 billion, or 14.4%, from the prior year nine-month period primarily due to
the June 2021 acquisition of Alliance Healthcare and growth across our
businesses. The U.S. Healthcare Solutions segment grew its revenue by $3.0
billion, or 6.0%, from the prior year quarter and $7.2 billion, or 4.8%, from
the prior nine-month period primarily due to overall market growth principally
driven by unit volume growth and increased sales to specialty physician
practices, offset in part by a decline in sales of COVID-19 treatments
(primarily commercial treatments). Revenue in International Healthcare Solutions
increased by $3.6 billion and $15.1 billion from the prior year quarter and
nine-month period, respectively, primarily due to the June 2021 acquisition of
Alliance Healthcare;

•Total gross profit increased by $127.2 million, or 6.7%, from the prior year
quarter and $1,437.0 million, or 29.5%, from the prior year nine-month period.
Gross profit was favorably impacted by increases of gross profit in
International Healthcare Solutions of $337.5 million, or 84.4%, from the prior
year quarter and $1,445.3 million, or 184.1%, from the prior year nine-month
period and increases in U.S. Healthcare Solutions of $101.7 million, or 8.3%,
from the prior year quarter and $287.8 million, or 7.6%, from the prior year
nine-month period. Gross profit in International Healthcare Solutions increased
from the prior year periods primarily due to the June 2021 acquisition of
Alliance Healthcare. U.S. Healthcare Solutions' gross profit increased from the
prior periods primarily due to overall revenue growth and fees earned relating
to the distribution of government-owned COVID-19 treatments. The increases were
offset in part by decreases in gains from antitrust litigation settlements,
last-in, first-out ("LIFO") expense in comparison to a LIFO credit in the prior
year quarter, a decrease in the LIFO credit from the prior year nine-month
period, and the Turkey highly inflationary economy's unfavorable impact on the
current year periods;

•Total operating expenses increased by $260.6 million, or 20.6%, compared to the
prior year quarter and $1,317.4 million, or 42.8%, compared to the prior year
nine-month period, primarily as a result of increases in distribution, selling,
and administrative expenses and depreciation and amortization expense primarily
due to the June 2021 acquisition of Alliance Healthcare, and a $75.9 million
goodwill impairment of our Profarma reporting unit, offset in part by lower
expense accruals related to opioid litigation settlements in the current year
periods;

•Total segment operating income increased by $125.6 million, or 19.9%, from
prior year quarter and $467.9 million, or 23.9%, from the prior year nine-month
period primarily due to the June 2021 acquisition of Alliance Healthcare and
9.5% and 7.3% operating income growth in the U.S. Healthcare Solutions segment
compared to the prior year quarter and nine-month period, respectively; and

•Our effective tax rates were 23.7% and 24.0% for the three and nine months
ended June 30, 2022, respectively. Our effective tax rates were 48.5% and 33.6%
for the three and nine months ended June 30, 2021, respectively. The effective
tax rate for the three and nine months ended June 30, 2022 was higher than the
U.S. statutory rate primarily due to U.S. state income taxes as well as discrete
tax expense associated with foreign valuation allowance adjustments, offset in
part by the benefit of non-U.S. income taxed at rates lower than the U.S.
statutory rate.

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Results of Operations

Revenue

                                                     Three months ended                                             Nine months ended
                                                          June 30,                                                      June 30,
(dollars in thousands)                           2022                  2021               Change               2022                   2021               Change
U.S. Healthcare Solutions:
Human Health                                $ 52,168,130          $ 49,182,311             6.1%          $ 153,721,040          $ 146,671,516             4.8%
Animal Health                                  1,221,215             1,193,531             2.3%              3,590,715              3,442,494             4.3%
Total U.S. Healthcare Solutions               53,389,345            50,375,842             6.0%            157,311,755            150,114,010

4.8%


International Healthcare Solutions:
Alliance Healthcare                            5,492,656             1,924,858            185.4%            16,658,799              1,924,858            765.5%
Other Healthcare Solutions                     1,184,070             1,105,911             7.1%              3,445,400              3,039,254             13.4%
Total International Healthcare
Solutions                                      6,676,726             3,030,769            120.3%            20,104,199              4,964,112

305.0%


Intersegment eliminations                         (1,470)                 (916)                                 (3,097)                (1,700)
Revenue                                     $ 60,064,601          $ 53,405,695            12.5%          $ 177,412,857          $ 155,076,422             14.4%


We expect our revenue growth percentage to be in the high-single to low-double
digits in fiscal 2022. 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 and biosimilars that will be available over the next few
years as a result of the expiration of certain drug patents held by brand-name
pharmaceutical manufacturers and the rate of conversion from brand products to
those generic drugs and biosimilars, price inflation and price deflation,
general economic conditions in the United States and Europe, competition within
the industry, customer consolidation, changes in pharmaceutical manufacturer
pricing and distribution policies and practices, increased downward pressure on
government and other third-party reimbursement rates to our customers, changes
in government rules and regulations, and the impact of the COVID-19 pandemic.

Revenue increased by 12.5% and 14.4% from the prior year quarter and nine-month
period, respectively, primarily due to the June 2021 acquisition of Alliance
Healthcare and growth across our businesses.

The U.S. Healthcare Solutions segment grew its revenue by $3.0 billion, or 6.0%,
from the prior year quarter and $7.2 billion, or 4.8%, from the prior year
nine-month period primarily due to overall market growth principally driven by
unit volume growth and increased sales to specialty physician practices, offset
in part by a decline in sales of COVID-19 treatments (primarily commercial
treatments).

More specifically, the increase in the U.S. Healthcare Solutions segment revenue was largely attributable to the following (in billions):

Nine-month


                                                    Three-month Period

Period


Increased sales to specialty physician practices           $0.7

$2.1


Decreased sales of COVID-19 treatments                    $(0.1)

$(1.4)


Increased sales to other customers                         $2.4

$6.5




The International Healthcare Solutions segment grew its revenue by $3.6 billion,
or 120.3%, from prior year quarter and $15.1 billion, or 305.0%, from the prior
nine-month period primarily due to the June 2021 acquisition of Alliance
Healthcare.

A number of our contracts with customers, including group purchasing
organizations, are typically subject to expiration each year. We may lose a
significant customer if an existing contract with such customer expires without
being extended, renewed, or replaced. During the nine months ended June 30,
2022, no significant contracts expired. In January 2022, we extended our
agreement with Express Scripts through September 2026. Over the next twelve
months, there are no significant contracts scheduled to expire. Additionally,
from time to time, significant contracts may be terminated in accordance with
their terms or extended, renewed, or replaced prior to their expiration dates.
If those contracts are extended, renewed, or replaced at less favorable terms,
they may also negatively impact our revenue, results of operations, and cash
flows.
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Gross Profit

                                                Three months ended                                          Nine months ended
                                                     June 30,                                                   June 30,
(dollars in thousands)                       2022                 2021              Change              2022                 2021              Change
U.S. Healthcare Solutions               $ 1,328,511          $ 1,226,833
         8.3%          $ 4,068,626          $ 3,780,790             7.6%
International Healthcare
Solutions                                   737,546              400,021            84.4%            2,230,297              785,030            184.1%

Gains from antitrust litigation
settlements                                       -              147,432                                 1,835              147,432
LIFO (expense) credit                       (23,070)             113,920                                37,668              160,565

Turkey highly inflationary impact           (27,618)                   -                               (27,618)                   -
Gross profit                            $ 2,015,369          $ 1,888,206             6.7%          $ 6,310,808          $ 4,873,817             29.5%


  Gross profit increased by $127.2 million, or 6.7%, from the prior year quarter
and $1,437.0 million, or 29.5%, from the prior year nine-month period. Gross
profit in the current year periods was favorably impacted by increases in gross
profit in International Healthcare Solutions and U.S. Healthcare Solutions. The
increases were offset in part by decreases in gains from antitrust litigation
settlements, LIFO expense in comparison to a LIFO credit in the prior year
quarter, a decrease in the LIFO credit from the prior year nine-month period,
and the Turkey highly inflationary economy's unfavorable impact on the current
year periods.

U.S. Healthcare Solutions gross profit increased by $101.7 million, or 8.3%,
from the prior year quarter and $287.8 million, or 7.6%, from the prior year
nine-month period primarily due to overall revenue growth and fees earned from
the distribution of government-owned COVID-19 treatments. As a percentage of
revenue, U.S. Healthcare Solutions' gross profit margin was 2.49% and 2.59% in
the current year quarter and nine-month period, respectively, a 5-basis point
increase from prior year quarter and a 7-basis point increase from the prior
year nine-month period primarily due to fees earned from the distribution of
government-owned COVID-19 treatments.

Gross profit in International Healthcare Solutions increased by $337.5 million, or 84.4%, from the prior year quarter and $1,445.3 million, or 184.1%, from prior year nine-month period primarily due to the June 2021 acquisition of Alliance Healthcare.



We recognized gains from antitrust litigation settlements with pharmaceutical
manufacturers of $1.8 million in the nine months ended June 30, 2022. We
recognized gains from antitrust litigation settlements with pharmaceutical
manufacturers of $147.4 million in the three and nine months ended June 30,
2021. The gains were recorded as reductions to Cost of Goods Sold (see Note 11
of the Notes to Consolidated Financial Statements).

Our cost of goods sold for interim periods includes a LIFO provision that is
recorded ratably on a quarterly basis and is based on our estimated annual LIFO
provision. The annual LIFO provision, which we estimate on a quarterly basis, is
affected by manufacturer pricing practices, which may be impacted by market and
other external influences, expected changes in inventory quantities, and product
mix, many of which are difficult to predict. Changes to any of the above factors
may have a material impact on our annual LIFO provision. The $122.9 million
decrease in the LIFO credit from the prior year nine-month period is primarily
due to lower generic pharmaceutical deflation and inventory product mix.

We recognized an expense in Cost of Goods Sold related to the impact of Turkey
highly inflationary accounting of $27.6 million in the three and nine months
ended June 30, 2022 (see Note 1 of the Notes to Consolidated Financial
Statements).

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Operating Expenses

                                                 Three months ended                                          Nine months ended
                                                      June 30,                                                   June 30,
(dollars in thousands)                        2022                 2021              Change              2022                 2021              Change
Distribution, selling, and
administrative                           $ 1,212,152          $   913,414            32.7%          $ 3,585,500          $ 2,378,563            50.7%
Depreciation and amortization                172,114              127,101            35.4%              523,333              327,451            59.8%
Employee severance, litigation,
and other                                     67,870              226,964                               209,234              375,501
Impairment of assets                               -                    -                                 4,946                    -
Goodwill impairment                           75,936                    -                                75,936                    -
Total operating expenses                 $ 1,528,072          $ 1,267,479            20.6%          $ 4,398,949          $ 3,081,515            42.8%


Distribution, selling, and administrative expenses increased by $298.7 million,
or 32.7%, compared to the prior year quarter and $1,206.9 million, or 50.7%,
compared to prior year nine-month period primarily due to the June 2021
acquisition of Alliance Healthcare. As a percentage of revenue, distribution,
selling, and administrative expenses were 2.02% in the current year quarter and
nine-month period and represent a 31-basis point increase compared to prior year
quarter and a 49-basis point increase compared to the prior year nine-month
period. The increases were primarily due to the June 2021 acquisition of
Alliance Healthcare.

Depreciation expense increased 18.1% and 24.9% from the prior year quarter and
nine-month period, respectively, primarily due to depreciation of property and
equipment originating from the June 2021 acquisition of Alliance Healthcare.
Amortization expense increased 67.3% and increased 144.0% from the prior year
quarter nine-month period, respectively, primarily due to amortization of
intangible assets originating from the June 2021 acquisition of Alliance
Healthcare.

Employee severance, litigation, and other in the three months ended June 30,
2022 included $36.6 million of acquisition-related deal and integration costs
primarily related to the integration of Alliance Healthcare, $23.4 million of
litigation costs related to legal fees in connection with opioid lawsuits and
investigations, $3.9 million of severance costs, $3.2 million related to
business transformation efforts, and $0.7 million of other restructuring
initiatives. Employee severance, litigation, and other in the three months ended
June 30, 2021 included $28.9 million of litigation costs related to legal fees
in connection with opioid lawsuits and investigations, a $124.3 million expense
accrual related to opioid litigation settlements, $54.7 million of
acquisition-related deal and integration costs primarily related to the June
2021 acquisition of Alliance Healthcare, $14.7 million related to business
transformation efforts, and $4.4 million of severance and other restructuring
initiatives.

Employee severance, litigation, and other in the nine months ended June 30, 2022
included $71.6 million of litigation costs related to legal fees in connection
with opioid lawsuits and investigations, a $36.6 million expense accrual related
to opioid litigation settlements, $69.7 million of acquisition-related deal and
integration costs primarily related to the integration of Alliance Healthcare,
$11.5 million related to business transformation efforts, $10.5 million of
severance costs, and $9.3 million of other restructuring initiatives. Employee
severance, litigation, and other in the nine months ended June 30, 2021 included
$85.9 million of litigation costs related to legal fees in connection with
opioid lawsuits and investigations, a $141.4 million expense accrual related to
opioid litigation settlements, $97.1 million of acquisition-related deal and
integration costs primarily related to the June 2021 acquisition of Alliance
Healthcare, $37.7 million related to business transformation efforts, $6.7
million of severance costs, and $6.6 million of other restructuring initiatives.

We recorded a $4.9 million loss on the remeasurement of a disposal group held
for sale to fair value less cost to sell in Impairment of Assets in the nine
months ended June 30, 2022 (see Note 2 of the Notes to Consolidated Financial
Statements).

We recorded a $75.9 million goodwill impairment of our Profarma reporting unit in the quarter and nine-month period ended June 30, 2022 (see Note 5 of the Notes to Consolidated Financial Statements).


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Operating Income

                                               Three months ended                                         Nine months ended
                                                    June 30,                                                  June 30,
(dollars in thousands)                       2022               2021             Change               2022                 2021              Change
U.S. Healthcare Solutions                $ 579,927          $ 529,790             9.5%           $ 1,878,556          $ 1,750,432             7.3%
International Healthcare Solutions         176,272            100,831             74.8%              543,400              203,663            166.8%

Total segment operating income             756,199            630,621             19.9%            2,421,956            1,954,095            23.9%

Gains from antitrust litigation
settlements                                      -            147,432                                  1,835              147,432
LIFO (expense) credit                      (23,070)           113,920                                 37,668              160,565
Turkey highly inflationary impact          (27,618)                 -                                (27,618)                   -

Acquisition-related intangibles
amortization                               (74,408)           (44,282)                              (231,866)             (94,289)
Employee severance, litigation,
and other                                  (67,870)          (226,964)                              (209,234)            (375,501)
Impairment of assets                             -                  -                                 (4,946)                   -
Goodwill impairment                        (75,936)                 -                                (75,936)                   -
Operating income                         $ 487,297          $ 620,727            (21.5)%         $ 1,911,859          $ 1,792,302             6.7%


Segment operating income is evaluated before gains from antitrust litigation
settlements; LIFO (expense) credit; Turkey highly inflationary impact;
acquisition-related intangibles amortization; employee severance, litigation,
and other; impairment of assets; and goodwill impairment.

U.S. Healthcare Solutions' operating income increased by $50.1 million, or 9.5%,
from the prior year quarter and $128.1 million, or 7.3%, from prior year
nine-month period primarily due to the increase in gross profit, as noted above,
and was offset in part by increases in operating expenses. As a percentage of
revenue, U.S. Healthcare Solutions' operating income margin was 1.09% and 1.19%
in the quarter and nine-month period ended June 30, 2022, respectively, and
represented increases of 4 basis points and 2 basis points compared to the prior
year quarter and nine-month period, respectively, primarily due to fees earned
from the distribution of government-owned COVID-19 treatments.

Operating income in International Healthcare Solutions increased by $75.4
million, or 74.8%, from the prior quarter and $339.7 million, or 166.8%, from
the prior year nine-month period primarily due to the June 2021 acquisition of
Alliance Healthcare.

Other (Income) Loss, Net

We recognized gains of $60.0 million from the sale of non-core businesses in the three and nine months ended June 30, 2022.

We recognized an expense related to the impact of Turkey highly inflationary accounting of $5.8 million in the three and nine months ended June 30, 2022.



We recorded foreign currency losses on the remeasurement of deferred tax assets
relating to Swiss tax reform of $8.9 million and $6.3 million in the three
months and nine months ended June 30, 2022, respectively. We recorded foreign
currency income on the remeasurement of deferred tax assets relating to Swiss
tax reform of $6.2 million in the three months ended June 30, 2021 and a foreign
currency loss of $1.1 million in the nine months ended June 30, 2021.

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Interest Expense, Net

Interest expense, net and the respective weighted average interest rates in the three months ended June 30, 2022 and 2021 are as follows:



                                           2022

2021


                                            Weighted Average                     Weighted Average
(dollars in thousands)        Amount         Interest Rate          Amount        Interest Rate
Interest expense            $ 57,657             2.71%            $ 53,011                 2.78  %
Interest income               (4,795)            0.70%              (1,673)                0.16  %
Interest expense, net       $ 52,862                              $ 51,338

Interest expense, net and the respective weighted average interest rates in the nine months ended June 30, 2022 and 2021 are as follows:



                                           2022

2021


                                             Weighted Average                       Weighted Average
(dollars in thousands)        Amount          Interest Rate          Amount          Interest Rate
Interest expense            $ 169,661             2.63%            $ 122,773             2.98%
Interest income               (10,511)            0.75%               (3,295)            0.13%
Interest expense, net       $ 159,150                              $

119,478




Interest expense, net increased by $1.5 million, or 3.0%, from the prior year
quarter and $39.7 million, or 33.2%, from the prior year nine-month period. The
increase from the prior year nine-month period was due to the issuance of our
$1,525 million of 0.737% senior notes and $1,000 million of 2.700% senior notes
in March 2021 and the $500 million variable-rate term loan that was issued in
June 2021, all of which were used to finance a portion of the June 2021
acquisition of Alliance Healthcare, and the incremental interest expense
associated with Alliance Healthcare's debt in certain countries, offset in part
by the increase in interest income. The increase in interest income was
primarily due to higher investment interest rates, offset in part by lower
average invested cash balances in the current year periods compared to the prior
year periods.

Income Tax Expense

Our effective tax rates were 23.7% and 24.0% for the three and nine months ended
June 30, 2022, respectively. Our effective tax rates were 48.5% and 33.6% for
the three and nine months ended June 30, 2021, respectively. The effective tax
rate for the three and nine months ended June 30, 2022 were higher than the U.S.
statutory rate primarily due to U.S. state income taxes as well as discrete tax
expense associated with foreign valuation allowance adjustments, offset in part
by the benefit of non-U.S. income taxed at rates lower than the U.S. statutory
rate. The effective tax rate for the three and nine months ended June 30, 2021
were higher than the U.S. statutory rate primarily due to UK Tax Reform.

Liquidity and Capital Resources



   Our operating results have generated cash flows, which, together with
availability under our debt agreements and credit terms from suppliers, have
provided sufficient capital resources to finance working capital and cash
operating requirements, and to fund capital expenditures, acquisitions,
repayment of debt, the payment of interest on outstanding debt, dividends, and
purchases of shares of our common stock.

Our primary ongoing cash requirements will be to finance working capital, fund
the repayment of debt, fund the payment of interest on debt, fund the payment of
dividends, fund purchases of our common stock, finance acquisitions, and fund
capital expenditures and routine growth and expansion through new business
opportunities. Future cash flows from operations and borrowings are expected to
be sufficient to fund our ongoing cash requirements, including the opioid
litigation payments that will be made over 18 years (see below).

Cash Flows



As of June 30, 2022 and September 30, 2021, our cash and cash equivalents held
by foreign subsidiaries were $772.6 million and $725.4 million, respectively. We
have the ability to repatriate the majority of our cash and cash equivalents
held by our foreign subsidiaries without incurring significant additional taxes
upon repatriation.

We have increased seasonal needs related to our inventory build during the
December and March quarters that, depending on our cash balance, may require the
use of our credit facilities to fund short-term capital needs. Our cash balances
in the nine months ended June 30, 2022 and 2021 were supplemented by
intra-period credit facility borrowings to cover short-term working capital
needs. The largest amount of intra-period borrowings under our revolving and
securitization credit

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facilities that was outstanding at any one time during the nine months ended
June 30, 2022 and 2021 was $590.0 million and $637.7 million, respectively. We
had $3,991.6 million and $4,612.4 million of cumulative intra-period borrowings
that were repaid under our credit facilities during the nine months ended
June 30, 2022 and 2021, respectively.

During the nine months ended June 30, 2022, our operating activities provided
cash of $1,538.6 million in comparison to $1,656.8 million in the prior year
period. Cash provided by operations during the nine months ended June 30, 2022
was principally the result of the following:

•An increase in accounts payable of $2,074.6 million primarily due to the
increase in our inventory balances and the timing of scheduled payments to our
suppliers;
•Net income of $1,367.9 million;
•Positive non-cash items of $704.6 million, which is primarily comprised of
depreciation expense of $292.3 million and amortization expense of $243.2
million, and was offset in part by:
•An increase in accounts receivable of $1,551.0 million primarily due to an
increase in sales and the timing of scheduled payments from our customers;
•An increase in inventories of $712.8 million to support the increase in
business volume; and
•A decrease in accrued expenses and other liabilities of $445.9 million.

During the nine months ended June 30, 2021, our operating activities provided
cash of $1,656.8 million. Cash provided by operations during the nine months
ended June 30, 2021 was principally the result of the following:

•Net income of $1,108.2 million;
•Positive non-cash items of $600.0 million, which is primarily comprised of a
provision for deferred income taxes of $303.6 million, depreciation expense of
$237.9 million, and amortization expense of $102.6 million;
•An increase in accounts payable of $242.4 primarily due to the increase in our
inventory balances and the timing of scheduled payments to our suppliers;
•A decrease in income tax receivables of $234.4 million; and was offset in part
by:
•An increase in inventories of $594.7 million to support the increase in
business volume;
•An increase in accounts receivable of $116.8 million as a result of increased
sales and the timing of payments from our customers.

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

                               Three months ended            Nine months ended
                                    June 30,                      June 30,
                             2022              2021        2022              2021
Days sales outstanding       27.8              25.2        27.7              25.6
Days inventory on hand       27.9              28.6        28.3              28.9
Days payable outstanding     59.6              57.4        59.7              58.0


Our cash flows from operating activities can vary significantly from period to
period based upon fluctuations in our period-end working capital account
balances. Additionally, any changes to payment terms with a significant customer
or manufacturer supplier could have a material impact to our cash flows from
operations. The acquisition of Alliance Healthcare increased our days sales
outstanding and days payable outstanding as it has longer payments terms with
its customers and suppliers. Operating cash flows during the nine months ended
June 30, 2022 included $160.8 million of interest payments and $184.1 million of
income tax payments, net of refunds. Operating cash flows during the nine months
ended June 30, 2021 included $110.1 million of interest payments and $43.2
million of income tax refunds, net of payments.

Capital expenditures in the nine months ended June 30, 2022 and 2021 were $322.7
million and $273.4 million, respectively. Significant capital expenditures in
the nine months ended June 30, 2022 included investments in various technology
initiatives, including technology investments at Alliance Healthcare.
Significant capital expenditures in the nine months ended June 30, 2021 included
costs associated with facility expansions, various technology initiatives,
including costs related to enhancing and upgrading our primary information
technology operating systems.

We currently expect to invest approximately $500 million for capital
expenditures during fiscal 2022. Larger 2022 capital expenditures will include
investments relating to various technology initiatives, including technology
investments at Alliance Healthcare.

In addition to capital expenditures, net cash used in investing activity in the
nine months ended June 30, 2022 included $124.2 million of costs to acquire
companies, including $60.0 million that was paid to settle accrued consideration
related to the

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Alliance Healthcare acquisition (see Note 2 of the Notes to Consolidated
Financial Statements), and was offset in part by $258.1 million in proceeds from
the sale of non-core businesses. In addition to capital expenditures, net cash
used in investing activities in the nine months ended June 30, 2021 included
$5,536.7 million for the June 2021 acquisition of Alliance Healthcare, net of
cash acquired, and $162.6 million of costs for equity investments.

Net cash used in financing activities in the nine months ended June 30, 2022
principally resulted from a $500 million repayment of our 0.737% senior notes
that mature in 2023, the repayment of our $250 million term loan, $295.2 million
in cash dividends paid on our common stock, and $248.4 million in purchases of
our common stock. Net cash provided by financing activities in the nine months
ended June 30, 2021 principally resulted from proceeds from the issuance of
$2,525 million of senior notes and $164.3 million of exercises of stock options,
offset in part by the repayment of the $400 million Term Loan, $274.0 million in
cash dividends paid on our common stock, and $82.2 million in purchases of our
common stock.

Debt and Credit Facility Availability



The following table illustrates our debt structure as of June 30, 2022,
including availability under the multi-currency revolving credit facility, the
receivables securitization facility, the revolving credit note, the money market
facility, the Alliance Healthcare debt, and the overdraft facility:

                                                        Outstanding       Additional
(in thousands)                                            Balance        Availability
Fixed-Rate Debt:
0.737% senior notes due 2023                           $ 1,021,611      $

-

$500,000, 3.400% senior notes due 2024                     499,075

-

$500,000, 3.250% senior notes due 2025                     498,178

-

$750,000, 3.450% senior notes due 2027                     745,412

-

$500,000, 2.800% senior notes due 2030                     495,195

-

$1,000,000, 2.700% senior notes due 2031                   990,206

-

$500,000, 4.250% senior notes due 2045                     495,108

-

$500,000, 4.300% senior notes due 2047                     493,221                 -
Nonrecourse debt                                           116,790                 -
Total fixed-rate debt                                    5,354,796                 -

Variable-Rate Debt:
Revolving credit note                                            -            75,000
Money market facility                                            -           100,000
Receivables securitization facility due 2024               350,000

1,100,000


Overdraft facility due 2024 (£10,000)                        7,273

4,906


Multi-currency revolving credit facility due 2026                -         2,400,000
Alliance Healthcare debt                                   279,766           185,238
Nonrecourse debt                                            69,862                 -
Total variable-rate debt                                   706,901         3,865,144
Total debt                                             $ 6,061,697      $  3,865,144


We have a $2.4 billion multi-currency senior unsecured revolving credit facility
("Multi-Currency Revolving Credit Facility"), which is scheduled to expire in
November 2026, with a syndicate of lenders. Interest on borrowings under the
Multi-Currency Revolving Credit Facility accrues at specified rates based on our
debt rating and ranges from 70 basis points to 112.5 basis points over
CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee, as applicable (101.5 basis
points over CDOR/LIBOR/EURIBOR/Bankers Acceptance Stamping Fee as of June 30,
2022) and from 0 basis points to 12.5 basis points over the alternate base rate
and Canadian prime rate, as applicable. We pay facility fees to maintain the
availability under the Multi-Currency Revolving Credit Facility at specified
rates based on our debt rating, ranging from 5 basis points to 12.5 basis
points, annually, of the total commitment (11 basis points as of June 30, 2022).
We may choose to repay or reduce our commitments under the Multi-Currency
Revolving Credit Facility at any time. The Multi-Currency Revolving Credit
Facility contains covenants, including compliance with a financial leverage
ratio test, as well as others that impose limitations on, among other things,
indebtedness of subsidiaries and asset sales, with which we were compliant as of
June 30, 2022.

We have a commercial paper program whereby we may from time to time issue
short-term promissory notes in an aggregate amount of up to $2.4 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

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does not increase our borrowing capacity as it is fully backed by our Multi-Currency Revolving Credit Facility. There were no borrowings outstanding under our commercial paper program as of June 30, 2022.



We have a $1,450 million receivables securitization facility ("Receivables
Securitization Facility"), which is scheduled to expire in November 2024. We
have available to us an accordion feature whereby the commitment on the
Receivables Securitization Facility may be increased by up to $250 million,
subject to lender approval, for seasonal needs during the December and
March quarters. Interest rates are based on prevailing market rates for
short-term commercial paper or LIBOR plus a program fee. We pay a customary
unused fee at prevailing market rates, annually, to maintain the availability
under the Receivables Securitization Facility. The Receivables Securitization
Facility contains similar covenants to the Multi-Currency Revolving Credit
Facility, with which we were compliant as of June 30, 2022.

We have an uncommitted, unsecured line of credit available to us pursuant to a
revolving credit note ("Revolving Credit Note"). The Revolving Credit Note
provides us with the ability to request short-term unsecured revolving credit
loans from time to time in a principal amount not to exceed $75 million. The
Revolving Credit Note may be decreased or terminated by the bank or us at any
time without prior notice. We also have a £10 million uncommitted U.K. overdraft
facility ("Overdraft Facility"), which expires in February 2024, to fund
short-term normal trading cycle fluctuations related to our MWI Animal Health
business. We have an uncommitted, unsecured line of credit available to us
pursuant to a money market credit agreement ("Money Market Facility"). The Money
Market Facility provides us with the ability to request short-term unsecured
revolving credit loans from time to time in a principal amount not to exceed
$100 million. The Money Market Facility may be decreased or terminated by the
bank or us at any time without prior notice.

In March 2022, we elected to repay in full the $250 million term loan that was
scheduled to mature in June 2023. In June 2022, we elected to repay $500 million
of the originally issued $1.5 billion, 0.737% senior notes that are due in March
2023.

Alliance Healthcare debt is comprised of uncommitted revolving credit facilities
in various currencies with various rates. A majority of the outstanding
borrowings were held in Egypt (which is 50% owned) as of June 30, 2022. These
facilities are used to fund its working capital needs.

Nonrecourse debt is comprised of short-term and long-term debt belonging to the Brazil subsidiaries and is repaid solely from the Brazil subsidiaries' cash flows and such debt agreements provide that the repayment of the loans (and interest thereon) is secured solely by the capital stock, physical assets, contracts, and cash flows of the Brazil subsidiaries.

Share Purchase Programs and Dividends



In May 2020, our board of directors authorized a share repurchase program
allowing us to purchase up to $500 million of our outstanding shares of common
stock, subject to market conditions. During the nine months ended June 30, 2022,
we purchased $260.1 million of our common stock, which included $11.7 million of
June 2022 purchases that cash settled in July 2022. As of June 30, 2022, we had
$213.3 million of availability remaining under this program.

In May 2022, our board of directors authorized a new share repurchase program
allowing us to purchase up to $1.0 billion of our outstanding shares of common
stock, subject to market conditions. As of June 30, 2022, we had $1.0 billion of
availability remaining under this program as we did not purchase any shares of
our common stock under this program.

In November 2021, our board of directors increased the quarterly dividend paid
on common stock by 5% from $0.44 per share to $0.46 per share. We anticipate
that we will continue to pay quarterly cash dividends in the future. However,
the payment and amount of future dividends remains within the discretion of our
board of directors and will depend upon future earnings, financial condition,
capital requirements, and other factors.

Commitments and Obligations



As discussed in Note 10 of the Notes to Consolidated Financial Statements, we
have a $6.4 billion liability on our Consolidated Balance Sheet as of June 30,
2022 for litigation relating to our comprehensive opioid settlement as well as
other opioid-related litigation. On July 21, 2021, it was announced that we and
the two other national pharmaceutical distributors have negotiated a
comprehensive settlement agreement, and on April 2, 2022, the settlement
agreement became effective as to us and 46 Settling States, as well as over 98%
by population of subdivision in Settling States. The States of Washington and
Oklahoma intend to join the comprehensive settlement after certain conditions
have been met in those states. The settlement agreement requires us to pay
approximately $5.9 billion over 18 years. Our estimated liability related to
States and subdivisions that did not initially join the comprehensive settlement
agreement (including West Virginia subdivisions) and the Native American tribes
is approximately $0.8 billion. The payment of the aforementioned litigation
liability has not and is not expected to have an impact on our ability to pay
dividends.

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The following is a summary of our contractual obligations for future principal
and interest payments on our debt, minimum rental payments on our noncancellable
operating leases, and minimum payments on our other commitments as of June 30,
2022:

                                              Debt, Including
                                                  Interest             Operating               Other
Payments Due by Period (in thousands)             Payments               Leases             Commitments             Total
Within 1 year                                 $   1,610,984          $   197,128          $    133,159          $ 1,941,271
1-3 years                                         1,698,793              345,401               159,617            2,203,811
4-5 years                                           242,871              268,384                58,983              570,238
After 5 years                                     4,238,885              484,837                     -            4,723,722
Total                                         $   7,791,533          $ 1,295,750          $    351,759          $ 9,439,042


The 2017 Tax Act requires a one-time transition tax to be recognized on
historical foreign earnings and profits. We expect to pay $157.1 million, net of
overpayments and tax credits, related to the transition tax as of June 30, 2022,
which is payable in installments over a six-year period, and commenced in
January 2021. The transition tax commitment is included in "Other Commitments"
in the above table.

Our liability for uncertain tax positions was $543.2 million (including interest
and penalties) as of June 30, 2022. This liability represents an estimate of tax
positions that we have taken in our tax returns which may ultimately not be
sustained upon examination by taxing authorities. Since the amount and timing of
any future cash settlements cannot be predicted with reasonable certainty, the
estimated liability has been excluded from the above contractual obligations
table. Our liability for uncertain tax positions as of June 30, 2022 primarily
includes an uncertain tax benefit related to the $6.4 billion legal accrual for
litigation related to the distribution of prescription opioid pain medications,
as disclosed in Note 10 of the Notes to Consolidated Financial Statements.

Market Risks



We have exposure to foreign currency and exchange rate risk from our non-U.S.
operations. Our largest exposure to foreign exchange rates exists primarily with
the U.K. Pound Sterling, the Euro, the Turkish Lira, the Egyptian Pound, the
Brazilian Real, and the Canadian Dollar. During the quarter ended March 31,
2022, Turkey became a highly inflationary economy, as defined under U.S. GAAP
(see Note 1 of the Notes to Consolidated Financial Statements). Also, with the
June 2021 acquisition of Alliance Healthcare, our foreign currency and exchange
rate risk increased; therefore, we now use forward contracts to hedge against
the foreign currency exchange rate impact on certain intercompany receivable and
payable balances. We may use derivative instruments to hedge our foreign
currency exposure, but not for speculative or trading purposes. Revenue from our
foreign operations during the nine-month period ended June 30, 2022 was
approximately 11% of our consolidated revenue.

We have market risk exposure to interest rate fluctuations relating to our debt.
We manage interest rate risk by using a combination of fixed-rate and
variable-rate debt. The amount of variable-rate debt fluctuates during the year
based on our working capital requirements. We had $706.9 million of
variable-rate debt outstanding as of June 30, 2022. We periodically evaluate
financial instruments to manage our exposure to fixed and variable interest
rates. However, there are no assurances that such instruments will be available
in the combinations we want and/or on terms acceptable to us. There were no such
financial instruments in effect as of June 30, 2022.

We also have market risk exposure to interest rate fluctuations relating to our
cash and cash equivalents. We had $3,034.2 million in cash and cash equivalents
as of June 30, 2022. The unfavorable impact of a hypothetical decrease in
interest rates on cash and cash equivalents would be partially offset by the
favorable impact of such a decrease on variable-rate debt. For every
$100 million of cash invested that is in excess of variable-rate debt, a
10-basis point decrease in interest rates would increase our annual net interest
expense by $0.1 million.

Deterioration of general economic conditions, among other factors, could
adversely affect the number of prescriptions that are filled and the amount of
pharmaceutical products purchased by consumers and, therefore, could reduce
purchases by our customers. In addition, volatility in financial markets may
also negatively impact our customers' ability to obtain credit to finance their
businesses on acceptable terms. Reduced purchases by our customers or changes in
the ability of our customers to remit payments to us could adversely affect our
revenue growth, our profitability, and our cash flow from operations.

Recent elevated levels of inflation in the global and U.S. economies have not
had a significant impact on our results of operations. If elevated levels of
inflation persist or increase, our operations and financial results could be
adversely affected, particularly in certain global markets.

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We have risks from other geopolitical trends and events, such as the Russia-Ukraine war. Although the long-term implications of Russia's invasion of Ukraine are difficult to predict at this time, the financial impact of the conflict in fiscal 2022 has not been material.


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