DUBLIN, Ohio, May 1, 2017 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported third-quarter fiscal year 2017 revenues
of $31.8 billion, an increase of 4
percent. The company also reported a decline in GAAP operating
earnings of 8 percent to $605 million
and in non-GAAP operating earnings of 4 percent to $759 million. GAAP diluted earnings per share
(EPS) increased 3 percent to $1.20,
while non-GAAP diluted EPS increased 7 percent to $1.53.
"The third quarter came in largely as we expected, in a dynamic
market environment, as we noted a few weeks ago," said George S. Barrett, chairman and chief executive
officer of Cardinal Health. "Many of our lines of business continue
to perform well, particularly naviHealth, our medical/surgical
consumables lines, and our Specialty Solutions group. We are also
extremely excited about our recent announcement to acquire
Medtronic's Patient Care, Deep Vein Thrombosis and Nutritional
Insufficiency businesses. These product lines are natural
extensions to the work that we're doing across the continuum of
care from acute care, to surgery centers, to long-term care, into
the retail setting and even to the consumer."
Q3 FY17 summary
|
Q3
FY17
|
Q3
FY16
|
Y/Y
|
Revenue
|
$ 31.8
billion
|
$ 30.7
billion
|
4%
|
|
|
|
|
Operating
earnings
|
$ 605
million
|
$ 656
million
|
(8)%
|
Non-GAAP operating
earnings
|
$ 759
million
|
$ 788
million
|
(4)%
|
|
|
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$ 381
million
|
$ 386
million
|
(1)%
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$ 485
million
|
$ 472
million
|
3%
|
|
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$ 1.20
|
$ 1.17
|
3%
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$ 1.53
|
$ 1.43
|
7%
|
Diluted EPS for the quarter benefitted from a lower effective
tax rate and fewer weighted average shares outstanding than the
same quarter in the prior fiscal year.
Segment results
Pharmaceutical segment
Third-quarter revenue for the Pharmaceutical segment increased 3
percent to $28.4 billion due to
performance from the Specialty business and growth from
Pharmaceutical Distribution customers.
Segment profit for the quarter decreased 7 percent to
$611 million. This decrease was
driven by generic pharmaceutical pricing, the final quarterly
impact of the loss of Safeway, and the company's ongoing investment
in its pharmaceutical IT platform. These were partially offset by
solid performance from Red Oak Sourcing.
|
Q3
FY17
|
Q3
FY16
|
Y/Y
|
Revenue
|
$ 28.4
billion
|
$ 27.5
billion
|
3%
|
Segment
profit
|
$ 611
million
|
$ 660
million
|
(7)%
|
Medical segment
Third-quarter revenue for the Medical segment increased 9
percent to $3.4 billion driven by
contributions from new and existing customers
Segment profit increased 16 percent to $148 million, reflecting solid performance from
naviHealth, Cardinal Health Branded products (excluding Cordis) and
distribution services. A decline in Cordis performance
reflected increased SG&A expenses and the net favorable impact
of two larger inventory adjustments in the year-over-year
comparison.
|
Q3
FY17
|
Q3
FY16
|
Y/Y
|
Revenue
|
$ 3.4
billion
|
$ 3.1
billion
|
9%
|
Segment
profit
|
$ 148
million
|
$ 128
million
|
16%
|
Fiscal year 2017 outlook
As previously disclosed, the company does not provide GAAP EPS
outlook, because it is unable to reliably forecast most of the
items that are excluded from GAAP EPS to calculate non-GAAP EPS.
These items could cause EPS to differ materially from non-GAAP EPS.
See "Use of Non-GAAP Measures" following the attached schedules for
additional explanation.
The company reaffirms its expectation that its fiscal 2017
non-GAAP EPS from continuing operations will be at the bottom of
its previous guidance range of $5.35 to
$5.50. Additional details about this outlook can be found in
the company's press release issued April 18.
Additional third-quarter and recent highlights
- Announced intent to acquire Medtronic's Patient Care, Deep Vein
Thrombosis and Nutritional Insufficiency businesses for
$6.1 billion, enabling Cardinal
Health to add an industry-leading portfolio of products, deepen its
presence in the post-acute channel and increase its geographic
scale
- Acquired rights to Navidea's Lymphoseek, a radiopharmaceutical
diagnostic imaging agent
- Named on Fortune's 2017 "World's Most Admired Companies"
list
- Recognized among the nation's best workplaces for female
advancement as a Top Company for Executive Women by the National
Association for Female Executives
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss third-quarter
results. The webcast and corresponding slide presentation will be
available on the Investor Relations page at ir.cardinalhealth.com.
No access code is required.
Presentation slides and a webcast replay will be available on
the Cardinal Health website at ir.cardinalhealth.com until
April 30, 2018.
Upcoming webcasted investor events
- Goldman Sachs 38th Annual Global Healthcare
Conference on June 14 at 10:40 a.m. Pacific in Rancho Palos Verdes, Calif.
About Cardinal Health
Cardinal Health, Inc. is a
global, integrated healthcare services and products company,
providing customized solutions for hospitals, healthcare systems,
pharmacies, ambulatory surgery centers, clinical laboratories and
physician offices worldwide. The company provides clinically proven
medical products and pharmaceuticals and cost-effective solutions
that enhance supply chain efficiency from hospital to home.
Cardinal Health connects patients, providers, payers, pharmacists
and manufacturers for integrated care coordination and better
patient management. Backed by nearly 100 years of experience, with
more than 40,000 employees in nearly 60 countries, Cardinal Health
ranks among the top 25 on the Fortune 500. For more
information, visit cardinalhealth.com, follow @CardinalHealth on
Twitter and connect on LinkedIn at linkedin.com/
company/cardinal-health.
1GAAP refers to U.S. generally accepted accounting
principles. This news release includes GAAP financial measures as
well as non-GAAP financial measures, which are financial measures
not calculated in accordance with GAAP. See "Use of Non-GAAP
Measures" following the attached schedules for definitions of the
non-GAAP financial measures presented in this news release, and see
the attached schedules for reconciliations of the differences
between the non-GAAP financial measures and their most directly
comparable GAAP financial measures.
Cardinal Health uses its website as a channel of distribution
for material company information. Important information, including
news releases, financial information, earnings and analyst
presentations, and information about upcoming presentations and
events is routinely posted and accessible on the Investor Relations
page at ir.cardinalhealth.com. In addition, the website allows
investors and other interested persons to sign up automatically to
receive e-mail alerts when the company posts news releases, SEC
filings and certain other information on its website.
Cautions concerning forward-looking statements
This
news release contains forward-looking statements addressing
expectations, prospects, estimates and other matters that are
dependent upon future events or developments. These statements may
be identified by words such as "expect," "anticipate," "intend,"
"plan," "believe," "will," "should," "could," "would," "project,"
"continue," "likely," and similar expressions, and include
statements reflecting future results or guidance, statements of
outlook and expense accruals. These matters are subject to risks
and uncertainties that could cause actual results to differ
materially from those projected, anticipated or implied. These
risks and uncertainties include competitive pressures in Cardinal
Health's various lines of business; the amount or rate of
pharmaceutical price appreciation or deflation and the timing of
and benefit from generic pharmaceutical introductions; the ability
to maintain the benefits from the generic sourcing venture with CVS
Health; the ability to successfully complete the acquisition of the
Patient Recovery businesses from Medtronic on a timely basis,
including obtaining required regulatory approvals and the
satisfaction of other conditions; the conditions of the credit
markets and our ability to issue debt to fund the acquisition on
acceptable terms; if the acquisition of the Patient Recovery
businesses is completed, the ability to retain the acquired
businesses' customers and employees, the ability to successfully
integrate the acquired businesses into our operations and the
ability to achieve the expected synergies as well as accretion in
earnings; risks associated with the anticipated increase of
indebtedness and potential limitations on our ability to use our
cash for other purposes; our ability to successfully integrate and
realize the benefits from our acquisition of Cordis; the risk of
non-renewal or a default under one or more key customer or supplier
arrangements or changes to the terms of or level of purchases under
those arrangements; uncertainties due to government health care
reform including federal health care reform legislation; changes in
the distribution patterns or reimbursement rates for health care
products and services; the effects of any investigation or action
by any regulatory authority; and changes in foreign currency rates
and the cost of commodities such as oil-based resins, cotton, latex
and diesel fuel. Cardinal Health is subject to additional risks and
uncertainties described in Cardinal Health's Form 10-K, Form 10-Q
and Form 8-K reports and exhibits to those reports. This news
release reflects management's views as of May 1, 2017. Except to the extent required by
applicable law, Cardinal Health undertakes no obligation to update
or revise any forward-looking statement.
Schedule
1
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
|
|
|
Third
Quarter
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
Revenue
|
$
|
31,821
|
|
|
$
|
30,662
|
|
|
4
|
%
|
Cost of products
sold
|
30,093
|
|
|
28,973
|
|
|
4
|
%
|
Gross
margin
|
1,728
|
|
|
1,689
|
|
|
2
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
960
|
|
|
914
|
|
|
5
|
%
|
Restructuring and
employee severance
|
15
|
|
|
6
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
128
|
|
|
108
|
|
|
N.M.
|
Impairments and loss
on disposal of assets, net
|
2
|
|
|
—
|
|
|
N.M.
|
Litigation charges,
net
|
18
|
|
|
5
|
|
|
N.M.
|
Operating
earnings
|
605
|
|
|
656
|
|
|
(8)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(5)
|
|
|
—
|
|
|
N.M.
|
Interest expense,
net
|
46
|
|
|
44
|
|
|
N.M.
|
Earnings before
income taxes
|
564
|
|
|
612
|
|
|
(8)
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
182
|
|
|
226
|
|
|
(19)
|
%
|
Net
earnings
|
382
|
|
|
386
|
|
|
(1)
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
|
—
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
381
|
|
|
$
|
386
|
|
|
(1)
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
1.21
|
|
|
$
|
1.18
|
|
|
3
|
%
|
Diluted
|
1.20
|
|
|
1.17
|
|
|
3
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
316
|
|
|
328
|
|
|
|
Diluted
|
318
|
|
|
331
|
|
|
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
|
|
|
Year-to-Date
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
Revenue
|
$
|
97,010
|
|
|
$
|
90,162
|
|
|
8
|
%
|
Cost of products
sold
|
92,089
|
|
|
85,285
|
|
|
8
|
%
|
Gross
margin
|
4,921
|
|
|
4,877
|
|
|
1
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
2,792
|
|
|
2,678
|
|
|
4
|
%
|
Restructuring and
employee severance
|
31
|
|
|
19
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
365
|
|
|
327
|
|
|
N.M.
|
Impairments and loss
on disposal of assets, net
|
15
|
|
|
17
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
37
|
|
|
(3)
|
|
|
N.M.
|
Operating
earnings
|
1,681
|
|
|
1,839
|
|
|
(9)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(2)
|
|
|
5
|
|
|
N.M.
|
Interest expense,
net
|
134
|
|
|
134
|
|
|
N.M.
|
Earnings before
income taxes
|
1,549
|
|
|
1,700
|
|
|
(9)
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
533
|
|
|
604
|
|
|
(12)
|
%
|
Net
earnings
|
1,016
|
|
|
1,096
|
|
|
(7)
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(2)
|
|
|
(1)
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
1,014
|
|
|
$
|
1,095
|
|
|
(7)
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
3.19
|
|
|
$
|
3.33
|
|
|
(4)
|
%
|
Diluted
|
3.17
|
|
|
3.30
|
|
|
(4)
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
318
|
|
|
328
|
|
|
|
Diluted
|
320
|
|
|
331
|
|
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
|
|
|
(in
millions)
|
March 31,
2017
|
|
June 30,
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
1,368
|
|
|
$
|
2,356
|
|
Trade receivables,
net
|
7,505
|
|
|
7,405
|
|
Inventories,
net
|
11,641
|
|
|
10,615
|
|
Prepaid expenses and
other
|
1,769
|
|
|
1,580
|
|
Total current
assets
|
22,283
|
|
|
21,956
|
|
|
|
|
|
Property and
equipment, net
|
1,849
|
|
|
1,796
|
|
Goodwill and other
intangibles, net
|
9,287
|
|
|
9,426
|
|
Other
assets
|
755
|
|
|
944
|
|
Total
assets
|
$
|
34,174
|
|
|
$
|
34,122
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
17,535
|
|
|
$
|
17,306
|
|
Current portion of
long-term obligations and other short-term borrowings
|
607
|
|
|
587
|
|
Other accrued
liabilities
|
1,654
|
|
|
1,808
|
|
Total current
liabilities
|
19,796
|
|
|
19,701
|
|
|
|
|
|
Long-term
obligations, less current portion
|
4,854
|
|
|
4,952
|
|
Deferred income taxes
and other liabilities
|
2,742
|
|
|
2,781
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
117
|
|
|
117
|
|
|
|
|
|
Total Cardinal
Health, Inc. shareholders' equity
|
6,646
|
|
|
6,554
|
|
Noncontrolling
interests
|
19
|
|
|
17
|
|
Total shareholders'
equity
|
6,665
|
|
|
6,571
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
34,174
|
|
|
$
|
34,122
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
382
|
|
|
$
|
386
|
|
|
$
|
1,016
|
|
|
$
|
1,096
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
186
|
|
|
159
|
|
|
525
|
|
|
465
|
|
Impairments and loss
on sale of other investments
|
1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Impairments and loss
on disposal of assets, net
|
3
|
|
|
—
|
|
|
15
|
|
|
17
|
|
Share-based
compensation
|
26
|
|
|
26
|
|
|
73
|
|
|
82
|
|
Provision for bad
debts
|
17
|
|
|
16
|
|
|
46
|
|
|
51
|
|
Change in fair value
of contingent consideration obligation
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(16)
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Decrease/(increase)
in trade receivables
|
39
|
|
|
(328)
|
|
|
(107)
|
|
|
(721)
|
|
Decrease/(increase)
in inventories
|
284
|
|
|
108
|
|
|
(1,010)
|
|
|
(1,457)
|
|
Increase/(decrease)
in accounts payable
|
(1,338)
|
|
|
408
|
|
|
225
|
|
|
2,839
|
|
Other accrued
liabilities and operating items, net
|
202
|
|
|
146
|
|
|
(327)
|
|
|
(26)
|
|
Net cash provided
by/(used in) operating activities
|
(198)
|
|
|
919
|
|
|
460
|
|
|
2,330
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(102)
|
|
|
(99)
|
|
|
(113)
|
|
|
(3,383)
|
|
Additions to property
and equipment
|
(80)
|
|
|
(109)
|
|
|
(293)
|
|
|
(284)
|
|
Purchase of
available-for-sale securities and other investments
|
(63)
|
|
|
(62)
|
|
|
(188)
|
|
|
(150)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
43
|
|
|
42
|
|
|
115
|
|
|
99
|
|
Proceeds from
maturities of available-for-sale securities
|
10
|
|
|
18
|
|
|
49
|
|
|
37
|
|
Proceeds from
divestitures and disposal of property and equipment and held for
sale assets
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net cash used in
investing activities
|
(192)
|
|
|
(210)
|
|
|
(429)
|
|
|
(3,681)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
(3)
|
|
|
—
|
|
|
(3)
|
|
|
(23)
|
|
Net change in
short-term borrowings
|
(8)
|
|
|
(5)
|
|
|
25
|
|
|
34
|
|
Net purchase of
noncontrolling interests
|
—
|
|
|
(10)
|
|
|
(12)
|
|
|
(10)
|
|
Reduction of
long-term obligations
|
—
|
|
|
(1)
|
|
|
(60)
|
|
|
(5)
|
|
Proceeds from
interest rate swap terminations
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
20
|
|
|
4
|
|
|
20
|
|
|
(3)
|
|
Excess tax benefits
from share-based compensation
|
5
|
|
|
1
|
|
|
37
|
|
|
33
|
|
Dividends on common
shares
|
(142)
|
|
|
(127)
|
|
|
(435)
|
|
|
(386)
|
|
Purchase of treasury
shares
|
—
|
|
|
(300)
|
|
|
(600)
|
|
|
(300)
|
|
Net cash used in
financing activities
|
(128)
|
|
|
(438)
|
|
|
(1,014)
|
|
|
(660)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
5
|
|
|
3
|
|
|
(5)
|
|
|
(7)
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
(513)
|
|
|
274
|
|
|
(988)
|
|
|
(2,018)
|
|
Cash and equivalents
at beginning of period
|
1,881
|
|
|
2,324
|
|
|
2,356
|
|
|
4,616
|
|
Cash and
equivalents at end of period
|
$
|
1,368
|
|
|
$
|
2,598
|
|
|
$
|
1,368
|
|
|
$
|
2,598
|
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
|
Segment Business
Analysis
|
|
|
|
|
|
|
Third
Quarter
|
|
|
Third
Quarter
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
28,406
|
|
|
$
|
27,527
|
|
|
Amount
|
$
|
3,418
|
|
|
$
|
3,138
|
|
Growth
rate
|
3
|
%
|
|
22
|
%
|
|
Growth
rate
|
9
|
%
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
611
|
|
|
$
|
660
|
|
|
Amount
|
$
|
148
|
|
|
$
|
128
|
|
Growth
rate
|
(7)
|
%
|
|
16
|
%
|
|
Growth
rate1
|
16
|
%
|
|
26
|
%
|
Segment profit
margin
|
2.15
|
%
|
|
2.40
|
%
|
|
Segment profit
margin
|
4.34
|
%
|
|
4.08
|
%
|
|
|
1.
|
Segment profit for
three months ended March 31, 2016 includes a $21 million
unfavorable impact of Cordis-related inventory fair value step-up.
Excluding this step-up, year-over-year Medical segment profit
declined 1 percent and grew 47 percent for the three months ended
March 31, 2017 and 2016, respectively.
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended
March 31, 2017 was $31,821
million, which included total segment revenue of
$31,824 million and Corporate revenue
of $(3) million. Total consolidated
revenue for the three months ended March 31, 2016 was
$30,662 million, which included total
segment revenue of $30,665 million
and Corporate revenue of $(3)
million. Corporate revenue consists primarily of elimination
of inter-segment revenue and other revenue not allocated to the
segments.
Total consolidated operating earnings for the three months ended
March 31, 2017 were $605
million, which included total segment profit of $759 million and Corporate costs of $(154) million. Total consolidated operating
earnings for the three months ended March 31, 2016 were
$656 million, which included total
segment profit of $788 million and
Corporate costs of $(132) million.
Corporate includes, among other things, LIFO charges/(credits),
restructuring and employee severance, amortization and other
acquisition-related costs, impairments and (gain)/loss on disposal
of assets, litigation (recoveries)/charges, net and certain
investment spending that are not allocated to the segments.
Schedule
6
|
Cardinal Health,
Inc. and Subsidiaries
|
Segment Business
Analysis
|
|
|
|
|
|
|
Year-to-Date
|
|
|
Year-to-Date
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
86,911
|
|
|
$
|
80,954
|
|
|
Amount
|
$
|
10,107
|
|
|
$
|
9,220
|
|
Growth
rate
|
7
|
%
|
|
22
|
%
|
|
Growth
rate
|
10
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,682
|
|
|
$
|
1,945
|
|
|
Amount
|
$
|
435
|
|
|
$
|
335
|
|
Growth
rate
|
(14)
|
%
|
|
25
|
%
|
|
Growth
rate1
|
30
|
%
|
|
1
|
%
|
Segment profit
margin
|
1.94
|
%
|
|
2.40
|
%
|
|
Segment profit
margin
|
4.30
|
%
|
|
3.63
|
%
|
|
|
1.
|
Segment profit for
the six months ended March 31, 2016 includes the $43 million
unfavorable impact of the Cordis-related inventory fair value
step-up. Excluding this step-up, year-over-year Medical segment
profit growth was 15 percent and 14 percent for the nine months
ended March 31, 2017 and 2016, respectively.
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the nine months ended
March 31, 2017 was $97,010
million, which included total segment revenue of
$97,018 million and Corporate revenue
of $(8) million. Total consolidated
revenue for the nine months ended March 31, 2016 was
$90,162 million, which included total
segment revenue of $90,174 million
and Corporate revenue of $(12)
million. Corporate revenue consists primarily of
elimination of inter-segment revenue and other revenue not
allocated to the segments.
Total consolidated operating earnings for the nine months ended
March 31, 2017 were $1,681
million, which included total segment profit of $2,117 million and Corporate costs of
$(436) million. Total consolidated
operating earnings for the nine months ended March 31, 2016
were $1,839 million, which included
total segment profit of $2,280
million and Corporate costs of $(441)
million. Corporate includes, among other things, LIFO
charges/(credits), restructuring and employee severance,
amortization and other acquisition-related costs, impairments and
(gain)/loss on disposal of assets, litigation (recoveries)/charges,
net and certain investment spending that are not allocated to the
segments.
Schedule
7
|
Cardinal Health,
Inc. and Subsidiaries
|
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Operating
|
Earnings
|
Provision
|
|
|
|
|
|
|
Margin
|
|
Earnings
|
Before
|
for
|
|
Net
|
|
Diluted
|
|
Gross
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
(in millions, except
per common share
amounts)
|
Margin
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2,3,4
|
Growth
Rate
|
Third Quarter
2017
|
GAAP
|
$
|
1,728
|
|
2
|
%
|
$
|
605
|
|
(8)
|
%
|
$
|
564
|
|
$
|
182
|
|
$
|
381
|
|
(1)
|
%
|
$
|
1.20
|
|
3
|
%
|
LIFO
charges/(credits)
|
(9)
|
|
|
(9)
|
|
|
(9)
|
|
(4)
|
|
(5)
|
|
|
(0.02)
|
|
|
Restructuring and
employee severance
|
—
|
|
|
15
|
|
|
15
|
|
6
|
|
9
|
|
|
0.03
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
128
|
|
|
128
|
|
41
|
|
87
|
|
|
0.27
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
2
|
|
|
2
|
|
—
|
|
2
|
|
|
0.01
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
18
|
|
|
18
|
|
7
|
|
11
|
|
|
0.03
|
|
|
Non-GAAP
|
$
|
1,719
|
|
1
|
%
|
$
|
759
|
|
(4)
|
%
|
$
|
718
|
|
$
|
232
|
|
$
|
485
|
|
3
|
%
|
$
|
1.53
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
2016
|
GAAP
|
$
|
1,689
|
|
16
|
%
|
$
|
656
|
|
11
|
%
|
$
|
612
|
|
$
|
226
|
|
$
|
386
|
|
6
|
%
|
$
|
1.17
|
|
7
|
%
|
LIFO
charges/(credits)
|
12
|
|
|
12
|
|
|
12
|
|
4
|
|
8
|
|
|
0.02
|
|
|
Restructuring and
employee severance
|
—
|
|
|
6
|
|
|
6
|
|
2
|
|
4
|
|
|
0.01
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
108
|
|
|
108
|
|
37
|
|
71
|
|
|
0.21
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
5
|
|
|
5
|
|
2
|
|
3
|
|
|
0.01
|
|
|
Non-GAAP
|
$
|
1,702
|
|
17
|
%
|
$
|
788
|
|
20
|
%
|
$
|
744
|
|
$
|
272
|
|
$
|
472
|
|
19
|
%
|
$
|
1.43
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Operating
|
Earnings
|
Provision
|
|
|
|
|
|
|
Margin
|
|
Earnings
|
Before
|
for
|
|
Net
|
|
Diluted
|
|
Gross
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2
|
Growth
Rate
|
Year-to-Date
2017
|
GAAP
|
$
|
4,921
|
|
1
|
%
|
$
|
1,681
|
|
(9)
|
%
|
$
|
1,549
|
|
$
|
533
|
|
$
|
1,014
|
|
(7)
|
%
|
$
|
3.17
|
|
(4)
|
%
|
LIFO
charges/(credits)
|
—
|
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Restructuring and
employee severance
|
—
|
|
|
31
|
|
|
31
|
|
12
|
|
19
|
|
|
0.06
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
365
|
|
|
365
|
|
120
|
|
245
|
|
|
0.76
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
15
|
|
|
15
|
|
4
|
|
11
|
|
|
0.03
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
37
|
|
|
37
|
|
14
|
|
23
|
|
|
0.07
|
|
|
Non-GAAP
|
$
|
4,921
|
|
—
|
%
|
$
|
2,129
|
|
(5)
|
%
|
$
|
1,997
|
|
$
|
684
|
|
$
|
1,311
|
|
(4)
|
%
|
$
|
4.10
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2016
|
GAAP
|
$
|
4,877
|
|
15
|
%
|
$
|
1,839
|
|
15
|
%
|
$
|
1,700
|
|
$
|
604
|
|
$
|
1,095
|
|
19
|
%
|
$
|
3.30
|
|
20
|
%
|
LIFO
charges/(credits)
|
51
|
|
|
51
|
|
|
51
|
|
20
|
|
31
|
|
|
0.10
|
|
|
Restructuring and
employee severance
|
—
|
|
|
19
|
|
|
19
|
|
7
|
|
12
|
|
|
0.04
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
327
|
|
|
327
|
|
115
|
|
212
|
|
|
0.64
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
17
|
|
|
17
|
|
7
|
|
10
|
|
|
0.03
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
(3)
|
|
|
(3)
|
|
(3)
|
|
—
|
|
|
—
|
|
|
Non-GAAP
|
$
|
4,929
|
|
16
|
%
|
$
|
2,251
|
|
21
|
%
|
$
|
2,112
|
|
$
|
751
|
|
$
|
1,361
|
|
20
|
%
|
$
|
4.10
|
|
21
|
%
|
|
|
1
|
For more information
on these measures, refer to the Use of Non-GAAP Financial Measures
and Definitions schedules.
|
|
|
2
|
attributable to
Cardinal Health, Inc.
|
|
|
3
|
GAAP diluted EPS for
the three months ended March 31, 2017 compared to the prior
year period was favorably impacted by $0.13, which includes $0.08
due to change in the effective tax rate and $0.05 due to the change
in weighted average shares outstanding. The change in GAAP diluted
EPS due to the effective tax rate is calculated as ((GAAP Earnings
before Income Taxes for the current period times (one minus the
current period GAAP Effective Tax Rate)) minus (GAAP Earnings
before Income Taxes for the current period times (one minus the
prior period GAAP Effective Tax Rate))) divided by the current
period weighted average shares outstanding. The change in GAAP
diluted EPS due to the weighted average shares outstanding is
calculated as (GAAP Net Earnings for the current period divided by
the current period weighted average shares outstanding) minus (GAAP
Net Earnings for the current period divided by the prior period
weighted average shares outstanding).
|
|
|
4
|
Non-GAAP diluted EPS
for the three months ended March 31, 2017 compared to the
prior year period was favorably impacted by $0.16, which includes
$0.10 due to change in the effective tax rate and $0.06 due to the
change in weighted average shares outstanding. The change in
Non-GAAP diluted EPS due to the effective tax rate is calculated as
((Non-GAAP Earnings before Income Taxes for the current period
times (one minus the current period Non-GAAP Effective Tax Rate))
minus (Non-GAAP Earnings before Income Tax for the current period
times (one minus the prior period Non-GAAP Effective Tax Rate)))
divided by the current period weighted average shares outstanding.
The change in Non-GAAP diluted EPS due to the weighted average
shares outstanding is calculated as (Non-GAAP Net Earnings for the
current period divided by the current period weighted average
shares outstanding) minus (Non-GAAP Net Earnings for the current
period divided by the prior period weighted average shares
outstanding).
|
The sum of the components may not equal the total due to
rounding.
We apply varying tax rates depending on the item's nature and
tax jurisdiction where it is incurred.
There were no losses on extinguishment of debt during the
periods presented.
Schedule
8
|
Cardinal Health,
Inc. and Subsidiaries
|
GAAP / Non-GAAP
Reconciliation
|
|
|
|
Third
Quarter
|
(in
millions)
|
2017
|
|
2016
|
GAAP effective tax
rate
|
32.3
|
%
|
|
36.9
|
%
|
|
|
|
|
Non-GAAP effective
tax rate
|
|
|
|
Earnings before
income taxes
|
$
|
564
|
|
|
$
|
612
|
|
LIFO
charges/(credits)
|
(9)
|
|
|
12
|
|
Restructuring and
employee severance
|
15
|
|
|
6
|
|
Amortization and
other acquisition-related costs
|
128
|
|
|
108
|
|
Impairments and loss
on disposal of assets
|
2
|
|
|
—
|
|
Litigation
(recoveries)/charges, net
|
18
|
|
|
5
|
|
Adjusted earnings
before income taxes
|
$
|
718
|
|
|
$
|
744
|
|
|
|
|
|
Provision for income
taxes
|
$
|
182
|
|
|
$
|
226
|
|
LIFO
charges/(benefits) tax benefit/(expense)
|
(4)
|
|
|
4
|
|
Restructuring and
employee severance tax benefit
|
6
|
|
|
2
|
|
Amortization and
other acquisition-related costs tax benefit
|
41
|
|
|
37
|
|
Litigation
(recoveries)/charges, net tax benefit/(expense)
|
7
|
|
|
2
|
|
Adjusted provision
for income taxes
|
$
|
232
|
|
|
$
|
272
|
|
|
|
|
|
Non-GAAP effective
tax rate
|
32.3
|
%
|
|
36.6
|
%
|
The sum of the components may not equal the total due to
rounding.
We apply varying tax rates depending on the item's nature and
tax jurisdiction where it is incurred.
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP").
In addition to analyzing our business based on financial
information prepared in accordance with GAAP, we use these non-GAAP
financial measures internally to evaluate our performance, evaluate
the balance sheet, engage in financial and operational planning,
and determine incentive compensation because we believe that these
measures provide additional perspective on and, in some
circumstances are more closely correlated to, the performance of
our underlying, ongoing business. We provide these non-GAAP
financial measures to investors as supplemental metrics to assist
readers in assessing the effects of items and events on our
financial and operating results on a year-over-year basis and in
comparing our performance to that of our competitors. However, the
non-GAAP financial measures that we use may be calculated
differently from, and therefore may not be comparable to, similarly
titled measures used by other companies. The non-GAAP financial
measures disclosed by us should not be considered a substitute for,
or superior to, financial measures calculated in accordance with
GAAP, and the financial results calculated in accordance with GAAP
and reconciliations to those financial statements set forth below
should be carefully evaluated.
Exclusions from Non-GAAP Financial Measures
Management believes it is useful to exclude the following items
from the non-GAAP measures presented in this earnings release for
its own and for investors' assessment of the business for the
reasons identified below:
- LIFO charges and credits are excluded because the factors that
drive last-in first-out ("LIFO") inventory charges or credits, such
as pharmaceutical manufacturer price appreciation or deflation and
year-end inventory levels (which can be meaningfully influenced by
customer buying behavior immediately preceding our fiscal
year-end), are largely out of our control and cannot be accurately
predicted. The exclusion of LIFO charges from non-GAAP metrics
allows for a better comparison of our current financial results to
our historical financial results and to our peer group companies'
financial results.
- Restructuring and employee severance costs are excluded because
they relate to programs in which we fundamentally change our
operations and because they are not part of the ongoing operations
of our underlying business, which includes normal levels of
reinvestment in the business.
- Amortization and other acquisition-related costs are excluded
primarily for consistency with the presentation of the financial
results of our peer group companies. Additionally, amortization of
acquisition-related intangible assets are non-cash amounts, which
are variable in amount and frequency and are significantly impacted
by the timing and size of acquisitions, so their exclusion allows
for better comparison of historical, current and forecasted
financial results. We also exclude other acquisition-related costs
because they are directly related to an acquisition but do not meet
the criteria to be recognized on the acquired entity's initial
balance sheet as part of the purchase price allocation. They are
also significantly impacted by the timing and size of
acquisitions.
- Impairments and gains or loss on disposal of assets are
excluded because they do not occur in or reflect the ordinary
course of our ongoing business operations and their exclusion
results in a metric that more meaningfully reflects the
sustainability of our operating performance.
- Litigation recoveries or charges, net are excluded because they
often relate to events that may have occurred in prior or multiple
periods, and are inherently unpredictable in timing and amount. In
the third quarter of fiscal 2017, consistent with the presentation
of financial results by peer medical device companies, litigation
recoveries or charges, net began to include accrued losses and
legal fees, net of expected recoveries, related to mass tort
product liability claims, including claims for injuries allegedly
caused by Cordis OptEase and TrapEase inferior vena cava (IVC)
filter products. [Such amounts would not have materially
affected litigations recoveries or charges in prior periods, so
have not been reclassified for those periods.]
- Loss on extinguishment of debt is excluded because it does not
typically occur in the normal course of business operations and may
obscure analysis of trends and financial performance. Additionally,
the amount and frequency of this type of charge is not consistent
and is significantly impacted by the timing and size of debt
financing transactions.
The tax effect for each of the items listed above is determined
using the tax rate and other tax attributes applicable to the item
and the jurisdiction(s) in which the item is recorded. The gross,
tax and net impact of each item are presented with our GAAP to
non-GAAP reconciliations.
Forward Looking Non-GAAP Measures
In this earnings release, the Company presents its outlook for
fiscal 2017 non-GAAP EPS. The Company does not provide
EPS outlook, which is the most directly comparable GAAP measure to
non-GAAP EPS, because changes in the items that the Company
excludes from EPS to calculate non-GAAP EPS, described above, can
be dependent on future events that are less capable of being
controlled or reliably predicted by management and are not part of
the Company's routine operating activities. Additionally, due to
their unpredictability, management does not forecast many of the
excluded items for internal use and therefore cannot create or rely
on an EPS outlook.
The timing and amount of any of the excluded items could
significantly impact the Company's fiscal 2017 EPS. Over the past
five fiscal years, the excluded items have lowered the Company's
EPS from $0.14 to $2.76, which
includes a goodwill impairment charge of $2.32 per share related to our Nuclear
Pharmacy Services division that we recognized in fiscal
2013.
Definitions
Growth rate calculation: Growth rates in this earnings
release are determined by dividing the difference between current
period results and prior period results by prior period
results.
Non-GAAP operating earnings: operating earnings excluding
(1) LIFO charges/(credits), (2) restructuring and employee
severance, (3) amortization and other acquisition-related costs,
(4) impairments and (gain)/loss on disposal of assets and (5)
litigation (recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings before
income taxes excluding (1) LIFO charges/(credits), (2)
restructuring and employee severance, (3) amortization and other
acquisition-related costs, (4) impairments and (gain)/loss on
disposal of assets, (5) litigation (recoveries)/charges, net and
(6) loss on extinguishment of debt.
Non-GAAP effective tax rate: (provision for income taxes
adjusted for (1) LIFO charges/(credits), (2) restructuring and
employee severance, (3) amortization and other acquisition-related
costs, (4) impairments and (gain)/loss on disposal of assets,
(5) litigation (recoveries)/charges, net, and (6) loss on
extinguishment of debt) divided by (earnings before income taxes
adjusted for the same six items).
Non-GAAP net earnings attributable to Cardinal Health,
Inc.: net earnings attributable to Cardinal Health, Inc.
excluding (1) LIFO charges/(credits), (2) restructuring and
employee severance, (3) amortization and other acquisition-related
costs, (4) impairments and (gain)/loss on disposal of assets, (5)
litigation (recoveries)/charges, net and (6) loss on extinguishment
of debt, each net of tax.
Non-GAAP diluted EPS attributable to Cardinal Health,
Inc.: non-GAAP net earnings attributable to Cardinal Health,
Inc. divided by diluted weighted-average shares outstanding.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cardinal-health-reports-third-quarter-results-for-fiscal-year-2017-300448594.html
SOURCE Cardinal Health