DUBLIN, Ohio, Aug. 2, 2017 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported fourth-quarter fiscal year 2017 revenues
of $33 billion, an increase of 5
percent from the fourth quarter last year, and fiscal 2017 revenues
of $130 billion, an increase of 7
percent from the same period last year. For the quarter, GAAP
diluted earnings per share (EPS) decreased 16 percent to
$0.86, while non-GAAP diluted EPS
increased 15 percent to $1.31. GAAP
diluted EPS for fiscal year 2017 decreased 7 percent to
$4.03, and non-GAAP diluted EPS
increased 3 percent to $5.40.
"While these last 12 months were clearly a dynamic period in
healthcare and certainly presented challenges for our fiscal 17, it
was also a year in which we took important actions to strengthen
our market positioning, grow our scale, add new, long-term drivers
of growth, and improve the overall balance of our integrated
portfolio," said George Barrett,
chairman and CEO of Cardinal Health. "In spite of the challenges of
the year, our team was able to deliver growth in non-GAAP EPS."
Q4 and year-end FY17 summary
|
Q4
FY17
|
Q4
FY16
|
Y/Y
|
FY17
|
FY16
|
Y/Y
|
Revenue
|
$33.0
billion
|
$31.4
billion
|
5%
|
$130.0
billion
|
$121.5
billion
|
7%
|
|
|
|
|
|
|
|
Operating
earnings
|
$439
million
|
$620
million
|
(29%)
|
$2,120
million
|
$2,459
million
|
(14%)
|
Non-GAAP
operating
earnings
|
$640
million
|
$643
million
|
(1%)
|
$2,769
million
|
$2,895
million
|
(4%)
|
|
|
|
|
|
|
|
Net earnings
attributable to
Cardinal Health, Inc.
|
$274
million
|
$333
million
|
(18%)
|
$1,288
million
|
$1,427
million
|
(10%)
|
Non-GAAP net
earnings attributable to
Cardinal Health, Inc.
|
$416
million
|
$372
million
|
12%
|
$1,727
million
|
$1,732
million
|
-
|
|
|
|
|
|
|
|
Diluted EPS
attributable to
Cardinal Health, Inc.
|
$0.86
|
$1.02
|
(16%)
|
$4.03
|
$4.32
|
(7%)
|
Non-GAAP
diluted EPS
attributable to
Cardinal Health, Inc.
|
$1.31
|
$1.14
|
15%
|
$5.40
|
$5.24
|
3%
|
Diluted EPS for the quarter and year benefitted from a lower
effective tax rate and fewer weighted average shares outstanding
than the prior-year periods.
Segment results
Pharmaceutical segment
Fourth-quarter revenue for the Pharmaceutical segment increased
5 percent to $29.6 billion due to
growth from Pharmaceutical Distribution customers and strong
performance from the Specialty Solutions business. Segment profit
decreased 7 percent to $505 million.
This decrease was driven by generic pharmaceutical pricing and the
company's ongoing investment in its Pharmaceutical IT platform.
These were partially offset by solid performance from Red Oak
Sourcing.
Full-year revenue for the Pharmaceutical segment increased 7
percent to $116.5 billion due to
growth from Pharmaceutical Distribution customers and strong
performance from the Specialty Solutions business. Segment profit
for the year decreased 12 percent to $2.2
billion driven by generic pharmaceutical pricing, and to a
lesser extent, the impact of the loss of Safeway and reduced levels
of branded manufacturer price appreciation. These were partially
offset by solid performance from Red Oak Sourcing.
|
Q4
FY17
|
Q4
FY16
|
Y/Y
|
FY17
|
FY16
|
Y/Y
|
Revenue
|
$29.6
billion
|
$28.2
billion
|
5%
|
$116.5
billion
|
$109.1
billion
|
7%
|
Segment
profit
|
$505
million
|
$542
million
|
(7%)
|
$2.2
billion
|
$2.5
billion
|
(12%)
|
Medical segment
Revenue for the Medical segment increased 6 percent to
$3.4 billion driven by contributions
from new and existing customers. Segment profit increased 13
percent to $138 million reflecting
solid performance from post-acute solutions, favorability from
compensation-related items and growth in distribution services.
These were partially offset by performance in Cardinal Health
Branded products (including Cordis).
Full-year revenue for the Medical segment increased 9 percent to
$13.5 billion due to contributions
from new and existing customers and, to a lesser extent,
acquisitions. Segment profit increased 25 percent to $572 million due to the contribution from
post-acute solutions, Cardinal Health Branded products (including
Cordis), favorability from compensation-related items and growth in
distribution services.
|
Q4
FY17
|
Q4
FY16
|
Y/Y
|
FY17
|
FY16
|
Y/Y
|
Revenue
|
$3.4
billion
|
$3.2
billion
|
6%
|
$13.5
billion
|
$12.4
billion
|
9%
|
Segment
profit
|
$138
million
|
$122
million
|
13%
|
$572
million
|
$457
million
|
25%
|
Outlook
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's fiscal year 2018 guidance range for non-GAAP
diluted EPS from continuing operations is $4.85 to $5.10. This guidance now reflects
incremental discrete items of $0.16
per share, identified since the early outlook announcement provided
in April.
In a further comment on the year ahead, Barrett said: "As we
indicated in our April early outlook, we expected our fiscal 2018
non-GAAP EPS to be down. Our perspective and operating
expectations have not meaningfully changed. We are, however, taking
some discrete actions, which will affect our EPS in FY18 and will
improve our trajectory for 2019 and beyond. And we are targeting
fiscal 2019 non-GAAP EPS of at least $5.60."
FY17 and recent highlights
- Completed the acquisition of Medtronic's Patient Care, Deep
Vein Thrombosis and Nutritional Insufficiency business for
$6.1 billion on July 29, 2017
- Acquired rights to Navidea's Lymphoseek, a radiopharmaceutical
diagnostic imaging agent
- Convened the 27th annual Retail Business Conference, which
provided one of the industry's largest lineups of continuing
education courses, buying opportunities, and access to Cardinal
Health solutions that help independent pharmacists diversify and
improve their business
- Through the Cordis business, became the exclusive U.S.
distributor of the Tryton Side Branch Stent, the first dedicated
bifurcation device to receive regulatory approval in the U.S. to
treat significant coronary bifurcation lesions
- Increased quarterly dividend by 3 percent to $0.4624 per share, or $1.85 on an annualized basis
Awards and recognition
Over the past year, Cardinal Health was recognized for
its leadership and commitment to diversity and sustainability,
including:
- Named on the 2017 World's Most Admired Companies list
by Fortune
- Recognized by the National Association for Female Executives as
a Top 60 Company for Executive Women for the sixth consecutive
year
- Included in Becker's Healthcare 150 Top Places to
Work in Healthcare 2017 listing
- Named to the Human Rights Campaign (HRC) Best Places to Work
for LGBT Equality for the fifth consecutive year based on ratings
in HRC's 2017 Corporate Equality Index
- Included in the Dow Jones Sustainability North American Company
Index for the eleventh consecutive year
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss fourth-quarter and
year-end results. To access the webcast and corresponding slide
presentation, go to 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
Aug. 1, 2018.
Upcoming webcasted investor events
- Robert W. Baird's Global Healthcare Conference on Thursday, Sept. 7 at 9:05
a.m. Eastern in New York
City
- Morgan Stanley 15th Annual Global Healthcare Conference on
Monday, Sept. 11 at 8:45 a.m. Eastern in New York City
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. Because Cardinal Health helps ensure
pharmacists and the consumers they serve have access to medications
they need while working to help prevent prescription drug
diversion, the company and its education partners created
Generation Rx, a national program to help prevent the misuse of
prescription medications. Backed by nearly 100 years of experience,
with approximately 50,000 employees in nearly 60 countries,
Cardinal Health ranks #15 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; risks associated with the recently completed acquisition of
Medtronic's Patient Recovery Business, including 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; 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
proposals to modify or repeal the Affordable Care Act;
uncertainties with respect to U.S. tax or trade laws, including
proposals relating to a "border adjustment tax" or new import
tariffs; changes in the distribution patterns or reimbursement
rates for health care products and services; the effects of any
investigation or action by any governmental or regulatory
authority, including litigation relating to opioid distribution;
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 August 2, 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)
|
|
|
Fourth
Quarter
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
Revenue
|
$
|
32,966
|
|
|
$
|
31,384
|
|
|
5
|
%
|
Cost of products
sold
|
31,343
|
|
|
29,719
|
|
|
5
|
%
|
Gross
margin
|
1,623
|
|
|
1,665
|
|
|
(3)
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
983
|
|
|
970
|
|
|
1
|
%
|
Restructuring and
employee severance
|
24
|
|
|
6
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
163
|
|
|
132
|
|
|
N.M.
|
Impairments and loss
on disposal of assets, net
|
3
|
|
|
3
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
11
|
|
|
(66)
|
|
|
N.M.
|
Operating
earnings
|
439
|
|
|
620
|
|
|
(29)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(3)
|
|
|
—
|
|
|
N.M.
|
Interest expense,
net
|
68
|
|
|
44
|
|
|
55
|
%
|
Earnings before
income taxes
|
374
|
|
|
576
|
|
|
(35)
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
96
|
|
|
241
|
|
|
(60)
|
%
|
Net
earnings
|
278
|
|
|
335
|
|
|
(17)
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(4)
|
|
|
(2)
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
274
|
|
|
$
|
333
|
|
|
(18)
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
0.87
|
|
|
$
|
1.03
|
|
|
(16)
|
%
|
Diluted
|
0.86
|
|
|
1.02
|
|
|
(16)
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
316
|
|
|
324
|
|
|
|
Diluted
|
318
|
|
|
327
|
|
|
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
Fiscal
Year
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
Revenue
|
$
|
129,976
|
|
|
$
|
121,546
|
|
|
7
|
%
|
Cost of products
sold
|
123,432
|
|
|
115,003
|
|
|
7
|
%
|
Gross
margin
|
6,544
|
|
|
6,543
|
|
|
—
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
3,775
|
|
|
3,648
|
|
|
3
|
%
|
Restructuring and
employee severance
|
56
|
|
|
25
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
527
|
|
|
459
|
|
|
N.M.
|
Impairments and loss
on disposal of assets, net
|
18
|
|
|
21
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
48
|
|
|
(69)
|
|
|
N.M.
|
Operating
earnings
|
2,120
|
|
|
2,459
|
|
|
(14)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(5)
|
|
|
5
|
|
|
N.M.
|
Interest expense,
net
|
201
|
|
|
178
|
|
|
13
|
%
|
Earnings before
income taxes
|
1,924
|
|
|
2,276
|
|
|
(15)
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
630
|
|
|
845
|
|
|
(25)
|
%
|
Net
earnings
|
1,294
|
|
|
1,431
|
|
|
(10)
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(6)
|
|
|
(4)
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
1,288
|
|
|
$
|
1,427
|
|
|
(10)
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
4.06
|
|
|
$
|
4.36
|
|
|
(7)
|
%
|
Diluted
|
4.03
|
|
|
4.32
|
|
|
(7)
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
317
|
|
|
327
|
|
|
|
Diluted
|
320
|
|
|
330
|
|
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in
millions)
|
June 30,
2017
|
|
June 30,
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
6,879
|
|
|
$
|
2,356
|
|
Trade receivables,
net
|
8,048
|
|
|
7,405
|
|
Inventories,
net
|
11,301
|
|
|
10,615
|
|
Prepaid expenses and
other
|
2,117
|
|
|
1,580
|
|
Total current
assets
|
28,345
|
|
|
21,956
|
|
|
|
|
|
Property and
equipment, net
|
1,879
|
|
|
1,796
|
|
Goodwill and other
intangibles, net
|
9,207
|
|
|
9,426
|
|
Other
assets
|
681
|
|
|
944
|
|
Total
assets
|
$
|
40,112
|
|
|
$
|
34,122
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
17,906
|
|
|
$
|
17,306
|
|
Current portion of
long-term obligations and other short-term borrowings
|
1,327
|
|
|
587
|
|
Other accrued
liabilities
|
1,988
|
|
|
1,808
|
|
Total current
liabilities
|
21,221
|
|
|
19,701
|
|
|
|
|
|
Long-term
obligations, less current portion
|
9,068
|
|
|
4,952
|
|
Deferred income taxes
and other liabilities
|
2,877
|
|
|
2,781
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
118
|
|
|
117
|
|
|
|
|
|
Total Cardinal
Health, Inc. shareholders' equity
|
6,808
|
|
|
6,554
|
|
Noncontrolling
interests
|
20
|
|
|
17
|
|
Total shareholders'
equity
|
6,828
|
|
|
6,571
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
40,112
|
|
|
$
|
34,122
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
Fourth
Quarter
|
|
Fiscal
Year
|
(in
millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(Unaudited)
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
278
|
|
|
$
|
335
|
|
|
$
|
1,294
|
|
|
$
|
1,431
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
192
|
|
|
176
|
|
|
717
|
|
|
641
|
|
Gain on sale of other
investments
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
Gain on disposal of
assets, net
|
3
|
|
|
4
|
|
|
18
|
|
|
21
|
|
Share-based
compensation
|
23
|
|
|
29
|
|
|
96
|
|
|
111
|
|
Provision for
deferred income taxes
|
291
|
|
|
87
|
|
|
291
|
|
|
87
|
|
Provision for bad
debts
|
17
|
|
|
22
|
|
|
63
|
|
|
73
|
|
Change in fair value
of contingent consideration obligation
|
(5)
|
|
|
—
|
|
|
(5)
|
|
|
(16)
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Increase in trade
receivables
|
(558)
|
|
|
(145)
|
|
|
(665)
|
|
|
(866)
|
|
Decrease/(increase)
in inventories
|
337
|
|
|
278
|
|
|
(673)
|
|
|
(1,179)
|
|
Increase/(decrease)
in accounts payable
|
329
|
|
|
(24)
|
|
|
564
|
|
|
2,815
|
|
Other accrued
liabilities and operating items, net
|
(183)
|
|
|
(121)
|
|
|
(520)
|
|
|
(147)
|
|
Net cash provided by
operating activities
|
724
|
|
|
641
|
|
|
1,184
|
|
|
2,971
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(19)
|
|
|
(231)
|
|
|
(132)
|
|
|
(3,614)
|
|
Additions to property
and equipment
|
(94)
|
|
|
(181)
|
|
|
(387)
|
|
|
(465)
|
|
Purchase of
available-for-sale securities and other investments
|
(6)
|
|
|
(50)
|
|
|
(194)
|
|
|
(200)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
113
|
|
|
37
|
|
|
228
|
|
|
136
|
|
Proceeds from
maturities of available-for-sale securities
|
28
|
|
|
13
|
|
|
77
|
|
|
50
|
|
Proceeds from
divestitures and disposal of property and equipment and held for
sale assets
|
2
|
|
|
13
|
|
|
3
|
|
|
13
|
|
Net cash provided
by/(used in) investing activities
|
24
|
|
|
(399)
|
|
|
(405)
|
|
|
(4,080)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
—
|
|
|
(2)
|
|
|
(3)
|
|
|
(25)
|
|
Net change in
short-term borrowings
|
(22)
|
|
|
(8)
|
|
|
3
|
|
|
26
|
|
Net purchase of
noncontrolling interests
|
—
|
|
|
—
|
|
|
(12)
|
|
|
(10)
|
|
Reduction of
long-term obligations
|
(250)
|
|
|
(1)
|
|
|
(310)
|
|
|
(6)
|
|
Proceeds from
interest rate swap terminations
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Proceeds from
long-term obligations, net of issuance costs
|
5,171
|
|
|
—
|
|
|
5,171
|
|
|
—
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
6
|
|
|
9
|
|
|
26
|
|
|
6
|
|
Excess tax benefits
from share-based compensation
|
(3)
|
|
|
—
|
|
|
34
|
|
|
33
|
|
Dividends on common
shares
|
(142)
|
|
|
(126)
|
|
|
(577)
|
|
|
(512)
|
|
Purchase of treasury
shares
|
—
|
|
|
(351)
|
|
|
(600)
|
|
|
(651)
|
|
Net cash provided
by/(used in) financing activities
|
4,760
|
|
|
(479)
|
|
|
3,746
|
|
|
(1,139)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
3
|
|
|
(5)
|
|
|
(2)
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
5,511
|
|
|
(242)
|
|
|
4,523
|
|
|
(2,260)
|
|
Cash and equivalents
at beginning of period
|
1,368
|
|
|
2,598
|
|
|
2,356
|
|
|
4,616
|
|
Cash and
equivalents at end of period
|
$
|
6,879
|
|
|
$
|
2,356
|
|
|
$
|
6,879
|
|
|
$
|
2,356
|
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries Segment Business
Analysis
|
|
|
Fourth
Quarter
|
|
|
Fourth
Quarter
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
29,552
|
|
|
$
|
28,177
|
|
|
Amount
|
$
|
3,416
|
|
|
$
|
3,210
|
|
Growth
rate
|
5
|
%
|
|
14
|
%
|
|
Growth
rate
|
6
|
%
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
505
|
|
|
$
|
542
|
|
|
Amount
|
$
|
138
|
|
|
$
|
122
|
|
Growth
rate
|
(7)
|
%
|
|
1
|
%
|
|
Growth
rate
|
13
|
%
|
|
19
|
%
|
Segment profit
margin
|
1.71
|
%
|
|
1.93
|
%
|
|
Segment profit
margin
|
4.03
|
%
|
|
3.81
|
%
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended
June 30, 2017 was $32,966
million, which included total segment revenue of
$32,968 million and Corporate revenue
of $(2) million. Total consolidated
revenue for the three months ended June 30, 2016 was
$31,384 million, which included total
segment revenue of $31,387 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
June 30, 2017 were $439 million,
which included total segment profit of $643
million and Corporate costs of $(204)
million. Total consolidated operating earnings for the three
months ended June 30, 2016 were $620
million, which included total segment profit of $664 million and Corporate costs of $(44) 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. The increase in corporate costs is
primarily due to the change in ligation (recoveries)/charges, net
driven by the lack of litigation recoveries from the prior period
recurring in the current period and the prior year LIFO credits
that did not recur in the current period.
Schedule
6
|
Cardinal Health,
Inc. and Subsidiaries Segment Business
Analysis
|
|
|
Fiscal
Year
|
|
|
Fiscal
Year
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
116,463
|
|
|
$
|
109,131
|
|
|
Amount
|
$
|
13,524
|
|
|
$
|
12,430
|
|
Growth
rate
|
7
|
%
|
|
20
|
%
|
|
Growth
rate
|
9
|
%
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
2,187
|
|
|
$
|
2,488
|
|
|
Amount
|
$
|
572
|
|
|
$
|
457
|
|
Growth
rate
|
(12)
|
%
|
|
19
|
%
|
|
Growth
rate1
|
25
|
%
|
|
6
|
%
|
Segment profit
margin
|
1.88
|
%
|
|
2.28
|
%
|
|
Segment profit
margin
|
4.23
|
%
|
|
3.68
|
%
|
|
|
1.
|
Segment profit for
the fiscal year ended June 30, 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 14 percent and 15 percent for the fiscal years
ended June 30, 2017 and 2016, respectively.
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the fiscal year ended
June 30, 2017 was $129,976
million, which included total segment revenue of
$129,987 million and Corporate
revenue of $(11) million. Total
consolidated revenue for the fiscal year ended June 30, 2016
was $121,546 million, which included
total segment revenue of $121,561
million and Corporate revenue of $(15) 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 fiscal year ended
June 30, 2017 were $2,120
million, which included total segment profit of $2,759 million and Corporate costs of
$(639) million. Total consolidated
operating earnings for the fiscal year ended June 30, 2016
were $2,459 million, which included
total segment profit of $2,945
million and Corporate costs of $(486)
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
|
Fourth Quarter
2017
|
GAAP
|
$
|
1,623
|
|
(3)
|
%
|
$
|
439
|
|
(29)%
|
|
$
|
374
|
|
$
|
96
|
|
$
|
274
|
|
(18)
|
%
|
$
|
0.86
|
|
(16)
|
%
|
Restructuring and
employee severance
|
—
|
|
|
24
|
|
|
24
|
|
9
|
|
15
|
|
|
0.05
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
163
|
|
|
163
|
|
45
|
|
118
|
|
|
0.37
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
3
|
|
|
3
|
|
1
|
|
2
|
|
|
0.01
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
11
|
|
|
11
|
|
4
|
|
7
|
|
|
0.02
|
|
|
Non-GAAP
|
$
|
1,623
|
|
1
|
%
|
$
|
640
|
|
(1)%
|
|
$
|
575
|
|
$
|
155
|
|
$
|
416
|
|
12
|
%
|
$
|
1.31
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
2016
|
GAAP
|
$
|
1,665
|
|
14
|
%
|
$
|
620
|
|
11
|
%
|
$
|
576
|
|
$
|
241
|
|
$
|
333
|
|
14
|
%
|
$
|
1.02
|
|
16
|
%
|
LIFO
charges/(credits)
|
(51)
|
|
|
(51)
|
|
|
(51)
|
|
(20)
|
|
(31)
|
|
|
(0.10)
|
|
|
Restructuring and
employee severance
|
—
|
|
|
6
|
|
|
6
|
|
2
|
|
4
|
|
|
0.01
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
132
|
|
|
132
|
|
28
|
|
104
|
|
|
0.32
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
3
|
|
|
3
|
|
—
|
|
3
|
|
|
0.01
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
(66)
|
|
|
(66)
|
|
(25)
|
|
(41)
|
|
|
(0.13)
|
|
|
Non-GAAP
|
$
|
1,614
|
|
11
|
%
|
$
|
643
|
|
5
|
%
|
$
|
599
|
|
$
|
226
|
|
$
|
372
|
|
12
|
%
|
$
|
1.14
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
Fiscal Year
2017
|
GAAP
|
$
|
6,544
|
|
$
|
—
|
$
|
2,120
|
|
(14)%
|
|
$
|
1,924
|
|
$
|
630
|
|
$
|
1,288
|
|
(10)
|
%
|
$
|
4.03
|
|
(7)
|
%
|
Restructuring and
employee severance
|
—
|
|
|
56
|
|
|
56
|
|
20
|
|
36
|
|
|
0.11
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
527
|
|
|
527
|
|
165
|
|
362
|
|
|
1.13
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
18
|
|
|
18
|
|
6
|
|
12
|
|
|
0.04
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
48
|
|
|
48
|
|
19
|
|
29
|
|
|
0.09
|
|
|
Non-GAAP
|
$
|
6,544
|
|
—
|
%
|
$
|
2,769
|
|
(4)%
|
|
$
|
2,572
|
|
$
|
839
|
|
$
|
1,727
|
|
—
|
%
|
$
|
5.40
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2016
|
GAAP
|
$
|
6,543
|
|
15
|
%
|
$
|
2,459
|
|
14
|
%
|
$
|
2,276
|
|
$
|
845
|
|
$
|
1,427
|
|
18
|
%
|
$
|
4.32
|
|
20
|
%
|
Restructuring and
employee severance
|
—
|
|
|
25
|
|
|
25
|
|
9
|
|
16
|
|
|
0.05
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
459
|
|
|
459
|
|
143
|
|
316
|
|
|
0.96
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
21
|
|
|
21
|
|
6
|
|
15
|
|
|
0.04
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
(69)
|
|
|
(69)
|
|
(27)
|
|
(42)
|
|
|
(0.13)
|
|
|
Non-GAAP
|
$
|
6,543
|
|
15
|
%
|
$
|
2,895
|
|
17
|
%
|
$
|
2,711
|
|
$
|
976
|
|
$
|
1,732
|
|
18
|
%
|
$
|
5.24
|
|
20
|
%
|
1For more information on these measures, refer to the
Use of Non-GAAP Financial Measures and Definitions schedules.
2attributable to Cardinal Health, Inc.
3GAAP diluted EPS for the three months ended
June 30, 2017 compared to the prior
year period was favorably impacted by $0.21, which includes $0.19 due to change in the effective tax rate and
$0.02 due to the change in weighted
average shares outstanding. GAAP diluted EPS for the twelve months
ended June 30, 2017 compared to the
prior year period was favorably impacted by $0.39, which includes $0.26 due to change in the effective tax rate and
$0.13 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).
4Non-GAAP diluted EPS for the three months ended
June 30, 2017 compared to the prior
year period was favorably impacted by $0.22, which includes $0.19 due to change in the effective tax
rate and $0.03 due to the change in
weighted average shares outstanding. Non-GAAP diluted EPS for the
twelve months ended June 30, 2017
compared to the prior year period was favorably impacted by
$0.44, which includes $0.27 due to change in the effective tax rate and
$0.17 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
|
|
|
Fourth
Quarter
|
|
Fiscal
Year
|
(in
millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
GAAP effective tax
rate
|
25.8
|
%
|
|
41.8
|
%
|
|
32.7
|
%
|
|
37.1
|
%
|
|
|
|
|
|
|
|
|
Non-GAAP effective
tax rate
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
$
|
374
|
|
|
$
|
576
|
|
|
$
|
1,924
|
|
|
$
|
2,276
|
|
LIFO
charges/(credits)
|
—
|
|
|
(51)
|
|
|
—
|
|
|
—
|
|
Restructuring and
employee severance
|
24
|
|
|
6
|
|
|
56
|
|
|
25
|
|
Amortization and
other acquisition-related costs
|
163
|
|
|
132
|
|
|
527
|
|
|
459
|
|
Impairments and loss
on disposal of assets
|
3
|
|
|
3
|
|
|
18
|
|
|
21
|
|
Litigation
(recoveries)/charges, net
|
11
|
|
|
(66)
|
|
|
48
|
|
|
(69)
|
|
Adjusted earnings
before income taxes
|
$
|
575
|
|
|
$
|
599
|
|
|
$
|
2,572
|
|
|
$
|
2,711
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
$
|
96
|
|
|
$
|
241
|
|
|
$
|
630
|
|
|
$
|
845
|
|
LIFO
charges/(benefits) tax benefit/(expense)
|
—
|
|
|
(20)
|
|
|
—
|
|
|
—
|
|
Restructuring and
employee severance tax benefit
|
9
|
|
|
2
|
|
|
20
|
|
|
9
|
|
Amortization and
other acquisition-related costs tax benefit
|
45
|
|
|
28
|
|
|
165
|
|
|
143
|
|
Impairments and loss
on disposal of assets tax benefit
|
1
|
|
|
—
|
|
|
6
|
|
|
6
|
|
Litigation
(recoveries)/charges, net tax benefit/(expense)
|
4
|
|
|
(25)
|
|
|
19
|
|
|
(27)
|
|
Adjusted provision
for income taxes
|
$
|
155
|
|
|
$
|
226
|
|
|
$
|
839
|
|
|
$
|
976
|
|
|
|
|
|
|
|
|
|
Non-GAAP effective
tax rate
|
27.0
|
%
|
|
37.6
|
%
|
|
32.6
|
%
|
|
36.0
|
%
|
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.
- Amortization and other acquisition-related costs are excluded
primarily for consistency with the presentation of the financial
results of our peer group companies. Additionally, costs for
amortizations 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, in
litigation recoveries or charges, net we began to classify 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 litigation recoveries or charges, net 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 2018 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. For fiscal 2018, the Company expects the
acquisition of the Patient Recovery Business to significantly
increase amortization and other acquisition-related costs.
The timing and amount of any of the excluded items could
significantly impact the Company's fiscal 2018 EPS. Over the past
five fiscal years, the excluded items have lowered the Company's
EPS from $0.47 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.
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SOURCE Cardinal Health