DUBLIN, Ohio, Feb. 8, 2018 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported second-quarter fiscal year 2018 revenue
of $35.2 billion, an increase of 6
percent. The company also reported a decline in GAAP operating
earnings of 26 percent to $399
million and an increase in GAAP diluted earnings per share
(EPS) of 226 percent to $3.33. GAAP
EPS included, among other items, $2.83 of transitional tax benefits related to the
enactment of U.S. tax reform discussed below. Non-GAAP operating
earnings increased 4 percent to $730
million, while non-GAAP EPS increased 13 percent to
$1.51. Excluding a $0.20 benefit from a lower tax rate applied to
year-to-date non-GAAP pre-tax earnings due to U.S. tax reform,
non-GAAP EPS for the quarter was $1.31, a 2 percent decrease from non-GAAP EPS in
the prior-year quarter.
"Overall, we are very pleased with the quarter," said
Mike Kaufmann, CEO of Cardinal
Health. "Our Pharmaceutical Distribution business performed better
than expected, and we continue to see strong growth in Specialty
Solutions. In the Medical segment, the integration of the Patient
Recovery business is progressing as planned, and we are excited by
the opportunities in that business. In addition, we remain
encouraged by how well our value proposition is resonating with
customers.
"As we look to the remainder of the year," Kaufmann continued,
"we anticipate our overall operating performance to be as
expected."
Q2 FY18 summary
|
Q2
FY18
|
Q2
FY17
|
Y/Y
|
Revenue
|
$ 35.2
billion
|
$33.1
billion
|
6%
|
|
|
|
|
Operating
earnings
|
$399
million
|
$542
million
|
(26)%
|
Non-GAAP
operating
earnings
|
$730
million
|
$701
million
|
4%
|
|
|
|
|
Net earnings
attributable to
Cardinal Health, Inc.
|
$1.1
billion
|
$324
million
|
225%
|
Non-GAAP net
earnings
attributable to Cardinal
Health, Inc.
|
$478
million
|
$427
million
|
12%
|
|
|
|
|
Diluted EPS
attributable to
Cardinal Health, Inc.
|
$3.33
|
$1.02
|
226%
|
Non-GAAP diluted
EPS
attributable to Cardinal
Health, Inc.
|
$1.51
|
$1.34
|
13%
|
U.S. tax reform
The enactment of the U.S. Tax Cuts and Jobs Act ("U.S. tax
reform") has two primary components impacting Cardinal Health's
financial results. First, there is a tax benefit included in
earnings that reflects the impact of applying a lower federal tax
rate to U.S. earnings. Given the company's June 30 fiscal year end, the lower tax rate will
be phased in across fiscal years 2018 and 2019, resulting in a U.S.
statutory federal rate of approximately 28 percent for fiscal year
2018. For the quarter ended Dec. 31,
2017, the application of this lower tax rate to fiscal
year-to-date U.S. earnings resulted in a benefit of $0.20 per share. Any impact on the tax
benefit from future changes in the estimated effective tax rate
will be reflected in the applicable period of the change in
estimate.
Second, as part of U.S. tax reform, the company recorded
transitional tax benefits totaling $2.83 per share. These benefits reflected the
re-measurement of Cardinal Health's net U.S. deferred tax
liabilities and assets at the lower federal rate of 21 percent,
partially offset by the required U.S. repatriation tax on
undistributed foreign earnings. As these tax reform benefits are
estimated, the company may record adjustments to these amounts
during the next 12 months. These transitional tax benefits are
excluded from the company's reported non-GAAP earnings.
Fiscal year 2018 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 is raising its outlook for fiscal 2018 non-GAAP EPS
to $5.25-$5.50 to reflect $0.40 per share of benefit from the lower federal
rate due to U.S. tax reform.
Segment results
Pharmaceutical segment
Second-quarter revenue for the Pharmaceutical segment increased
5 percent to $31.1 billion due to
sales growth from pharmaceutical and specialty distribution
customers, which was partially offset by the previously announced
expiration of a large, mail-order customer contract.
Segment profit for the quarter decreased 4 percent to
$514 million, which was driven by
costs related to the company's ongoing investment in its
Pharmaceutical IT platform, as well as the company's generics
program performance. These were partially offset by strong
performance in the Specialty Solutions business.
|
Q2
FY18
|
Q2
FY17
|
Y/Y
|
Revenue
|
$31.1
billion
|
$29.7
billion
|
5%
|
Segment
profit
|
$514
million
|
$537
million
|
(4)%
|
Medical segment
Second-quarter revenue for the Medical segment increased 19
percent to $4 billion, which was
driven by contributions from the acquisition of the Patient
Recovery business and, to a lesser extent, new and existing
customers.
Segment profit increased 38 percent to $220 million, driven by contributions from the
acquisition of the Patient Recovery business, which were partially
offset by performance in Cardinal Health Branded products,
including Cordis. Segment profit for the quarter included the
impact of the Patient Recovery business inventory fair value
step-up expense. Excluding the $22
million step-up in the quarter, year-over-year Medical
segment profit growth was 52 percent.
|
Q2
FY18
|
Q2
FY17
|
Y/Y
|
Revenue
|
$4.0
billion
|
$3.4
billion
|
19%
|
Segment
profit
|
$220
million
|
$159
million
|
38%
|
Additional second-quarter and recent highlights
- The Cardinal Health board of directors approved a new
authorization to repurchase up to $1
billion of Cardinal Health common shares, which will expire
on Dec. 31, 2020. With this new
authorization, Cardinal Health is now authorized to repurchase up
to $1.3 billion of its common
shares.
- The company closed its divestiture of its Cardinal Health China
distribution business on Feb. 1 with
net proceeds of approximately $800
million.
- Cordis and Medinol announced U.S. Food and Drug Administration
approval of the EluNIRâ„¢ drug-eluting stent for the treatment of
patients with narrowing or blockages to their coronary arteries.
The companies also announced treatment of the first patients in
the United States with the device
following its approval.
- The company launched the Opioid Action Program, aimed at
helping communities in four of the nation's hardest-hit states
combat the opioid epidemic. The pilot program will deliver much
needed front-line assistance to help prevent opioid abuse and
support first responders in Ohio,
Kentucky, Tennessee and West
Virginia.
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss second-quarter
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
Feb. 7, 2019.
Upcoming webcasted investor events
- Leerink Partners 7th Annual Global Healthcare
Conference on Feb. 15 at 9 a.m. in New York
City
- 2018 RBC Capital Markets Global Healthcare Conference on
Feb. 21 at 8:30 a.m. in New York
City
- Cowen 38th Annual
Health Care Conference on March 12 at
11:20 a.m. in Boston
- Barclays Global Healthcare Conference on March 13 at 9 a.m.
in Miami
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, 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. To help combat prescription drug abuse, the company and
its education partners created Generation Rx, a national drug
education and awareness program. 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, @cardinalhealthwings on Facebook 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
the 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 the recently enacted Tax Cuts and
Jobs Act, including the ability to realize the benefits of, and
manage the potential impact from certain provisions of the Act;
changes in the distribution patterns or reimbursement rates for
health care products and services; the effects of ongoing
investigations and of any action by any governmental or regulatory
authority, including litigation or reputational harm arising from
the distribution of opioids; 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 Feb. 8, 2018. 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)
|
|
|
Second
Quarter
|
|
|
(in millions, except
per common share amounts)
|
2018
|
|
2017
|
|
%
Change
|
Revenue
|
$
|
35,186
|
|
|
$
|
33,150
|
|
|
6
|
%
|
Cost of products
sold
|
33,325
|
|
|
31,548
|
|
|
6
|
%
|
Gross
margin
|
1,861
|
|
|
1,602
|
|
|
16
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,131
|
|
|
910
|
|
|
24
|
%
|
Restructuring and
employee severance
|
21
|
|
|
7
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
184
|
|
|
115
|
|
|
N.M.
|
Impairments and
(gain)/loss on disposal of assets, net
|
68
|
|
|
9
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
58
|
|
|
19
|
|
|
N.M.
|
Operating
earnings
|
399
|
|
|
542
|
|
|
(26)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(5)
|
|
|
7
|
|
|
N.M.
|
Interest expense,
net
|
87
|
|
|
44
|
|
|
96
|
%
|
Earnings before
income taxes
|
317
|
|
|
491
|
|
|
(35)
|
%
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes
|
(736)
|
|
|
167
|
|
|
(541)
|
%
|
Net
earnings
|
1,053
|
|
|
324
|
|
|
225
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
1,053
|
|
|
$
|
324
|
|
|
225
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
3.35
|
|
|
$
|
1.02
|
|
|
228
|
%
|
Diluted
|
3.33
|
|
|
1.02
|
|
|
226
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
315
|
|
318
|
|
|
Diluted
|
316
|
|
319
|
|
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
Year-to-Date
|
|
|
(in millions, except
per common share amounts)
|
2018
|
|
2017
|
|
%
Change
|
Revenue
|
$
|
67,827
|
|
|
$
|
65,189
|
|
|
4
|
%
|
Cost of products
sold
|
64,294
|
|
|
61,997
|
|
|
4
|
%
|
Gross
margin
|
3,533
|
|
|
3,192
|
|
|
11
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
2,193
|
|
|
1,831
|
|
|
20
|
%
|
Restructuring and
employee severance
|
153
|
|
|
16
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
368
|
|
|
237
|
|
|
N.M.
|
Impairments and
(gain)/loss on disposal of assets, net
|
68
|
|
|
12
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
90
|
|
|
20
|
|
|
N.M.
|
Operating
earnings
|
661
|
|
|
1,076
|
|
|
(39)
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(4)
|
|
|
3
|
|
|
N.M.
|
Interest expense,
net
|
168
|
|
|
88
|
|
|
91
|
%
|
Loss on
extinguishment of debt
|
2
|
|
|
—
|
|
|
N.M.
|
Earnings before
income taxes
|
495
|
|
|
985
|
|
|
(50)
|
%
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes
|
(675)
|
|
|
351
|
|
|
(292)
|
%
|
Net
earnings
|
1,170
|
|
|
634
|
|
|
85
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interest
|
(2)
|
|
|
(1)
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
1,168
|
|
|
$
|
633
|
|
|
85
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
3.70
|
|
|
$
|
1.99
|
|
|
86
|
%
|
Diluted
|
3.68
|
|
|
1.97
|
|
|
87
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
315
|
|
319
|
|
|
Diluted
|
317
|
|
321
|
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in
millions)
|
December 31,
2017
|
|
June 30,
2017
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
1,249
|
|
|
$
|
6,879
|
|
Trade receivables,
net
|
7,664
|
|
|
8,048
|
|
Inventories,
net
|
12,087
|
|
|
11,301
|
|
Prepaid expenses and
other
|
1,972
|
|
|
2,117
|
|
Assets held for
sale
|
2,216
|
|
|
—
|
|
Total current
assets
|
25,188
|
|
|
28,345
|
|
|
|
|
|
Property and
equipment, net
|
2,547
|
|
|
1,879
|
|
Goodwill and other
intangibles, net
|
14,366
|
|
|
9,207
|
|
Other
assets
|
804
|
|
|
681
|
|
Total
assets
|
$
|
42,905
|
|
|
$
|
40,112
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
19,194
|
|
|
$
|
17,906
|
|
Current portion of
long-term obligations and other short-term borrowings
|
702
|
|
|
1,327
|
|
Other accrued
liabilities
|
|
1,890
|
|
|
|
1,988
|
|
Liabilities related
to assets held for sale
|
1,339
|
|
|
—
|
|
Total current
liabilities
|
23,125
|
|
|
21,221
|
|
|
|
|
|
Long-term
obligations, less current portion
|
9,057
|
|
|
9,068
|
|
Deferred income taxes
and other liabilities
|
3,091
|
|
|
2,877
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
13
|
|
|
118
|
|
|
|
|
|
Total Cardinal
Health, Inc. shareholders' equity
|
7,599
|
|
|
6,808
|
|
Noncontrolling
interests
|
20
|
|
|
20
|
|
Total shareholders'
equity
|
7,619
|
|
|
6,828
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
42,905
|
|
|
$
|
40,112
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Second
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
1,053
|
|
|
$
|
324
|
|
|
$
|
1,170
|
|
|
$
|
634
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
291
|
|
|
166
|
|
|
520
|
|
|
339
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
Impairments and loss
on sale of other investments
|
—
|
|
|
3
|
|
|
6
|
|
|
3
|
|
Impairments and loss
on disposal of assets, net
|
67
|
|
|
9
|
|
|
68
|
|
|
12
|
|
Share-based
compensation
|
23
|
|
|
24
|
|
|
40
|
|
|
47
|
|
Provision for bad
debts
|
24
|
|
|
22
|
|
|
49
|
|
|
29
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Decrease/(increase)
in trade receivables
|
(258)
|
|
|
160
|
|
|
(617)
|
|
|
(146)
|
|
Increase in
inventories
|
(614)
|
|
|
(996)
|
|
|
(995)
|
|
|
(1,294)
|
|
Increase in accounts
payable
|
811
|
|
|
1,284
|
|
|
2,107
|
|
|
1,563
|
|
Other accrued
liabilities and operating items, net
|
(1,118)
|
|
|
(442)
|
|
|
(890)
|
|
|
(529)
|
|
Net cash provided by
operating activities
|
279
|
|
|
554
|
|
|
1,460
|
|
|
658
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(2)
|
|
|
(2)
|
|
|
(6,141)
|
|
|
(11)
|
|
Additions to property
and equipment
|
(101)
|
|
|
(113)
|
|
|
(168)
|
|
|
(213)
|
|
Purchase of
available-for-sale securities and other investments
|
(3)
|
|
|
(73)
|
|
|
(6)
|
|
|
(125)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
1
|
|
|
38
|
|
|
65
|
|
|
72
|
|
Proceeds from
maturities of available-for-sale securities
|
—
|
|
|
22
|
|
|
—
|
|
|
39
|
|
Proceeds from
divestitures and disposal of property and equipment and held for
sale assets
|
—
|
|
|
1
|
|
|
1
|
|
|
1
|
|
Net cash used in
investing activities
|
(105)
|
|
|
(127)
|
|
|
(6,249)
|
|
|
(237)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
(2)
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
Net change in
short-term borrowings
|
161
|
|
|
8
|
|
|
155
|
|
|
33
|
|
Purchase of
noncontrolling interests
|
(103)
|
|
|
(2)
|
|
|
(106)
|
|
|
(12)
|
|
Proceeds from
long-term obligations, net of issuance costs
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Reduction of
long-term obligations
|
(1)
|
|
|
(59)
|
|
|
(403)
|
|
|
(60)
|
|
Proceeds from
interest rate swap terminations
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
2
|
|
|
9
|
|
|
(16)
|
|
|
—
|
|
Excess tax benefits
from share-based compensation
|
—
|
|
|
2
|
|
|
—
|
|
|
32
|
|
Dividends on common
shares
|
(146)
|
|
|
(144)
|
|
|
(296)
|
|
|
(293)
|
|
Purchase of treasury
shares
|
—
|
|
|
(350)
|
|
|
(150)
|
|
|
(600)
|
|
Net cash used in
financing activities
|
(86)
|
|
|
(536)
|
|
|
(830)
|
|
|
(886)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
(2)
|
|
|
(11)
|
|
|
7
|
|
|
(10)
|
|
Cash reclassified to
assets held for sale
|
(18)
|
|
|
—
|
|
|
(18)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
68
|
|
|
(120)
|
|
|
(5,630)
|
|
|
(475)
|
|
Cash and equivalents
at beginning of period
|
1,181
|
|
|
2,001
|
|
|
6,879
|
|
|
2,356
|
|
Cash and
equivalents at end of period
|
$
|
1,249
|
|
|
$
|
1,881
|
|
|
$
|
1,249
|
|
|
$
|
1,881
|
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
Segment
Information
|
|
|
Second
Quarter
|
|
|
Second
Quarter
|
(in
millions)
|
2018
|
|
2017
|
|
(in
millions)
|
2018
|
|
2017
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
31,146
|
|
|
$
|
29,743
|
|
|
Amount
|
$
|
4,044
|
|
|
$
|
3,410
|
|
Growth
rate
|
5
|
%
|
|
5
|
%
|
|
Growth
rate
|
19
|
%
|
|
8
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
514
|
|
|
$
|
537
|
|
|
Amount
|
$
|
220
|
|
|
$
|
159
|
|
Growth
rate
|
(4)
|
%
|
|
(14)
|
%
|
|
Growth
rate1
|
38
|
%
|
|
50
|
%
|
Segment profit
margin
|
1.65
|
%
|
|
1.81
|
%
|
|
Segment profit
margin
|
5.43
|
%
|
|
4.68
|
%
|
|
1Segment
profit includes a $22 million impact from the roll-out of the
inventory fair value step up related to the Patient Recovery
acquisition for the three months ended December 31, 2017.
Excluding the impact of the inventory fair value step up, Medical
segment profit would have increased 52% for the three months ended
December 31, 2017.
|
Supplemental Consolidated Information
Total consolidated revenue for the three months ended
December 31, 2017 was $35,186
million, which included total segment revenue of
$35,190 million and Corporate revenue
of $(4) million. Total consolidated
revenue for the three months ended December 31, 2016 was
$33,150 million, which included total
segment revenue of $33,153 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
December 31, 2017 were $399
million, which included total segment profit of $734 million and Corporate costs of $(335) million. Total consolidated operating
earnings for the three months ended December 31, 2016 were
$542 million, which included total
segment profit of $696 million and
Corporate costs of $(154) 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
Information
|
|
|
Year-to-Date
|
|
|
Year-to-Date
|
(in
millions)
|
2018
|
|
2017
|
|
(in
millions)
|
2018
|
|
2017
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
60,066
|
|
|
$
|
58,505
|
|
|
Amount
|
$
|
7,768
|
|
|
$
|
6,690
|
|
Growth
rate
|
3
|
%
|
|
10
|
%
|
|
Growth
rate
|
16
|
%
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
981
|
|
|
$
|
1,071
|
|
|
Amount
|
$
|
348
|
|
|
$
|
286
|
|
Growth
rate
|
(8)
|
%
|
|
(17)
|
%
|
|
Growth
rate1
|
22
|
%
|
|
39
|
%
|
Segment profit
margin
|
1.63
|
%
|
|
1.83
|
%
|
|
Segment profit
margin
|
4.48
|
%
|
|
4.28
|
%
|
|
1Segment
profit includes a $64 million impact from the roll-out of the
inventory fair value step up related to the Patient Recovery
acquisition for the six months ended December 31, 2017. Excluding
the impact of the inventory fair value step up, Medical segment
profit would have increased 44% for the six months ended December
31, 2017.
|
Supplemental Consolidated Information
Total consolidated revenue for the six months ended
December 31, 2017 was $67,827
million, which included total segment revenue of
$67,834 million and Corporate revenue
of $(7) million. Total consolidated
revenue for the six months ended December 31, 2016 was
$65,189 million, which included total
segment revenue of $65,195 million
and Corporate revenue of $(6)
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 six months ended
December 31, 2017 were $661
million, which included total segment profit of $1,329 million and Corporate costs of
$(668) million. Total consolidated
operating earnings for the six months ended December 31, 2016
were $1,076 million, which included
total segment profit of $1,357
million and Corporate costs of $(281)
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
|
|
|
|
Operating
|
Earnings
|
Provision
for/
|
|
|
|
|
|
|
Earnings
|
Before
|
(Benefit
from)
|
|
Net
|
|
Diluted
|
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
(in millions, except
per common share amounts)
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2
|
Growth
Rate
|
Second Quarter
2018
|
GAAP
|
$
|
399
|
|
(26)
|
%
|
$
|
317
|
|
$
|
(736)
|
|
$
|
1,053
|
|
225
|
%
|
$
|
3.33
|
|
226
|
%
|
Restructuring and
employee severance
|
21
|
|
|
21
|
|
(2)
|
|
23
|
|
|
0.07
|
|
|
Amortization and
other acquisition-related costs
|
184
|
|
|
184
|
|
41
|
|
143
|
|
|
0.46
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
68
|
|
|
68
|
|
(43)
|
|
111
|
|
|
0.35
|
|
|
Litigation
(recoveries)/charges, net
|
58
|
|
|
58
|
|
17
|
|
41
|
|
|
0.13
|
|
|
Transitional tax
benefit, net3
|
—
|
|
|
—
|
|
894
|
|
(894)
|
|
|
(2.83)
|
|
|
Non-GAAP
|
$
|
730
|
|
4
|
%
|
$
|
648
|
|
$
|
171
|
|
$
|
478
|
|
12
|
%
|
$
1.514
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
2017
|
GAAP
|
$
|
542
|
|
(4)
|
%
|
$
|
491
|
|
$
|
167
|
|
$
|
324
|
|
—
|
%
|
$
|
1.02
|
|
4
|
%
|
LIFO
charges/(credits)
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
Restructuring and
employee severance
|
7
|
|
|
7
|
|
2
|
|
5
|
|
|
0.01
|
|
|
Amortization and
other acquisition-related costs
|
115
|
|
|
115
|
|
39
|
|
76
|
|
|
0.24
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
9
|
|
|
9
|
|
3
|
|
6
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net
|
19
|
|
|
19
|
|
7
|
|
12
|
|
|
0.04
|
|
|
Non-GAAP
|
$
|
701
|
|
(4)
|
%
|
$
|
650
|
|
$
|
222
|
|
$
|
427
|
|
(1)
|
%
|
$
|
1.34
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
Earnings
|
Provision
for/
|
|
|
|
|
|
|
Earnings
|
Before
|
(Benefit
from)
|
|
Net
|
|
Diluted
|
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
(in millions, except
per common share amounts)
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2
|
Growth
Rate
|
Year-to-Date
2018
|
GAAP
|
$
|
661
|
|
(39)
|
%
|
$
|
495
|
|
$
|
(675)
|
|
$
|
1,168
|
|
85
|
%
|
$
|
3.68
|
|
87
|
%
|
Restructuring and
employee severance
|
153
|
|
|
153
|
|
45
|
|
108
|
|
|
0.34
|
|
|
Amortization and
other acquisition-related costs
|
368
|
|
|
368
|
|
98
|
|
270
|
|
|
0.85
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
68
|
|
|
68
|
|
(43)
|
|
111
|
|
|
0.35
|
|
|
Litigation
(recoveries)/charges, net
|
90
|
|
|
90
|
|
30
|
|
60
|
|
|
0.19
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
2
|
|
1
|
|
1
|
|
|
—
|
|
|
Transitional tax
benefit, net3
|
—
|
|
|
—
|
|
894
|
|
(894)
|
|
|
(2.82)
|
|
|
Non-GAAP
|
$
|
1,340
|
|
(2)
|
%
|
$
|
1,175
|
|
$
|
350
|
|
$
|
823
|
|
—
|
%
|
$
2.604
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2017
|
GAAP
|
$
|
1,076
|
|
(9)
|
%
|
$
|
985
|
|
$
|
351
|
|
$
|
633
|
|
(11)
|
%
|
$
|
1.97
|
|
(8)
|
%
|
LIFO
charges/(credits)
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
Restructuring and
employee severance
|
16
|
|
|
16
|
|
6
|
|
10
|
|
|
0.03
|
|
|
Amortization and
other acquisition-related costs
|
237
|
|
|
237
|
|
79
|
|
158
|
|
|
0.49
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
12
|
|
|
12
|
|
4
|
|
8
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net
|
20
|
|
|
20
|
|
8
|
|
12
|
|
|
0.04
|
|
|
Non-GAAP
|
$
|
1,370
|
|
(6)
|
%
|
$
|
1,279
|
|
$
|
452
|
|
$
|
826
|
|
(7)
|
%
|
$
|
2.57
|
|
(4)
|
%
|
|
1For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
|
2attributable to Cardinal Health,
Inc.
|
|
3Reflects
the estimated net transitional benefit from the re-measurement of
our deferred tax assets and liabilities partially offset by the
one-time repatriation tax on cash and earnings of foreign
subsidiaries. We have not yet completed our analysis of the
impact of the Tax Act and, as such, these amounts are provisional
estimates and we may record additional provisional amounts or
adjustments to the provisional amounts in future
periods.
|
|
4Non-GAAP
EPS for the three and six months ended December 31, 2017 includes a
$0.20 benefit from applying a lower federal tax rate to our
year-to-date U.S. pre-tax non-GAAP earnings. Excluding this
benefit, non-GAAP EPS would have been $1.31 and $2.40 for the three
and six months ended December 31, 2017, respectively.
|
The sum of the components may not equal the total due to
rounding.
We generally 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, 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
facilitates 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
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 facilitates comparison of historical, current and
forecasted financial results. We also exclude other
acquisition-related costs, which 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. These costs are also significantly impacted by
the timing, complexity and size of acquisitions.
- Impairments and gain 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 are inherently unpredictable in
timing and amount, and in the case of impairments, are non-cash
amounts, so their exclusion facilitates comparison of historical,
current and forecasted financial results.
- Litigation recoveries or charges, net are excluded because they
often relate to events that may have occurred in prior or multiple
periods, do not occur in or reflect the ordinary course of our
business and are inherently unpredictable in timing and amount.
- Loss on extinguishment of debt is excluded because it does not
typically occur in the normal course of business 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.
- Transitional tax benefit, net related to the Tax Cuts and Jobs
Act is excluded because it results from the one-time impact during
the one-year measurement period of a very significant change in the
U.S. federal corporate tax rate and, due to the significant size of
the benefit, obscures analysis of trends and financial performance.
The transitional tax benefit includes the estimate for the
re-measurement of deferred tax assets and liabilities due to the
reduction of the U.S. federal corporate income tax rate and the
repatriation tax on undistributed foreign earnings, both
of which are subject to adjustment during an up to 12 month
measurement period.
The tax effect for each of the items listed above, other than
the transitional tax benefit item, 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.
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. During the second
quarter of fiscal 2018, the excluded items have increased the
Company's EPS by $1.82, which
includes a $2.83 transitional tax
benefit related to the Tax Cuts and Jobs Act.
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, (6) loss on
extinguishment of debt, and (7) transitional tax benefit, net)
divided by (earnings before income taxes adjusted for the first 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, (6) loss on extinguishment of
debt, each net of tax, and (7) transitional tax benefit, net.
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