DUBLIN, Ohio, Nov. 8, 2018 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported first quarter fiscal year 2019 revenues
of $35.2 billion, an increase of 8
percent. The company also reported growth in GAAP operating
earnings of 211 percent to $816
million and a decrease in non-GAAP operating earnings of 11
percent to $542 million. GAAP
operating earnings included a gain of $508
million ($378 million
after-tax) related to the naviHealth divestiture. GAAP diluted
earnings per share (EPS) from continuing operations increased 439
percent to $1.94, while non-GAAP
diluted EPS increased 18 percent to $1.29.
"We are pleased that the first quarter provided a solid start to
fiscal year 2019," said Mike
Kaufmann, CEO of Cardinal Health. "Operating performance
came in as expected, and we are on track in executing on our
strategic initiatives to deliver increased value to our
shareholders, our customers and their patients. We look forward to
making further strides over the balance of the year and building on
Cardinal Health's essential role in healthcare."
Q1 FY19 summary
|
Q1
FY19
|
Q1
FY18
|
Y/Y
|
Revenue
|
$35.2
billion
|
$32.6
billion
|
8%
|
|
|
|
|
Operating
earnings
|
$816
million
|
$262
million
|
211%
|
Non-GAAP operating
earnings
|
$542
million
|
$610
million
|
(11)%
|
|
|
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$593
million
|
$115
million
|
416%
|
Non-GAAP net earnings
attributable to
Cardinal Health, Inc.
|
$396
million
|
$346
million
|
14%
|
|
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$1.94
|
$0.36
|
439%
|
Non-GAAP diluted
EPS
attributable to Cardinal Health, Inc.
|
$1.29
|
$1.09
|
18%
|
Tax rate
During the three months ended September
30, 2018 and 2017, GAAP effective tax rates were 19.4
percent and 34.2 percent, respectively, and non-GAAP effective tax
rates were 14.0 percent and 34.1 percent, respectively.
This quarter's lower effective tax rates are attributable to the
lower U.S. federal income tax rate due to the U.S. Tax Cuts and
Jobs Act, and the approximately $0.18
per share positive impact of discrete tax benefits primarily
related to international legal entity changes.
Segment results
Pharmaceutical segment
First quarter revenue for the Pharmaceutical segment increased 9
percent to $31.4 billion due to sales
growth from Pharmaceutical Distribution and Specialty Solutions
customers, partially offset by the divestiture of the company's
China distribution business.
Segment profit for the quarter decreased 12 percent to
$409 million, which reflects the
negative impact from the company's generic program performance.
|
Q1
FY19
|
Q1
FY18
|
Y/Y
|
Revenue
|
$31.4
billion
|
$28.9
billion
|
9%
|
Segment
profit
|
$409
million
|
$467
million
|
(12)%
|
Medical segment
First quarter revenue for the Medical segment increased 2
percent to $3.8 billion, which was
driven primarily by new and existing customers.
Segment profit increased 5 percent to $135 million. This increase was due to the
beneficial comparison to the prior-year fair value step-up of
inventory acquired with the Patient Recovery business. This was
partially offset by increased costs related to Cardinal Health
Brand products, including Cordis.
|
Q1
FY19
|
Q1
FY18
|
Y/Y
|
Revenue
|
$3.8
billion
|
$3.7
billion
|
2%
|
Segment
profit
|
$135
million
|
$129
million
|
5%
|
Fiscal year 2019 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 reaffirmed its fiscal year 2019 guidance range for
non-GAAP diluted EPS of $4.90 to $5.15.
Additional first quarter and recent highlights
- Announced Victor Crawford will
join the company as chief executive officer of the Pharmaceutical
segment on November 12
- Exited transition services agreement (TSA) with Medtronic for
the Europe, Middle East and Africa region during the last week of October
and on track for TSA exits in the remaining regions in early
2019
- The Cardinal Health board of directors approved a quarterly
dividend of $0.4763 per share. The
dividend will be payable on January 15,
2019 to shareholders of record at the close of business on
January 2, 2019
- Recently completed a $600 million
share repurchase program, and this week, the board of directors
approved a three-year authorization to repurchase up to an
additional $1 billion of Cardinal
Health common shares, which will expire on December 31, 2021. The company is now authorized
to repurchase up to $1.3 billion of
its common shares
- Sponsored inaugural Women Pharmacist Day on October 12, in conjunction with National
Pharmacist Month, to recognize the important contributions women
pharmacists make to delivering quality care to patients
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss first 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
November 7, 2019.
Upcoming webcasted investor events
- Credit Suisse 27th Annual Healthcare Conference on November 14 at 8:35
a.m. Mountain in Scottsdale,
Ariz.
- 37th Annual J.P. Morgan Healthcare Conference on January 7-10, 2019 in San Francisco, 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,
pharmaceuticals and cost-effective solutions that enhance supply
chain efficiency from hospital to home. 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 46 countries, Cardinal Health ranks #14 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 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 various accruals and estimates. 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 generic deflation and our ability to offset
generic deflation and maintain other financial and strategic
benefits through our generic sourcing venture with CVS Health; our
ability to manage uncertainties associated with the pricing of
branded pharmaceuticals, including decreased branded inflation and
possible branded price reductions; risks associated with our
ability to stabilize the performance of and reduce costs associated
with our Cordis business; risks associated with the acquisition of
the Patient Recovery business, including the ability to
successfully integrate the acquired businesses and the ability to
achieve the expected synergies and accretion in earnings; the risk
of non-renewal under our contracts with CVS Health or one or more
other key customer or supplier arrangements or changes to the
pricing or other terms of or level of purchases under those
arrangements; uncertainties due to government health care reform
including federal health care reform legislation or administrative
action; uncertainties with respect to the recently enacted Tax Cuts
and Jobs Act; changes in the distribution patterns or reimbursement
rates for health care products and services; risks associated with
the distribution of opioids, including the cost and risk of ongoing
investigations and lawsuits by certain governmental and regulatory
authorities as well as private plaintiffs, the potential financial
impact of enacted and possible taxes or other assessments on the
sale of opioids, and potential reputational or operational harm;
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 presentation reflects management's
views as of Nov. 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)
|
|
|
First
Quarter
|
|
|
(in millions, except
per common share amounts)
|
2019
|
|
2018
|
|
%
Change
|
Revenue
|
$
|
35,213
|
|
|
$
|
32,641
|
|
|
8
|
%
|
Cost of products
sold
|
33,546
|
|
|
30,969
|
|
|
8
|
%
|
Gross
margin
|
1,667
|
|
|
1,672
|
|
|
—
|
%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,155
|
|
|
1,062
|
|
|
9
|
%
|
Restructuring and
employee severance
|
32
|
|
|
132
|
|
|
N.M.
|
|
Amortization and
other acquisition-related costs
|
156
|
|
|
183
|
|
|
N.M.
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(511)
|
|
|
1
|
|
|
N.M.
|
|
Litigation
(recoveries)/charges, net
|
19
|
|
|
32
|
|
|
N.M.
|
|
Operating
earnings
|
816
|
|
|
262
|
|
|
211
|
%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
3
|
|
|
2
|
|
|
N.M.
|
|
Interest expense,
net
|
77
|
|
|
81
|
|
|
(5)
|
%
|
Loss on
extinguishment of debt
|
—
|
|
|
1
|
|
|
N.M.
|
|
Earnings before
income taxes
|
736
|
|
|
178
|
|
|
313
|
%
|
|
|
|
|
|
|
Provision for income
taxes
|
142
|
|
|
61
|
|
|
133
|
%
|
Net
earnings
|
594
|
|
|
117
|
|
|
408
|
%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
|
(2)
|
|
|
N.M.
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
593
|
|
|
$
|
115
|
|
|
416
|
%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
1.95
|
|
|
$
|
0.36
|
|
|
442
|
%
|
Diluted
|
1.94
|
|
|
0.36
|
|
|
439
|
%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
305
|
|
316
|
|
|
Diluted
|
306
|
|
318
|
|
|
Schedule
2
|
Cardinal Health, Inc.
and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
|
|
(in
millions)
|
September
30,
2018
|
|
June 30,
2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
2,045
|
|
|
$
|
1,763
|
|
Trade receivables,
net
|
8,082
|
|
|
7,800
|
|
Inventories,
net
|
12,481
|
|
|
12,308
|
|
Prepaid expenses and
other
|
1,837
|
|
|
1,926
|
|
Assets held for
sale
|
—
|
|
|
756
|
|
Total current
assets
|
24,445
|
|
|
24,553
|
|
|
|
|
|
Property and
equipment, net
|
2,436
|
|
|
2,487
|
|
Goodwill and other
intangibles, net
|
12,093
|
|
|
12,229
|
|
Investments
|
394
|
|
|
50
|
|
Other
assets
|
643
|
|
|
632
|
|
Total
assets
|
$
|
40,011
|
|
|
$
|
39,951
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
20,236
|
|
|
$
|
19,677
|
|
Current portion of
long-term obligations and other short-term borrowings
|
1,002
|
|
|
1,001
|
|
Other accrued
liabilities
|
1,819
|
|
|
2,002
|
|
Liabilities related
to assets held for sale
|
—
|
|
|
213
|
|
Total current
liabilities
|
23,057
|
|
|
22,893
|
|
|
|
|
|
Long-term
obligations, less current portion
|
7,999
|
|
|
8,012
|
|
Deferred income taxes
and other liabilities
|
3,042
|
|
|
2,975
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
—
|
|
|
12
|
|
|
|
|
|
Total shareholders'
equity
|
5,913
|
|
|
6,059
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
40,011
|
|
|
$
|
39,951
|
|
Schedule
3
|
Cardinal Health, Inc.
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
First
Quarter
|
(in
millions)
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
Net
earnings
|
$
|
594
|
|
|
$
|
117
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
245
|
|
|
229
|
|
Impairments and
(gain)/loss on sale of investments
|
2
|
|
|
6
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(511)
|
|
|
1
|
|
Share-based
compensation
|
19
|
|
|
17
|
|
Provision for bad
debts
|
21
|
|
|
16
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
(Increase)/decrease
in trade receivables
|
(302)
|
|
|
(359)
|
|
(Increase)/decrease
in inventories
|
(178)
|
|
|
(381)
|
|
Increase/(decrease)
in accounts payable
|
559
|
|
|
1,296
|
|
Other accrued
liabilities and operating items, net
|
(84)
|
|
|
239
|
|
Net cash provided by
operating activities
|
365
|
|
|
1,181
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
—
|
|
|
(6,139)
|
|
Additions to property
and equipment
|
(58)
|
|
|
(67)
|
|
Purchase of
available-for-sale securities and other investments
|
(4)
|
|
|
(3)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
1
|
|
|
64
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment
|
740
|
|
|
1
|
|
Net cash provided
by/(used in) investing activities
|
679
|
|
|
(6,144)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Payment of contingent
consideration obligation
|
—
|
|
|
(15)
|
|
Net change in
short-term borrowings
|
—
|
|
|
(6)
|
|
Purchase of
noncontrolling interests
|
—
|
|
|
(3)
|
|
Reduction of
long-term obligations
|
(1)
|
|
|
(402)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
(13)
|
|
|
(18)
|
|
Dividends on common
shares
|
(150)
|
|
|
(150)
|
|
Purchase of treasury
shares
|
(600)
|
|
|
(150)
|
|
Net cash used in
financing activities
|
(764)
|
|
|
(744)
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
2
|
|
|
9
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
282
|
|
|
(5,698)
|
|
Cash and equivalents
at beginning of period
|
1,763
|
|
|
6,879
|
|
Cash and
equivalents at end of period
|
$
|
2,045
|
|
|
$
|
1,181
|
|
Schedule
4
|
Cardinal Health, Inc.
and Subsidiaries
Segment Information
|
|
|
First
Quarter
|
|
|
First
Quarter
|
(in
millions)
|
2019
|
|
2018
|
|
(in
millions)
|
2019
|
|
2018
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
31,416
|
|
|
$
|
28,920
|
|
|
Amount
|
$
|
3,801
|
|
|
$
|
3,724
|
|
Growth
rate
|
9
|
%
|
|
1
|
%
|
|
Growth
rate
|
2
|
%
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
409
|
|
|
$
|
467
|
|
|
Amount1
|
$
|
135
|
|
|
$
|
129
|
|
Growth
rate
|
(12)
|
%
|
|
(13)
|
%
|
|
Growth
rate
|
5
|
%
|
|
1
|
%
|
Segment profit
margin
|
1.30
|
%
|
|
1.61
|
%
|
|
Segment profit
margin
|
3.55
|
%
|
|
3.45
|
%
|
|
|
1
|
For the three months
ended September 30, 2017 segment profit includes a $42 million
impact from the roll-out of the inventory fair value step up
related to the Patient Recovery acquisition.
|
Schedule
5
|
Cardinal Health, Inc.
and Subsidiaries
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
Operating
|
Earnings
|
Provision
|
|
|
|
|
|
|
|
SG&A2
|
|
Earnings
|
Before
|
for
|
|
Net
|
Effective
|
|
Diluted
|
|
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings3
|
Tax
|
Diluted
|
EPS3
|
(in millions, except
per common share amounts)
|
SG&A2
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings3
|
Growth
Rate
|
Rate
|
EPS3
|
Growth
Rate
|
First Quarter
Fiscal 2019
|
GAAP
|
$
|
1,155
|
|
9
|
%
|
$
|
816
|
|
211
|
%
|
$
|
736
|
|
$
|
142
|
|
$
|
593
|
|
416
|
%
|
19.4
|
%
|
$
|
1.94
|
|
439
|
%
|
State opioid
assessment related to prior fiscal years
|
(29)
|
|
|
29
|
|
|
29
|
|
8
|
|
21
|
|
|
|
0.07
|
|
|
Restructuring and
employee severance
|
—
|
|
|
32
|
|
|
32
|
|
8
|
|
24
|
|
|
|
0.08
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
156
|
|
|
156
|
|
36
|
|
120
|
|
|
|
0.39
|
|
|
Impairments and
(gain)/loss on disposal of assets4
|
—
|
|
|
(511)
|
|
|
(511)
|
|
(134)
|
|
(377)
|
|
|
|
(1.23)
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
19
|
|
|
19
|
|
5
|
|
14
|
|
|
|
0.05
|
|
|
Non-GAAP
|
$
|
1,126
|
|
6
|
%
|
$
|
542
|
|
(11)
|
%
|
$
|
461
|
|
$
|
65
|
|
$
|
396
|
|
14
|
%
|
14.0
|
%
|
$
|
1.29
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter Fiscal
2018
|
GAAP
|
$
|
1,062
|
|
15
|
%
|
$
|
262
|
|
(51)
|
%
|
$
|
178
|
|
$
|
61
|
|
$
|
115
|
|
(63)
|
%
|
34.2
|
%
|
$
|
0.36
|
|
(63)
|
%
|
Restructuring and
employee severance
|
—
|
|
|
132
|
|
|
132
|
|
47
|
|
85
|
|
|
|
0.27
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
183
|
|
|
183
|
|
58
|
|
125
|
|
|
|
0.40
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
1
|
|
|
1
|
|
—
|
|
1
|
|
|
|
—
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
32
|
|
|
32
|
|
13
|
|
19
|
|
|
|
0.06
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
1
|
|
1
|
|
—
|
|
|
|
—
|
|
|
Non-GAAP
|
$
|
1,062
|
|
15
|
%
|
$
|
610
|
|
(9)
|
%
|
$
|
527
|
|
$
|
180
|
|
$
|
346
|
|
(13)
|
%
|
34.1
|
%
|
$
|
1.09
|
|
(12)
|
%
|
|
|
1
|
For more information
on these measures, refer to the Use of Non-GAAP Financial Measures
and Definitions schedules.
|
|
|
2
|
Distribution,
selling, general and administrative expenses.
|
|
|
3
|
attributable to
Cardinal Health, Inc.
|
|
|
4
|
First quarter 2019
includes a $508 million gain ($378 million after-tax) related to
the naviHealth divestiture
|
|
|
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 report 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 and credits from non-GAAP
metrics facilitates comparison of our current financial results to
our historical financial results and to our peer group companies'
financial results.
- State opioid assessment related to prior fiscal years is the
portion of the New York State
assessment for prescription opioid medications that were sold or
distributed in periods prior to fiscal 2019 and is excluded from
non-GAAP financial measures because it relates to sales in prior
fiscal years and inclusion would obscure analysis of the current
fiscal year results of our underlying, ongoing business.
Additionally, while the New York
law will require us to make payments on an ongoing basis, the
portion of the assessment related to sales in periods prior to
fiscal 2019 is a one-time, nonrecurring item.
- Restructuring and employee severance costs are excluded because
they are not part of the ongoing operations of our underlying
business.
- Amortization and other acquisition-related costs, which include
transaction costs, integration costs, and changes in the fair value
of contingent consideration obligations, 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
extinguishment 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 initial estimate and
measurement period adjustments 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 through
December 2018.
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 document, the Company presents certain forward-looking
non-GAAP metrics. The Company does not provide outlook on a GAAP
basis because changes in the items that the Company excludes from
GAAP to calculate the comparable non-GAAP measure can be dependent
on future events that are less capable of being controlled or
reliability predicted by management and are not part of the
Company's routine operating activities. Additionally, management
does not forecast many of the excluded items for internal use and
therefore cannot create or rely on outlook done on a GAAP
basis.
The timing and amount of any of the excluded items could
significantly impact the Company's fiscal 2019 EPS. Over the past
five fiscal years, the excluded items have lowered the Company's
EPS from $0.47 to $4.19, which includes a goodwill impairment
charge of $4.36 per
share related to our Medical Segment that we recognized
in fiscal 2018.
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 distribution, selling, general and administrative
expenses or Non-GAAP SG&A: distribution, selling, general
and administrative expenses, excluding state opioid assessment
related to prior fiscal years.
Non-GAAP operating earnings: operating earnings excluding
(1) LIFO charges/(credits), (2) state opioid assessment related to
prior fiscal years, (3) restructuring and employee severance, (4)
amortization and other acquisition-related costs, (5) impairments
and (gain)/loss on disposal of assets, and (6) litigation
(recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings before
income taxes excluding (1) LIFO charges/(credits), (2) state opioid
assessment related to prior fiscal years, (3) restructuring and
employee severance, (4) amortization and other acquisition-related
costs, (5) impairments and (gain)/loss on disposal of assets, (6)
litigation (recoveries)/charges, net, and (7) loss on
extinguishment of debt.
Non-GAAP effective tax rate: (provision for income taxes
adjusted for (1) LIFO charges/(credits), (2) state opioid
assessment related to prior fiscal years, (3) restructuring and
employee severance, (4) amortization and other acquisition-related
costs, (5) impairments and (gain)/loss on disposal of assets,
(6) litigation (recoveries)/charges, net, (7) loss on
extinguishment of debt, and (8) transitional tax benefit, (net)
divided by (earnings before income taxes adjusted for the first
seven items).
Non-GAAP Net Earnings attributable to Cardinal Health,
Inc.: net earnings attributable to Cardinal Health, Inc.
excluding (1) LIFO charges/(credits), (2) state opioid assessment
related to prior fiscal years, (3) restructuring and employee
severance, (4) amortization and other acquisition-related costs,
(5) impairments and (gain)/loss on disposal of assets, (6)
litigation (recoveries)/charges, net, (7) loss on extinguishment of
debt, each net of tax, and (8) transitional tax benefit related to
the Tax Cuts and Jobs Act.
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