DUBLIN, Ohio, May 9, 2019 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported third quarter fiscal year 2019 revenues
of $35.2 billion, an increase of 5
percent. The company also reported a decrease in GAAP operating
earnings of 21 percent to $432
million and a decrease in non-GAAP operating earnings of 15
percent to $667 million. GAAP diluted
earnings per share (EPS) were $0.99,
an increase of 22 percent. Non-GAAP diluted EPS increased 14
percent to $1.59.
"We are pleased that Cardinal Health again delivered
overall operating results that were consistent with our
expectations for the quarter," said Mike
Kaufmann, CEO. "Solid progress on our strategic initiatives,
the recent renewal of our largest customer and our ability to
navigate evolving market dynamics give us confidence over the long
term."
Q3 FY19 summary
|
Q3
FY19
|
Q3
FY18
|
Y/Y
|
Revenue
|
$35.2
billion
|
$33.6
billion
|
5%
|
|
|
|
|
Operating
earnings
|
$432
million
|
$546
million
|
(21)%
|
Non-GAAP operating
earnings
|
$667
million
|
$781
million
|
(15)%
|
|
|
|
|
Net earnings
attributable to Cardinal Health,
Inc.
|
$296
million
|
$255
million
|
16%
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$475
million
|
$437
million
|
9%
|
|
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$0.99
|
$0.81
|
22%
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$1.59
|
$1.39
|
14%
|
Tax rate
During the third quarters of fiscal 2019 and 2018, GAAP
effective tax rates were 20.0 percent and 45.1 percent,
respectively, and non-GAAP effective tax rates were 21.6 percent
and 37.5 percent, respectively.
This quarter's lower effective tax rates included net favorable
discrete items of $0.06 per share and
a lower U.S. federal income tax rate. During the same quarter last
year, the tax rate included unfavorable discrete items and a
significant negative impact from Cordis.
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 is raising the lower end of its fiscal 2019 non-GAAP
EPS guidance to the range of $5.02 to
$5.17 from the range of $4.97 to $5.17.
Segment results
Pharmaceutical segment
Third quarter revenue for the Pharmaceutical segment increased 6
percent to $31.4 billion due to sales
growth from Pharmaceutical Distribution and Specialty Solutions
customers.
Segment profit for the quarter decreased 10 percent to
$536 million, which reflects the
negative impact from the company's generics program performance,
partially offset by Specialty Solutions performance.
|
Q3
FY19
|
Q3
FY18
|
Y/Y
|
Revenue
|
$31.4
billion
|
$29.7
billion
|
6%
|
Segment
profit
|
$536
million
|
$596
million
|
(10)%
|
Medical segment
Third quarter revenue for the Medical segment was down 1 percent
due to the divestitures of the China distribution and naviHealth businesses,
offset by growth from existing customers.
Medical segment profit decreased 22 percent to $155 million driven by performance of Cardinal
Health Brand products.
|
Q3
FY19
|
Q3
FY18
|
Y/Y
|
Revenue
|
$3.9
billion
|
$3.9
billion
|
(1)%
|
Segment
profit
|
$155
million
|
$199
million
|
(22)%
|
Additional third quarter and recent highlights
- Cardinal Health extended its agreements with CVS Health to
distribute pharmaceuticals to retail pharmacies and distribution
centers through June 30, 2023.
- Cardinal Health board of directors approved a 1 percent
increase in the company's quarterly dividend from $0.4763 per share to $0.4811 per share, or $1.92 on an annualized basis. The dividend will
be payable on July 15, 2019 to
shareholders of record on July 1,
2019.
- Cardinal Health announced the acquisition of mscripts®, a
company that delivers patient adherence and engagement solutions
through an innovative, easy-to-use mobile and web-based health
management platform.
- Cardinal Health Specialty Solutions announced a collaboration
with PANTHERx Specialty Pharmacy designed to meet the growing needs
of the market and strengthen its cell and gene therapy
capability.
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss third 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
May 8, 2020.
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 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
improve the performance of our Cordis business; risks associated
with the integration of the Patient Recovery business, including
the ability to successfully operate the acquired businesses, retain
customers of the acquired businesses, and achieve the expected
synergies and accretion in earnings; the risk of non-renewal under
one or more 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 proposals; changes in the
distribution patterns, reimbursement rates, pricing or rebates 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 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 release reflects management's views as of
May 9, 2019. Except to the extent
required by applicable law, Cardinal Health undertakes no
obligation to update or revise any forward-looking statement.
Schedule
1
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in millions, except
per common share amounts)
|
2019
|
|
2018
|
|
%
Change
|
|
2019
|
|
2018
|
|
%
Change
|
Revenue
|
$
|
35,228
|
|
|
$
|
33,633
|
|
|
5
|
%
|
|
$
|
108,181
|
|
|
$
|
101,460
|
|
|
7
|
%
|
Cost of products
sold
|
33,464
|
|
|
31,720
|
|
|
5
|
%
|
|
103,021
|
|
|
96,014
|
|
|
7
|
%
|
Gross
margin
|
1,764
|
|
|
1,913
|
|
|
(8)
|
%
|
|
5,160
|
|
|
5,446
|
|
|
(5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,097
|
|
|
1,132
|
|
|
(3)
|
%
|
|
3,315
|
|
|
3,325
|
|
|
—
|
%
|
Restructuring and
employee severance
|
53
|
|
|
2
|
|
|
N.M.
|
|
|
97
|
|
|
155
|
|
|
N.M.
|
|
Amortization and
other acquisition-related costs
|
154
|
|
|
175
|
|
|
N.M.
|
|
|
468
|
|
|
543
|
|
|
N.M.
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
11
|
|
|
(6)
|
|
|
N.M.
|
|
|
(492)
|
|
|
62
|
|
|
N.M.
|
|
Litigation
(recoveries)/charges, net
|
17
|
|
|
64
|
|
|
N.M.
|
|
|
20
|
|
|
155
|
|
|
N.M.
|
|
Operating
earnings
|
432
|
|
|
546
|
|
|
(21)
|
%
|
|
1,752
|
|
|
1,206
|
|
|
45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(13)
|
|
|
(2)
|
|
|
N.M.
|
|
|
13
|
|
|
(6)
|
|
|
N.M.
|
|
Interest expense,
net
|
75
|
|
|
84
|
|
|
(11)
|
%
|
|
227
|
|
|
251
|
|
|
(10)
|
%
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
N.M.
|
|
—
|
|
|
2
|
|
|
N.M.
|
|
Earnings before
income taxes
|
370
|
|
|
464
|
|
|
(20)
|
%
|
|
1,512
|
|
|
959
|
|
|
58
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes
|
74
|
|
|
209
|
|
|
(65)
|
%
|
|
342
|
|
|
(466)
|
|
|
(173)
|
%
|
Net
earnings
|
296
|
|
|
255
|
|
|
16
|
%
|
|
1,170
|
|
|
1,425
|
|
|
(18)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
N.M.
|
|
|
(1)
|
|
|
(3)
|
|
|
N.M.
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
296
|
|
|
$
|
255
|
|
|
16
|
%
|
|
$
|
1,169
|
|
|
$
|
1,422
|
|
|
(18)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.99
|
|
|
$
|
0.81
|
|
|
22
|
%
|
|
$
|
3.89
|
|
|
$
|
4.52
|
|
|
(14)
|
%
|
Diluted
|
0.99
|
|
|
0.81
|
|
|
22
|
%
|
|
3.88
|
|
|
4.50
|
|
|
(14)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
298
|
|
|
313
|
|
|
|
|
301
|
|
|
314
|
|
|
|
Diluted
|
299
|
|
|
315
|
|
|
|
|
302
|
|
|
316
|
|
|
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in
millions)
|
March 31,
2019
|
|
June 30,
2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
3,438
|
|
|
$
|
1,763
|
|
Trade receivables,
net
|
7,879
|
|
|
7,800
|
|
Inventories,
net
|
12,622
|
|
|
12,308
|
|
Prepaid expenses and
other
|
1,643
|
|
|
1,926
|
|
Assets held for
sale
|
—
|
|
|
756
|
|
Total current
assets
|
25,582
|
|
|
24,553
|
|
|
|
|
|
Property and
equipment, net
|
2,322
|
|
|
2,487
|
|
Goodwill and other
intangibles, net
|
11,860
|
|
|
12,229
|
|
Other
assets
|
1,045
|
|
|
682
|
|
Total
assets
|
$
|
40,809
|
|
|
$
|
39,951
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
20,517
|
|
|
$
|
19,677
|
|
Current portion of
long-term obligations and other short-term borrowings
|
1,451
|
|
|
1,001
|
|
Other accrued
liabilities
|
1,951
|
|
|
2,002
|
|
Liabilities related
to assets held for sale
|
—
|
|
|
213
|
|
Total current
liabilities
|
23,919
|
|
|
22,893
|
|
|
|
|
|
Long-term
obligations, less current portion
|
7,629
|
|
|
8,012
|
|
Deferred income taxes
and other liabilities
|
3,029
|
|
|
2,975
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
—
|
|
|
12
|
|
|
|
|
|
Total shareholders'
equity
|
6,232
|
|
|
6,059
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
40,809
|
|
|
$
|
39,951
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
|
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
296
|
|
|
$
|
255
|
|
|
$
|
1,170
|
|
|
$
|
1,425
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
261
|
|
|
259
|
|
|
759
|
|
|
779
|
|
Impairments and loss
on sale of other investments
|
—
|
|
|
—
|
|
|
2
|
|
|
6
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
11
|
|
|
(6)
|
|
|
(492)
|
|
|
62
|
|
Share-based
compensation
|
23
|
|
|
24
|
|
|
64
|
|
|
64
|
|
Provision for bad
debts
|
19
|
|
|
27
|
|
|
59
|
|
|
50
|
|
Change in fair value
of contingent consideration obligation
|
—
|
|
|
(2)
|
|
|
—
|
|
|
(2)
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
(Increase)/decrease
in trade receivables
|
35
|
|
|
(15)
|
|
|
(156)
|
|
|
(632)
|
|
(Increase)/decrease
in inventories
|
408
|
|
|
130
|
|
|
(345)
|
|
|
(865)
|
|
Increase/(decrease)
in accounts payable
|
(95)
|
|
|
(472)
|
|
|
846
|
|
|
1,635
|
|
Other accrued
liabilities and operating items, net
|
522
|
|
|
554
|
|
|
309
|
|
|
(308)
|
|
Net cash provided by
operating activities
|
1,480
|
|
|
754
|
|
|
2,216
|
|
|
2,214
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(17)
|
|
|
(1)
|
|
|
(38)
|
|
|
(6,142)
|
|
Additions to property
and equipment
|
(76)
|
|
|
(78)
|
|
|
(192)
|
|
|
(246)
|
|
Purchase of
available-for-sale securities and other investments
|
(1)
|
|
|
(1)
|
|
|
(11)
|
|
|
(7)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
2
|
|
|
—
|
|
|
3
|
|
|
65
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment held for sale
|
8
|
|
|
861
|
|
|
749
|
|
|
862
|
|
Net cash provided
by/(used in) investing activities
|
(84)
|
|
|
781
|
|
|
511
|
|
|
(5,468)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
—
|
|
|
(5)
|
|
|
—
|
|
|
(22)
|
|
Net change in
short-term borrowings
|
—
|
|
|
(205)
|
|
|
—
|
|
|
(50)
|
|
Purchase of
noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(106)
|
|
Proceeds from
long-term obligations, net of issuance costs
|
1
|
|
|
—
|
|
|
1
|
|
|
3
|
|
Reduction of
long-term obligations
|
(1)
|
|
|
—
|
|
|
(3)
|
|
|
(403)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
—
|
|
|
13
|
|
|
(13)
|
|
|
(3)
|
|
Dividends on common
shares
|
(142)
|
|
|
(140)
|
|
|
(435)
|
|
|
(436)
|
|
Purchase of treasury
shares
|
—
|
|
|
(300)
|
|
|
(600)
|
|
|
(450)
|
|
Net cash used in
financing activities
|
(142)
|
|
|
(637)
|
|
|
(1,050)
|
|
|
(1,467)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
2
|
|
|
10
|
|
|
(2)
|
|
|
17
|
|
Change in cash held
for sale
|
—
|
|
|
18
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
1,256
|
|
|
926
|
|
|
1,675
|
|
|
(4,704)
|
|
Cash and equivalents
at beginning of period
|
2,182
|
|
|
1,249
|
|
|
1,763
|
|
|
6,879
|
|
Cash and
equivalents at end of period
|
$
|
3,438
|
|
|
$
|
2,175
|
|
|
$
|
3,438
|
|
|
$
|
2,175
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
|
Segment
Information
|
|
Third
Quarter
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
(in
millions)
|
2019
|
|
2018
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
31,361
|
|
|
$
|
29,720
|
|
|
Amount
|
$
|
3,871
|
|
|
$
|
3,916
|
|
Growth
rate
|
6
|
%
|
|
5
|
%
|
|
Growth
rate
|
(1)
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
536
|
|
|
$
|
596
|
|
|
Amount
|
$
|
155
|
|
|
$
|
199
|
|
Growth
rate
|
(10)
|
%
|
|
(3)
|
%
|
|
Growth
rate
|
(22)
|
%
|
|
34
|
%
|
Segment profit
margin
|
1.71
|
%
|
|
2.00
|
%
|
|
Segment profit
margin
|
4.01
|
%
|
|
5.09
|
%
|
|
|
Year-to-Date
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
(in
millions)
|
2019
|
|
2018
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
96,516
|
|
|
$
|
89,786
|
|
|
Amount
|
$
|
11,678
|
|
|
$
|
11,684
|
|
Growth
rate
|
7
|
%
|
|
3
|
%
|
|
Growth
rate
|
—
|
%
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,388
|
|
|
$
|
1,576
|
|
|
Amount
|
$
|
479
|
|
|
$
|
548
|
|
Growth
rate
|
(12)
|
%
|
|
(6)
|
%
|
|
Growth
rate1
|
(13)
|
%
|
|
26
|
%
|
Segment profit
margin
|
1.44
|
%
|
|
1.76
|
%
|
|
Segment profit
margin
|
4.10
|
%
|
|
4.69
|
%
|
|
1Segment
profit for the nine months ended March 31, 2018 includes a $64
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
|
|
|
|
|
|
|
|
Earnings
|
Before
|
for
|
|
Net
|
Effective
|
|
Diluted
|
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Tax
|
Diluted
|
EPS2
|
(in millions, except
per common share amounts)
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
Rate
|
EPS2,3,4
|
Growth
Rate
|
Third Quarter
2019
|
GAAP
|
$
|
432
|
|
(21)
|
%
|
$
|
370
|
|
$
|
74
|
|
$
|
296
|
|
16
|
%
|
20.0
|
%
|
$
|
0.99
|
|
22
|
%
|
Restructuring and
employee severance
|
53
|
|
|
53
|
|
14
|
|
39
|
|
|
|
0.13
|
|
|
Amortization and
other acquisition-related costs
|
154
|
|
|
154
|
|
38
|
|
116
|
|
|
|
0.39
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
11
|
|
|
11
|
|
4
|
|
7
|
|
|
|
0.03
|
|
|
Litigation
(recoveries)/charges, net
|
17
|
|
|
17
|
|
7
|
|
10
|
|
|
|
0.03
|
|
|
Transitional tax
benefit, net5
|
—
|
|
|
—
|
|
(5)
|
|
5
|
|
|
|
0.02
|
|
|
Non-GAAP
|
$
|
667
|
|
(15)
|
%
|
$
|
605
|
|
$
|
130
|
|
$
|
475
|
|
9
|
%
|
21.6
|
%
|
$
|
1.59
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
2018
|
GAAP
|
$
|
546
|
|
(10)
|
%
|
$
|
464
|
|
$
|
209
|
|
$
|
255
|
|
(33)
|
%
|
45.1
|
%
|
$
|
0.81
|
|
(33)
|
%
|
Restructuring and
employee severance
|
2
|
|
|
2
|
|
(17)
|
|
19
|
|
|
|
0.06
|
|
|
Amortization and
other acquisition-related costs
|
175
|
|
|
175
|
|
44
|
|
131
|
|
|
|
0.42
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(6)
|
|
|
(6)
|
|
(14)
|
|
8
|
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net
|
64
|
|
|
64
|
|
21
|
|
43
|
|
|
|
0.14
|
|
|
Transitional tax
benefit, net5
|
—
|
|
|
—
|
|
17
|
|
(17)
|
|
|
|
(0.06)
|
|
|
Non-GAAP
|
$
|
781
|
|
3
|
%
|
$
|
700
|
|
$
|
262
|
|
$
|
437
|
|
(10)
|
%
|
37.5
|
%
|
$
|
1.39
|
|
(9)
|
%
|
|
|
|
Year-to-Date
2019
|
GAAP
|
$
|
1,752
|
|
45
|
%
|
$
|
1,512
|
|
$
|
342
|
|
$
|
1,169
|
|
(18)
|
%
|
22.6
|
%
|
$
|
3.88
|
|
(14)
|
%
|
Restructuring and
employee severance
|
97
|
|
|
97
|
|
25
|
|
72
|
|
|
|
0.24
|
|
|
Amortization and
other acquisition-related costs
|
468
|
|
|
468
|
|
112
|
|
356
|
|
|
|
1.18
|
|
|
Impairments and
(gain)/loss on disposal of assets, net6
|
(492)
|
|
|
(492)
|
|
(129)
|
|
(363)
|
|
|
|
(1.20)
|
|
|
Litigation
(recoveries)/charges, net
|
20
|
|
|
20
|
|
7
|
|
13
|
|
|
|
0.04
|
|
|
Transitional tax
benefit, net5
|
—
|
|
|
—
|
|
(8)
|
|
8
|
|
|
|
0.03
|
|
|
Non-GAAP
|
$
|
1,845
|
|
(13)
|
%
|
$
|
1,605
|
|
$
|
349
|
|
$
|
1,255
|
|
—
|
%
|
21.7
|
%
|
$
|
4.17
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2018
|
GAAP
|
$
|
1,206
|
|
(28)
|
%
|
$
|
959
|
|
$
|
(466)
|
|
$
|
1,422
|
|
40
|
%
|
(48.6)
|
%
|
$
|
4.50
|
|
42
|
%
|
Restructuring and
employee severance
|
155
|
|
|
155
|
|
29
|
|
126
|
|
|
|
0.40
|
|
|
Amortization and
other acquisition-related costs
|
543
|
|
|
543
|
|
143
|
|
400
|
|
|
|
1.27
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
62
|
|
|
62
|
|
(57)
|
|
119
|
|
|
|
0.38
|
|
|
Litigation
(recoveries)/charges, net
|
155
|
|
|
155
|
|
51
|
|
104
|
|
|
|
0.33
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
2
|
|
1
|
|
1
|
|
|
|
—
|
|
|
Transitional tax
benefit, net5
|
—
|
|
|
—
|
|
911
|
|
(911)
|
|
|
|
(2.88)
|
|
|
Non-GAAP
|
$
|
2,121
|
|
—
|
%
|
$
|
1,875
|
|
$
|
612
|
|
$
|
1,261
|
|
(4)
|
%
|
32.6
|
%
|
$
|
3.99
|
|
(3)
|
%
|
|
1For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
|
2attributable to Cardinal Health,
Inc.
|
|
3GAAP
diluted EPS for the three months ended March 31, 2019 compared to
the prior year period was favorably impacted by $0.36 per share,
which includes $0.31 per share due to change in the effective tax
rate and $0.05 per share due to the change in weighted average
shares outstanding. GAAP diluted EPS for the nine months ended
March 31, 2019 compared to the prior year period was unfavorably
impacted by $(3.39) per share, which includes $(3.57) per share due
to change in the effective tax rate and $0.18 per share 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 March 31, 2019 compared to
the prior year period was favorably impacted by $0.40 per share,
which includes $0.32 per share due to change in the effective tax
rate and $0.08 per share due to the change in weighted average
shares outstanding. Non-GAAP diluted EPS for the nine months ended
March 31, 2019 compared to the prior year period was favorably
impacted by $0.77 per share, which includes $0.58 per share due to
change in the effective tax rate and $0.19 per share 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).
|
|
5Reflects
the net transitional benefit from the re-measurement of our
deferred tax assets and liabilities partially offset by the
repatriation tax on cash and earnings of foreign
subsidiaries.
|
|
6Year-to-date 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 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 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 under the Opioid Stewardship Act for prescription opioid
medications that were sold or distributed in periods prior to
fiscal 2019. This portion was excluded from non-GAAP financial
measures because it related to sales in prior fiscal years and
inclusion would have obscured analysis of the current fiscal year
results of our underlying, ongoing business. Additionally, while
the New York law would have
required us to make payments on an ongoing basis, the portion of
the assessment related to sales in periods prior to fiscal 2019 was
contemplated to be a one-time, nonrecurring item. In December 2018, this assessment was declared to be
unconstitutional.
- 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 because they
are not part of the ongoing operations of our underlying business
and to facilitate comparison of our current financial results to
our historical financial results and to our peer group companies'
financial results. 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 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 subsequent 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.
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 reliably 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 items excluded from GAAP to
calculate non-GAAP could significantly impact the Company's fiscal
2019 GAAP results. Over the past five 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. Additionally, the excluded items
for the fiscal 2019 year-to-date period have increased the
Company's EPS by $0.29, which
includes a $508 million gain
($378 million after-tax) related to
the naviHealth divestiture.
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) 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, 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