DUBLIN, Ohio, Aug. 8, 2019 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported fourth quarter fiscal year 2019 revenues
of $37.4 billion, an increase of 6
percent from the fourth quarter last year. GAAP operating earnings
were $307 million and non-GAAP
operating earnings were $507 million
in the quarter. GAAP diluted earnings per share (EPS) for the
fourth quarter were $0.65, while
non-GAAP diluted EPS were $1.11.
Fiscal 2019 revenues were $145.5
billion, an increase of 6 percent from fiscal 2018. GAAP
operating earnings were $2.1 billion
and non-GAAP operating earnings were $2.4
billion for the year. GAAP diluted EPS for fiscal year 2019
were $4.53, while non-GAAP diluted
EPS were $5.28.
"The fourth quarter capped off a year of progress for Cardinal
Health," said Mike Kaufmann, CEO of
Cardinal Health. "During fiscal 2019, we delivered on our overall
commitments and made significant strides on key initiatives that
position us for growth in an evolving healthcare environment. While
we still have work to do, we look forward to building on this
foundation in the coming year and continuing to enhance the value
we provide to our customers and their patients."
Q4 and full year FY19 summary
|
Q4
FY19
|
Q4
FY18
|
Y/Y
|
FY19
|
FY18
|
Y/Y
|
Revenue
|
$37.4
billion
|
$35.3
billion
|
6%
|
$145.5
billion
|
$136.8
billion
|
6%
|
|
|
|
|
|
|
|
Operating
earnings/(loss)
|
$307
million
|
$(1.1)
billion
|
N.M.
|
$2.1
billion
|
$126
million
|
N.M.
|
Non-GAAP
operating earnings
|
$507
million
|
$465
million
|
9%
|
$2.4
billion
|
$2.6
billion
|
(9)%
|
|
|
|
|
|
|
|
Net
earnings/(loss)
attributable to
Cardinal Health, Inc.
|
$194
million
|
$(1.2)
billion
|
N.M.
|
$1.4
billion
|
$256
million
|
N.M.
|
Non-GAAP net
earnings
attributable to
Cardinal Health, Inc.
|
$334
million
|
$315
million
|
6%
|
$1.6
billion
|
$1.6
billion
|
1%
|
|
|
|
|
|
|
|
Diluted EPS
attributable to
Cardinal Health, Inc.
|
$0.65
|
$(3.76)
|
N.M.
|
$4.53
|
$0.81
|
N.M.
|
Non-GAAP diluted
EPS attributable to
Cardinal Health, Inc.
|
$1.11
|
$1.01
|
10%
|
$5.28
|
$5.00
|
6%
|
Fiscal year 2019 GAAP results included a pre-tax gain of
$508 million from the divestiture of
the company's naviHealth business. Fiscal 2018 GAAP results
included a $1.4 billion goodwill
impairment taken in the fourth fiscal quarter related to the
Medical segment and transitional tax benefits of $936 million due to the enactment of the U.S. Tax
Cuts and Jobs Act ("U.S. tax reform").
Tax rate
During the fourth quarter of 2019 and 2018, GAAP effective tax
rates were 18.4 percent and 1.8 percent, respectively. In fiscal
years 2019 and 2018, GAAP effective tax rates were 22.1 percent and
213.8 percent, respectively. The fiscal year 2018 GAAP fourth
quarter and full year effective tax rates were adversely impacted
by the non-deductible Medical segment goodwill impairment.
Additionally, the fiscal year 2018 GAAP effective tax rate
benefitted from transitional tax benefits of $936 million due to the enactment of U.S. tax
reform. The fiscal year 2019 GAAP fourth quarter effective tax rate
was unfavorably impacted by net discrete items whereas the fiscal
year 2018 GAAP fourth quarter effective tax rate was favorably
impacted by net discrete items.
During the fourth quarter of 2019 and 2018, non-GAAP effective
tax rates were 23.7 percent and 11.8 percent, respectively. In
fiscal years 2019 and 2018, non-GAAP effective tax rates were 22.1
percent and 29.3 percent, respectively. Fiscal 2019 GAAP and
non-GAAP effective tax rates were favorably impacted by the full
benefit of the lower U.S. federal income tax rate due to U.S. tax
reform. The fiscal year 2019 non-GAAP fourth quarter effective tax
rate was unfavorably impacted by net discrete items whereas the
fiscal year 2018 non-GAAP fourth quarter effective tax rate was
favorably impacted by net discrete items.
Segment results
Pharmaceutical segment
Fourth quarter revenue for the Pharmaceutical segment increased
6 percent to $33.4 billion due to
sales growth from Pharmaceutical Distribution and Specialty
Solutions customers.
Pharmaceutical segment profit increased 7 percent to
$447 million in the fourth quarter,
which reflects the positive impact from Specialty Solutions and a
higher contribution from brand sales and mix, partially offset by
the company's generics program performance.
|
Q4
FY19
|
Q4
FY18
|
Y/Y
|
FY19
|
FY18
|
Y/Y
|
Revenue
|
$33.4
billion
|
$31.5
billion
|
6%
|
$129.9
billion
|
$121.2
billion
|
7%
|
Segment
profit
|
$447
million
|
$416
million
|
7%
|
$1.8
billion
|
$2.0
billion
|
(8)%
|
Medical segment
Fourth quarter revenue for the Medical segment increased 1
percent to $4.0 billion due to growth
from existing customers, partially offset by the divestiture of the
naviHealth business.
Medical segment profit decreased by 15 percent to $97 million in the fourth quarter, driven by the
performance of Cardinal Health Brand products, partially offset by
the benefits from cost savings initiatives.
|
Q4
FY19
|
Q4
FY18
|
Y/Y
|
FY19
|
FY18
|
Y/Y
|
Revenue
|
$4.0
billion
|
$3.9
billion
|
1%
|
$15.6
billion
|
$15.6
billion
|
0%
|
Segment
profit
|
$97
million
|
$114
million
|
(15)%
|
$576
million
|
$662
million
|
(13)%
|
Outlook
The company does not provide a GAAP EPS outlook because it is
unable to reliably forecast most of the items that are excluded
from GAAP EPS to calculate non-GAAP EPS. These items could cause
EPS to differ materially from non-GAAP EPS. See "Use of Non-GAAP
Measures" following the attached schedules for additional
explanation.
The company's fiscal year 2020 guidance range for non-GAAP diluted
earnings per share attributable to Cardinal Health, Inc. is
$4.85 to $5.10.
The company's guidance for fiscal 2020 includes an anticipated
incremental $130 million in cost
savings associated with actions intended to optimize and simplify
the company's operating model and cost structure. In connection
with these cost savings initiatives, the company expects to record
restructuring charges in the range of $120
million to $145 million, the
majority of which are expected to be expensed in fiscal year 2020.
Cardinal Health has targeted achieving more than $500 million in savings within five years,
relative to its fiscal 2018 baseline and may incur additional
restructuring charges in furtherance of this goal. Restructuring
charges are excluded from the company's non-GAAP results.
Recent highlights
- Cardinal Health announced that Dean
Scarborough, former chairman and CEO of Avery Dennison, and John
Weiland, former vice chairman, president and COO of C.R.
Bard, Inc., will join the board of directors effective September 1.
- Cardinal Health announced that Stephen
Mason, president of the company's Cardinal Health at-Home
Solutions business, is being promoted to CEO of Cardinal Health's
Medical segment effective August
16.
- Cardinal Health announced that David
Evans joined Cardinal Health on July
29 and will become interim CFO, effective September 1, as the company conducts its external
search for a permanent CFO. David most recently served as executive
vice president and CFO of Battelle Memorial Institute, and
previously served as executive vice president and CFO of Scotts
Miracle-Gro.
- Cardinal Health board of directors approved a quarterly
dividend of $0.4811 per share. The
dividend will be payable on October 15,
2019 to shareholders of record at the close of business on
October 1, 2019.
- As part of the company's Opioid Action Program, the Cardinal
Health Foundation awarded nearly $1
million in additional grants to state pharmacy associations
and colleges of pharmacy to support best strategies for prescribing
practices.
FY19 awards and recognition highlights
- Named to the Human Rights Campaign (HRC) Best Places to Work
for LGBT Equality for the eleventh consecutive year based on
ratings in HRC's 2019 Corporate Equality Index
- Recognized by Becker's Healthcare as one of the 150
Top Places to Work in Healthcare in 2019 for the fifth
consecutive year
- Earned distinction as a 2019 "Top 70 Companies for Executive
Women" by the National Association for Female Executives for the
eighth consecutive year
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss fourth quarter and
year end results. To access the webcast and corresponding slide
presentation, go to the Investor Relations page at
ir.cardinalhealth.com. No access code is required.
Presentation slides and a webcast replay will be available on
the Cardinal Health website at ir.cardinalhealth.com until
August 7, 2020.
Upcoming webcasted investor events
- Morgan Stanley 17th Annual Global Healthcare Conference on
Wednesday, September 11 at
8:45 a.m. Eastern in New York City
About Cardinal Health
Cardinal Health, Inc. is a
global, integrated healthcare services and products company,
providing customized solutions for hospitals, healthcare systems,
pharmacies, ambulatory surgery centers, clinical laboratories and
physician offices worldwide. The company enhances supply chain
efficiency for clinically proven medical products, pharmaceuticals
and cost-effective solutions. To combat prescription drug misuse,
the Cardinal Health Foundation and its education partners created
Generation Rx, a national drug prevention education and
awareness program. The Foundation actively supports an array of
other solutions, including efforts to reduce opioid
prescribing, promote drug take back and safe disposal and
expand collaborative community work.
Cardinal Health is backed by nearly 100 years of experience with
operations in nearly 46 countries. For more information, visit
cardinalhealth.com. Follow us on Twitter, Facebook and
LinkedIn.
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 and other components of our
generics pharmaceutical program; risks associated with the
distribution of opioids, including potential financial impact
associated with the outcome of the ongoing lawsuits and
investigations by certain governmental and regulatory authorities
as well as private plaintiffs and potential reputational or
operational harm; 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
Medical segment's Cardinal Health Brand Products business; 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 and proposals related to pharmaceutical pricing
transparency; changes in the distribution patterns, reimbursement
rates, pricing or rebates for health care products and services;
risks associated with our cost-savings initiatives, including the
possibility that they could result in greater charges or expenses
than we anticipate, could fail to achieve the desired efficiencies
or strategic outcomes and could have unintended consequences, such
as business disruption; 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 August 8,
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)
|
|
|
Fourth
Quarter
|
|
Fiscal
Year
|
(in millions, except
per common share amounts)
|
2019
|
|
2018
|
|
%
Change
|
|
2019
|
|
2018
|
|
%
Change
|
Revenue
|
$
|
37,353
|
|
|
$
|
35,349
|
|
|
6
|
%
|
|
$
|
145,534
|
|
|
$
|
136,809
|
|
|
6
|
%
|
Cost of products
sold
|
35,679
|
|
|
33,614
|
|
|
6
|
%
|
|
138,700
|
|
|
129,628
|
|
|
7
|
%
|
Gross
margin
|
1,674
|
|
|
1,735
|
|
|
(4)
|
%
|
|
6,834
|
|
|
7,181
|
|
|
(5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,168
|
|
|
1,270
|
|
|
(8)
|
%
|
|
4,480
|
|
|
4,596
|
|
|
(3)
|
%
|
Restructuring and
employee severance
|
28
|
|
|
22
|
|
|
N.M.
|
|
125
|
|
|
176
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
153
|
|
|
165
|
|
|
N.M.
|
|
621
|
|
|
707
|
|
|
N.M.
|
Impairments and
(gain)/loss on disposal of assets, net1
|
3
|
|
|
1,354
|
|
|
N.M.
|
|
(488)
|
|
|
1,417
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
15
|
|
|
4
|
|
|
N.M.
|
|
36
|
|
|
159
|
|
|
N.M.
|
Operating
earnings/(loss)
|
307
|
|
|
(1,080)
|
|
|
N.M.
|
|
2,060
|
|
|
126
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income)/expense, net
|
2
|
|
|
29
|
|
|
N.M.
|
|
15
|
|
|
23
|
|
|
N.M.
|
Interest expense,
net
|
67
|
|
|
78
|
|
|
(14)
|
%
|
|
294
|
|
|
329
|
|
|
(11)
|
%
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
N.M.
|
|
—
|
|
|
2
|
|
|
N.M.
|
Earnings/(loss)
before income taxes
|
238
|
|
|
(1,187)
|
|
|
N.M.
|
|
1,751
|
|
|
(228)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes
|
44
|
|
|
(21)
|
|
|
N.M
|
|
386
|
|
|
(487)
|
|
|
N.M.
|
Net
earnings/(loss)
|
194
|
|
|
(1,166)
|
|
|
N.M.
|
|
1,365
|
|
|
259
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
N.M.
|
|
(2)
|
|
|
(3)
|
|
|
N.M.
|
Net
earnings/(loss) attributable to Cardinal Health,
Inc.
|
$
|
194
|
|
|
$
|
(1,166)
|
|
|
N.M.
|
|
$
|
1,363
|
|
|
$
|
256
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss)
per common share attributable to Cardinal Health,
Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.65
|
|
|
$
|
(3.76)
|
|
|
N.M.
|
|
$
|
4.55
|
|
|
$
|
0.82
|
|
|
N.M.
|
Diluted
|
0.65
|
|
|
(3.76)
|
|
2
|
N.M.
|
|
4.53
|
|
|
0.81
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
298
|
|
|
310
|
|
|
|
|
300
|
|
|
313
|
|
|
|
Diluted
|
300
|
|
|
310
|
|
2
|
|
|
301
|
|
|
315
|
|
|
|
1In
conjunction with the preparation of our consolidated financial
statements for fiscal year 2018, we performed our annual goodwill
impairment test. As part of this annual test, we concluded that a
portion of our Medical segment goodwill was impaired, resulting in
a non-cash impairment charge of $1.4 billion during the fourth
quarter of fiscal 2018.
|
2Due to
the net loss during the fourth quarter of fiscal 2018, dilutive
potential common shares have not been included in the denominator
of the dilutive per share computation due to their antidilutive
effect.
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
(in
millions)
|
June 30,
2019
|
|
June 30,
2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
2,531
|
|
|
$
|
1,763
|
|
Trade receivables,
net
|
8,448
|
|
|
7,800
|
|
Inventories,
net
|
12,822
|
|
|
12,308
|
|
Prepaid expenses and
other
|
1,946
|
|
|
1,926
|
|
Assets held for
sale
|
—
|
|
|
756
|
|
Total current
assets
|
25,747
|
|
|
24,553
|
|
|
|
|
|
Property and
equipment, net
|
2,356
|
|
|
2,487
|
|
Goodwill and other
intangibles, net
|
11,808
|
|
|
12,229
|
|
Other
assets
|
1,052
|
|
|
682
|
|
Total
assets
|
$
|
40,963
|
|
|
$
|
39,951
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
21,535
|
|
|
$
|
19,677
|
|
Current portion of
long-term obligations and other short-term borrowings
|
452
|
|
|
1,001
|
|
Other accrued
liabilities
|
2,122
|
|
|
2,002
|
|
Liabilities related
to assets held for sale
|
—
|
|
|
213
|
|
Total current
liabilities
|
24,109
|
|
|
22,893
|
|
|
|
|
|
Long-term
obligations, less current portion
|
7,579
|
|
|
8,012
|
|
Deferred income taxes
and other liabilities
|
2,945
|
|
|
2,975
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
—
|
|
|
12
|
|
|
|
|
|
Total shareholders'
equity
|
6,330
|
|
|
6,059
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
40,963
|
|
|
$
|
39,951
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Fourth
Quarter
|
|
Fiscal
Year
|
(in
millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
194
|
|
|
$
|
(1,166)
|
|
|
$
|
1,365
|
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
241
|
|
|
253
|
|
|
1,000
|
|
|
1,032
|
|
Impairments and loss
on sale of other investments
|
1
|
|
|
—
|
|
|
3
|
|
|
6
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
4
|
|
|
1,354
|
|
|
(488)
|
|
|
1,417
|
|
Share-based
compensation
|
18
|
|
|
21
|
|
|
82
|
|
|
85
|
|
Provision
for/(benefit from) deferred income taxes
|
(83)
|
|
|
(1,012)
|
|
|
(83)
|
|
|
(1,012)
|
|
Provision for bad
debts
|
29
|
|
|
24
|
|
|
88
|
|
|
74
|
|
Change in fair value
of contingent consideration obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
Increase in trade
receivables
|
(595)
|
|
|
(239)
|
|
|
(751)
|
|
|
(871)
|
|
Increase in
inventories
|
(206)
|
|
|
(346)
|
|
|
(551)
|
|
|
(1,211)
|
|
Increase in accounts
payable
|
1,018
|
|
|
939
|
|
|
1,864
|
|
|
2,574
|
|
Other accrued
liabilities and operating items, net
|
(115)
|
|
|
726
|
|
|
193
|
|
|
417
|
|
Net cash provided by
operating activities
|
506
|
|
|
554
|
|
|
2,722
|
|
|
2,768
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(44)
|
|
|
—
|
|
|
(82)
|
|
|
(6,142)
|
|
Additions to property
and equipment
|
(136)
|
|
|
(138)
|
|
|
(328)
|
|
|
(384)
|
|
Purchase of
available-for-sale securities and other investments
|
(7)
|
|
|
(2)
|
|
|
(18)
|
|
|
(9)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
—
|
|
|
—
|
|
|
3
|
|
|
65
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment
|
14
|
|
|
—
|
|
|
763
|
|
|
862
|
|
Net cash provided
by/(used in) investing activities
|
(173)
|
|
|
(140)
|
|
|
338
|
|
|
(5,608)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(35)
|
|
Net change in
short-term borrowings
|
—
|
|
|
—
|
|
|
—
|
|
|
(50)
|
|
Purchase of
noncontrolling interests
|
—
|
|
|
—
|
|
|
—
|
|
|
(106)
|
|
Proceeds from
long-term obligations, net of issuance costs
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
Reduction of
long-term obligations
|
(1,100)
|
|
|
(551)
|
|
|
(1,102)
|
|
|
(954)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
(1)
|
|
|
—
|
|
|
(14)
|
|
|
(3)
|
|
Dividends on common
shares
|
(142)
|
|
|
(145)
|
|
|
(577)
|
|
|
(581)
|
|
Purchase of treasury
shares
|
—
|
|
|
(100)
|
|
|
(600)
|
|
|
(550)
|
|
Net cash used in
financing activities
|
(1,243)
|
|
|
(809)
|
|
|
(2,293)
|
|
|
(2,276)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
3
|
|
|
(13)
|
|
|
1
|
|
|
4
|
|
Change in cash held
for sale
|
—
|
|
|
(4)
|
|
|
—
|
|
|
(4)
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
(907)
|
|
|
(412)
|
|
|
768
|
|
|
(5,116)
|
|
Cash and equivalents
at beginning of period
|
3,438
|
|
|
2,175
|
|
|
1,763
|
|
|
6,879
|
|
Cash and
equivalents at end of period
|
$
|
2,531
|
|
|
$
|
1,763
|
|
|
$
|
2,531
|
|
|
$
|
1,763
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries Segment Information
|
|
Fourth
Quarter
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
(in
millions)
|
2019
|
|
2018
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
33,401
|
|
|
$
|
31,455
|
|
|
Amount
|
$
|
3,956
|
|
|
$
|
3,898
|
|
Growth
rate
|
6
|
%
|
|
6
|
%
|
|
Growth
rate
|
1
|
%
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
447
|
|
|
$
|
416
|
|
|
Amount
|
$
|
97
|
|
|
$
|
114
|
|
Growth
rate
|
7
|
%
|
|
(18)
|
%
|
|
Growth
rate
|
(15)
|
%
|
|
(17)
|
%
|
Segment profit
margin
|
1.34
|
%
|
|
1.32
|
%
|
|
Segment profit
margin
|
2.45
|
%
|
|
2.92
|
%
|
|
|
Fiscal
Year
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2019
|
|
2018
|
|
(in
millions)
|
2019
|
|
2018
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
129,917
|
|
|
$
|
121,241
|
|
|
Amount
|
$
|
15,633
|
|
|
$
|
15,581
|
|
Growth
rate
|
7
|
%
|
|
4
|
%
|
|
Growth
rate
|
—
|
%
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,834
|
|
|
$
|
1,992
|
|
|
Amount
|
$
|
576
|
|
|
$
|
662
|
|
Growth
rate
|
(8)
|
%
|
|
(9)
|
%
|
|
Growth
rate1
|
(13)
|
%
|
|
16
|
%
|
Segment profit
margin
|
1.41
|
%
|
|
1.64
|
%
|
|
Segment profit
margin
|
3.68
|
%
|
|
4.25
|
%
|
1Segment
profit for fiscal year 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
for/
|
|
|
|
|
|
|
Operating
|
Earnings
|
(Loss)
Before
|
(Benefit
from)
|
Net
|
Net
|
Effective
|
|
Diluted
|
|
Earnings/
|
Growth
|
Income
|
Income
|
Earnings/
|
Earnings2
|
Tax
|
Diluted
|
EPS2
|
(in millions, except
per common share amounts)
|
(Loss)
|
Rate
|
Taxes
|
Taxes
|
(Loss)2
|
Growth
Rate
|
Rate
|
EPS2,3,4
|
Growth
Rate
|
Fourth Quarter
2019
|
GAAP
|
$
|
307
|
|
N.M.
|
$
|
238
|
|
$
|
44
|
|
$
|
194
|
|
N.M.
|
18.4
|
%
|
$
|
0.65
|
|
N.M.
|
Restructuring and
employee severance
|
28
|
|
|
28
|
|
7
|
|
21
|
|
|
|
0.07
|
|
|
Amortization and
other acquisition-related costs
|
153
|
|
|
153
|
|
35
|
|
118
|
|
|
|
0.39
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
3
|
|
|
3
|
|
15
|
|
(12)
|
|
|
|
(0.04)
|
|
|
Litigation
(recoveries)/charges, net
|
15
|
|
|
15
|
|
3
|
|
12
|
|
|
|
0.04
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
(1)
|
|
1
|
|
|
|
—
|
|
|
Non-GAAP
|
$
|
507
|
|
9
|
%
|
$
|
438
|
|
$
|
103
|
|
$
|
334
|
|
6
|
%
|
23.7
|
%
|
$
|
1.11
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Fourth Quarter
2018
|
GAAP
|
$
|
(1,080)
|
|
N.M.
|
$
|
(1,187)
|
|
$
|
(21)
|
|
$
|
(1,166)
|
|
N.M.
|
1.8
|
%
|
$
|
(3.76)
|
|
N.M.
|
Restructuring and
employee severance
|
22
|
|
|
22
|
|
(3)
|
|
25
|
|
|
|
0.08
|
|
|
Amortization and
other acquisition-related costs
|
165
|
|
|
165
|
|
33
|
|
132
|
|
|
|
0.42
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
1,354
|
|
|
1,354
|
|
13
|
|
1,341
|
|
|
|
4.30
|
|
|
Litigation
(recoveries)/charges, net
|
4
|
|
|
4
|
|
(4)
|
|
8
|
|
|
|
0.02
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
25
|
|
(25)
|
|
|
|
(0.08)
|
|
|
Non-GAAP
|
$
|
465
|
|
(27)
|
%
|
$
|
358
|
|
$
|
43
|
|
$
|
315
|
|
(24)
|
%
|
11.8
|
%
|
$
|
1.01
|
|
(23)
|
%
|
|
|
|
|
|
Fiscal Year
2019
|
GAAP
|
$
|
2,060
|
|
N.M.
|
$
|
1,751
|
|
$
|
386
|
|
$
|
1,363
|
|
N.M.
|
22.1
|
%
|
$
|
4.53
|
|
N.M.
|
Restructuring and
employee severance
|
125
|
|
|
125
|
|
32
|
|
93
|
|
|
|
0.31
|
|
|
Amortization and
other acquisition-related costs
|
621
|
|
|
621
|
|
148
|
|
473
|
|
|
|
1.57
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(488)
|
|
|
(488)
|
|
(113)
|
|
(375)
|
|
|
|
(1.25)
|
|
|
Litigation
(recoveries)/charges, net
|
36
|
|
|
36
|
|
10
|
|
26
|
|
|
|
0.09
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
(9)
|
|
9
|
|
|
|
0.03
|
|
|
Non-GAAP
|
$
|
2,353
|
|
(9)
|
%
|
$
|
2,044
|
|
$
|
453
|
|
$
|
1,589
|
|
1
|
%
|
22.1
|
%
|
$
|
5.28
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
2018
|
GAAP
|
$
|
126
|
|
(94)
|
%
|
$
|
(228)
|
|
$
|
(487)
|
|
$
|
256
|
|
(80)
|
%
|
213.8
|
%
|
$
|
0.81
|
|
(80)
|
%
|
Restructuring and
employee severance
|
176
|
|
|
176
|
|
25
|
|
151
|
|
|
|
0.48
|
|
|
Amortization and
other acquisition-related costs
|
707
|
|
|
707
|
|
176
|
|
531
|
|
|
|
1.69
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
1,417
|
|
|
1,417
|
|
(44)
|
|
1,461
|
|
|
|
4.64
|
|
|
Litigation
(recoveries)/charges, net
|
159
|
|
|
159
|
|
48
|
|
111
|
|
|
|
0.35
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
2
|
|
1
|
|
1
|
|
|
|
—
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
936
|
|
(936)
|
|
|
|
(2.97)
|
|
|
Non-GAAP
|
$
|
2,585
|
|
(7)
|
%
|
$
|
2,233
|
|
$
|
655
|
|
$
|
1,575
|
|
(9)
|
%
|
29.3
|
%
|
$
|
5.00
|
|
(7)
|
%
|
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 June 30, 2019 compared to the prior year
period was favorably impacted by the fourth quarter 2018 goodwill
impairment charge related to our Medical segment. GAAP diluted EPS
for fiscal year 2019 compared to the prior year period was
favorably impacted by the fourth quarter 2018 goodwill impairment
charge related to our Medical segment, offset by the gain
in fiscal 2019 of $508 million ($378 million after-tax)
related to the naviHealth divestiture and the fiscal 2018
transitional benefit from the enactment of the U.S. Tax Cuts and
Jobs Act.
|
4Fourth
quarter fiscal 2018 GAAP diluted loss per share is calculated using
a weighted average of 310 million common shares and excludes
dilutive securities from the denominator due to their anti-dilutive
effects resulting from our GAAP net loss for the quarter. Fourth
quarter fiscal 2018 non-GAAP diluted EPS and the EPS impact from
the GAAP to non-GAAP per share reconciling items are calculated
using a weighted average of 312 million common shares, which
includes potentially dilutive securities. The inclusion of
approximately 2 million dilutive shares in the GAAP to non-GAAP per
share reconciling items has a $0.02 impact on our non-GAAP EPS
calculation.
|
|
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 and, as such, the charge we incurred in the three
months ended September 30, 2018 was
reversed during the three months ended December 31, 2018.
- 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 $0.75 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. The excluded items for fiscal
2019 increased the Company's EPS by $0.75, 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