DUBLIN, Ohio, May 11, 2020 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported financial results for the third quarter
of fiscal 2020 ended March 31,
2020.Third quarter revenue was $39.2
billion, an increase of 11% from the third quarter of last
year.
Third quarter GAAP operating earnings increased 30% to
$562 million. Non-GAAP operating
earnings increased 8% to $719
million. GAAP diluted earnings per share (EPS) increased 20%
to $1.19, while non-GAAP diluted EPS
increased 2% to $1.62.
"I want to express my gratitude to our employees and our
partners across the healthcare industry for their incredible
efforts to help us perform our critical role in the supply chain
during this unprecedented time," said Mike
Kaufmann, CEO of Cardinal Health. "We remain committed to
delivering products and solutions to front-line health care
providers so they can safely serve and treat patients around the
world. As we look toward and beyond the fourth quarter, we will
continue to take strategic actions to fulfill this mission."
Q3 FY20 summary
|
Q3
FY20
|
Q3
FY19
|
Y/Y
|
Revenue
|
$39.2
billion
|
$35.2
billion
|
11%
|
|
|
|
|
Operating
earnings
|
$562
million
|
$432
million
|
30%
|
Non-GAAP operating
earnings
|
$719
million
|
$667
million
|
8%
|
|
|
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$350
million
|
$296
million
|
18%
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$474
million
|
$475
million
|
0%
|
|
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$1.19
|
$0.99
|
20%
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$1.62
|
$1.59
|
2%
|
During the third quarters of fiscal 2020 and 2019, GAAP
effective tax rates were 26.8% and 20.0%, respectively. Non-GAAP
effective tax rates were 25.7% and 21.6%, respectively.
Segment results
Pharmaceutical segment
|
Q3
FY20
|
Q3
FY19
|
Y/Y
|
Revenue
|
$35.1
billion
|
$31.4
billion
|
12%
|
Segment
profit
|
$534
million
|
$536
million
|
0%
|
Third quarter revenue for the Pharmaceutical segment increased
12 percent to $35.1 billion, due to
sales growth from Pharmaceutical Distribution customers and, to a
lesser extent, Specialty Solutions customers. This growth included
an acceleration in overall pharmaceutical sales in March, which the
company believes was due to the COVID-19 pandemic.
Pharmaceutical segment profit was flat at $534 million in the third quarter. This reflects
strong performance in the company's generics program and the
adverse impact of Pharmaceutical Distribution customer contract
renewals.
Medical segment
|
Q3
FY20
|
Q3
FY19
|
Y/Y
|
Revenue
|
$4.1
billion
|
$3.9
billion
|
5%
|
Segment
profit
|
$178
million
|
$155
million
|
15%
|
Third quarter revenue for the Medical segment increased 5
percent to $4.1 billion, due to
growth in products and distribution and Cardinal Health at
Home.
Medical segment profit increased 15 percent to $178 million in the third quarter due to an
increase in products and distribution, including benefits from
global manufacturing and cost savings initiatives.
Fiscal year 2020 outlook
While both segments
experienced a modest net positive impact in the third quarter from
increased volume related to the COVID-19 pandemic, the company
expects a significant net negative impact to fourth quarter
financial results in both segments. This is driven most
meaningfully by a decrease in volume related to the cancellation or
deferral of elective medical procedures.
The company does not provide forward-looking guidance on a GAAP
basis as certain financial information, the probable significance
of which cannot be determined, is not available and cannot be
reasonably estimated. See "Use of Non-GAAP Measures" following the
attached schedules for additional explanation.
The company reaffirms its fiscal year 2020 guidance range for
non-GAAP diluted earnings per share attributable to Cardinal
Health, Inc. of $5.20 to $5.40.
Recent highlights
- Jason Hollar joined the company
on April 27 and will become Chief
Financial Officer on May 26. Jason
previously served as CFO of Tenneco Inc. and Sears Holdings
Corporation.
- Cardinal Health board of directors approved a quarterly
dividend of $0.4859 per share. The
dividend will be payable on July 15,
2020 to shareholders of record at the close of business on
July 1, 2020.
- The company was recognized as a "2020 NAFE Top Companies for
Executive Women" by the National Association for Female Executives
for the ninth consecutive year.
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 until
May 10, 2021.
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 email 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
and the risks associated with the ongoing global settlement
framework discussions, including the risk that we may fail to reach
a settlement agreement or that a final settlement could require us
to pay more than we currently anticipate; risks arising from the
ongoing COVID-19 pandemic and our critical role in the global
healthcare supply chain, including the possibility that continued
deferrals and cancellations of elective medical procedures will
result in a sustained reduction in demand for our products and the
possibility of product shortages or supply disruptions from either
new international regulations or forced shut downs of distribution
or manufacturing facilities; risks associated with the recent
recalls of our surgical gowns and affected Presource Packs,
including the possibility of government investigations or actions
by regulators which could result suspension of our ability to
produce, distribute or sell products and civil or criminal
sanction; our ability to manage uncertainties associated with the
pricing of branded pharmaceuticals; risks associated with our
ability to improve the performance of our Medical segment's
Cardinal Health Brand Products business; uncertainties due to
government health care reform; and 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.
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 11,
2020. Except to the extent required by applicable law,
Cardinal Health undertakes no obligation to update or revise any
forward-looking statement.
Media:
|
Sarah Shew
|
Investors:
|
Kevin
Moran
|
|
(614)
553-3401
|
|
(614)
757-7942
|
|
Sarah.Shew@cardinalhealth.com
|
|
Kevin.Moran@cardinalhealth.com
|
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)
|
2020
|
|
2019
|
|
%
Change
|
|
2020
|
|
2019
|
|
%
Change
|
Revenue
|
$
|
39,157
|
|
|
$
|
35,228
|
|
|
11
|
%
|
|
$
|
116,233
|
|
|
$
|
108,181
|
|
|
7
|
%
|
Cost of products
sold
|
37,272
|
|
|
33,464
|
|
|
11
|
%
|
|
110,955
|
|
|
103,021
|
|
|
8
|
%
|
Gross
margin
|
1,885
|
|
|
1,764
|
|
|
7
|
%
|
|
5,278
|
|
|
5,160
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,165
|
|
|
1,097
|
|
|
6
|
%
|
|
3,435
|
|
|
3,315
|
|
|
4
|
%
|
Restructuring and
employee severance
|
(6)
|
|
|
53
|
|
|
|
|
80
|
|
|
97
|
|
|
|
Amortization and
other acquisition-related costs
|
130
|
|
|
154
|
|
|
|
|
395
|
|
|
468
|
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(1)
|
|
|
11
|
|
|
|
|
7
|
|
|
(492)
|
|
|
|
Litigation
(recoveries)/charges, net 1
|
35
|
|
|
17
|
|
|
|
|
5,729
|
|
|
20
|
|
|
|
Operating
earnings/(loss)
|
562
|
|
|
432
|
|
|
30
|
%
|
|
(4,368)
|
|
|
1,752
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income)/expense, net
|
19
|
|
|
(13)
|
|
|
|
|
21
|
|
|
13
|
|
|
|
Interest expense,
net
|
60
|
|
|
75
|
|
|
(20)
|
%
|
|
189
|
|
|
227
|
|
|
(17)
|
%
|
Loss on
extinguishment of debt
|
5
|
|
|
—
|
|
|
|
|
9
|
|
|
—
|
|
|
|
Earnings/(loss)
before income taxes
|
478
|
|
|
370
|
|
|
29
|
%
|
|
(4,587)
|
|
|
1,512
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes 2
|
127
|
|
|
74
|
|
|
72
|
%
|
|
(237)
|
|
|
342
|
|
|
N.M.
|
|
Net
earnings/(loss)
|
351
|
|
|
296
|
|
|
19
|
%
|
|
(4,350)
|
|
|
1,170
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
|
—
|
|
|
|
|
(2)
|
|
|
(1)
|
|
|
|
Net
earnings/(loss) attributable to Cardinal Health,
Inc.
|
$
|
350
|
|
|
$
|
296
|
|
|
18
|
%
|
|
$
|
(4,352)
|
|
|
$
|
1,169
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss)
per common share attributable to Cardinal Health,
Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.20
|
|
|
$
|
0.99
|
|
|
21
|
%
|
|
$
|
(14.84)
|
|
|
$
|
3.89
|
|
|
N.M.
|
|
Diluted
|
1.19
|
|
|
0.99
|
|
|
20
|
%
|
|
(14.84)
|
3
|
|
3.88
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
292
|
|
|
298
|
|
|
|
|
293
|
|
|
301
|
|
|
|
Diluted
|
294
|
|
|
299
|
|
|
|
|
293
|
3
|
|
302
|
|
|
|
1
Litigation (recoveries)/charges, net includes a pre-tax charge of
$5.63 billion ($5.14 billion after tax) recorded in the first
quarter of fiscal 2020 for the estimated liability associated with
lawsuits and claims brought against us by states and political
subdivisions relating to the distribution of prescription opioid
pain medications. In October 2019, we agreed in principle to a
global settlement framework with a leadership group of state
attorneys general that is designed to resolve all pending and
future opioid lawsuits and claims by states and political
subdivisions. The amount of ultimate loss may differ materially
from this accrual.
|
|
2 In
connection with these matters, we recorded a tax benefit of $487
million, which is net of unrecognized tax benefits of $468 million,
during the first quarter of fiscal 2020, reflecting our current
assessment of the estimated future deductibility of the amount that
may be paid under the $5.63 billion accrual taken in connection
with the opioid litigation. The actual amount of tax benefit
related to uncertain tax positions may differ materially from these
estimates.
|
|
3 Due
to the net loss for the nine months ended March 31, 2020,
potentially dilutive common shares have not been included in the
denominator of the dilutive per share computation due to their
anti-dilutive effect.
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets (Unaudited)
|
|
|
|
|
(in
millions)
|
March 31,
2020
|
|
June 30,
2019
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
2,329
|
|
|
$
|
2,531
|
|
Trade receivables,
net
|
9,019
|
|
|
8,448
|
|
Inventories,
net
|
12,808
|
|
|
12,822
|
|
Prepaid expenses and
other
|
1,692
|
|
|
1,946
|
|
Total current
assets
|
25,848
|
|
|
25,747
|
|
|
|
|
|
Property and
equipment, net
|
2,299
|
|
|
2,356
|
|
Goodwill and other
intangibles, net
|
11,378
|
|
|
11,808
|
|
Other
assets
|
1,623
|
|
|
1,052
|
|
Total
assets
|
$
|
41,148
|
|
|
$
|
40,963
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
21,984
|
|
|
$
|
21,535
|
|
Current portion of
long-term obligations and other short-term borrowings
|
508
|
|
|
452
|
|
Other accrued
liabilities
|
2,179
|
|
|
2,122
|
|
Total current
liabilities
|
24,671
|
|
|
24,109
|
|
|
|
|
|
Long-term
obligations, less current portion
|
6,754
|
|
|
7,579
|
|
Deferred income taxes
and other liabilities
|
8,517
|
|
|
2,945
|
|
|
|
|
|
Total shareholders'
equity
|
1,206
|
|
|
6,330
|
|
Total liabilities
and shareholders' equity
|
$
|
41,148
|
|
|
$
|
40,963
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings/(loss)
|
$
|
351
|
|
|
$
|
296
|
|
|
$
|
(4,350)
|
|
|
$
|
1,170
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings/(loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
224
|
|
|
261
|
|
|
688
|
|
|
759
|
|
Impairments and loss
on sale of other investments
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
(1)
|
|
|
11
|
|
|
7
|
|
|
(492)
|
|
Loss on
extinguishment of debt
|
5
|
|
|
—
|
|
|
9
|
|
|
—
|
|
Share-based
compensation
|
27
|
|
|
23
|
|
|
68
|
|
|
64
|
|
Provision for bad
debts
|
39
|
|
|
19
|
|
|
86
|
|
|
59
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
(Increase)/decrease
in trade receivables
|
(774)
|
|
|
35
|
|
|
(653)
|
|
|
(156)
|
|
(Increase)/decrease
in inventories
|
983
|
|
|
408
|
|
|
(8)
|
|
|
(345)
|
|
Increase/(decrease)
in accounts payable
|
525
|
|
|
(95)
|
|
|
448
|
|
|
846
|
|
Other accrued
liabilities and operating items, net
|
297
|
|
|
522
|
|
|
5,425
|
|
|
309
|
|
Net cash provided by
operating activities
|
1,676
|
|
|
1,480
|
|
|
1,720
|
|
|
2,216
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
—
|
|
|
(17)
|
|
|
—
|
|
|
(38)
|
|
Additions to property
and equipment
|
(90)
|
|
|
(76)
|
|
|
(239)
|
|
|
(192)
|
|
Purchases of
investments
|
(12)
|
|
|
(1)
|
|
|
(18)
|
|
|
(11)
|
|
Proceeds from sale of
investments
|
4
|
|
|
1
|
|
|
6
|
|
|
3
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment
|
—
|
|
|
9
|
|
|
2
|
|
|
749
|
|
Net cash provided
by/(used in) investing activities
|
(98)
|
|
|
(84)
|
|
|
(249)
|
|
|
511
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Net change in
short-term borrowings
|
(683)
|
|
|
—
|
|
|
(2)
|
|
|
—
|
|
Reduction of
long-term obligations, net of issuance costs
|
(95)
|
|
|
—
|
|
|
(888)
|
|
|
(2)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
7
|
|
|
—
|
|
|
(4)
|
|
|
(13)
|
|
Dividends on common
shares
|
(141)
|
|
|
(142)
|
|
|
(428)
|
|
|
(435)
|
|
Purchase of treasury
shares
|
—
|
|
|
—
|
|
|
(350)
|
|
|
(600)
|
|
Net cash used in
financing activities
|
(912)
|
|
|
(142)
|
|
|
(1,672)
|
|
|
(1,050)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
4
|
|
|
2
|
|
|
(1)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
670
|
|
|
1,256
|
|
|
(202)
|
|
|
1,675
|
|
Cash and equivalents
at beginning of period
|
1,659
|
|
|
2,182
|
|
|
2,531
|
|
|
1,763
|
|
Cash and
equivalents at end of period
|
$
|
2,329
|
|
|
$
|
3,438
|
|
|
$
|
2,329
|
|
|
$
|
3,438
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Segment
Information
|
|
Third
Quarter
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2020
|
|
2019
|
|
(in
millions)
|
2020
|
|
2019
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
35,112
|
|
|
$
|
31,361
|
|
|
Amount
|
$
|
4,051
|
|
|
$
|
3,871
|
|
Growth
rate
|
12
|
%
|
|
6
|
%
|
|
Growth
rate
|
5
|
%
|
|
(1)
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
534
|
|
|
$
|
536
|
|
|
Amount
|
$
|
178
|
|
|
$
|
155
|
|
Growth
rate
|
—
|
%
|
|
(10)
|
%
|
|
Growth
rate
|
15
|
%
|
|
(22)
|
%
|
Segment profit
margin
|
1.52
|
%
|
|
1.71
|
%
|
|
Segment profit
margin
|
4.39
|
%
|
|
4.01
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2020
|
|
2019
|
|
(in
millions)
|
2020
|
|
2019
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
104,254
|
|
|
$
|
96,516
|
|
|
Amount
|
$
|
11,991
|
|
|
$
|
11,678
|
|
Growth
rate
|
8
|
%
|
|
7
|
%
|
|
Growth
rate
|
3
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,394
|
|
|
$
|
1,388
|
|
|
Amount1
|
$
|
543
|
|
|
$
|
479
|
|
Growth
rate
|
—
|
%
|
|
(12)
|
%
|
|
Growth
rate
|
13
|
%
|
|
(13)
|
%
|
Segment profit
margin
|
1.34
|
%
|
|
1.44
|
%
|
|
Segment profit
margin
|
4.53
|
%
|
|
4.10
|
%
|
1 Medical
segment profit for the nine months ended March 31, 2020 does
not include $95 million incurred for inventory write-offs and
certain remediation and supply disruption costs associated with the
recently announced voluntary surgical gown-related
recalls.
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
Operating
|
Earnings
|
|
|
Net
|
|
|
Diluted
|
|
|
Margin
|
|
SG&A2
|
|
Earnings
|
Before
|
Provision
for
|
|
Earnings3
|
Effective
|
|
EPS3
|
|
Gross
|
Growth
|
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Growth
|
Tax
|
Diluted
|
Growth
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
SG&A2
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings3
|
Rate
|
Rate
|
EPS3
|
Rate
|
Third Quarter
2020
|
GAAP
|
$
|
1,885
|
|
7
|
%
|
$
|
1,165
|
|
6
|
%
|
$
|
562
|
|
30
|
%
|
$
|
478
|
|
$
|
127
|
|
$
|
350
|
|
18
|
%
|
26.8
|
%
|
$
|
1.19
|
|
20
|
%
|
Surgical gown recall
costs
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
—
|
|
(1)
|
|
|
|
—
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
(6)
|
|
|
(6)
|
|
(3)
|
|
(3)
|
|
|
|
(0.01)
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
130
|
|
|
130
|
|
31
|
|
99
|
|
|
|
0.34
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
(1)
|
|
—
|
|
|
|
—
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
—
|
|
|
35
|
|
|
35
|
|
8
|
|
27
|
|
|
|
0.09
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
1
|
|
4
|
|
|
|
0.01
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
1
|
|
(1)
|
|
|
|
—
|
|
|
Non-GAAP
|
$
|
1,884
|
|
7
|
%
|
$
|
1,165
|
|
6
|
%
|
$
|
719
|
|
8
|
%
|
$
|
639
|
|
$
|
164
|
|
$
|
474
|
|
—
|
%
|
25.7
|
%
|
$
|
1.62
|
|
2
|
%
|
|
Third Quarter
2019
|
GAAP
|
$
|
1,764
|
|
(8)
|
%
|
$
|
1,097
|
|
(3)
|
%
|
$
|
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, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(5)
|
|
5
|
|
|
|
0.02
|
|
|
Non-GAAP
|
$
|
1,764
|
|
(8)
|
%
|
$
|
1,097
|
|
(3)
|
%
|
$
|
667
|
|
(15)
|
%
|
$
|
605
|
|
$
|
130
|
|
$
|
475
|
|
9
|
%
|
21.6
|
%
|
$
|
1.59
|
|
14
|
%
|
1For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
|
2Distribution, selling, general and
administrative expenses.
|
|
3Attributable to Cardinal Health,
Inc.
|
|
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.
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
Earnings/
|
|
|
Net
|
|
|
|
|
|
Gross
|
|
|
|
Earnings/
|
(Loss)
|
Provision
for/
|
|
Earnings/
|
|
|
Diluted
|
|
|
Margin
|
|
SG&A2
|
Operating
|
(Loss)
|
Before
|
(Benefit
from)
|
Net
|
(Loss)3
|
Effective
|
|
EPS3
|
|
Gross
|
Growth
|
|
Growth
|
Earnings/
|
Growth
|
Income
|
Income
|
Earnings/
|
Growth
|
Tax
|
Diluted
|
Growth
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
SG&A2
|
Rate
|
(Loss)
|
Rate
|
Taxes
|
Taxes
|
(Loss)3
|
Rate
|
Rate
|
EPS3,4
|
Rate
|
Year-to-Date
2020
|
GAAP
|
$
|
5,278
|
|
2
|
%
|
$
|
3,435
|
|
4
|
%
|
$
|
(4,368)
|
|
N.M
|
$
|
(4,587)
|
|
$
|
(237)
|
|
$
|
(4,352)
|
|
N.M
|
|
5.2
|
%
|
$
|
(14.84)
|
|
N.M
|
|
Surgical gown recall
costs
|
55
|
|
|
(40)
|
|
|
95
|
|
|
95
|
|
25
|
|
70
|
|
|
|
0.24
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
(4)
|
|
|
4
|
|
|
4
|
|
1
|
|
3
|
|
|
|
0.01
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
80
|
|
|
80
|
|
18
|
|
62
|
|
|
|
0.21
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
395
|
|
|
395
|
|
98
|
|
297
|
|
|
|
1.01
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
1
|
|
6
|
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net5
|
—
|
|
|
—
|
|
|
5,729
|
|
|
5,729
|
|
509
|
|
5,220
|
|
|
|
17.80
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
2
|
|
7
|
|
|
|
0.02
|
|
|
Transitional tax
benefit, net
|
|
|
—
|
|
|
—
|
|
|
—
|
|
12
|
|
(12)
|
|
|
|
(0.04)
|
|
|
Non-GAAP
|
$
|
5,333
|
|
3
|
%
|
$
|
3,391
|
|
2
|
%
|
$
|
1,942
|
|
5
|
%
|
$
|
1,732
|
|
$
|
429
|
|
$
|
1,300
|
|
4
|
%
|
24.8
|
%
|
$
|
4.41
|
|
6
|
%
|
|
Year-to-Date
2019
|
GAAP
|
$
|
5,160
|
|
(5)
|
%
|
$
|
3,315
|
|
—
|
%
|
$
|
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, net
|
—
|
|
|
—
|
|
|
(492)
|
|
|
(492)
|
|
(129)
|
|
(363)
|
|
|
|
(1.20)
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
7
|
|
13
|
|
|
|
0.04
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
(8)
|
|
8
|
|
|
|
0.03
|
|
|
Non-GAAP
|
$
|
5,160
|
|
(5)
|
%
|
$
|
3,315
|
|
—
|
%
|
$
|
1,845
|
|
(13)
|
%
|
$
|
1,605
|
|
$
|
349
|
|
$
|
1,255
|
|
—
|
%
|
21.7
|
%
|
$
|
4.17
|
|
5
|
%
|
1For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
|
2Distribution, selling, general and
administrative expenses.
|
|
3Attributable to Cardinal Health,
Inc.
|
|
4For the
nine months ended March 31, 2020, GAAP diluted loss per share
attributable to Cardinal Health, Inc. and the EPS impact from the
GAAP to non-GAAP per share reconciling items are calculated using a
weighted average of 293 million common shares, which excludes
potentially dilutive securities from the denominator due to their
anti-dilutive effects resulting from our GAAP net loss for the
period. Year-to-date fiscal 2020 non-GAAP diluted EPS is calculated
using a weighted average of 295 million common shares, which
includes potentially dilutive shares.
|
|
5Litigation (recoveries)/charges, net
includes a pre-tax charge of $5.63 billion ($5.14 billion after
tax) recorded in the first quarter of fiscal 2020 related to the
opioid litigation.
|
|
The sum of the
components may not equal the total due to rounding.
|
|
We generally apply
varying tax rates depending on the item's nature and tax
jurisdiction where it is incurred.
|
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
This earnings release contains financial measures that are not
calculated in accordance with U.S. generally accepted accounting
principles ("GAAP").
In addition to analyzing our business based on financial
information prepared in accordance with GAAP, we use these non-GAAP
financial measures internally to evaluate our performance, engage
in financial and operational planning, and, in most cases,
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 report 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.
- Surgical gown recall costs includes inventory write-offs
and certain remediation and supply disruption costs arising from
the January 2020 recall of select
Association for the Advancement of Medical Instrumentation ("AAMI")
Level 3 surgical gowns and voluntary field actions (a recall of
some packs and a corrective action allowing overlabeling of other
packs) for Presource Procedure Packs containing affected gowns. We
have excluded these costs from our non-GAAP metrics to allow
investors to better understand the underlying operating results of
the business and to facilitate comparison of our current financial
results to our historical financial results and to our peer group
companies' financial results.
- State opioid assessments related to prior fiscal years is
the portion of state assessments for prescription opioid
medications that were sold or distributed in periods prior to the
fiscal year of the initial assessment. This portion is excluded
from non-GAAP financial measures because it is retrospectively
applied to sales in prior fiscal years and inclusion would obscure
analysis of the current fiscal year results of our underlying,
ongoing business. Additionally, while states' laws may require us
to make payments on an ongoing basis, the portion of the assessment
related to sales in prior periods are contemplated to be one-time,
nonrecurring items. Reversals of these accruals have occurred when
certain assessments were found by a Court 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 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 occurrence, timing and amount of any of the items excluded
from GAAP to calculate non-GAAP could significantly impact the
Company's fiscal 2020 GAAP results. Over the past five fiscal
years, the excluded items have impacted 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 2020 year to date period impacted the Company's
EPS by $19.25, which includes a
$17.53 charge related to the opioid
litigation.
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 gross margin: gross margin, excluding LIFO
charges/(credits) and surgical gown recall costs.
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 and surgical gown recall costs.
Non-GAAP operating earnings: operating earnings/(loss)
excluding (1) LIFO charges/(credits), (2) surgical gown recall
costs, (3) state opioid assessment related to prior fiscal years,
(4) restructuring and employee severance, (5) amortization and
other acquisition-related costs, (6) impairments and (gain)/loss on
disposal of assets, and (7) litigation (recoveries)/charges,
net.
Non-GAAP earnings before income taxes: earnings/(loss)
before income taxes excluding (1) LIFO charges/(credits), (2)
surgical gown recall costs, (3) state opioid assessment related to
prior fiscal years, (4) restructuring and employee severance, (5)
amortization and other acquisition-related costs, (6) impairments
and (gain)/loss on disposal of assets, (7) litigation
(recoveries)/charges, net, and (8) loss on extinguishment of
debt.
Non-GAAP net earnings attributable to Cardinal Health,
Inc.: net earnings/(loss) attributable to Cardinal Health, Inc.
excluding (1) LIFO charges/(credits), (2) surgical gown recall
costs, (3) state opioid assessment related to prior fiscal years,
(4) restructuring and employee severance, (5) amortization and
other acquisition-related costs, (6) impairments and (gain)/loss on
disposal of assets, (7) litigation (recoveries)/charges, net, (8)
loss on extinguishment of debt, each net of tax, and (9)
transitional tax benefit, net.
Non-GAAP effective tax rate: provision for/(benefit from)
income taxes adjusted for (1) LIFO charges/(credits), (2) surgical
gown recall costs, (3) state opioid assessment related to prior
fiscal years, (4) restructuring and employee severance, (5)
amortization and other acquisition-related costs, (6) impairments
and (gain)/loss on disposal of assets, (7) litigation
(recoveries)/charges, net, (8) loss on extinguishment of debt, and
(9) transitional tax benefit, (net) divided by (earnings/(loss)
before income taxes adjusted for the first eight items).
Non-GAAP diluted earnings per share attributable to Cardinal
Health, Inc.: non-GAAP net earnings attributable to Cardinal
Health, Inc. divided by diluted weighted-average shares
outstanding.
View original content to download
multimedia:http://www.prnewswire.com/news-releases/cardinal-health-reports-third-quarter-results-for-fiscal-year-2020-301056508.html
SOURCE Cardinal Health