DUBLIN, Ohio, Feb. 5, 2021 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported second-quarter fiscal year 2021 revenue
of $41.5 billion, an increase of 5%
from the second quarter of last year. Second-quarter GAAP operating
earnings increased 38% to $461
million, primarily due to the beneficial comparison to the
prior-year charge related to voluntary surgical gown recalls. GAAP
diluted earnings per share (EPS) increased to $2.13, primarily due to the tax effect of a
self-insurance loss.
Non-GAAP operating earnings decreased 3% to $628 million in the quarter, and this decrease
included a modest net negative impact from COVID-19. The
Pharmaceutical segment was adversely affected by COVID-19, while
the Medical segment experienced a net positive impact. Non-GAAP
diluted EPS increased 14% to $1.74 in
the quarter, benefiting from a lower non-GAAP effective tax
rate.
"As we collectively navigate the pandemic, we remain committed
to supporting customers, patients, and communities around the
world," said Mike Kaufmann, CEO of
Cardinal Health. "Our second-quarter results demonstrate our
resilient business model, strong fundamentals, and the adaptability
of our dedicated employees. We remain focused on optimizing our
core businesses, investing in key areas, and efficiently deploying
capital to drive long-term, sustainable growth."
Q2 FY21 summary
|
Q2
FY21
|
|
Q2 FY20
|
|
Y/Y
|
Revenue
|
$
|
41.5
|
billion
|
|
$
|
39.7
|
billion
|
|
5%
|
Operating
earnings
|
$
|
461
|
million
|
|
$
|
334
|
million
|
|
38%
|
Non-GAAP operating
earnings
|
$
|
628
|
million
|
|
$
|
646
|
million
|
|
(3)%
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
629
|
million
|
|
$
|
220
|
million
|
|
N.M.
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$
|
514
|
million
|
|
$
|
448
|
million
|
|
15%
|
Effective Tax
Rate
|
(47.6)
|
%
|
|
21.0
|
%
|
|
|
Non-GAAP Effective
Tax Rate
|
13.2
|
%
|
|
24.8
|
%
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$
|
2.13
|
|
|
$
|
0.75
|
|
|
N.M.
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$
|
1.74
|
|
|
$
|
1.52
|
|
|
14%
|
Segment results
Pharmaceutical segment
|
Q2
FY21
|
|
Q2 FY20
|
|
Y/Y
|
Revenue
|
$
|
37.2
|
billion
|
|
$
|
35.7
|
billion
|
|
4%
|
Segment
profit
|
$
|
413
|
million
|
|
$
|
462
|
million
|
|
(11)%
|
Second-quarter revenue for the Pharmaceutical segment increased
4% to $37.2 billion, driven by sales
growth from Pharmaceutical Distribution and Specialty Solutions
customers.
Pharmaceutical segment profit decreased 11% to $413 million in the second quarter, due to the
adverse impact of COVID-19-related volume declines, primarily in
the company's generics program and Nuclear and Precision Health
Solutions business. This was partially offset by a higher
contribution from brand sales mix.
Medical segment
|
Q2
FY21
|
|
Q2 FY20
|
|
Y/Y
|
Revenue
|
$
|
4.3
|
billion
|
|
$
|
4.0
|
billion
|
|
7%
|
Segment
profit
|
$
|
236
|
million
|
|
$
|
195
|
million
|
|
21%
|
Second-quarter revenue for the Medical segment increased 7% to
$4.3 billion, driven by a net
positive impact from COVID-19. This increase was primarily due to
the impact of personal protective equipment (PPE) sales and higher
volumes in our lab business, partially offset by the adverse
effects of cancelled or deferred elective procedures.
Medical segment profit increased 21% to $236 million in the second quarter, due to the
net positive impact from COVID-19 and cost savings, which included
global manufacturing efficiencies. The net positive impact from
COVID-19 was primarily due to higher volumes in our Lab business
and an increased contribution from PPE, partially offset by the
adverse effects of cancelled or deferred elective procedures.
Tax rate
During the second quarter of fiscal 2021, our
wholly-owned insurance subsidiary recorded a self-insurance pre-tax
loss in its fiscal 2020 statutory financial statements related to
charges previously accrued in the company's consolidated financial
statements. This self-insurance pre-tax loss, which did not impact
the company's pre-tax consolidated results, is currently deductible
on our fiscal 2020 consolidated federal income tax return, and
contributed to a significant net operating loss for tax purposes.
In addition, pursuant to the Coronavirus Aid, Relief and Economic
Security Act enacted by the United States Congress in March 2020, this net operating loss will be
carried back to fiscal years 2015-2018 to recover previously-paid
Federal taxes at rates that were in effect at that time.
Accordingly, the second-quarter fiscal 2021 GAAP effective tax
rate of (47.6)% reflects a benefit of $420
million associated with the net operating loss carryback.
Additionally, we intend to file for a federal income tax refund of
$974 million, primarily as a result
of the net operating loss carryback, which we expect to receive
within 12 months. The company has recorded a corresponding current
asset on its second quarter fiscal 2021 consolidated balance
sheet.
The second-quarter fiscal 2021 non-GAAP effective tax rate of
13.2% reflects the impact of certain discrete items.
Fiscal year 2021 outlook1
Cardinal Health
raised its fiscal year 2021 guidance range for non-GAAP diluted
earnings per share attributable to Cardinal Health, Inc. to
$5.85 to $6.10, from the prior range of $5.65 to $5.95.
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.
Recent highlights
- Cardinal Health Board of Directors approved a quarterly
dividend of $0.4859 per share. The
dividend will be payable on April 15,
2021 to shareholders of record at the close of business on
April 1, 2021.
- The company reached an agreement with the Centers for Disease
Control and Prevention (CDC) to act as a network administrator in
Phase 2 of the Federal Pharmacy Partnership Strategy for COVID-19.
Additionally, the Cardinal Health OptiFreight® Logistics business
was selected by the Ohio Department of Health to support efforts to
distribute COVID-19 vaccines.
- For the 13th consecutive year, Cardinal Health was honored as
one of the "Best Places to Work for LGBTQ Equality" by the Human
Rights Campaign (HRC) Foundation, achieving 100% on the HRC's 2021
Corporate Equality Index (CEI).
Upcoming webcasted investor events
- Barclays Global Healthcare Conference at 8:35 a.m. Eastern, March
9
Webcast
Cardinal Health will host a webcast today at
8:30 a.m. Eastern to discuss second
quarter results. To access the webcast and corresponding slide
presentation, go to the Investor Relations page at
ir.cardinalhealth.com. No access code is required.
Presentation slides and a webcast replay will be available until
February 4, 2022.
About Cardinal Health
Cardinal Health is a
distributor of pharmaceuticals, a global manufacturer and
distributor of medical and laboratory products, and a provider of
performance and data solutions for healthcare facilities. With 50
years in business, operations in more than 40 countries and
approximately 48,000 employees globally, Cardinal Health is
essential to care. Information about Cardinal Health is available
at cardinalhealth.com.
Contacts
Media: Sarah
Shew, sarah.shew@cardinalhealth.com and 614.553.3401
Investors: Kevin Moran,
kevin.moran@cardinalhealth.com and 614.757.7942
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 risks arising from the
ongoing COVID-19 pandemic and our critical role in the global
healthcare supply chain including the impact of deferrals and
cancellations of elective medical procedures, our ability to recoup
or mitigate cost increases to source certain personal protective or
other equipment, and the impact of additional supply
disruptions of distribution or manufacturing facilities;
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 the
financial impact associated with the outcome of the ongoing
lawsuits and investigations by certain governmental and regulatory
authorities and risks and uncertainties associated with the ongoing
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
associated with the manufacture and sourcing of certain products,
including risks related to our ability and the ability of
third-party manufacturers to comply with applicable regulations;
risks associated with our interpretations and estimates used to
calculate the tax benefit associated with our self-insurance loss
position; our ability to manage uncertainties associated with the
pricing of branded pharmaceuticals; and risks associated with our
cost savings initiatives. 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 February 5, 2021. Except to the extent required
by applicable law, Cardinal Health undertakes no obligation to
update or revise any forward-looking statement.
Schedule
1
|
Cardinal Health,
Inc. and Subsidiaries Condensed Consolidated Statements
of Earnings (Unaudited)
|
|
|
Second
Quarter
|
|
Year-to-Date
|
(in millions, except
per common share amounts)
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
%
Change
|
Revenue
|
$
|
41,541
|
|
|
$
|
39,735
|
|
|
5
|
%
|
|
$
|
80,606
|
|
|
$
|
77,076
|
|
|
5
|
%
|
Cost of products
sold
|
39,765
|
|
|
38,021
|
|
|
5
|
%
|
|
77,115
|
|
|
73,683
|
|
|
5
|
%
|
Gross
margin
|
1,776
|
|
|
1,714
|
|
|
4
|
%
|
|
3,491
|
|
|
3,393
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,147
|
|
|
1,163
|
|
|
(1)
|
%
|
|
2,284
|
|
|
2,270
|
|
|
1
|
%
|
Restructuring and
employee severance
|
20
|
|
|
56
|
|
|
|
|
57
|
|
|
86
|
|
|
|
Amortization and
other acquisition-related costs
|
116
|
|
|
133
|
|
|
|
|
234
|
|
|
265
|
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
7
|
|
|
|
|
9
|
|
|
8
|
|
|
|
Litigation
(recoveries)/charges, net 1
|
32
|
|
|
21
|
|
|
|
|
1,070
|
|
|
5,694
|
|
|
|
Operating
earnings/(loss)
|
461
|
|
|
334
|
|
|
38
|
%
|
|
(163)
|
|
|
(4,930)
|
|
|
N.M
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(12)
|
|
|
(12)
|
|
|
|
|
(19)
|
|
|
2
|
|
|
|
Interest expense,
net
|
46
|
|
|
63
|
|
|
(27)
|
%
|
|
91
|
|
|
129
|
|
|
(29)
|
%
|
Loss on
extinguishment of debt
|
—
|
|
|
4
|
|
|
|
|
1
|
|
|
4
|
|
|
|
Earnings/(loss) before
income taxes
|
427
|
|
|
279
|
|
|
53
|
%
|
|
(236)
|
|
|
(5,065)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes 2
|
(203)
|
|
|
59
|
|
|
N.M
|
|
(613)
|
|
|
(364)
|
|
|
N.M.
|
Net
earnings/(loss)
|
630
|
|
|
220
|
|
|
N.M
|
|
377
|
|
|
(4,701)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
|
—
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
|
Net earnings/(loss)
attributable to Cardinal Health, Inc.
|
$
|
629
|
|
|
$
|
220
|
|
|
N.M.
|
|
$
|
376
|
|
|
$
|
(4,702)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss)
per common share attributable to Cardinal Health,
Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
2.14
|
|
|
$
|
0.75
|
|
|
N.M.
|
|
$
|
1.28
|
|
|
$
|
(15.99)
|
|
|
N.M.
|
Diluted
|
2.13
|
|
|
0.75
|
|
|
N.M.
|
|
1.27
|
|
|
(15.99)
|
|
3
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
294
|
|
292
|
|
|
|
293
|
|
294
|
|
|
Diluted
|
295
|
|
294
|
|
|
|
295
|
|
294
|
3
|
|
|
1
Litigation (recoveries)/charges, net includes pre-tax charges of
$1.02 billion and $5.63 billion recorded in the first quarter of
fiscal 2021 and 2020, respectively, related to the opioid
litigation.
|
|
2
Provision for/(benefit from) income taxes includes a tax benefit
recorded during the three months ended December 31, 2020 related to
a net operating loss carryback. Our wholly-owned insurance
subsidiary recorded a self-insurance pre-tax loss in its fiscal
2020 statutory financial statements primarily related to the opioid
litigation charges previously accrued in our consolidated financial
statements. This self-insurance pre-tax loss, which did not impact
our pre-tax consolidated results, is currently deductible on our
fiscal 2020 consolidated federal income tax return and contributed
to a significant net operating loss for tax purposes. The net
operating loss is being carried back and applied to adjust our
taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted
under the Coronavirus Aid, Relief and Economic Security ("CARES")
Act. The total net benefit was $420 million.
|
|
In addition, the
amount of tax expense increased by approximately $150 million
during the three months ended December 31, 2020 while the amount of
tax benefit increased by approximately $300 million during the six
months ended December 31, 2020 compared to the tax impacts that
would have been recognized without the opioid litigation charge.
The treatment of the tax impacts of opioid litigation charges is
expected to significantly increase the provision for income taxes
during the remainder of the fiscal year. The net tax benefits
associated with the opioid litigation charges are $35 million and
$488 million for fiscal 2021 and 2020, respectively.
|
|
3 Due
to the net loss for the six months ended December 31, 2019,
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
|
|
(in
millions)
|
December 31,
2020
|
|
June 30,
2020
|
Assets
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
3,737
|
|
|
$
|
2,771
|
|
Trade receivables,
net
|
8,728
|
|
|
8,264
|
|
Inventories,
net
|
14,443
|
|
|
13,198
|
|
Prepaid expenses and
other
|
3,205
|
|
|
1,707
|
|
Total current
assets
|
30,113
|
|
|
25,940
|
|
|
|
|
|
Property and
equipment, net
|
2,386
|
|
|
2,366
|
|
Goodwill and other
intangibles, net
|
11,102
|
|
|
11,275
|
|
Other
assets
|
1,118
|
|
|
1,185
|
|
Total
assets
|
$
|
44,719
|
|
|
$
|
40,766
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
23,235
|
|
|
$
|
21,374
|
|
Current portion of
long-term obligations and other short-term borrowings
|
13
|
|
|
10
|
|
Other accrued
liabilities
|
2,502
|
|
|
2,231
|
|
Total current
liabilities
|
25,750
|
|
|
23,615
|
|
|
|
|
|
Long-term
obligations, less current portion
|
6,720
|
|
|
6,765
|
|
Deferred income taxes
and other liabilities
|
10,274
|
|
|
8,594
|
|
|
|
|
|
Total shareholders'
equity
|
1,975
|
|
|
1,792
|
|
Total liabilities
and shareholders' equity
|
$
|
44,719
|
|
|
$
|
40,766
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries Condensed Consolidated Statements
of Cash Flows (Unaudited)
|
|
|
Second
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings/(loss)
|
$
|
630
|
|
|
$
|
220
|
|
|
$
|
377
|
|
|
$
|
(4,701)
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings/(loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
199
|
|
|
230
|
|
|
404
|
|
|
464
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
7
|
|
|
9
|
|
|
8
|
|
Loss on extinguishment
of debt
|
1
|
|
|
4
|
|
|
1
|
|
|
4
|
|
Share-based
compensation
|
23
|
|
|
21
|
|
|
51
|
|
|
41
|
|
Provision for bad
debts
|
19
|
|
|
18
|
|
|
35
|
|
|
47
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
(Increase)/decrease in
trade receivables
|
(111)
|
|
|
(108)
|
|
|
(499)
|
|
|
121
|
|
Increase in
inventories
|
(1,011)
|
|
|
(1,347)
|
|
|
(1,256)
|
|
|
(991)
|
|
Increase/(decrease) in
accounts payable
|
1,548
|
|
|
1,735
|
|
|
1,861
|
|
|
(77)
|
|
Other accrued
liabilities and operating items, net
|
(81)
|
|
|
(83)
|
|
|
504
|
|
|
5,128
|
|
Net cash provided by
operating activities
|
1,217
|
|
|
697
|
|
|
1,487
|
|
|
44
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(3)
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
Additions to property
and equipment
|
(96)
|
|
|
(77)
|
|
|
(174)
|
|
|
(149)
|
|
Purchases of
investments
|
(1)
|
|
|
(3)
|
|
|
(18)
|
|
|
(6)
|
|
Proceeds from sale of
investments
|
3
|
|
|
—
|
|
|
4
|
|
|
2
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
Net cash used in
investing activities
|
(97)
|
|
|
(78)
|
|
|
(191)
|
|
|
(151)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Net change in
short-term borrowings
|
—
|
|
|
683
|
|
|
—
|
|
|
681
|
|
Reduction of
long-term obligations
|
(9)
|
|
|
(719)
|
|
|
(49)
|
|
|
(793)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
6
|
|
|
2
|
|
|
(6)
|
|
|
(11)
|
|
Dividends on common
shares
|
(143)
|
|
|
(141)
|
|
|
(289)
|
|
|
(287)
|
|
Purchase of treasury
shares
|
—
|
|
|
—
|
|
|
—
|
|
|
(350)
|
|
Net cash used in
financing activities
|
(146)
|
|
|
(175)
|
|
|
(344)
|
|
|
(760)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
17
|
|
|
3
|
|
|
14
|
|
|
(5)
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
991
|
|
|
447
|
|
|
966
|
|
|
(872)
|
|
Cash and equivalents
at beginning of period
|
2,746
|
|
|
1,212
|
|
|
2,771
|
|
|
2,531
|
|
Cash and
equivalents at end of period
|
$
|
3,737
|
|
|
$
|
1,659
|
|
|
$
|
3,737
|
|
|
$
|
1,659
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries Segment Information
|
|
Second
Quarter
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2021
|
|
2020
|
|
(in
millions)
|
2021
|
|
2020
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
37,236
|
|
|
$
|
35,714
|
|
|
Amount
|
$
|
4,310
|
|
|
$
|
4,023
|
|
Growth
rate
|
4
|
%
|
|
6
|
%
|
|
Growth
rate
|
7
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
413
|
|
|
$
|
462
|
|
|
Amount
|
$
|
236
|
|
|
$
|
195
|
|
Growth
rate
|
(11)
|
%
|
|
4
|
%
|
|
Growth
rate
|
21
|
%
|
|
4
|
%
|
Segment profit
margin
|
1.11
|
%
|
|
1.29
|
%
|
|
Segment profit
margin
|
5.48
|
%
|
|
4.86
|
%
|
|
|
Year-to-Date
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2021
|
|
2020
|
|
(in
millions)
|
2021
|
|
2020
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
72,348
|
|
|
$
|
69,142
|
|
|
Amount
|
$
|
8,267
|
|
|
$
|
7,940
|
|
Growth
rate
|
5
|
%
|
|
6
|
%
|
|
Growth
rate
|
4
|
%
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
815
|
|
|
$
|
860
|
|
|
Amount
|
$
|
466
|
|
|
$
|
365
|
|
Growth
rate
|
(5)
|
%
|
|
1
|
%
|
|
Growth
rate
|
28
|
%
|
|
13
|
%
|
Segment profit
margin
|
1.13
|
%
|
|
1.24
|
%
|
|
Segment profit
margin
|
5.64
|
%
|
|
4.60
|
%
|
|
The sum of the
components and certain computations may reflect rounding
adjustments.
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries GAAP / Non-GAAP
Reconciliation1
|
|
|
|
Gross
|
|
|
|
Operating
|
Earnings
|
Provision
for/
|
|
Net
|
|
|
Diluted
|
|
|
Margin
|
|
SG&A2
|
|
Earnings
|
Before
|
(Benefit
from)
|
|
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
|
Second Quarter
2021
|
GAAP
|
$
|
1,776
|
|
4
|
%
|
$
|
1,147
|
|
(1)
|
%
|
$
|
461
|
|
38
|
%
|
$
|
427
|
|
$
|
(203)
|
|
$
|
629
|
|
N.M.
|
(47.6)
|
%
|
$
|
2.13
|
|
N.M.
|
Surgical gown recall
costs
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
—
|
|
(1)
|
|
|
|
—
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
20
|
|
|
20
|
|
5
|
|
15
|
|
|
|
0.05
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
116
|
|
|
116
|
|
29
|
|
87
|
|
|
|
0.29
|
|
|
Litigation
(recoveries)/charges, net4
|
—
|
|
|
—
|
|
|
32
|
|
|
32
|
|
248
|
|
(216)
|
|
|
|
(0.73)
|
|
|
Non-GAAP
|
$
|
1,775
|
|
—
|
%
|
$
|
1,147
|
|
2
|
%
|
$
|
628
|
|
(3)
|
%
|
$
|
594
|
|
$
|
79
|
|
$
|
514
|
|
15
|
%
|
13.2
|
%
|
$
|
1.74
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
2020
|
GAAP
|
$
|
1,714
|
|
(1)
|
%
|
$
|
1,163
|
|
9
|
%
|
$
|
334
|
|
(34)
|
%
|
$
|
279
|
|
$
|
59
|
|
$
|
220
|
|
(21)
|
%
|
21.0
|
%
|
$
|
0.75
|
|
(19)
|
%
|
Surgical gown recall
costs
|
56
|
|
|
(40)
|
|
|
96
|
|
|
96
|
|
25
|
|
71
|
|
|
|
0.24
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
1
|
|
|
(1)
|
|
|
(1)
|
|
—
|
|
(1)
|
|
|
|
—
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
56
|
|
|
56
|
|
14
|
|
42
|
|
|
|
0.14
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
133
|
|
|
133
|
|
33
|
|
100
|
|
|
|
0.34
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
2
|
|
5
|
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
—
|
|
|
21
|
|
|
21
|
|
3
|
|
18
|
|
|
|
0.06
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
1
|
|
3
|
|
|
|
0.01
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
11
|
|
(11)
|
|
|
|
(0.04)
|
|
|
Non-GAAP
|
$
|
1,770
|
|
2
|
%
|
$
|
1,124
|
|
3
|
%
|
$
|
646
|
|
1
|
%
|
$
|
596
|
|
$
|
148
|
|
$
|
448
|
|
16
|
%
|
24.8
|
%
|
$
|
1.52
|
|
18
|
%
|
|
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.
|
|
4Litigation (recoveries)/charges, net
includes pre-tax charges of $1.02 billion and $5.63 billion
recorded in the first quarter of fiscal 2021 and 2020,
respectively, related to the opioid litigation. For fiscal 2021,
the amount of tax expense increased by approximately $150 million
during the three months ended December 31, 2020 while the amount of
tax benefit increased by approximately $300 million during the six
months ended December 31, 2020 compared to the tax impacts that
would have been recognized without the opioid litigation charge.
The treatment of the tax impacts of opioid litigation charges is
expected to significantly increase the provision for income taxes
during the remainder of the fiscal year. The net tax benefits
associated with the opioid litigation charges are $35 million and
$488 million for fiscal 2021 and 2020, respectively.
|
|
Litigation(recoveries)/charges, net also includes a
tax benefit recorded during the three months ended December 31,
2020 related to a net operating loss carryback. Our wholly-owned
insurance subsidiary recorded a self-insurance pre-tax loss in its
fiscal 2020 statutory financial statements primarily related to the
opioid litigation charges previously accrued in our consolidated
financial statements. This self-insurance pre-tax loss, which did
not impact our pre-tax consolidated results, is currently
deductible on our fiscal 2020 consolidated federal income tax
return and contributed to a significant net operating loss for tax
purposes. The net operating loss is being carried back and applied
to adjust our taxable income for fiscal 2015, 2016, 2017 and 2018
as permitted under the Coronavirus Aid, Relief and Economic
Security ("CARES") Act. The total net benefit was $420 million;
however, for purposes of reconciling Non-GAAP financial measures,
we allocated $394 million of the benefit to litigation
(recoveries)/charges, net, which is excluded from non-GAAP
measures, based on the relative amount of the self-insurance
pre-tax loss related to opioid litigation claims versus separate
tax adjustments. The tax benefit allocated to the separate tax
adjustments of $26 million is included in non-GAAP measures. As the
fiscal year 2020 federal return is finalized, both the tax benefit
and the relative allocation may be adjusted.
|
|
The sum of the
components and certain computations may reflect rounding
adjustments.
|
|
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
2021
|
GAAP
|
$
|
3,491
|
|
3
|
%
|
$
|
2,284
|
|
1
|
%
|
$
|
(163)
|
|
N.M.
|
$
|
(236)
|
|
$
|
(613)
|
|
$
|
376
|
|
N.M.
|
259.7
|
%
|
$
|
1.27
|
|
N.M.
|
Surgical gown recall
costs
|
1
|
|
|
3
|
|
|
(2)
|
|
|
(2)
|
|
(1)
|
|
(1)
|
|
|
|
—
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
(41)
|
|
|
41
|
|
|
41
|
|
10
|
|
31
|
|
|
|
0.10
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
57
|
|
|
57
|
|
14
|
|
43
|
|
|
|
0.15
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
234
|
|
|
234
|
|
58
|
|
176
|
|
|
|
0.60
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
16
|
|
(7)
|
|
|
|
(0.02)
|
|
|
Litigation
(recoveries)/charges, net5
|
—
|
|
|
—
|
|
|
1,070
|
|
|
1,070
|
|
728
|
|
342
|
|
|
|
1.16
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
—
|
|
1
|
|
|
|
—
|
|
|
Non-GAAP
|
$
|
3,492
|
|
1
|
%
|
$
|
2,246
|
|
1
|
%
|
$
|
1,246
|
|
2
|
%
|
$
|
1,174
|
|
$
|
212
|
|
$
|
960
|
|
16
|
%
|
18.1
|
%
|
$
|
3.26
|
|
16
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2020
|
GAAP
|
$
|
3,393
|
|
—
|
%
|
$
|
2,270
|
|
2
|
%
|
$
|
(4,930)
|
|
N.M.
|
$
|
(5,065)
|
|
$
|
(364)
|
|
$
|
(4,702)
|
|
N.M.
|
7.2
|
%
|
$
|
(15.99)
|
|
N.M.
|
Surgical gown recall
costs
|
56
|
|
|
(40)
|
|
|
96
|
|
|
96
|
|
25
|
|
71
|
|
|
|
0.24
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
(4)
|
|
|
4
|
|
|
4
|
|
1
|
|
3
|
|
|
|
0.01
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
86
|
|
|
86
|
|
21
|
|
65
|
|
|
|
0.22
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
265
|
|
|
265
|
|
67
|
|
198
|
|
|
|
0.67
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
8
|
|
|
8
|
|
2
|
|
6
|
|
|
|
0.02
|
|
|
Litigation
(recoveries)/charges, net5
|
—
|
|
|
—
|
|
|
5,694
|
|
|
5,694
|
|
501
|
|
5,193
|
|
|
|
17.66
|
|
|
Loss on
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
4
|
|
1
|
|
3
|
|
|
|
0.01
|
|
|
Transitional tax
benefit, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
11
|
|
(11)
|
|
|
|
(0.04)
|
|
|
Non-GAAP
|
$
|
3,449
|
|
2
|
%
|
$
|
2,226
|
|
—
|
%
|
$
|
1,223
|
|
4
|
%
|
$
|
1,092
|
|
$
|
265
|
|
$
|
826
|
|
6
|
%
|
24.3
|
%
|
$
|
2.80
|
|
9
|
%
|
|
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
six months ended December 31, 2019, GAAP diluted loss per
share attributable to Cardinal Health, Inc. ("GAAP diluted EPS")
and the EPS impact from the GAAP to non-GAAP per share reconciling
items are calculated using a weighted average of 294 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. For the six months ended
December 31, 2019, 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 pre-tax charges of $1.02 billion and $5.63 billion
recorded in the first quarter of fiscal 2021 and 2020,
respectively, related to the opioid litigation. For fiscal 2021,
the amount of tax expense increased by approximately $150 million
during the three months ended December 31, 2020 while the amount of
tax benefit increased by approximately $300 million during the six
months ended December 31, 2020 compared to the tax impacts that
would have been recognized without the opioid litigation charge.
The treatment of the tax impacts of opioid litigation charges is
expected to significantly increase the provision for income taxes
during the remainder of the fiscal year. The net tax benefits
associated with the opioid litigation charges are $35 million and
$488 million for fiscal 2021 and 2020,
respectively.
|
|
Litigation(recoveries)/charges, net also includes a
tax benefit recorded during the three months ended December 31,
2020 related to a net operating loss carryback. Our wholly-owned
insurance subsidiary recorded a self-insurance pre-tax loss in its
fiscal 2020 statutory financial statements primarily related to the
opioid litigation charges previously accrued in our consolidated
financial statements. This self-insurance pre-tax loss, which did
not impact our pre-tax consolidated results, is currently
deductible on our fiscal 2020 consolidated federal income tax
return and contributed to a significant net operating loss for tax
purposes. The net operating loss is being carried back and applied
to adjust our taxable income for fiscal 2015, 2016, 2017 and 2018
as permitted under the Coronavirus Aid, Relief and Economic
Security ("CARES") Act. The total net benefit was $420 million;
however, for purposes of reconciling Non-GAAP financial measures,
we allocated $394 million of the benefit to litigation
(recoveries)/charges, net, which is excluded from non-GAAP
measures, based on the relative amount of the self-insurance
pre-tax loss related to opioid litigation claims versus separate
tax adjustments. The tax benefit allocated to the separate tax
adjustments of $26 million is included in non-GAAP measures. As the
fiscal year 2020 federal return is finalized, both the tax benefit
and the relative allocation may be adjusted.
|
|
The sum of the
components and certain computations may reflect rounding
adjustments.
|
|
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 period in
which the expense is incurred. 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
the underlying assessments were invalidated by a Court.
- 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.
During fiscal 2021, we incurred a tax benefit related to a
carryback of a net operating loss. Some pre-tax amounts, which
contributed to this loss, relate to litigation charges. As a
result, we allocated a portion of the tax benefit to litigation
charges.
- 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 2021 GAAP results. Over the past five fiscal
years, the excluded items have impacted the Company's EPS from
$0.75 to $18.06, which includes a $17.54 charge related to the opioid litigation we
recognized in fiscal 2020. The excluded items for fiscal 2021 year
to date period impacted the Company's EPS by $1.99, which includes a $2.38 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.
Interest and Other, net: other(income)/expense, net plus
interest expense, net.
Segment Profit: segment revenue minus (segment cost
of products sold and segment distribution, selling, general and
administrative expenses).
Segment Profit margin: segment profit divided by segment
revenue.
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 surgical gown recall costs
and state opioid assessment related to prior fiscal years.
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 early 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 early 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.
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SOURCE Cardinal Health