DUBLIN, Ohio, May 6, 2021 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported third-quarter fiscal year 2021 revenue
of $39.3 billion, in-line with the
third quarter of last year. Third-quarter GAAP operating earnings
decreased 16% to $473 million,
primarily due to the write-down of the net assets held for sale
from the planned divestiture of the Cordis business. Third-quarter
GAAP diluted earnings per share (EPS) decreased to $0.40, due to the previously-disclosed tax effect
of the litigation charge in the first quarter.
Non-GAAP operating earnings decreased 4% to $689 million in the quarter due to the negative
impact from COVID-19, primarily concentrated in the Pharmaceutical
segment. Non-GAAP diluted EPS decreased 6% to $1.53 in the quarter, reflecting a higher
non-GAAP effective tax rate, partially offset by lower interest
expense.
"We remain focused on serving our customers and their patients
and continue to advance our strategic priorities," said
Mike Kaufmann, CEO of Cardinal
Health. "With our resilient business model and strong fundamentals,
we are navigating the effects of the pandemic and finding
opportunities to adapt, innovate and invest for future growth."
Q3 FY21 summary
|
Q3
FY21
|
|
Q3 FY20
|
|
Y/Y
|
Revenue
|
$39.3
billion
|
|
$39.2
billion
|
|
—%
|
Operating
earnings
|
$473
million
|
|
$562
million
|
|
(16)%
|
Non-GAAP operating
earnings
|
$689
million
|
|
$719
million
|
|
(4)%
|
Net earnings
attributable to Cardinal Health, Inc.
|
$119
million
|
|
$350
million
|
|
N.M.
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$451
million
|
|
$474
million
|
|
(5)%
|
Effective Tax
Rate
|
72.8%
|
|
26.8%
|
|
|
Non-GAAP Effective
Tax Rate
|
31.2%
|
|
25.7%
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$0.40
|
|
$1.19
|
|
N.M.
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$1.53
|
|
$1.62
|
|
(6)%
|
Segment results
Pharmaceutical segment
|
Q3
FY21
|
|
Q3 FY20
|
|
Y/Y
|
Revenue
|
$
|
35.1
|
billion
|
|
$
|
35.1
|
billion
|
|
—%
|
Segment
profit
|
$
|
511
|
million
|
|
$
|
534
|
million
|
|
(4)%
|
Third-quarter revenue for the Pharmaceutical segment was flat at
$35.1 billion. This reflects sales
growth from Pharmaceutical Distribution and Specialty Solutions
customers in the current period compared against the unfavorable
prior-year comparison of the COVID-19-related acceleration in
overall pharmaceutical sales.
Pharmaceutical segment profit decreased 4% to $511 million in the third quarter, primarily due
to COVID-19-related volume declines in the company's generics
program. This was partially offset by a higher contribution from
brand sales mix.
Medical segment
|
Q3
FY21
|
|
Q3 FY20
|
|
Y/Y
|
Revenue
|
$
|
4.2
|
billion
|
|
$
|
4.1
|
billion
|
|
3%
|
Segment
profit
|
$
|
174
|
million
|
|
$
|
178
|
million
|
|
(2)%
|
Third-quarter revenue for the Medical segment increased 3% to
$4.2 billion, driven by a net
positive impact from COVID-19 on products and distribution. 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 reduced elective
procedures.
Medical segment profit decreased 2% to $174 million in the third quarter. Cost savings,
including global manufacturing efficiencies, were offset by a
decline in products and distribution. Additionally, the segment
experienced a slight negative impact due to COVID-19.
Tax rate
During the third quarters of fiscal 2021 and
2020, GAAP effective tax rates were 72.8% and 26.8%, respectively.
The increase was primarily due to the previously-disclosed tax
effect of the litigation charge in the first quarter. Non-GAAP
effective tax rates were 31.2% and 25.7%, respectively, for the
third quarters of fiscal 2021 and 2020. Third-quarter fiscal 2021
effective tax rates reflect the resolution of all open issues with
the IRS for fiscal years 2008 to 2010 as well as certain transfer
pricing matters for fiscal years 2011 to 2014, which also impacted
reserves for later years.
Fiscal year 2021 outlook1
Cardinal Health
narrowed its fiscal year 2021 guidance range for non-GAAP diluted
earnings per share attributable to Cardinal Health, Inc. to
$5.90 to $6.05, from the prior range of $5.85 to $6.10.
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 1% increase in
the company's quarterly dividend from $0.4859 per share to $0.4908 per share, or $1.96 on an annualized basis. The dividend will
be payable on July 15, 2021 to
shareholders of record at the close of business on July 1, 2021.
- Cardinal Health announced that it signed a definitive agreement
to sell its Cordis business to Hellman & Friedman (H&F) for
approximately $1 billion. The company
anticipates the transaction to close in the first quarter of fiscal
2022.
- Cardinal Health recently launched Outcomes, a digital ecosystem
that provides personalized medication therapy management, patient
engagement and telepharmacy through its Connect™ platform,
connecting pharmacists, payers and pharmaceutical companies to
improve medication adherence, drive better outcomes and lower the
cost of care.
- Cardinal Health recently announced a partnership with
FourKites, the largest predictive supply chain visibility platform,
to create a cognitive supply chain network that combines real-time
visibility, machine learning and artificial intelligence to
facilitate the flow of inventory throughout the supply chain.
- Cardinal Health Specialty Solutions launched Cardinal Health™
Navista™ Tech Solutions (TS), an advanced suite of technology
solutions to help community oncologists improve outcomes and costs
associated with patient treatment as they transition to value-based
care.
- Cardinal Health was awarded a $57.8
million contract, including options that if exercised by the
U.S. Department of Health and Human Services (HHS) could reach
$91.6 million, for the storage and
distribution of 80,000 pallets of personal protective equipment
(PPE) to support the Strategic National Stockpile (SNS).
Upcoming webcasted investor events
- Bank of America Healthcare Conference at 8:45 a.m. Eastern, May
11
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 5, 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 ongoing volume reductions in our
generics program, our ability to recoup or mitigate cost increases
to source certain personal protective or other equipment, and the
possible impact of additional disruptions of our distribution or
manufacturing facilities; competitive pressures in Cardinal
Health's various lines of business; the performance of our generics
program, including 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; risks associated with the distribution of opioids,
including the financial impact associated with the outcome of
ongoing lawsuits and investigations and risks and uncertainties
associated with the ongoing settlement framework discussions with
governmental authorities, including the risk that we may fail to
reach a settlement agreement or that a final settlement or judicial
decision could require us to pay more than we currently anticipate
and the risk that the Congressional inquiry on our plan to take tax
deductions for opioid-related losses could adversely impact our
financial results; 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 arising from the planned divestiture
of our Cordis business, including the risk that we may not receive
required regulatory approvals or that we may not be able to
complete the divestiture in a timely manner and risks that we may
fail to achieve the anticipated strategic objectives from the
divestiture; 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
May 6, 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)
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in millions, except
per common share amounts)
|
2021
|
|
2020
|
|
%
Change
|
|
2021
|
|
2020
|
|
%
Change
|
Revenue
|
$
|
39,275
|
|
|
$
|
39,157
|
|
|
—
|
%
|
|
$
|
119,881
|
|
|
$
|
116,233
|
|
|
3
|
%
|
Cost of products
sold
|
37,463
|
|
|
37,272
|
|
|
1
|
%
|
|
114,578
|
|
|
110,955
|
|
|
3
|
%
|
Gross
margin
|
1,812
|
|
|
1,885
|
|
|
(4)
|
%
|
|
5,303
|
|
|
5,278
|
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,120
|
|
|
1,165
|
|
|
(4)
|
%
|
|
3,404
|
|
|
3,435
|
|
|
(1)
|
%
|
Restructuring and
employee severance
|
24
|
|
|
(6)
|
|
|
|
|
81
|
|
|
80
|
|
|
|
Amortization and
other acquisition-related costs
|
111
|
|
|
130
|
|
|
|
|
345
|
|
|
395
|
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
69
|
|
|
(1)
|
|
|
|
|
78
|
|
|
7
|
|
|
|
Litigation
(recoveries)/charges, net 1
|
15
|
|
|
35
|
|
|
|
|
1,085
|
|
|
5,729
|
|
|
|
Operating
earnings/(loss)
|
473
|
|
|
562
|
|
|
(16)
|
%
|
|
310
|
|
|
(4,368)
|
|
|
N.M
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(income)/expense, net
|
(12)
|
|
|
19
|
|
|
|
|
(31)
|
|
|
21
|
|
|
|
Interest expense,
net
|
45
|
|
|
60
|
|
|
(25)
|
%
|
|
136
|
|
|
189
|
|
|
(28)
|
%
|
Loss on early
extinguishment of debt
|
—
|
|
|
5
|
|
|
|
|
1
|
|
|
9
|
|
|
|
Earnings/(loss) before
income taxes
|
440
|
|
|
478
|
|
|
(8)
|
%
|
|
204
|
|
|
(4,587)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for/(benefit from) income taxes 2
|
320
|
|
|
127
|
|
|
N.M
|
|
|
(293)
|
|
|
(237)
|
|
|
N.M.
|
|
Net
earnings/(loss)
|
120
|
|
|
351
|
|
|
N.M
|
|
|
497
|
|
|
(4,350)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
|
(1)
|
|
|
|
|
(2)
|
|
|
(2)
|
|
|
|
Net earnings/(loss)
attributable to Cardinal Health, Inc.
|
$
|
119
|
|
|
$
|
350
|
|
|
N.M.
|
|
|
$
|
495
|
|
|
$
|
(4,352)
|
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(loss)
per common share attributable to Cardinal Health,
Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.41
|
|
|
$
|
1.20
|
|
|
N.M.
|
|
|
$
|
1.69
|
|
|
$
|
(14.84)
|
|
|
N.M.
|
|
Diluted
|
0.40
|
|
|
1.19
|
|
|
N.M.
|
|
|
1.68
|
|
|
(14.84)
|
3
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
292
|
|
|
292
|
|
|
|
|
293
|
|
|
293
|
|
|
|
Diluted
|
294
|
|
|
294
|
|
|
|
|
294
|
|
|
293
|
3
|
|
|
1Litigation (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.
2Provision for/(benefit from) income taxes includes a
tax benefit recorded during the nine months ended March 31, 2021 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, was deducted on our fiscal 2020 consolidated
federal income tax return and contributed to a significant net
operating loss for tax purposes. The net operating loss was carried
back and adjusted 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
$419 million.
In addition, the amount of tax expense increased by
approximately $140 million during the
three months ended March 31, 2021
while the amount of tax benefit increased by approximately
$180 million during the nine months
ended March 31, 2021 compared to the
tax impacts that would have been recognized without the opioid
litigation charge. The net tax benefits associated with the opioid
litigation charges are $37 million
and $488 million for fiscal 2021 and
2020, respectively.
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
|
|
(in
millions)
|
March 31,
2021
|
|
June 30,
2020
|
Assets
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
3,499
|
|
|
$
|
2,771
|
|
Trade receivables,
net
|
8,727
|
|
|
8,264
|
|
Inventories,
net
|
14,329
|
|
|
13,198
|
|
Prepaid expenses and
other
|
2,715
|
|
|
1,707
|
|
Assets held for
sale
|
1,092
|
|
|
—
|
|
Total current
assets
|
30,362
|
|
|
25,940
|
|
|
|
|
|
Property and
equipment, net
|
2,315
|
|
|
2,366
|
|
Goodwill and other
intangibles, net
|
10,179
|
|
|
11,275
|
|
Other
assets
|
1,018
|
|
|
1,185
|
|
Total
assets
|
$
|
43,874
|
|
|
$
|
40,766
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
22,641
|
|
|
$
|
21,374
|
|
Current portion of
long-term obligations and other short-term borrowings
|
16
|
|
|
10
|
|
Other accrued
liabilities
|
2,573
|
|
|
2,231
|
|
Liabilities related
to assets held for sale
|
93
|
|
|
—
|
|
Total current
liabilities
|
25,323
|
|
|
23,615
|
|
|
|
|
|
Long-term
obligations, less current portion
|
6,715
|
|
|
6,765
|
|
Deferred income taxes
and other liabilities
|
10,042
|
|
|
8,594
|
|
|
|
|
|
Total shareholders'
equity
|
1,794
|
|
|
1,792
|
|
Total liabilities
and shareholders' equity
|
$
|
43,874
|
|
|
$
|
40,766
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings/(loss)
|
$
|
120
|
|
|
$
|
351
|
|
|
$
|
497
|
|
|
$
|
(4,350)
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings/(loss) to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
199
|
|
|
224
|
|
|
603
|
|
|
688
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
69
|
|
|
(1)
|
|
|
78
|
|
|
7
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
5
|
|
|
1
|
|
|
9
|
|
Share-based
compensation
|
33
|
|
|
27
|
|
|
84
|
|
|
68
|
|
Provision for bad
debts
|
14
|
|
|
39
|
|
|
49
|
|
|
86
|
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
Increase in
trade receivables
|
(12)
|
|
|
(774)
|
|
|
(511)
|
|
|
(653)
|
|
(Increase)/decrease in inventories
|
(67)
|
|
|
983
|
|
|
(1,323)
|
|
|
(8)
|
|
Increase/(decrease) in accounts payable
|
(594)
|
|
|
525
|
|
|
1,267
|
|
|
448
|
|
Other accrued
liabilities and operating items, net
|
515
|
|
|
297
|
|
|
1,019
|
|
|
5,425
|
|
Net cash provided by
operating activities
|
277
|
|
|
1,676
|
|
|
1,764
|
|
|
1,720
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
—
|
|
|
—
|
|
|
(3)
|
|
|
—
|
|
Additions to property
and equipment
|
(100)
|
|
|
(90)
|
|
|
(274)
|
|
|
(239)
|
|
Purchases of
investments
|
—
|
|
|
(12)
|
|
|
(18)
|
|
|
(18)
|
|
Proceeds from sale of
investments
|
1
|
|
|
4
|
|
|
5
|
|
|
6
|
|
Proceeds from
divestitures, net of cash sold, and disposal of property and
equipment
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
Net cash used in
investing activities
|
(99)
|
|
|
(98)
|
|
|
(290)
|
|
|
(249)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Net change in
short-term borrowings
|
—
|
|
|
(683)
|
|
|
—
|
|
|
(2)
|
|
Proceeds from
interest rate swap terminations
|
18
|
|
|
—
|
|
|
18
|
|
|
—
|
|
Reduction of
long-term obligations
|
(4)
|
|
|
(95)
|
|
|
(53)
|
|
|
(888)
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
5
|
|
|
7
|
|
|
(1)
|
|
|
(4)
|
|
Dividends on common
shares
|
(143)
|
|
|
(141)
|
|
|
(432)
|
|
|
(428)
|
|
Purchase of treasury
shares
|
(200)
|
|
|
—
|
|
|
(200)
|
|
|
(350)
|
|
Net cash used in
financing activities
|
(324)
|
|
|
(912)
|
|
|
(668)
|
|
|
(1,672)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
(6)
|
|
|
4
|
|
|
8
|
|
|
(1)
|
|
Cash and equivalents
reclassified to assets held for sale
|
(86)
|
|
|
—
|
|
|
(86)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and equivalents
|
(238)
|
|
|
670
|
|
|
728
|
|
|
(202)
|
|
Cash and equivalents
at beginning of period
|
3,737
|
|
|
1,659
|
|
|
2,771
|
|
|
2,531
|
|
Cash and
equivalents at end of period
|
$
|
3,499
|
|
|
$
|
2,329
|
|
|
$
|
3,499
|
|
|
$
|
2,329
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Segment
Information
|
|
Third
Quarter
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2021
|
|
2020
|
|
(in
millions)
|
2021
|
|
2020
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
35,104
|
|
|
$
|
35,112
|
|
|
Amount
|
$
|
4,174
|
|
|
$
|
4,051
|
|
Growth
rate
|
—
|
%
|
|
12
|
%
|
|
Growth
rate
|
3
|
%
|
|
5
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
511
|
|
|
$
|
534
|
|
|
Amount
|
$
|
174
|
|
|
$
|
178
|
|
Growth
rate
|
(4)
|
%
|
|
—
|
%
|
|
Growth
rate
|
(2)
|
%
|
|
15
|
%
|
Segment profit
margin
|
1.46
|
%
|
|
1.52
|
%
|
|
Segment profit
margin
|
4.18
|
%
|
|
4.39
|
%
|
|
Year-to-Date
|
|
|
|
|
|
|
|
|
|
(in
millions)
|
2021
|
|
2020
|
|
(in
millions)
|
2021
|
|
2020
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
107,452
|
|
|
$
|
104,254
|
|
|
Amount
|
$
|
12,441
|
|
|
$
|
11,991
|
|
Growth
rate
|
3
|
%
|
|
8
|
%
|
|
Growth
rate
|
4
|
%
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,326
|
|
|
$
|
1,394
|
|
|
Amount
|
$
|
640
|
|
|
$
|
543
|
|
Growth
rate
|
(5)
|
%
|
|
—
|
%
|
|
Growth
rate
|
18
|
%
|
|
13
|
%
|
Segment profit
margin
|
1.23
|
%
|
|
1.34
|
%
|
|
Segment profit
margin
|
5.14
|
%
|
|
4.53
|
%
|
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
|
|
|
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
2021
|
GAAP
|
$
|
1,812
|
|
(4)
|
%
|
$
|
1,120
|
|
(4)
|
%
|
$
|
473
|
|
(16)
|
%
|
$
|
440
|
|
$
|
320
|
|
$
|
119
|
|
N.M.
|
|
72.8
|
%
|
$
|
0.40
|
|
N.M.
|
|
Surgical gown recall
costs
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
(1)
|
|
—
|
|
(1)
|
|
|
|
—
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
2
|
|
|
(2)
|
|
|
(2)
|
|
(1)
|
|
(1)
|
|
|
|
—
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
24
|
|
|
24
|
|
6
|
|
18
|
|
|
|
0.06
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
111
|
|
|
111
|
|
28
|
|
83
|
|
|
|
0.28
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
69
|
|
|
69
|
|
(4)
|
|
73
|
|
|
|
0.25
|
|
|
Litigation
(recoveries)/charges, net4
|
—
|
|
|
—
|
|
|
15
|
|
|
15
|
|
(144)
|
|
159
|
|
|
|
0.54
|
|
|
Non-GAAP
|
$
|
1,811
|
|
(4)
|
%
|
$
|
1,121
|
|
(4)
|
%
|
$
|
689
|
|
(4)
|
%
|
$
|
657
|
|
$
|
205
|
|
$
|
451
|
|
(5)
|
%
|
31.2
|
%
|
$
|
1.53
|
|
(6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 early
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
|
%
|
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 $140
million during the three months ended March 31, 2021 while the amount of tax benefit
increased by approximately $180
million during the nine months ended March 31, 2021 compared to the tax impacts that
would have been recognized without the opioid litigation charge.
The net tax benefits associated with the opioid litigation charges
are $37 million and $488 million for fiscal 2021 and 2020,
respectively.
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
|
$
|
5,303
|
|
—
|
%
|
$
|
3,404
|
|
(1)
|
%
|
$
|
310
|
|
N.M.
|
|
$
|
204
|
|
$
|
(293)
|
|
$
|
495
|
|
N.M.
|
|
(143.3)
|
%
|
$
|
1.68
|
|
N.M.
|
|
Surgical gown recall
costs
|
—
|
|
|
3
|
|
|
(3)
|
|
|
(3)
|
|
(1)
|
|
(2)
|
|
|
|
—
|
|
|
State opioid
assessment related to prior fiscal years
|
—
|
|
|
(39)
|
|
|
39
|
|
|
39
|
|
9
|
|
30
|
|
|
|
0.10
|
|
|
Restructuring and
employee severance
|
—
|
|
|
—
|
|
|
81
|
|
|
81
|
|
20
|
|
61
|
|
|
|
0.21
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
—
|
|
|
345
|
|
|
345
|
|
86
|
|
259
|
|
|
|
0.88
|
|
|
Impairments and
(gain)/loss on disposal of assets, net
|
—
|
|
|
—
|
|
|
78
|
|
|
78
|
|
12
|
|
66
|
|
|
|
0.22
|
|
|
Litigation
(recoveries)/charges, net5
|
—
|
|
|
—
|
|
|
1,085
|
|
|
1,085
|
|
584
|
|
501
|
|
|
|
1.70
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
—
|
|
1
|
|
|
|
—
|
|
|
Non-GAAP
|
$
|
5,303
|
|
(1)
|
%
|
$
|
3,368
|
|
(1)
|
%
|
$
|
1,935
|
|
—
|
%
|
$
|
1,830
|
|
$
|
417
|
|
$
|
1,411
|
|
9
|
%
|
22.8
|
%
|
$
|
4.79
|
|
9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 early
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
|
%
|
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. ("GAAP
diluted EPS") 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. For the nine
months ended March 31, 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
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 $140
million during the three months ended March 31, 2021 while the amount of tax benefit
increased by approximately $180
million during the nine months ended March 31, 2021 compared to the tax impacts that
would have been recognized without the opioid litigation charge.
The net tax benefits associated with the opioid litigation charges
are $37 million and $488 million for fiscal 2021 and 2020,
respectively.
Litigation(recoveries)/charges, net also includes a tax benefit
recorded during the nine months ended March
31, 2021 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, was
deducted on our fiscal 2020 consolidated federal income tax return
and contributed to a significant net operating loss for tax
purposes. The net operating loss carried back and adjusted 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 $419
million; however, for purposes of reconciling Non-GAAP
financial measures, we allocated $385
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 $34 million is included in non-GAAP measures.
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
relating to 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. Income from state opioid assessments related to
prior fiscal years represents reversals of accruals when the
underlying assessments were invalidated by a Court, updates to
prior estimates or reimbursement of assessments from
manufacturers.
- 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 early 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 $3.11, which includes a $2.85 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 early 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