Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 1, 2024

Cardinal Health, Inc.

(Exact name of registrant as specified in its charter)

Ohio

1-11373

31-0958666

(State or other
jurisdiction of incorporation)

(Commission

File Number)

(IRS Employer
Identification No.)

7000 Cardinal Place, Dublin, Ohio 43017

(614) 757-5000

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares (without par value)	CAH	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).


Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. p

Item 2.02: Results of Operations and Financial Condition

On February 1, 2024, Cardinal Health, Inc. (the "Company") issued a news release announcing its results for the quarter ended December 31, 2023. A copy of the news release is included as Exhibit 99.1 to this report.

Item 7.01: Regulation FD Disclosure

During a webcast scheduled to be held at 8:30 a.m. Eastern time on February 1, 2024, the Company's Chief Executive Officer and Chief Financial Officer will discuss the Company's results for the quarter ended December 31, 2023 and outlook for the fiscal year ending June 30, 2024. The slide presentation for the webcast will be available on the Investors page at ir.cardinalhealth.com. An audio replay of the webcast also will be available on the Investors page at ir.cardinalhealth.com.

Item 9.01: Financial Statements and Exhibits

(d) Exhibits


Exhibit Number			Exhibit Description
99.1			News release issued by the Company on February 1 , 202 4 announcing second-quarter results.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


		Cardinal Health, Inc.
		(Registrant)

Date:	February 1, 2024	By:	/s/ AARON E. ALT
			Aaron E. Alt
			Chief Financial Officer

Exhibit 99.1

FOR IMMEDIATE RELEASE

Cardinal Health Reports Second Quarter Fiscal 2024 Results and Raises Fiscal 2024 Outlook

•Revenue increased 12% to $57.4 billion

•GAAP1 operating earnings were $482 million; GAAP diluted EPS was $1.43

•Non-GAAP operating earnings increased 20% to $562 million; non-GAAP diluted EPS increased 38% to $1.82

•Fiscal 2024 non-GAAP EPS guidance raised to $7.20 to $7.35, from $6.75 to $7.002,3

•Fiscal 2024 non-GAAP adjusted free cash flow guidance raised to ~$2.5 billion, from ~$2.0 billion

•Cardinal Health to acquire Specialty Networks, a technology-enabled multi-specialty group purchasing and practice enhancement organization

DUBLIN, Ohio, February 1, 2024 – Cardinal Health (NYSE: CAH) today reported second quarter fiscal 2024 revenue of $57.4 billion, an increase of 12% from the second quarter of last year. Second quarter GAAP operating earnings were $482 million and GAAP diluted earnings per share (EPS) were $1.43. Second quarter non-GAAP operating earnings increased 20% to $562 million, driven by strong growth in both Pharmaceutical segment profit and Medical segment profit. Non-GAAP diluted earnings per share (EPS) increased 38% to $1.82, driven by four factors: the increase in non-GAAP operating earnings, a lower share count following incremental share repurchase activity, lower interest and other expense and a lower non-GAAP effective tax rate.

"We delivered strong second quarter results across the enterprise, demonstrating continued momentum against our strategic priorities,” said Jason Hollar, CEO of Cardinal Health. "With strong growth in Pharmaceutical segment profit and continued progress against our Medical Improvement Plan, we are continuing to drive operational execution in our core business. Along with our recent announcements of a tech-enabled specialty acquisition and growth portfolio prioritization, we remain focused on best serving our customers and creating value for our shareholders."

"With our first half performance including positive operating leverage, incremental return of capital to shareholders beyond our baseline plans, and confidence in our efforts as we look ahead, we are pleased to again raise our FY24 non-GAAP EPS guidance, which reflects 26% growth at the mid-point compared to our FY23 results,” said Aaron Alt, CFO of Cardinal Health.

Q2 FY24 summary

Q2 FY24

Q2 FY23

Y/Y

Revenue

$57.4 billion

$51.5 billion

12%

Operating earnings/(loss)

$482 million

$(119) million

N.M.

Non-GAAP operating earnings

$562 million

$467 million

20%

Net earnings/(loss) attributable to Cardinal Health, Inc.

$353 million

$(130) million

N.M.

Non-GAAP net earnings attributable to Cardinal Health, Inc.

$447 million

$346 million

29%

Effective Tax Rate

27.7%

5.4%4

Non-GAAP Effective Tax Rate

21.3%

23.0%

Diluted EPS attributable to Cardinal Health, Inc.

$1.43

$(0.50)

N.M.

Non-GAAP diluted EPS attributable to Cardinal Health, Inc.

$1.82

$1.32

38%

Cardinal Health

Page 2

Segment results

Pharmaceutical segment

Q2 FY24

Q2 FY23

Y/Y

Revenue

$53.5 billion

$47.7 billion

12%

Segment profit

$518 million

$464 million

12%

Second quarter revenue for the Pharmaceutical segment increased 12% to $53.5 billion, driven by brand and specialty pharmaceutical sales growth from existing customers.

Pharmaceutical segment profit increased 12% to $518 million in the second quarter, driven by positive generics program performance and a higher contribution from brand and specialty products, including distribution of COVID-19 vaccines. This increase was partially offset by higher costs to support sales growth.

Medical segment

Q2 FY24

Q2 FY23

Y/Y

Revenue

$3.9 billion

$3.8 billion

Segment profit

$71 million

$17 million

N.M.

Second quarter revenue for the Medical segment increased 3% to $3.9 billion, driven by growth in at-Home Solutions and Global Medical Products and Distribution, which primarily reflects higher Cardinal Health Brand volumes.

Medical segment profit increased by $54 million to $71 million in the second quarter, driven by an improvement in net inflationary impacts, including mitigation initiatives.

Fiscal 2024 outlook2

The company raised its fiscal 2024 guidance range for non-GAAP diluted earnings per share attributable to Cardinal Health, Inc. to $7.20 to $7.35, from $6.75 to $7.003.

The company reiterated its expectations for segment profit growth for the former Pharmaceutical Segment of 7% to 9% and updated its fiscal 2024 segment profit outlook for the former Medical Segment to approximately $380 million, from approximately $400 million.

Additionally, the company now expects interest and other in the range of $50 million to $65 million, diluted weighted average shares outstanding of approximately 247 million, a non-GAAP effective tax rate of 23% to 24% and non-GAAP adjusted free cash of approximately $2.5 billion.

Cardinal Health

Page 3

Pro-forma fiscal 2024 outlook, updated segment structure

As announced on January 9, 2024, the company updated its enterprise operating and segment reporting structure, effective January 1, 2024, to be reflected in the company's financial reporting beginning third quarter fiscal 2024. Therefore, the company provided preliminary guidance for fiscal 2024 according to its updated segment reporting structure.

FY23 Actuals5

FY24 Outlook

Long-term Target

Businesses

Pharmaceutical and Specialty Solutions

Revenue:

~$188.8B

Segment Profit:

~1.87B

Revenue:

10% to 12% growth

Segment Profit:

7% to 9% growth

4-6%

Segment Profit CAGR6

Former Pharmaceutical Segment, excluding Nuclear and Precision Health Solutions

GMPD

Revenue:

~$12.1B

Segment Profit:

~$(165)M

Revenue:

~2% growth

Segment Profit:

~$65M

~$300 million

in Segment Profit by FY267

Former Medical Segment, excluding at-Home Solutions and OptiFreight® Logistics

Other

Revenue:

~$4.1B

Segment Profit:

~$410M

Revenue:

~10% growth

Segment Profit:

6% to 8% growth

8-10%

Segment Profit CAGR6

at-Home Solutions, Nuclear and Precision Health Solutions and OptiFreight® Logistics

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 announced progress on the company's business and portfolio review on January 9, 2024. The company completed its review of the growth businesses within the former Medical Segment, determining to invest in and further develop at-Home Solutions and OptiFreight® Logistics as part of the company's portfolio for long-term growth and value creation. The company's review of the Global Medical Products and Distribution business continues, with a focus on driving operational performance through the Medical Improvement Plan.

•Cardinal Health completed a $250 million accelerated share repurchase program in the second quarter, resulting in a total of $750 million year-to-date share repurchases in fiscal 2024.

•Cardinal Health announced plans to build a new at-Home Solutions distribution center in Texas, with increased capacity, advanced automation and robotics within the facility.

Upcoming webcasted investor events

•Barclays 26th Annual Global Healthcare Conference at 8:30 a.m. EST, March 13, 2024.

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 on the Investor Relations page for 12 months.

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 more than 50 years in business, operations in more than 30 countries and approximately 48,000 employees globally, Cardinal Health is essential to care. Information about Cardinal Health is available at cardinalhealth.com.

Contacts

Media: Erich Timmerman, erich.timmerman@cardinalhealth.com and 614.757.8231

Investors: Matt Sims, matt.sims@cardinalhealth.com and 614.553.3661

Cardinal Health

Page 4

1 GAAP 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.

2 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.

3 The company updated its fiscal 2024 enterprise guidance on January 9, 2024, to the high end of the $6.75 to $7.00 EPS range provided on November 3, 2023, as part of the first quarter fiscal 2024 earnings release.

4 The second quarter fiscal 2023 GAAP effective tax rate reflected the effects of the goodwill impairment charge included in the company’s estimated annual effective tax rate.

5 Recast FY23 actuals for updated segment reporting structure are considered preliminary and pending a final recast of segment results that is expected to be completed by the company’s Q3 FY24 earnings release. The sum of the components may reflect rounding adjustments.

6 FY24 to FY26 CAGR, as of FY23 baseline.

7 The company’s previously announced Medical Improvement Plan targeting at least $650M of segment profit by FY26 continues, with elements of that plan to reside in the results of both GMPD and Other.

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.

Cardinal Health

Page 5

Cautions Concerning Forward-Looking Statements

This news 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, preliminary recast fiscal 2023 results 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 ongoing inflationary pressures, including the risk that our plans to mitigate such effects may not be as successful as we anticipate or that costs could remain elevated; the possibility that our Medical unit goodwill could be further impaired due to additional changes to our long-term financial plan, increases in global interest rates or unfavorable changes in the U.S. statutory tax rate; risks associated with our ongoing review of our operations, portfolio and businesses, including the risk that our management team could become distracted or that the outcome of such review may have unintended consequences; competitive pressures in Cardinal Health's various lines of business, including the risk that customers may reduce purchases made under their contracts with us or terminate or not renew their contracts; 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 or other components of our generics programs; ongoing risks associated with the distribution of opioids, including the financial impact associated with the settlements with governmental authorities and the risk that challenges to tax deductions for opioid-related losses could adversely impact our financial results; risks arising from the Department of Justice investigation which we believe concerns our anti-diversion program and risks associated with the injunctive relief requirements under the national settlement, including the risk that we may incur higher costs or operational challenges in the implementation and maintenance of the required changes; risks associated with the manufacture and sourcing of certain products, including risks related to our ability and the ability of third-party manufacturers to import or export certain products or component parts and to comply with applicable regulations; our ability to manage uncertainties associated with the pricing of branded pharmaceuticals; uncertainties related to the timing, magnitude and profit impact of the distribution of recently commercially available COVID-19 vaccines; risks associated with business process initiatives, such as the Medical Improvement Plan, including the possibility that they could fail to achieve the intended results; the risk that we may not realize the anticipated benefits related to our updated operating and segment reporting structure; and risks associated with our planned acquisition of Specialty Networks, including the risk that we may not receive required regulatory approval or otherwise fail to complete the acquisition and the risk that we may fail to realize the anticipated strategic and financial benefits. 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 news release reflects management’s views as of February 1, 2024. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement. Forward-looking statements are aspirational and not guarantees or promises that goals, targets or projections will be met, and no assurance can be given that any commitment, expectation, initiative or plan in this news release can or will be achieved or completed.

Schedule 1

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings/(Loss) (Unaudited)



	Second Quarter						Year-to-Date
(in millions, except per common share amounts)	2024		2023		% Change		2024		2023		% Change
Revenue	$	57,445	$	51,469	12	%	$	112,208	$	101,072	11	%
Cost of products sold	55,599		49,806		12	%	108,594		97,795		11	%

Gross margin	1,846		1,663		11	%	3,614		3,277		10	%

Operating expenses:
Distribution, selling, general and administrative expenses	1,283		1,191		8	%	2,480		2,388		4	%
Restructuring and employee severance	28		17				53		46
Amortization and other acquisition-related costs	63		71				127		142
Impairments and (gain)/loss on disposal of assets, net1	1		710				538		863
Litigation (recoveries)/charges, net	(11)		(207)				(52)		(180)
Operating earnings/(loss)	482		(119)		N.M.		468		18		N.M.

Other (income)/expense, net	(16)		(7)				(18)		(5)
Interest expense, net	8		25		(68)	%	22		50		(56)	%


Earnings/(loss) before income taxes	490		(137)		N.M.		464		(27)		N.M.

Provision for/(benefit from) income taxes2	136		(7)		N.M.		104		(8)		N.M.
Net earnings/(loss)	354		(130)		N.M.		360		(19)		N.M.

Less: Net earnings attributable to noncontrolling interests	(1)		—				(2)		(1)
Net earnings/(loss) attributable to Cardinal Health, Inc.	$	353	$	(130)	N.M.		$	358	$	(20)	N.M.

Earnings/(Loss) per common share attributable to Cardinal Health, Inc.:
Basic	$	1.44	$	(0.50)	N.M.		$	1.45	$	(0.08)	N.M.
Diluted	1.43		(0.50)		N.M.		1.44		(0.08)		N.M.

Weighted-average number of common shares outstanding:
Basic	245		261				247		266
Diluted	246		261				248		266

1 Impairments and (gain)/loss on disposal of assets, net included pre-tax impairment charges related to the Medical segment of $581 million recorded during the six months ended December 31, 2023. During the three and six months ended December 31, 2022, impairments and (gain)/loss on disposal of assets, net included pre-tax goodwill impairment charges of $709 million and $863 million, respectively, related to the Medical segment.

2 For fiscal 2024, the net tax benefit related to the impairment charge is $45 million and is included in the annual effective tax rate. As a result, the tax benefit for the six months ended December 31, 2023 increased approximately by an incremental $65 million and will increase the provision for income taxes for the remainder of fiscal 2024. For fiscal 2023, the net tax benefit related to these impairment charges was $68 million and was included in the annual effective tax rate. As a result, the amount of tax benefit increased approximately by an incremental $118 million and $140 million for the three and six months ended December 31, 2022, respectively, and increased the provision for income taxes for the remainder of fiscal 2023.

Schedule 2

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


(in millions)	December 31, 2023		June 30, 2023
Assets	(Unaudited)
Current assets:
Cash and equivalents	$	4,591	$	4,043
Trade receivables, net	11,788		11,344
Inventories, net	18,451		15,940
Prepaid expenses and other	2,816		2,362
Assets held for sale	12		144
Total current assets	37,658		33,833

Property and equipment, net	2,446		2,462
Goodwill and other intangibles, net	5,371		6,081

Other assets	1,098		1,041
Total assets	$	46,573	$	43,417

Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	34,259	$	29,813
Current portion of long-term obligations and other short-term borrowings	1,188		792
Other accrued liabilities	2,839		3,059
Liabilities related to assets held for sale	—		42
Total current liabilities	38,286		33,706

Long-term obligations, less current portion	3,535		3,909
Deferred income taxes and other liabilities	8,199		8,653





Total shareholders’ deficit	(3,447)		(2,851)
Total liabilities and shareholders’ deficit	$	46,573	$	43,417

Schedule 3

Cardinal Health, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)



	Second Quarter				Year-to-Date
(in millions)	2024		2023		2024		2023
Cash flows from operating activities:
Net earnings/(loss)	$	354	$	(130)	$	360	$	(19)

Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities:
Depreciation and amortization	175		170		347		341

Impairments and (gain)/loss on disposal of assets, net	1		710		538		863


Share-based compensation	28		25		57		48

Provision for bad debts	14		30		43		59


Change in operating assets and liabilities, net of effects from acquisitions and divestitures:
Increase in trade receivables	(537)		(411)		(487)		(919)
Increase in inventories	(1,479)		(1,379)		(2,536)		(1,643)
Increase in accounts payable	2,719		1,720		4,446		2,954
Other accrued liabilities and operating items, net	(86)		(138)		(1,034)		(1,064)
Net cash provided by operating activities	1,189		597		1,734		620

Cash flows from investing activities:
Proceeds from divestitures, net of cash sold	9		—		9		—

Additions to property and equipment	(114)		(85)		(206)		(155)
Proceeds from disposal of property and equipment	1		—		2		2
Purchases of investments	(1)		(2)		(2)		(5)
Proceeds from investments	—		—		1		1
Proceeds from net investment hedge terminations	—		—		28		—
Net cash used in investing activities	(105)		(87)		(168)		(157)

Cash flows from financing activities:





Reduction of long-term obligations	(8)		(6)		(15)		(13)
Net tax proceeds from share-based compensation	29		23		1		9

Dividends on common shares	(124)		(129)		(255)		(271)
Purchase of treasury shares	(250)		(250)		(750)		(1,250)
Net cash used in financing activities	(353)		(362)		(1,019)		(1,525)

Effect of exchange rate changes on cash and equivalents	6		14		1		(1)


Net increase/(decrease) in cash and equivalents	737		162		548		(1,063)
Cash and equivalents at beginning of period	3,854		3,492		4,043		4,717
Cash and equivalents at end of period	$	4,591	$	3,654	$	4,591	$	3,654

Schedule 4

Cardinal Health, Inc. and Subsidiaries

Segment Information


Second Quarter


(in millions)	2024			2023			(in millions)	2024			2023
Pharmaceutical							Medical

Revenue							Revenue
Amount	$	53,520		$	47,673		Amount	$	3,928		$	3,797
Growth rate	12		%	15		%	Growth rate	3		%	(7)		%

Segment profit							Segment profit
Amount	$	518		$	464		Amount	$	71		$	17
Growth rate	12		%	9		%	Growth rate	N.M.			(66)		%
Segment profit margin	0.97		%	0.97		%	Segment profit margin	1.81		%	0.45		%


Year-to-Date


(in millions)	2024			2023			(in millions)	2024			2023
Pharmaceutical							Medical

Revenue							Revenue
Amount	$	104,526		$	93,501		Amount	$	7,688		$	7,575
Growth rate	12		%	15		%	Growth rate	1		%	(8)		%

Segment profit							Segment profit
Amount	$	1,025		$	895		Amount	$	142		$	9
Growth rate	15		%	8		%	Growth rate	N.M.			(95)		%
Segment profit margin	0.98		%	0.96		%	Segment profit margin	1.85		%	0.12		%

The sum of the components and certain computations may reflect rounding adjustments.

Schedule 5

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation1



													Earnings/
			Gross								Operating		(Loss)		Provision for/				Net						Diluted
			Margin				SG&A2		Operating		Earnings		Before		(Benefit from)		Net		Earnings3		Effective				EPS 3
(in millions, except per common share amounts)	Gross		Growth				Growth		Earnings/		Growth		Income		Income		Earnings/		Growth		Tax		Diluted		Growth
	Margin		Rate		SG&A 2		Rate		(Loss)		Rate		Taxes		Taxes		(Loss) 3		Rate		Rate		EPS 3,4		Rate
	Second Quarter 2024
GAAP	$	1,846	11	%	$	1,283	8	%	$	482	N.M.		$	490	$	136	$	353	N.M.		27.7	%	$	1.43	N.M.


Surgical gown recall income	—				1				(1)				(1)		—		(1)						—

Restructuring and employee severance	—				—				28				28		7		21						0.09
Amortization and other acquisition-related costs	—				—				63				63		17		46						0.19
Impairments and (gain)/loss on disposal of assets, net	—				—				1				1		(33)		34						0.14
Litigation (recoveries)/charges, net	—				—				(11)				(11)		(5)		(6)						(0.03)



Non-GAAP	$	1,846	11	%	$	1,284	8	%	$	562	20	%	$	569	$	121	$	447	29	%	21.3	%	$	1.82	38	%

	Second Quarter 2023
GAAP	$	1,663	3	%	$	1,191	3	%	$	(119)	(87)	%	$	(137)	$	(7)	$	(130)	N.M.		5.4	%	$	(0.50)	N.M.
State opioid assessment related to prior fiscal years	—				6				(6)				(6)		(2)		(4)						(0.02)
Shareholder cooperation agreement costs	—				(2)				2				2		1		1						0.01


Restructuring and employee severance	—				—				17				17		4		13						0.05
Amortization and other acquisition-related costs	—				—				71				71		18		53						0.20
Impairments and (gain)/loss on disposal of assets, net 5	—				—				710				710		173		537						2.06
Litigation (recoveries)/charges, net	—				—				(207)				(207)		(83)		(124)						(0.48)



Non-GAAP	$	1,663	3	%	$	1,196	4	%	$	467	—	%	$	450	$	104	$	346	(3)	%	23.0	%	$	1.32	4	%

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.

4 For the three months ended December 31, 2022, GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 261 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 periods. For the three months ended December 31, 2022, non-GAAP diluted EPS is calculated using a weighted average of 263 million common shares, which includes potentially dilutive shares.

5 For the three months ended December 31, 2022, impairments and (gain)/loss on disposal of assets, net included a pre-tax goodwill impairment charge of $709 million related to the Medical segment. For fiscal 2023, the net tax benefit related to the cumulative impairment charges was $68 million and was included in the annual effective tax rate. As a result, the amount of tax benefit increased approximately by an incremental $118 million for the three months ended December 31, 2022 and increased the provision for income taxes for the remainder of fiscal 2023.

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



													Earnings/
			Gross								Operating		(Loss)		Provision for/				Net						Diluted
			Margin				SG&A 2		Operating		Earnings		Before		(Benefit from)		Net		Earnings3		Effective				EPS 3
	Gross		Growth				Growth		Earnings/		Growth		Income		Income		Earnings/		Growth		Tax		Diluted		Growth
(in millions, except per common share amounts)	Margin		Rate		SG&A 2		Rate		(Loss)		Rate		Taxes		Taxes		(Loss) 3		Rate		Rate		EPS 3,4		Rate
	Year-to-Date 2024
GAAP	$	3,614	10	%	$	2,480	4	%	$	468	N.M.		$	464	$	104	$	358	N.M.		22.4	%	$	1.44	N.M.
Surgical gown recall income	—				1				(1)				(1)		—		(1)						—


Restructuring and employee severance	—				—				53				53		14		39						0.16
Amortization and other acquisition-related costs	—				—				127				127		33		94						0.38
Impairments and (gain)/loss on disposal of assets, net 5	—				—				538				538		112		426						1.71
Litigation (recoveries)/charges, net	—				—				(52)				(52)		(16)		(36)						(0.14)



Non-GAAP	$	3,614	10	%	$	2,481	4	%	$	1,133	27	%	$	1,129	$	247	$	880	30	%	21.9	%	$	3.55	41	%

	Year-to-Date 2023
GAAP	$	3,277	1	%	$	2,388	5	%	$	18	N.M.		$	(27)	$	(8)	$	(20)	N.M.		30.0	%	$	(0.08)	N.M.

State opioid assessment related to prior fiscal years	—				6				(6)				(6)		(2)		(4)						(0.02)
Shareholder cooperation agreement costs	—				(8)				8				8		2		6						0.02
Restructuring and employee severance	—				—				46				46		10		36						0.13
Amortization and other acquisition-related costs	—				—				142				142		37		105						0.40
Impairments and (gain)/loss on disposal of assets, net 5	—				—				863				863		207		656						2.46
Litigation (recoveries)/charges, net	—				—				(180)				(180)		(76)		(104)						(0.39)



Non-GAAP	$	3,277	1	%	$	2,386	5	%	$	891	(10)	%	$	846	$	170	$	675	(7)	%	20.1	%	$	2.52	(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.

4 For the six months ended December 31, 2022, GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 266 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 periods. For the six months ended December 31, 2022, non-GAAP diluted EPS is calculated using a weighted average of 268 million common shares, which includes potentially dilutive shares.

5 For the six months ended December 31, 2023, impairments and (gain)/loss on disposal of assets, net includes a pre-tax goodwill impairment charge of $581 million related to the Medical segment. For fiscal 2024, the net tax benefit related to the impairment charge is $45 million and is included in the annual effective tax rate. As a result, the tax benefit for the six months ended December 31, 2023 increased approximately by an incremental $65 million and will increase the provision for income taxes for the remainder of fiscal 2024.

For the six months December 31, 2022, impairments and (gain)/loss on disposal of assets, net included cumulative pre-tax goodwill impairment charges of $863 million related to the Medical segment. For fiscal 2023, the net tax benefit related to these impairment charges was $68 million and was included in the annual effective tax rate. As a result, the amount of tax benefit increased approximately by an incremental $140 million for the six months ended December 31, 2022 and increased the provision for income taxes for the remainder of fiscal 2023.

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 6

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation - GAAP Cash Flow to Non-GAAP Adjusted Free Cash Flow



	Second Quarter				Year-to-Date
(in millions)	2024		2023		2024		2023
GAAP - Cash Flow Categories
Net cash provided by operating activities	$	1,189	$	597	$	1,734	$	620
Net cash used in investing activities	(105)		(87)		(168)		(157)
Net cash used in financing activities	(353)		(362)		(1,019)		(1,525)
Effect of exchange rates changes on cash and equivalents	6		14		1		(1)

Net increase/(decrease) in cash and equivalents	$	737	$	162	$	548	$	(1,063)

Non-GAAP Adjusted Free Cash Flow
Net cash provided by operating activities	$	1,189	$	597	$	1,734	$	620
Additions to property and equipment	(114)		(85)		(206)		(155)
Payments/(receipts) related to matters included in litigation (recoveries)/charges, net	(27)		(73)		515		316



Non-GAAP Adjusted Free Cash Flow	$	1,048	$	439	$	2,043	$	781

1For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules.

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 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. We did not recognize any LIFO charges or credits during the periods presented.

•Surgical gown recall costs or income includes inventory write-offs and certain remediation and supply disruption costs, net of related insurance recoveries, 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. Income from surgical gown recall costs represents insurance recoveries of these certain costs. 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 due to changes in estimates or when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.

•Shareholder cooperation agreement costs includes costs such as legal, consulting and other expenses incurred in relation to the agreement (the "Cooperation Agreement") entered into among Elliott Associates, L.P., Elliott International, L.P. (together, "Elliott") and Cardinal Health, including costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the Business Review Committee of the Board of Directors, which was formed under this Cooperation Agreement. We have excluded these costs from our non-GAAP metrics because they do not occur in or reflect the ordinary course of our ongoing business operations and may obscure analysis of trends and financial performance.

•Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business and include, but are not limited to, costs related to divestitures, closing and consolidating facilities, changing the way we manufacture or distribute our products, moving manufacturing of a product to another location, changes in production or business process outsourcing or insourcing, employee severance and realigning operations.

•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, net 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 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.

The tax effect for each of the items listed above 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.

Non-GAAP adjusted free cash flow: We provide this non-GAAP financial measure as a supplemental metric to assist readers in assessing the effects of items and events on our cash flow on a year-over-year basis and in comparing our performance to that of our peer group companies. In calculating this non-GAAP metric, certain items are excluded from net cash provided by operating activities because they relate to significant and unusual or non-recurring events and are inherently unpredictable in timing and amount. We believe adjusted free cash flow is important to management and useful to investors as a supplemental measure as it indicates the cash flow available for working capital needs, debt repayments, dividend payments, share repurchases, strategic acquisitions, or other strategic uses of cash. A reconciliation of our GAAP financial results to Non-GAAP adjusted free cash flow is provided in Schedule 6 of the financial statement tables included with this release.

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 2024 GAAP results. Over the past five fiscal years, the excluded items have impacted the Company’s EPS from $0.75 to $18.06, which included a $17.54 charge related to the opioid litigation we recognized in fiscal 2020.

Definitions

Growth rate calculation: growth rates in this report 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/(income).

Non-GAAP distribution, selling, general and administrative expenses or Non-GAAP SG&A: distribution, selling, general and administrative expenses, excluding surgical gown recall costs/(income), state opioid assessment related to prior fiscal years and shareholder cooperation agreement costs.

Non-GAAP operating earnings: operating earnings/(loss) excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) shareholder cooperation agreement costs, (5) restructuring and employee severance, (6) amortization and other acquisition-related costs, (7) impairments and (gain)/loss on disposal of assets, net and (8) 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/(income), (3) state opioid assessment related to prior fiscal years, (4) shareholder cooperation agreement costs, (5) restructuring and employee severance, (6) amortization and other acquisition-related costs, (7) impairments and (gain)/loss on disposal of assets, net and (8) litigation (recoveries)/charges, net and (9) 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/(income), (3) state opioid assessment related to prior fiscal years, (4) shareholder cooperation agreement costs, (5) restructuring and employee severance, (6) amortization and other acquisition-related costs, (7) impairments and (gain)/loss on disposal of assets, net and (8) litigation (recoveries)/charges, net and (9) loss on early extinguishment of debt.

Non-GAAP effective tax rate: provision for/(benefit from) income taxes adjusted for the tax impacts of (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) shareholder cooperation agreement costs, (5) restructuring and employee severance, (6) amortization and other acquisition-related costs, (7) impairments and (gain)/loss on disposal of assets, net and (8) litigation (recoveries)/charges, net and (9) loss on early extinguishment of debt divided by (earnings/(loss) before income taxes adjusted for the nine items above).

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.

Non-GAAP adjusted free cash flow: net cash provided by operating activities less payments related to additions to property and equipment, excluding settlement payments and receipts related to matters included in litigation (recoveries)/charges, net, as defined above, or other significant and unusual or non-recurring cash payments or receipts.

Cover Page	Feb. 01, 2024
Cover [Abstract]
Document Type	8-K
Document Period End Date	Feb. 01, 2024
Entity Registrant Name	Cardinal Health, Inc.
Entity Incorporation, State or Country Code	OH
Entity File Number	1-11373
Entity Tax Identification Number	31-0958666
Entity Address, Address Line One	7000 Cardinal Place
Entity Address, City or Town	Dublin
Entity Address, State or Province	OH
Entity Address, Postal Zip Code	43017
City Area Code	614
Local Phone Number	757-5000
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common shares (without par value)
Trading Symbol	CAH
Security Exchange Name	NYSE
Entity Emerging Growth Company	false
Entity Central Index Key	0000721371
Amendment Flag	false