- Revenue increased 9% to $54.9
billion
- GAAP1 operating earnings were $367 million; GAAP diluted EPS was $1.05
- Non-GAAP operating earnings increased 10% to $666 million; non-GAAP diluted EPS increased 20%
to $2.08
- Fiscal year 2024 non-GAAP EPS
guidance2 raised and narrowed to
$7.30 to $7.40, from $7.20
to $7.35
- Company provides preliminary fiscal year 2025 non-GAAP EPS
guidance of at least $7.50
DUBLIN,
Ohio, May 2, 2024 /PRNewswire/ -- Cardinal
Health (NYSE: CAH) today reported third quarter fiscal year 2024
revenues of $54.9 billion, an
increase of 9% from the third quarter of fiscal year 2023. Third
quarter GAAP operating earnings were $367
million and GAAP diluted earnings per share (EPS) were
$1.05, which included a non-cash,
pre-tax goodwill impairment of $90
million related to the Global Medical Products and
Distribution (GMPD) segment as a result of the reallocation of
goodwill related to the reporting structure update. Third quarter
non-GAAP operating earnings increased 10% to $666 million driven by growth in Global Medical
Products and Distribution segment profit and Pharmaceutical and
Specialty Solutions segment profit. Non-GAAP diluted EPS increased
20% to $2.08, primarily due to the
growth in non-GAAP operating earnings and a lower share count.
"In Q3, we delivered broad-based growth, including solid profit
growth in Pharmaceutical and Specialty Solutions, on top of an
exceptionally strong quarter from a year ago," said Jason Hollar, CEO of Cardinal Health. "We were
also pleased to see the ongoing acceleration in GMPD. With
confidence in our outlook for the year, we are raising and
narrowing our FY24 EPS guidance and providing preliminary guidance
for FY25 that reflects the strength and resiliency of our
company."
Q3 FY24 summary
|
Q3
FY24
|
|
Q3 FY23
|
|
Y/Y
|
Revenue
|
$54.9
billion
|
|
$50.5
billion
|
|
9 %
|
Operating
earnings
|
$367
million
|
|
$572 million
|
|
(36) %
|
Non-GAAP operating
earnings
|
$666
million
|
|
$606 million
|
|
10 %
|
Net earnings
attributable to Cardinal Health, Inc.
|
$258
million
|
|
$345 million
|
|
(25) %
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$509
million
|
|
$447 million
|
|
14 %
|
Effective Tax
Rate
|
24.2 %
|
|
36.3 %
|
|
|
Non-GAAP Effective Tax
Rate
|
20.4 %
|
|
22.4 %
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$1.05
|
|
$1.34
|
|
(22) %
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$2.08
|
|
$1.74
|
|
20 %
|
Segment results3
Pharmaceutical and Specialty Solutions
segment
|
Q3
FY24
|
|
Q3 FY23
|
|
Y/Y
|
Revenue
|
$
50.7 billion
|
|
$
46.5 billion
|
|
9 %
|
Segment
profit
|
$
580 million
|
|
$
560 million
|
|
4 %
|
Third quarter revenue for the Pharmaceutical and Specialty
Solutions segment increased 9% to $50.7
billion, driven by brand and specialty pharmaceutical sales
growth from existing customers.
Pharmaceutical and Specialty Solutions segment profit increased
4% to $580 million in the third
quarter, driven by positive generics program performance.
Global Medical Products and Distribution
segment
|
Q3
FY24
|
|
Q3 FY23
|
|
Y/Y
|
Revenue
|
$
3.1 billion
|
|
$
3.0 billion
|
|
4 %
|
Segment
profit
|
$
20 million
|
|
$
(46) million
|
|
N.M.
|
Third quarter revenue for the Global Medical Products and
Distribution segment increased 4% to $3.1
billion, driven by volume growth from existing
customers.
Global Medical Products and Distribution segment profit
increased $66 million to $20 million in the third quarter, driven by an
improvement in net inflationary impacts, including mitigation
initiatives.
Other4
|
Q3
FY24
|
|
Q3 FY23
|
|
Y/Y
|
Revenue
|
$
1.2 billion
|
|
$
1.0 billion
|
|
14 %
|
Segment
profit
|
$
111 million
|
|
$
106 million
|
|
5 %
|
Third quarter revenue for Other increased 14% to $1.2 billion, driven by growth across the three
operating segments: at-Home Solutions, Nuclear and Precision Health
Solutions and OptiFreight® Logistics.
Other segment profit increased 5% to $111
million in the third quarter, due to the performance of
OptiFreight® Logistics.
Fiscal year 2024 outlook2
The company raised and narrowed its fiscal year 2024 guidance
range for non-GAAP diluted earnings per share attributable to
Cardinal Health, Inc. to $7.30 to
$7.40, from $7.20 to $7.35.
This guidance includes an update to the company's Pharmaceutical
and Specialty Solutions segment profit outlook to 8.5% to 9.5%
growth, from 7% to 9% growth.
Additionally, the company updated expectations for its non-GAAP
effective tax rate to a range of 22% to 23%, from 23% to 24%.
Preliminary Fiscal Year 2025
outlook2
The company is also providing preliminary guidance for fiscal
year 2025:
|
FY25
outlook
|
Non-GAAP Diluted
EPS
|
At least
$7.50
|
Pharmaceutical and
Specialty Solutions
|
At least 1%
Segment profit
growth
|
Global Medical
Products and Distribution
|
~$175M
Segment
profit
|
Other4
|
~10%
Segment profit
growth
|
Interest and
Other
|
$160M to
$190M
|
Non-GAAP Effective
Tax Rate
|
23% to 24%
|
Diluted weighted
average shares outstanding
|
244M to 245M
|
Baseline share
repurchases
|
$500M
|
Recent highlights
- Cardinal Health completed its acquisition of Specialty
Networks. Specialty Networks is an integrated multi-specialty
platform that creates clinical and economic value for independent
specialty providers and partners across urology, gastroenterology
and rheumatology.
- Cardinal Health announced that its Board of Directors has
elected Robert "Bob" Azelby as an independent director, effective
March 1, 2024. Mr. Azelby joins the
board with over 30 years of experience, including as a Chief
Executive Officer and board member in the biopharmaceutical,
oncology and other specialty industries.
- Cardinal Health's U.S. Medical Products and Distribution
business was recognized for high achievements in supply chain
resiliency by HIRC's Resiliency Badge program, a healthcare
industry benchmark.
- Cardinal Health released its Fiscal 2023 Environmental, Social
and Governance (ESG) Report, highlighting the company's work toward
building a healthier, more equitable future. Additionally, the
company received approval by the Science Based Targets initiative
(SBTi) for its near-term science-based greenhouse gas (GHG)
emissions reduction targets.
- Debbie Weitzman, CEO of the
Pharmaceutical and Specialty Solutions segment, and Michelle
Greene, EVP, Chief Information Officer, were named to Reuters'
Trailblazing Women lists for significant contributions to their
fields. Additionally, Ola Snow,
Chief Human Resources Officer, was selected as one of The HR
Digest's top CHROs shaping the future of work.
- Fortune has recognized Cardinal Health as one of America's Most
Innovative Companies for the second year in a row.
Upcoming webcasted investor events
- Bank of America Securities Health Care Conference at
11:00 a.m. EST, May 14, 2024
- Leerink Partners Healthcare Crossroads Conference at
9:00 a.m. EST, May 29, 2024
Webcast
Cardinal Health will host a webcast today at
8:30 a.m. Eastern Standard Time 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 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 health care 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
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.
2The 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.
3Previously reported segment results have been recast to
conform to the company's updated segment reporting structure.
4Other includes the following three operating segments:
Nuclear and Precision Health Solutions (NPHS), at-Home Solutions
and OptiFreight® Logistics, which are not significant
enough individually to require reportable segment disclosure.
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
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 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; 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 risk that we may not be as successful as anticipated
in mitigating the negative impacts from the recent loss of a
significant Pharmaceutical and Specialty Solutions segment customer
contract; 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 other
parties 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
concerns our anti-diversion program and risks associated with the
injunctive relief requirements under the national settlement; 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,
including the recent scrutiny on products manufactured in or
sourced from China; our ability to
manage uncertainties associated with the pricing of branded
pharmaceuticals; risks associated with business process
initiatives, such as the Global Medical Products and Distribution
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 the acquisition of
Specialty Networks, including 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 May 2, 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 (Unaudited)
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in millions, except
per common share amounts)
|
2024
|
|
2023
|
|
%
Change
|
|
2024
|
|
2023
|
|
%
Change
|
Revenue
|
$
54,911
|
|
$
50,487
|
|
9 %
|
|
$
167,119
|
|
$
151,559
|
|
10 %
|
Cost of products
sold
|
52,964
|
|
48,702
|
|
9 %
|
|
161,558
|
|
146,497
|
|
10 %
|
Gross
margin
|
1,947
|
|
1,785
|
|
9 %
|
|
5,561
|
|
5,062
|
|
10 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Distribution, selling,
general and administrative expenses
|
1,282
|
|
1,179
|
|
9 %
|
|
3,762
|
|
3,567
|
|
5 %
|
Restructuring and
employee severance
|
53
|
|
16
|
|
|
|
106
|
|
62
|
|
|
Amortization and other
acquisition-related costs
|
80
|
|
74
|
|
|
|
207
|
|
216
|
|
|
Impairments and
(gain)/loss on disposal of assets, net 1
|
84
|
|
20
|
|
|
|
622
|
|
883
|
|
|
Litigation
(recoveries)/charges, net
|
81
|
|
(76)
|
|
|
|
29
|
|
(256)
|
|
|
Operating
earnings
|
367
|
|
572
|
|
(36) %
|
|
835
|
|
590
|
|
42 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income)/expense,
net
|
(7)
|
|
—
|
|
|
|
(25)
|
|
(5)
|
|
|
Interest expense,
net
|
33
|
|
28
|
|
18 %
|
|
55
|
|
78
|
|
(29) %
|
Earnings before income
taxes
|
341
|
|
544
|
|
(37) %
|
|
805
|
|
517
|
|
56 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for income
taxes 2
|
82
|
|
197
|
|
(58) %
|
|
186
|
|
189
|
|
(2) %
|
Net
earnings
|
259
|
|
347
|
|
(25) %
|
|
619
|
|
328
|
|
89 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
(1)
|
|
(2)
|
|
|
|
(3)
|
|
(3)
|
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
258
|
|
$
345
|
|
(25) %
|
|
$
616
|
|
$
325
|
|
90 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
1.06
|
|
$
1.35
|
|
(21) %
|
|
$
2.51
|
|
$
1.24
|
|
N.M.
|
Diluted
|
1.05
|
|
1.34
|
|
(22) %
|
|
2.49
|
|
1.23
|
|
N.M.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
243
|
|
256
|
|
|
|
245
|
|
263
|
|
|
Diluted
|
245
|
|
258
|
|
|
|
247
|
|
264
|
|
|
|
1 For the
three and nine months ended March 31, 2024, impairments and
(gain)/loss on disposal of assets, net includes pre-tax goodwill
impairment charges of $90 million and $671 million, respectively,
related to the Global Medical Products and Distribution ("GMPD")
segment. During the nine months ended March 31, 2023, impairments
and (gain)/loss on disposal of assets, net included pre-tax
impairment charges of $863 million related to the GMPD
segment.
|
2 For fiscal
2024, the net tax benefit related to the impairment charge is $56
million and is included in the annual effective tax rate. As a
result, the tax benefit recognized during the nine months ended
March 31, 2024 increased approximately by an incremental $36
million which will reverse in the fourth quarter of the fiscal
year. 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 tax benefit recognized during
the nine months ended March 31, 2023 increased approximately by an
incremental $66 million which reversed in the fourth quarter of
fiscal 2023.
|
Schedule
2
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Balance Sheets
|
|
|
|
|
(in
millions)
|
March 31,
2024
|
|
June 30,
2023
|
Assets
|
(Unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
3,718
|
|
$
4,043
|
Trade receivables,
net
|
11,566
|
|
11,344
|
Inventories,
net
|
17,277
|
|
15,940
|
Prepaid expenses and
other
|
3,161
|
|
2,362
|
Assets held for
sale
|
12
|
|
144
|
Total current
assets
|
35,734
|
|
33,833
|
|
|
|
|
Property and equipment,
net
|
2,470
|
|
2,462
|
Goodwill and other
intangibles, net
|
6,507
|
|
6,081
|
Other assets
|
1,169
|
|
1,041
|
Total
assets
|
$
45,880
|
|
$
43,417
|
|
|
|
|
Liabilities and
Shareholders' Deficit
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
32,089
|
|
$
29,813
|
Current portion of
long-term obligations and other short-term borrowings
|
1,187
|
|
792
|
Other accrued
liabilities
|
3,030
|
|
3,059
|
Liabilities related to
assets held for sale
|
—
|
|
42
|
Total current
liabilities
|
36,306
|
|
33,706
|
|
|
|
|
Long-term obligations,
less current portion
|
4,667
|
|
3,909
|
Deferred income taxes
and other liabilities
|
8,169
|
|
8,653
|
|
|
|
|
Total shareholders'
deficit
|
(3,262)
|
|
(2,851)
|
Total liabilities
and shareholders' deficit
|
$
45,880
|
|
$
43,417
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net earnings
|
$
259
|
|
$
347
|
|
$
619
|
|
$
328
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash provided by/(used in) operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
177
|
|
175
|
|
524
|
|
516
|
Impairments and
(gain)/loss on disposal of assets, net
|
84
|
|
20
|
|
622
|
|
883
|
Share-based
compensation
|
31
|
|
21
|
|
88
|
|
69
|
Provision for bad
debts
|
16
|
|
20
|
|
59
|
|
79
|
Change in operating
assets and liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
|
|
|
|
(Increase)/decrease in
trade receivables
|
225
|
|
409
|
|
(262)
|
|
(510)
|
(Increase)/decrease in
inventories
|
1,165
|
|
631
|
|
(1,371)
|
|
(1,012)
|
Increase/(decrease) in
accounts payable
|
(2,170)
|
|
(481)
|
|
2,276
|
|
2,473
|
Other accrued
liabilities and operating items, net
|
164
|
|
219
|
|
(870)
|
|
(845)
|
Net cash provided
by/(used in) operating activities
|
(49)
|
|
1,361
|
|
1,685
|
|
1,981
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(1,192)
|
|
(10)
|
|
(1,192)
|
|
(10)
|
Proceeds from
divestitures, net of cash sold
|
—
|
|
—
|
|
9
|
|
—
|
Additions to property
and equipment
|
(112)
|
|
(109)
|
|
(318)
|
|
(264)
|
Proceeds from disposal
of property and equipment
|
8
|
|
—
|
|
10
|
|
2
|
Purchases of
investments
|
(1)
|
|
(1)
|
|
(3)
|
|
(6)
|
Proceeds from
investments
|
—
|
|
—
|
|
1
|
|
1
|
Proceeds from net
investment hedge terminations
|
—
|
|
29
|
|
28
|
|
29
|
Purchases of short-term
time deposits
|
(550)
|
|
—
|
|
(550)
|
|
—
|
Net cash used in
investing activities
|
(1,847)
|
|
(91)
|
|
(2,015)
|
|
(248)
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Proceeds from long-term
obligations, net of issuance costs
|
1,139
|
|
—
|
|
1,139
|
|
—
|
Reduction of long-term
obligations
|
(8)
|
|
(558)
|
|
(23)
|
|
(571)
|
Net tax proceeds from
share-based compensation
|
22
|
|
2
|
|
23
|
|
11
|
Dividends on common
shares
|
(122)
|
|
(128)
|
|
(377)
|
|
(399)
|
Purchase of treasury
shares
|
—
|
|
(250)
|
|
(750)
|
|
(1,500)
|
Net cash provided
by/(used in) financing activities
|
1,031
|
|
(934)
|
|
12
|
|
(2,459)
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash and equivalents
|
(8)
|
|
—
|
|
(7)
|
|
(1)
|
|
|
|
|
|
|
|
|
Net increase/(decrease)
in cash and equivalents
|
(873)
|
|
336
|
|
(325)
|
|
(727)
|
Cash and equivalents at
beginning of period
|
4,591
|
|
3,654
|
|
4,043
|
|
4,717
|
Cash and
equivalents at end of period
|
$
3,718
|
|
$
3,990
|
|
$
3,718
|
|
$
3,990
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Segment
Information
|
|
|
|
Third
Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical and
Specialty Solutions
|
|
Global Medical
Products and Distribution
|
|
Other
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
$
50,651
|
|
$
46,496
|
|
$
3,113
|
|
$
2,989
|
|
$
1,167
|
|
$
1,025
|
Growth rate
|
9 %
|
|
14 %
|
|
4 %
|
|
(8) %
|
|
14 %
|
|
16 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
$
580
|
|
$
560
|
|
$
20
|
|
$
(46)
|
|
$
111
|
|
$
106
|
Growth rate
|
4 %
|
|
23 %
|
|
N.M.
|
|
N.M.
|
|
5 %
|
|
13 %
|
Segment profit
margin
|
1.15 %
|
|
1.20 %
|
|
0.64 %
|
|
(1.54) %
|
|
9.51 %
|
|
10.34 %
|
|
Year-to-Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical and
Specialty Solutions
|
|
Global Medical
Products and Distribution
|
|
Other
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
|
2024
|
|
2023
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
$
154,524
|
|
$
139,441
|
|
$
9,264
|
|
$
9,140
|
|
$
3,392
|
|
$
3,038
|
Growth rate
|
11 %
|
|
15 %
|
|
1 %
|
|
(10) %
|
|
12 %
|
|
16 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
|
|
|
|
|
|
|
Amount
|
$
1,541
|
|
$
1,394
|
|
$
18
|
|
$
(175)
|
|
$
319
|
|
$
305
|
Growth rate
|
11 %
|
|
13 %
|
|
N.M.
|
|
N.M.
|
|
5 %
|
|
6 %
|
Segment profit
margin
|
1.00 %
|
|
1.00 %
|
|
0.19 %
|
|
(1.91) %
|
|
9.40 %
|
|
10.04 %
|
|
The sum of the
components and certain computations may reflect rounding
adjustments.
|
Our previously reported
fiscal 2023 segment results have been recast to conform to our new
reporting structure and reflect changes in the elimination of
inter-segment revenue and allocated corporate expenses for shared
functions, which are driven by the reporting structure
change.
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
Operating
|
Earnings
|
|
|
Net
|
|
|
Diluted
|
|
|
Margin
|
|
SG&A
2
|
|
Earnings
|
Before
|
Provision
for
|
|
Earnings
3
|
Effective
|
|
EPS 3
|
(in millions, except
per common share amounts)
|
Gross
|
Growth
|
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Growth
|
Tax
|
Diluted
|
Growth
|
Margin
|
Rate
|
SG&A
2
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings
3
|
Rate
|
Rate
|
EPS 3
|
Rate
|
Third Quarter
2024
|
GAAP
|
$
1,947
|
9 %
|
$
1,282
|
9 %
|
$
367
|
(36) %
|
$
341
|
$
82
|
$
258
|
(25) %
|
24.2 %
|
$
1.05
|
(22) %
|
Shareholder cooperation
agreement costs
|
—
|
|
(1)
|
|
1
|
|
1
|
—
|
1
|
|
|
—
|
|
Restructuring and
employee severance
|
—
|
|
—
|
|
53
|
|
53
|
14
|
39
|
|
|
0.16
|
|
Amortization and other
acquisition-related costs
|
—
|
|
—
|
|
80
|
|
80
|
21
|
59
|
|
|
0.24
|
|
Impairments and
(gain)/loss on disposal of assets, net 4
|
—
|
|
—
|
|
84
|
|
84
|
(21)
|
105
|
|
|
0.44
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
—
|
|
81
|
|
81
|
34
|
47
|
|
|
0.19
|
|
Non-GAAP
|
$
1,947
|
9 %
|
$
1,281
|
9 %
|
$
666
|
10 %
|
$
640
|
$
130
|
$
509
|
14 %
|
20.4 %
|
$
2.08
|
20 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
2023
|
GAAP
|
$
1,785
|
6 %
|
$
1,179
|
4 %
|
$ 572
|
N.M.
|
$ 544
|
$
197
|
$
345
|
N.M.
|
36.3 %
|
$
1.34
|
N.M.
|
Restructuring and
employee severance
|
—
|
|
—
|
|
16
|
|
16
|
4
|
12
|
|
|
0.05
|
|
Amortization and other
acquisition-related costs
|
—
|
|
—
|
|
74
|
|
74
|
19
|
55
|
|
|
0.21
|
|
Impairments and
(gain)/loss on disposal of assets, net 4
|
—
|
|
—
|
|
20
|
|
20
|
(69)
|
89
|
|
|
0.35
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
—
|
|
(76)
|
|
(76)
|
(22)
|
(54)
|
|
|
(0.21)
|
|
Non-GAAP
|
$
1,785
|
6 %
|
$
1,179
|
4 %
|
$ 606
|
11 %
|
$ 578
|
$
129
|
$
447
|
11 %
|
22.4 %
|
$
1.74
|
20 %
|
|
1 For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
2
Distribution, selling, general and administrative
expenses.
|
3
Attributable to Cardinal Health, Inc.
|
4 For the
three months ended March 31, 2024, impairments and (gain)/loss on
disposal of assets, net includes a pre-tax goodwill impairment
charge of $90 million related to the GMPD segment. For fiscal 2024,
the estimated net tax benefit related to the impairments is $56
million and is included in the annual effective tax rate. As a
result, the amount of tax expense recognized increased
approximately by an incremental $30 million during the three months
ended March 31, 2024.
For the nine months
ended March 31, 2023, impairments and (gain)/loss on disposal of
assets, net included pre-tax impairment charges of $863 million
related to the Global Medical Products and Distribution segment.
For fiscal 2023, the net tax benefit related to the impairment was
$68 million and was included in the annual effective tax rate. As a
result, the amount of tax expense recognized increased
approximately by an incremental $74 million during the three months
ended March 31, 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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
Operating
|
Earnings
|
|
|
Net
|
|
|
Diluted
|
|
|
Margin
|
|
SG&A
2
|
|
Earnings
|
Before
|
Provision
for
|
|
Earnings3
|
Effective
|
|
EPS 3
|
|
Gross
|
Growth
|
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Growth
|
Tax
|
Diluted
|
Growth
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
SG&A
2
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings
3
|
Rate
|
Rate
|
EPS 3
|
Rate
|
Year-to-Date
2024
|
GAAP
|
$
5,561
|
10 %
|
$
3,762
|
5 %
|
$
835
|
42 %
|
$
805
|
$
186
|
$
616
|
90 %
|
23.2 %
|
$
2.49
|
N.M.
|
Shareholder cooperation
agreement costs
|
—
|
|
(1)
|
|
1
|
|
1
|
—
|
1
|
|
|
—
|
|
Restructuring and
employee severance
|
—
|
|
—
|
|
106
|
|
106
|
28
|
78
|
|
|
0.32
|
|
Amortization and other
acquisition-related costs
|
—
|
|
—
|
|
207
|
|
207
|
54
|
153
|
|
|
0.62
|
|
Impairments and
(gain)/loss on disposal of assets, net 4
|
—
|
|
—
|
|
622
|
|
622
|
92
|
530
|
|
|
2.14
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
—
|
|
29
|
|
29
|
17
|
12
|
|
|
0.05
|
|
Non-GAAP
|
$
5,561
|
10 %
|
$
3,762
|
6 %
|
$
1,799
|
20 %
|
$
1,769
|
$
377
|
$
1,389
|
24 %
|
21.3 %
|
$
5.62
|
33 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2023
|
GAAP
|
$
5,062
|
2 %
|
$
3,567
|
5 %
|
$
590
|
N.M.
|
$ 517
|
$
189
|
$
325
|
N.M.
|
36.7 %
|
$
1.23
|
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
|
—
|
|
—
|
|
62
|
|
62
|
14
|
48
|
|
|
0.18
|
|
Amortization and other
acquisition-related costs
|
—
|
|
—
|
|
216
|
|
216
|
56
|
160
|
|
|
0.61
|
|
Impairments and
(gain)/loss on disposal of assets, net 4
|
—
|
|
—
|
|
883
|
|
883
|
138
|
745
|
|
|
2.82
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
—
|
|
(256)
|
|
(256)
|
(98)
|
(158)
|
|
|
(0.60)
|
|
Non-GAAP
|
$
5,062
|
2 %
|
$
3,565
|
5 %
|
$ 1,497
|
(3) %
|
$
1,424
|
$
299
|
$
1,122
|
(1) %
|
21.0 %
|
$
4.24
|
6 %
|
|
1 For more
information on these measures, refer to the Use of Non-GAAP
Measures and Definitions schedules.
|
2
Distribution, selling, general and administrative
expenses.
|
3
Attributable to Cardinal Health, Inc.
|
4 For the
nine months ended March 31, 2024, impairments and (gain)/loss on
disposal of assets, net includes cumulative pre-tax goodwill
impairment charges of $671 million related to the GMPD segment. For
fiscal 2024, the estimated net tax benefit related to the
impairments is $56 million and is included in the annual effective
tax rate. As a result, the incremental interim tax benefit
recognized during the nine months ended March 31, 2024 is $36
million and will reverse in the fourth quarter of the fiscal
year.
For the nine months
ended March 31, 2023, impairments and (gain)/loss on disposal of
assets, net included cumulative pre-tax goodwill impairment charges
of $863 million related to the GMPD segment. For fiscal 2023, the
net tax benefit related to the impairment was $68 million and was
included in the annual effective tax rate. As a result, the
incremental interim tax benefit recognized during the nine months
ended March 31, 2023 was $66 million and reversed in the fourth
quarter 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
|
|
|
|
|
|
|
|
|
|
Third
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2024
|
|
2023
|
|
2024
|
|
2023
|
GAAP - Cash Flow
Categories
|
|
|
|
|
|
|
|
Net cash provided
by/(used in) operating activities
|
$
(49)
|
|
$
1,361
|
|
$
1,685
|
|
$
1,981
|
Net cash used in
investing activities
|
(1,847)
|
|
(91)
|
|
(2,015)
|
|
(248)
|
Net cash provided
by/(used in) financing activities
|
1,031
|
|
(934)
|
|
12
|
|
(2,459)
|
Effect of exchange rate
changes on cash and equivalents
|
(8)
|
|
—
|
|
(7)
|
|
(1)
|
Net increase/(decrease)
in cash and equivalents
|
$
(873)
|
|
$
336
|
|
$
(325)
|
|
$
(727)
|
|
|
|
|
|
|
|
|
Non-GAAP Adjusted
Free Cash Flow
|
|
|
|
|
|
|
|
Net cash provided
by/(used in) operating activities
|
$
(49)
|
|
$
1,361
|
|
$
1,685
|
|
$
1,981
|
Additions to property
and equipment
|
(112)
|
|
(109)
|
|
(318)
|
|
(264)
|
Payments related to
matters included in litigation (recoveries)/charges, net
|
246
|
|
57
|
|
761
|
|
373
|
Non-GAAP Adjusted Free
Cash Flow
|
$
85
|
|
$
1,309
|
|
$
2,128
|
|
$
2,090
|
|
For 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.
- 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/(used in)
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).
Non-GAAP distribution, selling, general and administrative
expenses or Non-GAAP SG&A: distribution, selling, general
and administrative expenses, excluding state opioid assessment
related to prior fiscal years and shareholder cooperation agreement
costs.
Non-GAAP operating earnings: operating earnings excluding
(1) LIFO charges/(credits), (2) state opioid assessment related to
prior fiscal years, (3) shareholder cooperation agreement costs,
(4) restructuring and employee severance, (5) amortization and
other acquisition-related costs, (6) impairments and (gain)/loss on
disposal of assets, net and (7) litigation (recoveries)/charges,
net.
Non-GAAP earnings before income taxes: earnings
before income taxes excluding (1) LIFO charges/(credits), (2) state
opioid assessment related to prior fiscal years, (3) shareholder
cooperation agreement costs, (4) restructuring and employee
severance, (5) amortization and other acquisition-related costs,
(6) impairments and (gain)/loss on disposal of assets, net, (7)
litigation (recoveries)/charges, net and (8) loss on early
extinguishment of debt.
Non-GAAP net earnings attributable to Cardinal Health,
Inc.: net earnings attributable to Cardinal Health, Inc.
excluding (1) LIFO charges/(credits), (2) state opioid assessment
related to prior fiscal years, (3) shareholder cooperation
agreement costs, (4) restructuring and employee severance, (5)
amortization and other acquisition-related costs, (6) impairments
and (gain)/loss on disposal of assets, net, (7) litigation
(recoveries)/charges, net and (8) loss on early extinguishment of
debt, each net of tax.
Non-GAAP effective tax rate: provision for income taxes
adjusted for the tax impacts of (1) LIFO charges/(credits), (2)
state opioid assessment related to prior fiscal years, (3)
shareholder cooperation agreement costs, (4) restructuring and
employee severance, (5) amortization and other acquisition-related
costs, (6) impairments and (gain)/loss on disposal of assets, net,
(7) litigation (recoveries)/charges, net and (8) loss on early
extinguishment of debt divided by (earnings before income taxes
adjusted for the eight 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/(used in) 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.
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SOURCE Cardinal Health, Inc.