- 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, Feb. 1, 2024 /PRNewswire/ -- 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 %
|
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
|
|
3 %
|
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.
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
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.
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.
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SOURCE Cardinal Health, Inc.