DUBLIN, Ohio, Feb. 7, 2017 /PRNewswire/ -- Cardinal Health
(NYSE: CAH) today reported second-quarter fiscal year 2017 revenue
of $33.1 billion, an increase of 5
percent. The company also reported a decline in GAAP operating
earnings of 4 percent to $542 million
and in non-GAAP operating earnings of 4 percent to $701 million. GAAP diluted earnings per share
(EPS) increased 4 percent to $1.02,
while non-GAAP diluted EPS increased 3 percent to $1.34.
"Our organization has shown great resilience in the first half
of our fiscal 2017. While pricing in the generic pharmaceutical
market was a significant headwind for our Pharmaceutical segment
profit and our enterprise operating earnings, overall we are seeing
greater growth in more lines of business than we've seen in some
time," said George Barrett, chairman
and CEO of Cardinal Health. "Of particular note, we saw strong
growth in our Specialty Solutions group, and our Medical segment,
where virtually every part of that business grew.
"As we enter the second half of the year, our organization
continues to work with a clear sense of purpose – patient-centered
and squarely focused on helping our partners improve the quality,
safety and efficiency of the healthcare system."
Q2 FY17 summary
|
Q2
FY17
|
Q2
FY16
|
Y/Y
|
Revenue
|
$33.1
billion
|
$31.4
billion
|
5%
|
|
|
|
|
Operating
earnings
|
$542
million
|
$563
million
|
(4)%
|
Non-GAAP operating
earnings
|
$701
million
|
$726
million
|
(4)%
|
|
|
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$324
million
|
$326
million
|
N.M.
|
Non-GAAP net earnings
attributable to Cardinal Health, Inc.
|
$427
million
|
$430
million
|
(1)%
|
|
|
|
|
Diluted EPS
attributable to Cardinal Health, Inc.
|
$1.02
|
$0.98
|
4%
|
Non-GAAP diluted EPS
attributable to Cardinal Health, Inc.
|
$1.34
|
$1.30
|
3%
|
Diluted EPS for the quarter benefitted from a lower effective
tax rate and fewer weighted average shares outstanding than the
same quarter in the prior fiscal year.
Segment results
Pharmaceutical segment
Second-quarter revenue for the Pharmaceutical segment increased
5 percent to $29.7 billion due to
growth from existing Pharmaceutical Distribution customers and
strong performance from the Specialty business.
Segment profit for the quarter decreased 14 percent to
$537 million. This decrease was
driven by generic pharmaceutical pricing and, to a lesser extent,
the previously announced loss of a large Pharmaceutical
Distribution customer. This was partially offset by solid
performance from Red Oak Sourcing.
|
Q2
FY17
|
Q2
FY16
|
Y/Y
|
Revenue
|
$29.7
billion
|
$28.3
billion
|
5%
|
Segment
profit
|
$537
million
|
$627
million
|
(14)%
|
Medical segment
Second-quarter revenue for the Medical segment increased 8
percent to $3.4 billion, driven by
contributions from net new and existing customers.
Segment profit increased 50 percent to $159 million due to the contribution from
Cardinal Health Brand products, which includes Cordis. The increase
reflects the $21 million unfavorable
impact of the Cordis-related inventory fair value step-up in the
second quarter of fiscal year 2016. Excluding this step-up,
year-over-year Medical segment profit growth was 25 percent.
|
Q2
FY17
|
Q2
FY16
|
Y/Y
|
Revenue
|
$3.4
billion
|
$3.2
billion
|
8%
|
Segment
profit
|
$159
million
|
$106
million
|
50%
|
Fiscal year 2017 outlook
As previously disclosed, the company does not provide GAAP EPS
outlook, because it is unable to reliably forecast most of the
items that are excluded from GAAP EPS to calculate non-GAAP EPS.
These items could cause EPS to differ materially from non-GAAP EPS.
See "Use of Non-GAAP Measures" following the attached schedules for
additional explanation.
Having completed more than half its fiscal year, the company is
adjusting its fiscal year 2017 guidance range for non-GAAP diluted
EPS from continuing operations to $5.35 to
$5.50 from $5.40 to
$5.60. This now reflects non-GAAP EPS growth of 2 to 5
percent for the fiscal year.
More details about this outlook can be found on the company's
webcast and accompanying slides; see below for details.
Additional second-quarter and recent highlights
- Renewed Department of Defense medical/surgical distribution
prime vendor agreement
- Signed several new strategic distribution agreements that will
enable Cordis, Cardinal Health's interventional vascular business,
to rapidly expand its product portfolio in select countries
globally
- Recognized Cincinnati Children's Hospital Medical Center as the
recipient of the 2016 Award for Excellence in Medication Safety
from the Cardinal Health Foundation and the American Society of
Health-System Pharmacists Foundation
- Chairman and CEO George Barrett
named chairman of the Healthcare Leadership Council; Pharmaceutical
Segment CEO Jon Giacomin named
chairman of the Healthcare Distribution Alliance board
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 Cardinal Health website at ir.cardinalhealth.com until
Feb. 6, 2018.
Upcoming webcasted investor events
- Barclays Global Healthcare Conference on March 16 at 8:30
a.m. Eastern in Miami
About Cardinal Health
Cardinal Health Inc. is a global, integrated healthcare services
and products company, providing customized solutions for hospital
systems, pharmacies, ambulatory surgery centers, clinical
laboratories and physician offices worldwide. The company provides
clinically-proven medical products and pharmaceuticals and
cost-effective solutions that enhance supply chain efficiency.
Cardinal Health connects patients, providers, payers, pharmacists
and manufacturers for integrated care coordination and better
patient management. Backed by nearly 100 years of experience, with
more than 37,000 employees in nearly 60 countries, Cardinal Health
ranks among the top 25 on the Fortune 500. For more
information, visit cardinalhealth.com, follow @CardinalHealth on
Twitter and connect on LinkedIn at
linkedin.com/company/cardinal-health.
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.
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 e-mail 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, trends or guidance,
statements of outlook and expense accruals. 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 competitive pressures in
Cardinal Health's various lines of business; the amount or rate of
generic and branded pharmaceutical price appreciation or deflation
and the timing of and benefit from generic pharmaceutical
introductions; the ability to maintain the benefits from the
generic sourcing venture with CVS Health; the ability to
successfully integrate and realize the benefits from the
acquisition of Cordis; the risk of non-renewal or a default under
one or more key customer or supplier arrangements or changes to the
terms of or level of purchases under those arrangements;
uncertainties due to government health care reform including recent
proposals to modify or repeal the Affordable Care Act;
uncertainties with respect to U.S. tax and trade laws, including
proposals relating to a "border adjustment tax" and new import
tariffs; changes in the distribution patterns or reimbursement
rates for health care products and services; the effects of any
investigation or action by any regulatory authority; and changes in
foreign currency rates and the cost of commodities such as
oil-based resins, cotton, latex and diesel fuel. 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
Feb. 7, 2017. Except to the extent
required by applicable law, Cardinal Health undertakes no
obligation to update or revise any forward-looking
statement.
Schedule
1
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
Second
Quarter
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
Revenue
|
$
|
33,150
|
|
|
$
|
31,445
|
|
|
5%
|
Cost of products
sold
|
31,548
|
|
|
29,836
|
|
|
6%
|
Gross
margin
|
1,602
|
|
|
1,609
|
|
|
—%
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
910
|
|
|
922
|
|
|
(1)%
|
Restructuring and
employee severance
|
7
|
|
|
2
|
|
|
N.M.
|
Amortization and
other acquisition-related costs
|
115
|
|
|
114
|
|
|
N.M.
|
Impairments and loss
on disposal of assets, net
|
9
|
|
|
17
|
|
|
N.M.
|
Litigation
(recoveries)/charges, net
|
19
|
|
|
(9)
|
|
|
N.M.
|
Operating
earnings
|
542
|
|
|
563
|
|
|
(4)%
|
|
|
|
|
|
|
Other
(income)/expense, net
|
7
|
|
|
(2)
|
|
|
N.M.
|
Interest expense,
net
|
44
|
|
|
45
|
|
|
(2)%
|
Earnings before
income taxes
|
491
|
|
|
520
|
|
|
(6)%
|
|
|
|
|
|
|
Provision for income
taxes
|
167
|
|
|
194
|
|
|
(14)%
|
Net
earnings
|
324
|
|
|
326
|
|
|
—%
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
N.M.
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
324
|
|
|
$
|
326
|
|
|
—%
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
Basic
|
$
|
1.02
|
|
|
$
|
0.99
|
|
|
3%
|
Diluted
|
1.02
|
|
|
0.98
|
|
|
4%
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
Basic
|
318
|
|
|
329
|
|
|
|
Diluted
|
319
|
|
|
332
|
|
|
|
Schedule
2
|
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Earnings (Unaudited)
|
|
|
|
|
Year-to-Date
|
|
|
|
(in millions, except
per common share amounts)
|
2017
|
|
2016
|
|
%
Change
|
|
Revenue
|
$
|
65,189
|
|
|
$
|
59,499
|
|
|
10%
|
|
Cost of products
sold
|
61,997
|
|
|
56,311
|
|
|
10%
|
|
Gross
margin
|
3,192
|
|
|
3,188
|
|
|
—%
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
Distribution,
selling, general and administrative expenses
|
1,831
|
|
|
1,764
|
|
|
4%
|
|
Restructuring and
employee severance
|
16
|
|
|
14
|
|
|
N.M.
|
|
Amortization and
other acquisition-related costs
|
237
|
|
|
219
|
|
|
N.M.
|
|
Impairments and loss
on disposal of assets, net
|
12
|
|
|
17
|
|
|
N.M.
|
|
Litigation
(recoveries)/charges, net
|
20
|
|
|
(9)
|
|
|
N.M.
|
|
Operating
earnings
|
1,076
|
|
|
1,183
|
|
|
(9)%
|
|
|
|
|
|
|
|
|
Other expense,
net
|
3
|
|
|
6
|
|
|
N.M.
|
|
Interest expense,
net
|
88
|
|
|
90
|
|
|
(2)%
|
|
Earnings before
income taxes
|
985
|
|
|
1,087
|
|
|
(9)%
|
|
|
|
|
|
|
|
|
Provision for income
taxes
|
351
|
|
|
377
|
|
|
(7)%
|
|
Net
earnings
|
634
|
|
|
710
|
|
|
(11)%
|
|
|
|
|
|
|
|
|
Less: Net earnings
attributable to noncontrolling interest
|
(1)
|
|
|
(1)
|
|
|
N.M.
|
|
Net earnings
attributable to Cardinal Health, Inc.
|
$
|
633
|
|
|
$
|
709
|
|
|
(11)%
|
|
|
|
|
|
|
|
|
Earnings per
common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
Basic
|
$
|
1.99
|
|
|
$
|
2.16
|
|
|
(8)%
|
|
Diluted
|
1.97
|
|
|
2.14
|
|
|
(8)%
|
|
|
|
|
|
|
|
|
Weighted-average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
319
|
|
|
329
|
|
|
|
|
Diluted
|
321
|
|
|
332
|
|
|
|
|
Schedule
3
|
Cardinal Health,
Inc. and Subsidiaries Condensed Consolidated Balance
Sheets (Unaudited)
|
|
(in
millions)
|
December 31,
2016
|
|
June 30,
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
equivalents
|
$
|
1,881
|
|
|
$
|
2,356
|
|
Trade receivables,
net
|
7,533
|
|
|
7,405
|
|
Inventories,
net
|
11,915
|
|
|
10,615
|
|
Prepaid expenses and
other
|
1,824
|
|
|
1,580
|
|
Total current
assets
|
23,153
|
|
|
21,956
|
|
|
|
|
|
Property and
equipment, net
|
1,856
|
|
|
1,796
|
|
Goodwill and other
intangibles, net
|
9,276
|
|
|
9,426
|
|
Other
assets
|
736
|
|
|
944
|
|
Total
assets
|
$
|
35,021
|
|
|
$
|
34,122
|
|
|
|
|
|
Liabilities,
Redeemable Noncontrolling Interests and Shareholders'
Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
18,857
|
|
|
$
|
17,306
|
|
Current portion of
long-term obligations and other short-term borrowings
|
603
|
|
|
587
|
|
Other accrued
liabilities
|
1,554
|
|
|
1,808
|
|
Total current
liabilities
|
21,014
|
|
|
19,701
|
|
|
|
|
|
Long-term
obligations, less current portion
|
4,859
|
|
|
4,952
|
|
Deferred income taxes
and other liabilities
|
2,692
|
|
|
2,781
|
|
|
|
|
|
Redeemable
noncontrolling interests
|
115
|
|
|
117
|
|
|
|
|
|
Total Cardinal
Health, Inc. shareholders' equity
|
6,323
|
|
|
6,554
|
|
Noncontrolling
interests
|
18
|
|
|
17
|
|
Total shareholders'
equity
|
6,341
|
|
|
6,571
|
|
Total liabilities,
redeemable noncontrolling interests and shareholders'
equity
|
$
|
35,021
|
|
|
$
|
34,122
|
|
Schedule
4
|
Cardinal Health,
Inc. and Subsidiaries
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
Second
Quarter
|
|
Year-to-Date
|
(in
millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
324
|
|
|
$
|
326
|
|
|
$
|
634
|
|
|
$
|
710
|
|
|
|
|
|
|
|
|
|
Adjustments to
reconcile net earnings to net cash from operating
activities:
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
166
|
|
|
169
|
|
|
339
|
|
|
306
|
|
Impairments and loss
on sale of other investments
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
Impairments and loss
on disposal of assets, net
|
9
|
|
|
17
|
|
|
12
|
|
|
17
|
|
Share-based
compensation
|
24
|
|
|
26
|
|
|
47
|
|
|
56
|
|
Provision for bad
debts
|
22
|
|
|
18
|
|
|
29
|
|
|
35
|
|
Change in fair value
of contingent consideration obligation
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(14)
|
|
Change in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
|
|
Decrease/(increase)
in trade receivables
|
160
|
|
|
(45)
|
|
|
(146)
|
|
|
(393)
|
|
Increase in
inventories
|
(996)
|
|
|
(1,070)
|
|
|
(1,294)
|
|
|
(1,565)
|
|
Increase in accounts
payable
|
1,284
|
|
|
2,006
|
|
|
1,563
|
|
|
2,431
|
|
Other accrued
liabilities and operating items, net
|
(442)
|
|
|
29
|
|
|
(529)
|
|
|
(172)
|
|
Net cash provided by
operating activities
|
554
|
|
|
1,463
|
|
|
658
|
|
|
1,411
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
Acquisition of
subsidiaries, net of cash acquired
|
(2)
|
|
|
(1,885)
|
|
|
(11)
|
|
|
(3,284)
|
|
Additions to property
and equipment
|
(113)
|
|
|
(92)
|
|
|
(213)
|
|
|
(175)
|
|
Purchase of
available-for-sale securities and other investments
|
(73)
|
|
|
(62)
|
|
|
(125)
|
|
|
(88)
|
|
Proceeds from sale of
available-for-sale securities and other investments
|
38
|
|
|
32
|
|
|
72
|
|
|
57
|
|
Proceeds from
maturities of available-for-sale securities
|
22
|
|
|
14
|
|
|
39
|
|
|
19
|
|
Proceeds from
divestitures and disposal of property and equipment and held for
sale assets
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Net cash used in
investing activities
|
(127)
|
|
|
(1,993)
|
|
|
(237)
|
|
|
(3,471)
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
Payment of contingent
consideration obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
(23)
|
|
Net change in
short-term borrowings
|
8
|
|
|
3
|
|
|
33
|
|
|
39
|
|
Net purchase of
noncontrolling interests
|
(2)
|
|
|
—
|
|
|
(12)
|
|
|
—
|
|
Reduction of
long-term obligations
|
(59)
|
|
|
—
|
|
|
(60)
|
|
|
(4)
|
|
Proceeds from
interest rate swap terminations
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
Net tax
proceeds/(withholdings) from share-based compensation
|
9
|
|
|
14
|
|
|
—
|
|
|
(7)
|
|
Tax proceeds from
share-based compensation
|
2
|
|
|
1
|
|
|
32
|
|
|
32
|
|
Dividends on common
shares
|
(144)
|
|
|
(128)
|
|
|
(293)
|
|
|
(259)
|
|
Purchase of treasury
shares
|
(350)
|
|
|
—
|
|
|
(600)
|
|
|
—
|
|
Net cash used in
financing activities
|
(536)
|
|
|
(110)
|
|
|
(886)
|
|
|
(222)
|
|
|
|
|
|
|
|
|
|
Effect of exchange
rates changes on cash and equivalents
|
(11)
|
|
|
(10)
|
|
|
(10)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
and equivalents
|
(120)
|
|
|
(650)
|
|
|
(475)
|
|
|
(2,292)
|
|
Cash and equivalents
at beginning of period
|
2,001
|
|
|
2,974
|
|
|
2,356
|
|
|
4,616
|
|
Cash and
equivalents at end of period
|
$
|
1,881
|
|
|
$
|
2,324
|
|
|
$
|
1,881
|
|
|
$
|
2,324
|
|
Schedule
5
|
Cardinal Health,
Inc. and Subsidiaries
Segment Business
Analysis
|
|
|
Second
Quarter
|
|
|
Second
Quarter
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
29,743
|
|
|
$
|
28,287
|
|
|
Amount
|
$
|
3,410
|
|
|
$
|
3,162
|
|
Growth
rate
|
5%
|
|
|
25%
|
|
|
Growth
rate
|
8%
|
|
|
9%
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
537
|
|
|
$
|
627
|
|
|
Amount
|
$
|
159
|
|
|
$
|
106
|
|
Growth
rate
|
(14)%
|
|
|
16%
|
|
|
Growth
rate1
|
50%
|
|
|
(8)%
|
|
Segment profit
margin
|
1.81%
|
|
|
2.22%
|
|
|
Segment profit
margin
|
4.68%
|
|
|
3.36%
|
|
|
|
1.
|
Segment profit for
three months ended December 31, 2015 includes a $21 million
unfavorable impact of Cordis-related inventory fair value step-up.
Excluding
this step-up, year-over-year Medical segment profit growth was 25
percent and 10 percent for the three months ended December 31, 2016
and 2015,
respectively.
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended
December 31, 2016 was $33,150
million, which included total segment revenue of
$33,153 million and Corporate revenue
of $(3) million. Total consolidated
revenue for the three months ended December 31, 2015 was
$31,445 million, which included total
segment revenue of $31,449 million
and Corporate revenue of $(4)
million. Corporate revenue consists primarily of elimination
of inter-segment revenue and other revenue not allocated to the
segments.
Total consolidated operating earnings for the three months ended
December 31, 2016 were $542
million, which included total segment profit of $696 million and Corporate costs of $(154) million. Total consolidated operating
earnings for the three months ended December 31, 2015 were
$563 million, which included total
segment profit of $733 million and
Corporate costs of $(170) million.
Corporate includes, among other things, LIFO charges/(credits),
restructuring and employee severance, amortization and other
acquisition-related costs, impairments and (gain)/loss on disposal
of assets, litigation (recoveries)/charges, net and certain
investment spending that are not allocated to the segments.
Schedule
6
|
Cardinal Health,
Inc. and Subsidiaries
Segment Business
Analysis
|
|
|
Year-to-Date
|
|
|
Year-to-Date
|
(in
millions)
|
2017
|
|
2016
|
|
(in
millions)
|
2017
|
|
2016
|
Pharmaceutical
|
|
|
|
|
Medical
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
|
|
Revenue
|
|
|
|
Amount
|
$
|
58,505
|
|
|
$
|
53,427
|
|
|
Amount
|
$
|
6,690
|
|
|
$
|
6,081
|
|
Growth
rate
|
10%
|
|
|
22%
|
|
|
Growth
rate
|
10%
|
|
|
5%
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
|
|
|
Segment
profit
|
|
|
|
Amount
|
$
|
1,071
|
|
|
$
|
1,285
|
|
|
Amount
|
$
|
286
|
|
|
$
|
207
|
|
Growth
rate
|
(17)%
|
|
|
29%
|
|
|
Growth
rate1
|
39%
|
|
|
(10)%
|
|
Segment profit
margin
|
1.83%
|
|
|
2.41%
|
|
|
Segment profit
margin
|
4.28%
|
|
|
3.40%
|
|
|
|
1.
|
Segment profit for
the six months ended December 31, 2015 includes the $21 million
unfavorable impact of the Cordis-related inventory step-up.
Excluding this
step-up, year-over-year Medical segment profit growth was 25
percent and flat for the six months ended December 31, 2016 and
2015, respectively.
|
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the six months ended
December 31, 2016 was $65,189
million, which included total segment revenue of
$65,195 million and Corporate revenue
of $(6) million. Total consolidated
revenue for the six months ended December 31, 2015 was
$59,499 million, which included total
segment revenue of $59,508 million
and Corporate revenue of $(9)
million. Corporate revenue consists primarily of
elimination of inter-segment revenue and other revenue not
allocated to the segments.
Total consolidated operating earnings for the six months ended
December 31, 2016 were $1,076
million, which included total segment profit of $1,357 million and Corporate costs of
$(281) million. Total consolidated
operating earnings for the six months ended December 31, 2015
were $1,183 million, which included
total segment profit of $1,492
million and Corporate costs of $(309)
million. Corporate includes, among other things, LIFO
charges/(credits), restructuring and employee severance,
amortization and other acquisition-related costs, impairments and
(gain)/loss on disposal of assets, litigation (recoveries)/charges,
net and certain investment spending that are not allocated to the
segments.
Schedule
7
|
|
Cardinal Health,
Inc. and Subsidiaries
GAAP / Non-GAAP
Reconciliation1
|
|
|
|
|
|
|
|
|
Gross
|
|
Operating
|
Earnings
|
Provision
|
|
|
|
|
|
|
|
Margin
|
|
Earnings
|
Before
|
for
|
|
Net
|
|
Diluted
|
|
|
Gross
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2,3,4
|
Growth
Rate
|
|
Second Quarter
2017
|
|
GAAP
|
$
|
1,602
|
|
—%
|
$
|
542
|
|
(4)%
|
$
|
491
|
|
$
|
167
|
|
$
|
324
|
|
—%
|
$
|
1.02
|
|
4%
|
|
LIFO
charges/(credits)
|
9
|
|
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
|
Restructuring and
employee severance
|
—
|
|
|
7
|
|
|
7
|
|
2
|
|
5
|
|
|
0.01
|
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
115
|
|
|
115
|
|
39
|
|
76
|
|
|
0.24
|
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
9
|
|
|
9
|
|
3
|
|
6
|
|
|
0.02
|
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
19
|
|
|
19
|
|
7
|
|
12
|
|
|
0.04
|
|
|
|
Non-GAAP
|
$
|
1,611
|
|
(2)%
|
$
|
701
|
|
(4)%
|
$
|
650
|
|
$
|
222
|
|
$
|
427
|
|
(1)%
|
$
|
1.34
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
2016
|
|
GAAP
|
$
|
1,609
|
|
11%
|
$
|
563
|
|
3%
|
$
|
520
|
|
$
|
194
|
|
$
|
326
|
|
13%
|
$
|
0.98
|
|
14%
|
|
LIFO
charges/(credits)
|
39
|
|
|
39
|
|
|
39
|
|
15
|
|
24
|
|
|
0.07
|
|
|
|
Restructuring and
employee severance
|
—
|
|
|
2
|
|
|
2
|
|
1
|
|
1
|
|
|
—
|
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
114
|
|
|
114
|
|
41
|
|
73
|
|
|
0.22
|
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
17
|
|
|
17
|
|
7
|
|
10
|
|
|
0.03
|
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
(9)
|
|
|
(9)
|
|
(5)
|
|
(4)
|
|
|
(0.01)
|
|
|
|
Non-GAAP
|
$
|
1,648
|
|
13%
|
$
|
726
|
|
14%
|
$
|
683
|
|
$
|
253
|
|
$
|
430
|
|
7%
|
$
|
1.30
|
|
8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
Operating
|
Earnings
|
Provision
|
|
|
|
|
|
|
|
Margin
|
|
Earnings
|
Before
|
for
|
|
Net
|
|
Diluted
|
|
|
Gross
|
Growth
|
Operating
|
Growth
|
Income
|
Income
|
Net
|
Earnings2
|
Diluted
|
EPS2
|
|
(in millions, except
per common share amounts)
|
Margin
|
Rate
|
Earnings
|
Rate
|
Taxes
|
Taxes
|
Earnings2
|
Growth
Rate
|
EPS2
|
Growth
Rate
|
|
Year-to-Date
2017
|
|
GAAP
|
$
|
3,192
|
|
—%
|
$
|
1,076
|
|
(9)%
|
$
|
985
|
|
$
|
351
|
|
$
|
633
|
|
(11)%
|
$
|
1.97
|
|
(8)%
|
|
LIFO
charges/(credits)
|
9
|
|
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
|
Restructuring and
employee severance
|
—
|
|
|
16
|
|
|
16
|
|
6
|
|
10
|
|
|
0.03
|
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
237
|
|
|
237
|
|
79
|
|
158
|
|
|
0.49
|
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
12
|
|
|
12
|
|
4
|
|
8
|
|
|
0.02
|
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
20
|
|
|
20
|
|
8
|
|
12
|
|
|
0.04
|
|
|
|
Non-GAAP
|
$
|
3,201
|
|
(1)%
|
$
|
1,370
|
|
(6)%
|
$
|
1,279
|
|
$
|
452
|
|
$
|
826
|
|
(7)%
|
$
|
2.57
|
|
(4)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-Date
2016
|
|
GAAP
|
$
|
3,188
|
|
14%
|
$
|
1,183
|
|
17%
|
$
|
1,087
|
|
$
|
377
|
|
$
|
709
|
|
28%
|
$
|
2.14
|
|
30%
|
|
LIFO
charges/(credits)
|
39
|
|
|
39
|
|
|
39
|
|
15
|
|
24
|
|
|
0.07
|
|
|
|
Restructuring and
employee severance
|
—
|
|
|
14
|
|
|
14
|
|
5
|
|
9
|
|
|
0.02
|
|
|
|
Amortization and
other acquisition-related costs
|
—
|
|
|
219
|
|
|
219
|
|
78
|
|
141
|
|
|
0.42
|
|
|
|
Impairments and
(gain)/loss on disposal of assets
|
—
|
|
|
17
|
|
|
17
|
|
7
|
|
10
|
|
|
0.03
|
|
|
|
Litigation
(recoveries)/charges, net
|
—
|
|
|
(9)
|
|
|
(9)
|
|
(5)
|
|
(4)
|
|
|
(0.01)
|
|
|
|
Non-GAAP
|
$
|
3,227
|
|
15%
|
$
|
1,463
|
|
22%
|
$
|
1,368
|
|
$
|
479
|
|
$
|
889
|
|
20%
|
$
|
2.68
|
|
22%
|
|
1For more information on these measures, refer to the
Use of Non-GAAP Measures and Definitions schedules.
2attributable to Cardinal Health, Inc.
3GAAP diluted EPS for the three months ended
December 31, 2016 compared to the
prior year period was favorably impacted by $0.09, which includes $0.05 due to change in the effective tax rate and
$0.04 due to the change in weighted
average shares outstanding. The change in GAAP diluted EPS due to
the effective tax rate is calculated as ((GAAP Earnings before
Income Taxes for the current period times (one minus the current
period GAAP Effective Tax Rate)) minus (GAAP Earnings before Income
Taxes for the current period times (one minus the prior period GAAP
Effective Tax Rate))) divided by the current period weighted
average shares outstanding. The change in GAAP diluted EPS due to
the weighted average shares outstanding is calculated as (GAAP Net
Earnings for the current period divided by the current period
weighted average shares outstanding) minus (GAAP Net Earnings for
the current period divided by the prior period weighted average
shares outstanding).
4Non-GAAP diluted EPS for the three months ended
December 31, 2016 compared to the
prior year period was favorably impacted by $0.11, which includes $0.06 due to change in the effective tax rate and
$0.05 due to the change in weighted
average shares outstanding. The change in Non-GAAP diluted EPS due
to the effective tax rate is calculated as ((Non-GAAP Earnings
before Income Taxes for the current period times (one minus the
current period Non-GAAP Effective Tax Rate)) minus (Non-GAAP
Earnings before Income Tax for the current period times (one minus
the prior period Non-GAAP Effective Tax Rate))) divided by the
current period weighted average shares outstanding. The change in
Non-GAAP diluted EPS due to the weighted average shares outstanding
is calculated as (Non-GAAP Net Earnings for the current period
divided by the current period weighted average shares outstanding)
minus (Non-GAAP Net Earnings for the current period divided by the
prior period weighted average shares outstanding).
The sum of the components may not equal the total due to
rounding.
We apply varying tax rates depending on the item's nature and
tax jurisdiction where it is incurred.
There were no losses on extinguishment of debt during the
periods presented.
Schedule
8
|
Cardinal Health,
Inc. and Subsidiaries
|
GAAP / Non-GAAP
Reconciliation
|
|
|
Second
Quarter
|
(in
millions)
|
2017
|
|
2016
|
GAAP effective tax
rate
|
34.0
|
%
|
|
37.3
|
%
|
|
|
|
|
Non-GAAP effective
tax rate
|
|
|
|
Earnings before
income taxes
|
$
|
491
|
|
|
$
|
520
|
|
LIFO
charges
|
9
|
|
|
39
|
|
Restructuring and
employee severance
|
7
|
|
|
2
|
|
Amortization and
other acquisition-related costs
|
115
|
|
|
114
|
|
Impairments and loss
on disposal of assets
|
9
|
|
|
17
|
|
Litigation
(recoveries)/charges, net
|
19
|
|
|
(9)
|
|
Adjusted earnings
before income taxes
|
$
|
650
|
|
|
$
|
683
|
|
|
|
|
|
Provision for income
taxes
|
$
|
167
|
|
|
$
|
194
|
|
LIFO charges tax
benefit
|
4
|
|
|
15
|
|
Restructuring and
employee severance tax benefit
|
2
|
|
|
1
|
|
Amortization and
other acquisition-related costs tax benefit
|
39
|
|
|
41
|
|
Impairments and loss
on disposal of assets tax benefit
|
3
|
|
|
7
|
|
Litigation
(recoveries)/charges, net tax benefit/(expense)
|
7
|
|
|
(5)
|
|
Adjusted provision
for income taxes
|
$
|
222
|
|
|
$
|
253
|
|
|
|
|
|
Non-GAAP effective
tax rate
|
34.2
|
%
|
|
37.1
|
%
|
The sum of the components may not equal the total due to
rounding.
We apply varying tax rates depending on the item's nature and
tax jurisdiction where it is incurred.
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
This earnings release
contains financial measures that are not calculated in accordance
with U.S. generally accepted accounting principles ("GAAP").
In addition to analyzing our business based on financial
information prepared in accordance with GAAP, we use these non-GAAP
financial measures internally to evaluate our performance, evaluate
the balance sheet, 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 earnings release 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 from non-GAAP metrics
allows for a better comparison of our current financial results to
our historical financial results and to our peer group companies'
financial results.
- Restructuring and employee severance costs are excluded because
they relate to programs in which we fundamentally change our
operations and because they are not part of the ongoing operations
of our underlying business, which includes normal levels of
reinvestment in the business.
- Amortization and other acquisition-related costs are excluded
primarily for consistency with the presentation of the financial
results of our peer group companies. Additionally, these non-cash
amounts are variable in amount and frequency and are significantly
impacted by the timing and size of acquisitions, so their exclusion
allows for better comparison of historical, current and forecasted
financial results. We exclude other acquisition-related costs
because they 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. They are
also significantly impacted by the timing and size of
acquisitions.
- Impairments and gains or loss on disposal of assets are
excluded because they do not occur in or reflect the ordinary
course of our ongoing business operations and their exclusion
results in a metric that more meaningfully reflects the
sustainability of our operating performance.
- 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 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 financing
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.
Forward Looking Non-GAAP Measures
In this earnings
release, the Company presents its outlook for fiscal 2017 non-GAAP
EPS. The Company does not provide EPS outlook, which is
the most directly comparable GAAP measure to non-GAAP
EPS, because changes in the items that the Company excludes
from EPS to calculate non-GAAP EPS, described above, 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, due to
their unpredictability, management does not forecast many of the
excluded items for internal use and therefore cannot create or rely
on an EPS outlook.
The timing and amount of any of the excluded items could
significantly impact the Company's fiscal 2017 EPS. Over the past
five fiscal years, the excluded items have lowered the Company's
EPS from $0.14 to $2.76, which
includes a goodwill impairment charge of $2.32 per share related to our Nuclear
Pharmacy Services division that we recognized in fiscal
2013.
Definitions
Growth rate calculation: Growth rates in this earnings
release are determined by dividing the difference between current
period results and prior period results by prior period
results.
Non-GAAP operating earnings: operating earnings excluding
(1) LIFO charges/(credits), (2) restructuring and employee
severance, (3) amortization and other acquisition-related costs,
(4) impairments and (gain)/loss on disposal of assets and (5)
litigation (recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings before
income taxes excluding (1) LIFO charges/(credits), (2)
restructuring and employee severance, (3) amortization and other
acquisition-related costs, (4) impairments and (gain)/loss on
disposal of assets, (5) litigation (recoveries)/charges, net and
(6) loss on extinguishment of debt.
Non-GAAP effective tax rate: (provision for income taxes
adjusted for (1) LIFO charges/(credits), (2) restructuring and
employee severance, (3) amortization and other acquisition-related
costs, (4) impairments and (gain)/loss on disposal of assets,
(5) litigation (recoveries)/charges, net, and (6) loss on
extinguishment of debt) divided by (earnings before income taxes
adjusted for the same six items).
Non-GAAP net earnings attributable to Cardinal Health,
Inc.: net earnings attributable to Cardinal Health, Inc.
excluding (1) LIFO charges/(credits), (2) restructuring and
employee severance, (3) amortization and other acquisition-related
costs, (4) impairments and (gain)/loss on disposal of assets, (5)
litigation (recoveries)/charges, net and (6) loss on extinguishment
of debt, each net of tax.
Non-GAAP diluted EPS attributable to Cardinal Health,
Inc.: non-GAAP net earnings attributable to Cardinal Health,
Inc. divided by diluted weighted-average shares outstanding.
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SOURCE Cardinal Health