Cardinal Health Reports Second Quarter Fiscal 2024 Results and Raises Fiscal 2024 Outlook
-
Revenue increased 12% to
$57.4 billion -
GAAP1 operating earnings were
$482 million ; GAAP diluted EPS was$1.43 -
Non-GAAP operating earnings increased 20% to
$562 million ; non-GAAP diluted EPS increased 38% to$1.82 -
Fiscal 2024 non-GAAP EPS guidance raised to
$7.20 to$7.35 , from$6.75 to$7.00 2,3 -
Fiscal 2024 non-GAAP adjusted free cash flow guidance raised to
~$2.5 billion , from~$2.0 billion -
Cardinal Health
"We delivered strong second quarter results across the enterprise, demonstrating continued momentum against our strategic priorities," said
"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
Q2 FY24 summary
|
Q2 FY24 |
|
Q2 FY23 |
|
Y/Y |
Revenue |
|
|
|
|
12 % |
Operating earnings/(loss) |
|
|
|
|
N.M. |
Non-GAAP operating earnings |
|
|
|
|
20 % |
Net earnings/(loss) attributable to |
|
|
|
|
N.M. |
Non-GAAP net earnings attributable to |
|
|
|
|
29 % |
Effective Tax Rate |
27.7 % |
|
5.4 %4 |
|
|
Non-GAAP Effective Tax Rate |
21.3 % |
|
23.0 % |
|
|
Diluted EPS attributable to |
|
|
|
|
N.M. |
Non-GAAP diluted EPS attributable to |
|
|
|
|
38 % |
Segment results
Pharmaceutical segment
|
Q2 FY24 |
|
Q2 FY23 |
|
Y/Y |
Revenue |
|
|
|
|
12 % |
Segment profit |
|
|
|
|
12 % |
Second quarter revenue for the Pharmaceutical segment increased 12% to
Pharmaceutical segment profit increased 12% to
Medical segment
|
Q2 FY24 |
|
Q2 FY23 |
|
Y/Y |
Revenue |
|
|
|
|
3 % |
Segment profit |
|
|
|
|
N.M. |
Second quarter revenue for the Medical segment increased 3% to
Medical segment profit increased by
Fiscal 2024 outlook2
The company raised its fiscal 2024 guidance range for non-GAAP diluted earnings per share attributable to
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
Additionally, the company now expects interest and other in the range of
Pro-forma fiscal 2024 outlook, updated segment structure
As announced on
|
FY23 Actuals5 |
FY24 Outlook |
Long-term Target |
Businesses |
Pharmaceutical and |
Revenue:
Segment Profit: ~1.87B |
Revenue: 10% to 12% growth Segment Profit: 7% to 9% growth |
4-6% Segment Profit CAGR6 |
Former Pharmaceutical Segment, |
GMPD |
Revenue:
Segment Profit:
|
Revenue: ~2% growth Segment Profit:
|
in Segment Profit by FY267 |
Former Medical Segment, |
Other |
Revenue:
Segment Profit:
|
Revenue: ~10% growth Segment Profit: 6% to 8% growth |
8-10% Segment Profit CAGR6 |
at-Home Solutions, Nuclear and |
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 onJanuary 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 inTexas , 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
Presentation slides and a webcast replay will be available on the Investor Relations page for 12 months.
About
Contacts
Media:
Investors:
1 GAAP refers to
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
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
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
Schedule 1 |
|||||||||||
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 |
$ 353 |
|
$ (130) |
|
N.M. |
|
$ 358 |
|
$ (20) |
|
N.M. |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings/(Loss) per common share attributable to |
|
|
|
|
|
|
|
|
|
|
|
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 |
|||||||||||
|
|||||||||||
2 For fiscal 2024, the net tax benefit related to the impairment charge is |
Schedule 2 |
|||
Condensed Consolidated Balance Sheets |
|||
|
|||
(in millions) |
|
|
|
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 |
|
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 |
|||||||
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 |
||||||||
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 |
|||||||||||||
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 |
|||||||||||||
|
|||||||||||||
4 For the three months ended |
|||||||||||||
|
|||||||||||||
5 For the three months ended |
|||||||||||||
|
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The sum of the components and certain computations may reflect rounding adjustments. |
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We generally apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. |
Schedule 5 |
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|
|
|
|
|
|
|
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) % |
|
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1For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules. |
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2Distribution, selling, general and administrative expenses. |
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3Attributable to |
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|
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4 For the six months ended |
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5 For the six months ended |
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|
|||||||||||||
For the six months |
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|
|||||||||||||
The sum of the components and certain computations may reflect rounding adjustments. |
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|
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We generally apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. |
Schedule 6 |
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|
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. |
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with
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 selectAssociation 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") andCardinal 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
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
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
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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