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Cardinal Health Reports Strong Q4 And Record Fiscal Year-End Non-GAAP Operating Earnings Results
Company Points to Progress on Strategic Priorities as it Provides Fiscal 2016 Outlook
- 33 percent increase in non-GAAP(1) operating earnings to $611 million for the fourth quarter
- 16 percent growth to record $2.5 billion in non-GAAP operating earnings for fiscal 2015
- 20 percent increase in non-GAAP diluted earnings per share from continuing operations to $1.00 for the fourth quarter
- 14 percent increase in non-GAAP diluted earnings per share from continuing operations to $4.38 for fiscal 2015
- Fiscal 2016 outlook for non-GAAP diluted earnings per share raised to $4.85 to $5.05, or 11 to 15 percent growth in FY2016

DUBLIN, Ohio, July 30, 2015 /PRNewswire/ -- Cardinal Health today reported fourth-quarter fiscal year 2015 revenues of $27.5 billion, an increase of 20 percent, and non-GAAP diluted earnings per share (EPS) from continuing operations of $1.00, an increase of 20 percent. Non-GAAP operating earnings increased 33 percent to $611 million. On a GAAP basis, operating earnings increased 44 percent to $558 million, and diluted EPS from continuing operations increased 29 percent to $0.88.

Fiscal year 2015 revenues increased 13 percent to $102.5 billion, and non-GAAP diluted EPS from continuing operations increased 14 percent to $4.38. Non-GAAP operating earnings increased 16 percent to $2.5 billion. On a GAAP basis, operating earnings and diluted EPS from continuing operations for fiscal year 2015 were $2.2 billion and $3.61, respectively, an increase of 15 percent and 7 percent, respectively, from the prior fiscal year.

"We finished our fiscal year 2015 with a very strong fourth quarter, capping off an outstanding year. During fiscal 2015, we had record non-GAAP operating earnings, achieved excellent growth in revenues and non-GAAP EPS, and generated $2.5 billion in cash flow," said George Barrett, chairman and chief executive officer of Cardinal Health.

"It was also a year of meaningful strategic initiatives, including: operationalizing Red Oak Sourcing, our generic sourcing venture with CVS Health; agreeing to acquire The Harvard Drug Group, which reinforces our position in generic drugs and telemarketing; and acquiring Metro Medical, which enhances the position of our fast-growing Specialty Solutions group," Barrett added. "We also combined forces with Henry Schein to serve office-based medical practices; enhanced our 'at Home' platform to expand the product portfolio; and, took a major step forward in our physician preference item portfolio with the planned acquisition of Cordis. At the same time, we were able to return $1.5 billion to shareholders through dividends and share repurchases.

"We look forward to fiscal year 2016 and the opportunities, enhanced by these growth drivers, to serve a health care system going through significant change," Barrett concluded.

The company raised the midpoint of its fiscal year 2016 outlook for non-GAAP diluted EPS from continuing operations, tightening the range to $4.85 to $5.05 due to its strong fiscal year 2015 performance and the momentum the company has carried into fiscal year 2016. While the company does not provide quarterly guidance, it expects financial performance to be weighted toward the second half of fiscal 2016.

In fiscal 2015, Cardinal Health generated $2.5 billion in operating cash flow and returned $1.5 billion to shareholders through dividends and share buybacks.

Q4 and Fiscal Year Summary

 

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$27.5 billion

$22.9 billion

20%

$102.5 billion

$91.1 billion

13%

             

 

Operating Earnings

$558 million

$387 million

 

44%

$2,161 million

$1,885 million

 

15%

Non-GAAP Operating Earnings

$611 million

$461 million

 

33%

$2,472 million

$2,133 million

 

16%

             

Earnings from Continuing Operations

$293 million

$234 million

 

25%

$1,212 million

$1,163 million

 

4%

Non-GAAP Earnings from Continuing Operations

$333 million

$284 million

 

17%

$1,469 million

$1,324 million

 

11%

             

Diluted EPS from Continuing Operations

$0.88

$0.68

29%

$3.61

$3.37

7%

Non-GAAP Diluted EPS from Continuing Operations

$1.00

$0.83

20%

$4.38

$3.84

14%

SEGMENT RESULTS

Pharmaceutical Segment

Fourth-quarter revenue for the Pharmaceutical segment increased 23 percent to $24.7 billion, due to growth from existing and new customers. Segment profit for the quarter increased 42 percent to $535 million, due to strong performance under the company's generics program, which includes the net benefit of Red Oak Sourcing, as well as growth from existing and new customers.  

For the full year, revenue for the Pharmaceutical segment increased 14 percent to $91.1 billion, and segment profit increased 20 percent to $2.1 billion.

 

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$24.7 billion

$20.1 billion

23%

$91.1 billion

$80.1 billion

14%

Segment Profit

   $535 million

$377 million

42%

$2.1 billion

$1.7 billion

20%

Medical Segment

Fourth-quarter revenue for the Medical segment increased 2 percent to $2.9 billion, due to contributions from acquisitions and growth in the Cardinal Health at Home platform, partially offset by a decline in Canada. Segment profit for the quarter increased 7 percent to $103 million, due to contributions from the strategic expansion of the company's portfolio of Cardinal Health brand products and services, which was driven by a combination of acquisitions and organic efforts, coupled with targeted cost reductions, during the past year.

For the full year, Medical segment revenue increased 4 percent to $11.4 billion, and segment profit decreased 3 percent to $433 million.

 

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$2.9 billion

$2.8 billion

2%

$11.4.billion

$11.0 billion

4%

Segment Profit

$103 million

$96 million

7%

$433 million

$444 million

(3%)

FY2015 SELECTED HIGHLIGHTS 

  • Entered into an agreement to acquire The Harvard Drug Group, a distributor of generic pharmaceuticals, over-the-counter medications and related products to retail, institutional and alternate care customers, increasing Cardinal Health's generics scale and reach; acquisition completed July 2015
  • Entered into an agreement to acquire Cordis, a worldwide leader in cardiovascular medical products
  • Acquired the specialty distribution business of Metro Medical Supply Inc., expanding scale and deepening reach into rheumatology, oncology and nephrology segments
  • Entered into a long-term strategic agreement with Henry Schein, the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners, to provide one of the most comprehensive service and product offerings to office-based medical practices
  • Unveiled the Cardinal Health™ negative pressure wound therapy PRO family of devices for use in the acute care setting, at discharge and in the home

Awards and Recognitions

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss fourth-quarter and full-year fiscal 2015 financial results and its future outlook. To access the call and corresponding slide presentation, go to the Investors page at ir.cardinalhealth.com. Alternatively, participants can call 913.312.1448 and use passcode 5598613.

There is no pre-registration for the call. Participants are advised to dial into the call at least 10 minutes prior to the start time.

Presentation slides and an audio replay will be archived on the Cardinal Health website after the conclusion of the meeting. The replay also will be available until Thursday, Aug. 6, by dialing 719.457.0820 and using passcode 5598613.

UPCOMING WEBCASTED INVESTOR EVENTS

  • FBR Second Annual Healthcare Conference on Sept. 9 at 12 p.m. Eastern in Boston
  • Baird's 2015 Healthcare Conference on Sept. 10 at 7:50 a.m. Eastern in New York
  • Morgan Stanley Global Healthcare Conference on Sept. 16 at 8:45 a.m. Eastern in New York

About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $103 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #26 on the Fortune 500, Cardinal Health employs nearly 35,000 people worldwide. More information about the company may be found at www.cardinalhealth.com and @CardinalHealth on Twitter.

1 See the attached tables for definitions of the non-GAAP financial measures presented in this news release and 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 Investors page at ir.cardinalhealth.com. In addition, our website allows investors and other interested persons to sign up automatically to receive e-mail alerts when we post news releases, SEC filings and certain other information on our website.

Cautions Concerning Forward-Looking Statements

This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and 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 ability to achieve  and maintain the benefits from the generic sourcing venture with CVS Health and from our acquisition of The Harvard Drug Group; the frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the ability to successfully complete the acquisition of Cordis and if completed to achieve the anticipated results from the Cordis acquisition; 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 federal health care reform legislation; 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 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 July 30, 2015. 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)

       
 

Fourth Quarter

   

(in millions, except per common share amounts)

2015

 

2014

 

% Change

Revenue

$

27,547

   

$

22,894

   

20

%

Cost of products sold

26,089

   

21,638

   

21

%

Gross margin

1,458

   

1,256

   

16

%

           

Operating expenses:

         

Distribution, selling, general and administrative expenses

847

   

795

   

7

%

Restructuring and employee severance

11

   

6

   

N.M.

 

Amortization and other acquisition-related costs

91

   

63

   

N.M.

 

Impairments and (gain)/loss on disposal of assets

   

4

   

N.M.

 

Litigation (recoveries)/charges, net

(49)

   

1

   

N.M.

 

Operating earnings

558

   

387

   

44

%

           

Other income, net

(1)

   

(3)

   

N.M.

 

Interest expense, net

36

   

33

   

9

%

Earnings before income taxes and discontinued operations

523

   

357

   

46

%

           

Provision for income taxes

230

   

123

   

87

%

Earnings from continuing operations

293

   

234

   

25

%

           

Earnings from discontinued operations, net of tax

2

   

   

N.M.

 

Net earnings

$

295

   

$

234

   

26

%

           

Basic earnings per common share:

         

Continuing operations

$

0.89

   

$

0.69

   

29

%

Discontinued operations

   

   

N.M.

 

Net basic earnings per common share

$

0.89

   

$

0.69

   

29

%

           

Diluted earnings per common share:

         

Continuing operations

$

0.88

   

$

0.68

   

29

%

Discontinued operations

   

   

N.M.

 

Net diluted earnings per common share

$

0.88

   

$

0.68

   

29

%

           

Weighted-average number of common shares outstanding:

         

Basic

330

   

339

     

Diluted

333

   

343

     

 

     

Schedule 2

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

       
 

Fiscal Year

   

(in millions, except per common share amounts)

2015

 

2014

 

% Change

 

(Unaudited)

       

Revenue

$

102,531

   

$

91,084

   

13

%

Cost of products sold

96,819

   

85,923

   

13

%

Gross margin

5,712

   

5,161

   

11

%

           

Operating expenses:

         

Distribution, selling, general and administrative expenses

3,240

   

3,028

   

7

%

Restructuring and employee severance

44

   

31

   

N.M.

 

Amortization and other acquisition-related costs

281

   

223

   

N.M.

 

Impairments and (gain)/loss on disposal of assets

(19)

   

15

   

N.M.

 

Litigation (recoveries)/charges, net

5

   

(21)

   

N.M.

 

Operating earnings

2,161

   

1,885

   

15

%

           

Other income, net

(7)

   

(46)

   

N.M.

 

Interest expense, net

141

   

133

   

6

%

Loss on extinguishment of debt

60

   

   

N.M.

 

Earnings before income taxes and discontinued operations

1,967

   

1,798

   

9

%

           

Provision for income taxes

755

   

635

   

19

%

Earnings from continuing operations

1,212

   

1,163

   

4

%

           

Earnings from discontinued operations, net of tax

3

   

3

   

N.M.

 

Net earnings

$

1,215

   

$

1,166

   

4

%

           

Basic earnings per common share:

         

Continuing operations

$

3.65

   

$

3.41

   

7

%

Discontinued operations

0.01

   

0.01

   

N.M.

 

Net basic earnings per common share

$

3.66

   

$

3.42

   

7

%

           

Diluted earnings per common share:

         

Continuing operations

$

3.61

   

$

3.37

   

7

%

Discontinued operations

0.01

   

0.01

   

N.M.

 

Net diluted earnings per common share

$

3.62

   

$

3.38

   

7

%

           

Weighted-average number of common shares outstanding:

         

Basic

332

   

341

     

Diluted

335

   

345

     

 

     

Schedule 3

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

       

(in millions)

June 30,
 2015

 

June 30,
 2014

 

(Unaudited)

   

Assets

     

Current assets:

     

Cash and equivalents

$

4,616

   

$

2,865

 

Trade receivables, net

6,523

   

5,380

 

Inventories, net

9,211

   

8,266

 

Prepaid expenses and other

1,402

   

1,428

 

Total current assets

21,752

   

17,939

 
       

Property and equipment, net

1,506

   

1,459

 

Goodwill and other intangibles, net

6,018

   

5,870

 

Other assets

866

   

765

 

Total assets

$

30,142

   

$

26,033

 
       

Liabilities and Shareholders' Equity

     

Current liabilities:

     

Accounts payable

$

14,368

   

$

12,149

 

Current portion of long-term obligations and other short-term borrowings

281

   

801

 

Other accrued liabilities

2,594

   

2,165

 

Total current liabilities

17,243

   

15,115

 
       

Long-term obligations, less current portion

5,211

   

3,171

 

Deferred income taxes and other liabilities

1,432

   

1,346

 

Total shareholders' equity

6,256

   

6,401

 

Total liabilities and shareholders' equity

$

30,142

   

$

26,033

 

 

     

Schedule 4

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

       
 

Fourth Quarter

 

Fiscal Year

(in millions)

2015

 

2014

 

2015

 

2014

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

   

Cash flows from operating activities:

             

Net earnings

$

295

   

$

234

   

$

1,215

   

$

1,166

 

Earnings from discontinued operations, net of tax

(2)

   

   

(3)

   

(3)

 

Earnings from continuing operations

293

   

234

   

1,212

   

1,163

 
               

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:

             

Depreciation and amortization

115

   

115

   

451

   

459

 

Loss on extinguishment of debt

   

   

60

   

 

Gain on sale of other investments

   

   

(5)

   

(32)

 

Impairments and (gain)/loss on disposal of assets, net

   

4

   

(19)

   

15

 

Share-based compensation

30

   

24

   

110

   

96

 

Provision for deferred income taxes

219

   

26

   

219

   

26

 

Provision for bad debts

10

   

11

   

52

   

42

 

Change in fair value of contingent consideration obligation

8

   

   

8

   

 

Change in operating assets and liabilities, net of effects from acquisitions:

             

Decrease/(increase) in trade receivables

(152)

   

(548)

   

(870)

   

925

 

Decrease/(increase) in inventories

71

   

(208)

   

(779)

   

142

 

Increase/(decrease) in accounts payable

291

   

1,196

   

1,948

   

(196)

 

Other accrued liabilities and operating items, net

(17)

   

(138)

   

153

   

(116)

 

Net cash provided by operating activities

868

   

716

   

2,540

   

2,524

 
               

Cash flows from investing activities:

             

Acquisition of subsidiaries, net of cash acquired

(184)

   

(351)

   

(503)

   

(519)

 

Additions to property and equipment

(161)

   

(111)

   

(300)

   

(249)

 

Purchase of available-for-sale securities and other investments

(208)

   

(102)

   

(342)

   

(129)

 

Proceeds from sale of available-for-sale securities and other investments

77

   

   

206

   

47

 

Proceeds from maturities of available-for-sale securities

13

   

   

37

   

 

Proceeds from divestitures and disposal of held for sale assets

   

   

53

   

 

Net cash used in investing activities

(463)

   

(564)

   

(849)

   

(850)

 
               

Cash flows from financing activities:

             

Payment of contingent consideration obligation

(4)

   

   

(7)

   

 

Net change in short-term borrowings

(3)

   

49

   

(12)

   

114

 

Reduction of long-term obligations

   

(1)

   

(1,221)

   

(2)

 

Proceeds from long-term obligations, net of issuance costs

1,490

   

   

2,672

   

 

Net proceeds from issuance of common shares

13

   

8

   

72

   

227

 

Tax proceeds/(disbursements) from share-based compensation

(4)

   

3

   

52

   

39

 

Dividends on common shares

(114)

   

(103)

   

(460)

   

(415)

 

Purchase of treasury shares

(350)

   

(284)

   

(1,036)

   

(673)

 

Net cash provided by/(used in) financing activities

1,028

   

(328)

   

60

   

(710)

 
               

Net increase/(decrease) in cash and equivalents

1,433

   

(176)

   

1,751

   

964

 

Cash and equivalents at beginning of period

3,183

   

3,041

   

2,865

   

1,901

 

Cash and equivalents at end of period

$

4,616

   

$

2,865

   

$

4,616

   

$

2,865

 

 

 

     

Schedule 5

Cardinal Health, Inc. and Subsidiaries

Total Company Business Analysis

       
     

Non-GAAP

 

Fourth Quarter

 

Fourth Quarter

(in millions)

2015

 

2014

 

2015

 

2014

Revenue

             

Amount

$

27,547

   

$

22,894

         

Growth rate

20

%

 

(10)

%

       
               

Operating earnings

             

Amount

$

558

   

$

387

   

$

611

   

$

461

 

Growth rate

44

%

 

N.M.

   

33

%

 

(2)

%

               

Earnings from continuing operations

             

Amount

$

293

   

$

234

   

$

333

   

$

284

 

Growth rate

25

%

 

N.M.

   

17

%

 

4

%

               

Return on equity

18.7

%

 

14.5

%

 

21.3

%

 

17.6

%

               

Effective tax rate from continuing operations

44.1

%

 

34.4

%

 

42.2

%

 

34.2

%

               

Debt to total capital

47

%

 

38

%

       

Net debt to total capital

       

12

%

 

15

%

       
       
     

Non-GAAP

 

Fiscal Year

 

Fiscal Year

(in millions)

2015

 

2014

 

2015

 

2014

Revenue

             

Amount

$

102,531

   

$

91,084

         

Growth rate1

13

%

 

(10)

%

       
               

Operating earnings

             

Amount

$

2,161

   

$

1,885

   

$

2,472

   

$

2,133

 

Growth rate

15

%

 

89

%

 

16

%

 

4

%

               

Earnings from continuing operations

             

Amount

$

1,212

   

$

1,163

   

$

1,469

   

$

1,324

 

Growth rate

4

%

 

247

%

 

11

%

 

3

%

               

Return on equity

19.4

%

 

18.3

%

 

23.4

%

 

20.9

%

               

Effective tax rate from continuing operations

38.4

%

 

35.3

%

 

37.2

%

 

35.3

%

 

1       Revenue from Walgreens was $3.3 billion for the fiscal year ended June 30, 2014.  Excluding the impact of the Walgreens contract expiration, the fiscal 2015 revenue growth rate would have been 17 percent.

 

Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.

 

 

 

 

 

       

Schedule 6

Cardinal Health, Inc. and Subsidiaries

Segment Business Analysis

         
 

Fourth Quarter

   

Fourth Quarter

(in millions)

2015

 

2014

 

(in millions)

2015

 

2014

Pharmaceutical

       

Medical

     
                 

Revenue

       

Revenue

     

Amount

$

24,676

   

$

20,092

   

Amount

$

2,855

   

$

2,794

 

Growth rate

23

%

 

(12)

%

 

Growth rate

2

%

 

4

%

                 

Segment profit

       

Segment profit

     

Amount

$

535

   

$

377

   

Amount

$

103

   

$

96

 

Growth rate

42

%

 

(5)

%

 

Growth rate

7

%

 

(8)

%

Segment profit margin

2.17

%

 

1.88

%

 

Segment profit margin

3.59

%

 

3.43

%

 

Refer to definitions for an explanation of calculations.

 

Total consolidated revenue for the three months ended June 30, 2015 was $27,547 million, which included total segment revenue of $27,531 million and Corporate revenue of $16 million. Total consolidated revenue for the three months ended June 30, 2014 was $22,894 million, which included total segment revenue of $22,886 million and Corporate revenue of $8 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 June 30, 2015 were $558 million, which included total segment profit of $638 million and Corporate costs of $(80) million. Total consolidated operating earnings for the three months ended June 30, 2014 were $387 million, which included total segment profit of $473 million and Corporate costs of $(86) million. Corporate includes, among other things, 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

Segment Business Analysis

         
 

Fiscal Year

   

Fiscal Year

(in millions)

2015

 

2014

 

(in millions)

2015

 

2014

Pharmaceutical

       

Medical

     
                 

Revenue

       

Revenue

     

Amount

$

91,116

   

$

80,110

   

Amount

$

11,395

   

$

10,962

 

Growth rate1

14

%

 

(12)

%

 

Growth rate

4

%

 

9

%

                 

Segment profit

       

Segment profit

     

Amount

$

2,094

   

$

1,745

   

Amount

$

433

   

$

444

 

Growth rate

20

%

 

1

%

 

Growth rate

(3)

%

 

19

%

Segment profit margin

2.30

%

 

2.18

%

 

Segment profit margin

3.80

%

 

4.05

%

 

1       Revenue from Walgreens was $3.3 billion for the fiscal year ended June 30, 2014.  Excluding the impact of the Walgreens contract expiration,
         the fiscal 2015 Pharmaceutical segment revenue growth rate would have been 19 percent.

 

Refer to definitions for an explanation of calculations.

 

Total consolidated revenue for the fiscal year ended June 30, 2015 was $102,531 million, which included total segment revenue of $102,511 million and Corporate revenue of $20 million. Total consolidated revenue for the fiscal year ended June 30, 2014 was $91,084 million, which included total segment revenue of $91,072 million and Corporate revenue of $12 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 fiscal year ended June 30, 2015 were $2,161 million, which included total segment profit of $2,527 million and Corporate costs of $(366) million. Total consolidated operating earnings for the fiscal year ended June 30, 2014 were $1,885 million, which included total segment profit of $2,189 million and Corporate costs of $(304) million. Corporate includes, among other things, 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 8

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation

   
 

Fourth Quarter 2015

   

Operating

Earnings Before

Provision

Earnings

Earnings from

Diluted EPS

Diluted EPS

   

Earnings

Income Taxes

for

from

Continuing

from

from Continuing

(in millions, except per common share amounts)

Operating

Growth

and Discontinued

Income

Continuing

Operations

Continuing

Operations

Earnings

Rate

Operations

Taxes

Operations

Growth Rate

Operations

Growth Rate

GAAP

$

558

 

44

%

$

523

 

$

230

 

$

293

 

25

%

$

0.88

 

29

%

Restructuring and employee severance

11

   

11

 

4

 

7

   

0.02

   

Amortization and other acquisition-related costs

91

   

91

 

31

 

60

   

0.18

   

Impairments and (gain)/loss on disposal of assets

   

 

 

   

   

Litigation (recoveries)/charges, net

(49)

   

(49)

 

(22)

 

(27)

   

(0.08)

   

Loss on extinguishment of debt

   

 

 

   

   

Non-GAAP

$

611

 

33

%

$

577

 

$

243

 

$

333

 

17

%

$

1.00

 

20

%

                 
 

Fourth Quarter 2014

GAAP

$

387

 

N.M.

 

$

357

 

$

123

 

$

234

 

N.M.

 

$

0.68

 

N.M.

 

Restructuring and employee severance

6

   

6

 

2

 

4

   

0.01

   

Amortization and other acquisition-related costs

63

   

63

 

22

 

41

   

0.12

   

Impairments and loss on disposal of assets

4

   

4

 

1

 

3

   

0.01

   

Litigation (recoveries)/charges, net

1

   

1

 

 

1

   

   

Loss on extinguishment of debt

   

 

 

   

   

Non-GAAP

$

461

 

(2)

%

$

432

 

$

148

 

$

284

 

4

%

$

0.83

 

5

%

   
 

Fiscal Year 2015

   

Operating

Earnings Before

Provision

Earnings

Earnings from

Diluted EPS

Diluted EPS

   

Earnings

Income Taxes

for

from

Continuing

from

from Continuing

(in millions, except per common share amounts)

Operating

Growth

and Discontinued

Income

Continuing

Operations

Continuing

Operations

Earnings

Rate

Operations

Taxes

Operations

Growth Rate

Operations

Growth Rate

GAAP

$

2,161

 

15

%

$

1,967

 

$

755

 

$

1,212

 

4

%

$

3.61

 

7

%

Restructuring and employee severance

44

   

44

 

15

 

29

   

0.09

   

Amortization and other acquisition-related costs

281

   

281

 

100

 

181

   

0.54

   

Impairments and (gain)/loss on disposal of assets

(19)

   

(19)

 

(10)

 

(9)

   

(0.03)

   

Litigation (recoveries)/charges, net

5

   

5

 

(14)

 

19

   

0.06

   

Loss on extinguishment of debt

   

60

 

23

 

37

   

0.11

   

Non-GAAP

$

2,472

 

16

%

$

2,339

 

$

870

 

$

1,469

 

11

%

$

4.38

 

14

%

                 
 

Fiscal Year 2014

GAAP

$

1,885

 

89

%

$

1,798

 

$

635

 

$

1,163

 

247

%

$

3.37

 

247

%

Restructuring and employee severance

31

   

31

 

11

 

20

   

0.06

   

Amortization and other acquisition-related costs

223

   

223

 

79

 

144

   

0.42

   

Impairments and loss on disposal of assets

15

   

15

 

5

 

10

   

0.03

   

Litigation (recoveries)/charges, net

(21)

   

(21)

 

(8)

 

(13)

   

(0.04)

   

Loss on extinguishment of debt

   

 

 

   

   

Non-GAAP

$

2,133

 

4

%

$

2,047

 

$

722

 

$

1,324

 

3

%

$

3.84

 

3

%

 

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.

 

 

 

 

 

     

Schedule 9

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation

       
 

Fourth Quarter

   

(in millions)

2015

     

2014

   

GAAP return on equity

18.7

%

     

14.5

%

   
               

Non-GAAP return on equity

             

Net earnings

$

295

       

$

234

     

Restructuring and employee severance, net of tax, in continuing operations

7

       

4

     

Amortization and other acquisition-related costs, net of tax, in continuing operations

60

       

41

     

Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations

       

3

     

Litigation (recoveries)/charges, net, net of tax, in continuing operations

(27)

       

1

     

Adjusted net earnings

$

335

       

$

283

     

Annualized

$

1,340

       

$

1,132

     
               
 

Fourth

 

Third

 

Fourth

 

Third

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

2015

 

2015

 

2014

 

2014

Total shareholders' equity

$

6,256

   

$

6,369

   

$

6,401

   

$

6,532

 

Divided by average shareholders' equity

$

6,312

       

$

6,466

     

Non-GAAP return on equity

21.3

%

     

17.6

%

   
 

We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

                               

 

 

 

                 

Schedule 10

 

Cardinal Health, Inc. and Subsidiaries

               
 

GAAP / Non-GAAP Reconciliation

               
                   
 

Fiscal Year

               

(in millions)

2015

                 

2014

               

GAAP return on equity

19.4

%

                 

18.3

%

               
                                       

Non-GAAP return on equity

                                     

Net earnings

$

1,215

                   

$

1,166

                 

Restructuring and employee severance, net of tax, in continuing operations

29

                   

20

                 

Amortization and other acquisition-related costs, net of tax, in continuing operations

181

                   

144

                 

Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations

(9)

                   

10

                 

Litigation (recoveries)/charges, net, net of tax, in continuing operations

19

                   

(13)

                 

Loss on extinguishment of debt, net of tax, in continuing operations

37

                   

                 

Adjusted net earnings

$

1,472

                   

$

1,327

                 
                                       
 

Fourth

 

Third

 

Second

 

First

 

Fourth

 

Fourth

 

Third

 

Second

 

First

 

Fourth

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

Quarter

 

2015

 

2015

 

2015

 

2015

 

2014

 

2014

 

2014

 

2014

 

2014

 

2013

Total shareholders' equity

$

6,256

   

$

6,369

   

$

6,100

   

$

6,256

   

$

6,401

   

$

6,401

   

$

6,532

   

$

6,589

   

$

6,297

   

$

5,975

 

Divided by average shareholders' equity

$

6,276

                   

$

6,359

                 

Non-GAAP return on equity

23.4

%

                 

20.9

%

               
 

We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

                                                                               

 

 

     

Schedule 11

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation

       
 

Fourth Quarter

 

Fiscal Year

(in millions)

2015

 

2014

 

2015

 

2014

GAAP effective tax rate from continuing operations

44.1

%

 

34.4

%

 

38.4

%

 

35.3

%

               

Non-GAAP effective tax rate from continuing operations

             

Earnings before income taxes and discontinued operations

$

523

   

$

357

   

$

1,967

   

$

1,798

 

Restructuring and employee severance

11

   

6

   

44

   

31

 

Amortization and other acquisition-related costs

91

   

63

   

281

   

223

 

Impairments and (gain)/loss on disposal of assets

   

4

   

(19)

   

15

 

Litigation (recoveries)/charges, net

(49)

   

1

   

5

   

(21)

 

Loss on extinguishment of debt

   

   

60

   

 

Adjusted earnings before income taxes and discontinued operations

$

577

   

$

432

   

$

2,339

   

$

2,047

 
               

Provision for income taxes

$

230

   

$

123

   

$

755

   

$

635

 

Restructuring and employee severance tax benefit

4

   

2

   

15

   

11

 

Amortization and other acquisition-related costs tax benefit

31

   

22

   

100

   

79

 

Impairments and (gain)/loss on disposal of assets tax benefit/(expense)

   

1

   

(10)

   

5

 

Litigation (recoveries)/charges, net tax expense

(22)

   

   

(14)

   

(8)

 

Loss on extinguishment of debt tax benefit

   

   

23

   

 

Adjusted provision for income taxes

$

243

   

$

148

   

$

870

   

$

722

 
               

Non-GAAP effective tax rate from continuing operations

42.2

%

 

34.2

%

 

37.2

%

 

35.3

%

               
 

Fourth Quarter

       
 

2015

 

2014

       

Debt to total capital

47

%

 

38

%

       
               

Net debt to capital

             

Current portion of long-term obligations and other short-term borrowings

$

281

   

$

801

         

Long-term obligations, less current portion

5,211

   

3,171

         

Debt

$

5,492

   

$

3,972

         

Cash and equivalents

(4,616)

   

(2,865)

         

Net debt

$

876

   

$

1,107

         

Total shareholders' equity

6,256

   

6,401

         

Capital

$

7,132

   

$

7,508

         

Net debt to capital

12

%

 

15

%

       

 

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.

   

Forward-Looking Non-GAAP Financial Measures

We present non-GAAP earnings from continuing operations and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures, including per share calculations) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from continuing operations and effective tax rate from continuing operations. We are unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because we cannot reliably forecast restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, LIFO charges/(credits) and loss on extinguishment of debt, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact our future financial results.

   

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 general, the measures exclude items and charges that (i) management does not believe reflect Cardinal Health, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company's performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.

   

In fiscal 2015, the Company began excluding last-in, first-out ("LIFO") inventory charges/(credits)5 from its non-GAAP earnings, for consistency with the presentation by some of its peers. The Company did not record any LIFO charges or credits in fiscal 2015 or 2014, respectively.  In the second quarter of fiscal 2015, the Company excluded the loss on extinguishment of debt6 related to the early redemption of debt that occurred in December 2014 from its non-GAAP earnings.

   

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company's performance to that of its competitors.  However, the non-GAAP financial measures used by the Company 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 the Company 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 above should be carefully evaluated.

   

Definitions

Debt: long-term obligations plus short-term borrowings.

   

Debt to Total Capital: debt divided by (debt plus total shareholders' equity).

   

Net Debt: a Non-GAAP measure defined as debt minus (cash and equivalents).

   

Net Debt to Capital: a Non-GAAP measure defined as net debt divided by (net debt plus total shareholders' equity).

   

Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding.

   

Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) amortization and other acquisition-related costs2, (3) impairments and (gain)/loss on disposal of assets3, (4) litigation (recoveries)/charges, net4, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax.

   

Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt) divided by (earnings before income taxes and discontinued operations adjusted for the same six items).

   

Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net and (5) LIFO charges/(credits).

   

Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax) divided by average shareholders' equity.

   

Return on Equity: annualized current period net earnings divided by average shareholders' equity.

   

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.

   
   

1

Programs by which the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including realignment of the management structure of a business unit in response to changing market conditions).

   

2

Costs that consist primarily of amortization of acquisition-related intangibles assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations.

   

3

Asset impairments and (gains)/losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and (gain)/loss on disposal of assets within the consolidated statements of earnings.

   

4

Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.

   

5

The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market.  These charges or credits are included in cost of products sold, and represent changes in the Company's LIFO inventory reserve.

   

6

Charges related to the make-whole premium on the redemption of notes.

 

SOURCE Cardinal Health

For further information: Media: Debbie Mitchell, (614) 757-6225, debbie.mitchell@cardinalhealth.com; or Investors: Sally Curley, (614) 757-7115, sally.curley@cardinalhealth.com

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