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Cardinal Health Reports Strong Third-quarter Results For Fiscal Year 2016
- 21 percent increase in revenue to $30.7 billion
- 20 percent increase in non-GAAP1 operating earnings to $788 million
- 20 percent increase in non-GAAP diluted earnings per share to $1.43
- Revised range of $5.17 to $5.27 for fiscal 2016 non-GAAP diluted earnings per share

DUBLIN, Ohio, April 28, 2016 /PRNewswire/ -- Cardinal Health today reported third-quarter results for fiscal year 2016, including a 21 percent increase in revenue to $30.7 billion and a 20 percent increase in non-GAAP operating earnings to $788 million. Non-GAAP diluted earnings per share (EPS) increased 20 percent to $1.43. On a GAAP basis, operating earnings increased 11 percent to $656 million, and diluted EPS increased 7 percent to $1.17.

"We had a strong financial and operational performance in our fiscal third quarter. At the same time, we continued to enhance and grow enterprise-wide service and product lines, which are important to our customers and address some of health care's most difficult challenges," said George Barrett, chairman and chief executive officer of Cardinal Health. "We delivered double-digit growth in revenue and profit in both our Pharmaceutical and Medical reporting segments and had very solid performance across our lines of business."

The company tightened the range for its fiscal 2016 non-GAAP diluted earnings per share guidance to $5.17 to $5.27 from the prior range of $5.15 to $5.35.

Q3 FY16 SUMMARY


Q3 FY16

Q3 FY15

Y/Y

Revenue

$30.7 billion

$25.4 billion

21%





Operating Earnings

$656 million

$ 591 million

11%

Non-GAAP Operating Earnings

$788 million

$657 million

20%





Net Earnings attributable to
Cardinal Health, Inc.

$386 million

$365 million

6%

Non-GAAP Net Earnings
attributable to Cardinal
Health, Inc.

$472 million

$396 million

 

19%





Diluted EPS attributable to
Cardinal Health, Inc.

$1.17

$1.09

7%

Non-GAAP Diluted EPS
attributable to Cardinal Health,
Inc.

$1.43

$1.19

20%

 

SEGMENT RESULTS

Pharmaceutical segment

Third-quarter revenue for the Pharmaceutical segment increased 22 percent to $27.5 billion due to growth from new and existing customers as well as acquisitions.

Strong performance from both acquisitions and new and existing customers significantly contributed to segment profit growth of 16 percent to $660 million.


Q3 FY16

Q3 FY15

Y/Y

Revenue

$27.5 billion

$22.6 billion

22%

Segment Profit

$660 million

$567 million

16%

 

Medical segment

Third-quarter revenue for the Medical segment increased 13 percent to $3.1 billion due to the net contribution from acquisitions as well as solid growth from existing businesses.

Segment profit increased 26 percent to $128 million due to the contribution from acquisitions, net of divestitures, and from Cardinal Health-branded products. Segment profit includes the $21 million negative impact of the Cordis-related inventory fair value step-up.


Q3 FY16

Q3 FY15

Y/Y

Revenue

$3.1 billion

$2.8 billion

13%

Segment Profit

$128 million

$102 million

26%

 

ADDITIONAL THIRD-QUARTER AND RECENT HIGHLIGHTS 

  • Launched Cardinal Health MedSync Advantage™, a custom-built medication synchronization program to help community pharmacists improve medication adherence and patient outcomes and increase pharmacy efficiency
  • Announced winners of the sixth annual Generation Rx awards, recognizing student pharmacists from across the country and a clinical professor of pharmacy for their ongoing efforts to help prevent prescription medication misuse

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss third-quarter results. To access the call and corresponding slide presentation, go to ir.cardinalhealth.com. Alternatively, participants can call 913.312.1411 and use passcode 4332927.

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 a webcast replay will be available on the Cardinal Health website at ir.cardinalhealth.com.

UPCOMING WEBCASTED INVESTOR EVENTS

  • William Blair's 36th Annual Growth Stock Conference on June 15 at 8 a.m. Central in Chicago

At the event, Cardinal Health executives will discuss the company's diverse products and services, company performance and strategies for continued growth. To access more details and a live webcast of this event, go to ir.cardinalhealth.com.

About Cardinal Health

Cardinal Health, Inc. (NYSE: CAH), a global health services and products company, brings scaled solutions that help our customers thrive in a changing world. We improve the cost-effectiveness of healthcare through solutions that improve the efficiency of the supply chain; optimize the process and performance of healthcare; provide clinically proven, daily use medical products and pharmaceuticals; and connect patients, providers, payers, pharmacists and manufacturers for seamless care coordination and better patient management. Backed by nearly 100 years of experience, we rank among the top 50 on the Fortune 500 and among the Fortune Global 100.  We support our partners with more than 37,000 employees in nearly 60 countries worldwide. For more information, visit cardinalhealth.com and @CardinalHealth on Twitter.

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 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.

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.

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 frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the ability to continue to achieve and maintain the benefits from the generic sourcing venture with CVS Health and from the acquisitions of Cordis and The Harvard Drug Group; 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 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 April 28, 2016. 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)



Third Quarter



(in millions, except per common share amounts)

2016


2015


% Change

Revenue

$

30,662



$

25,375



21

%

Cost of products sold

28,973



23,916



21

%

Gross margin

1,689



1,459



16

%







Operating expenses:






Distribution, selling, general, and administrative expenses

914



803



14

%

Restructuring and employee severance

6



7



N.M.


Amortization and other acquisition-related costs

108



77



N.M.


Impairments and (gain)/loss on disposal of assets



(1)



N.M.


Litigation (recoveries)/charges, net

5



(18)



N.M.


Operating earnings

656



591



11

%







Other (income)/expense, net



(2)



N.M.


Interest expense, net

44



35



28

%

Earnings before income taxes

612



558



10

%







Provision for income taxes

226



193



17

%

Net earnings

386



365



6

%







Less: Net earnings attributable to noncontrolling interests





N.M.


Net earnings attributable to Cardinal Health, Inc.

$

386



$

365



6

%







Earnings per common share attributable to Cardinal Health, Inc.:






Basic

$

1.18



$

1.10



7

%

Diluted

1.17



1.09



7

%







Weighted-average number of common shares outstanding:






Basic

328



330




Diluted

331



334




 

 

 


Schedule 2


Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)



Year-to-Date



(in millions, except per common share amounts)

2016


2015


% Change

Revenue

$

90,162



$

74,983



20

%

Cost of products sold

85,285



70,729



21

%

Gross margin

4,877



4,254



15

%







Operating expenses:






Distribution, selling, general, and administrative expenses

2,678



2,393



12

%

Restructuring and employee severance

19



33



N.M.


Amortization and other acquisition-related costs

327



190



N.M.


Impairments and (gain)/loss on disposal of assets

17



(19)



N.M.


Litigation (recoveries)/charges, net

(3)



54



N.M.


Operating earnings

1,839



1,603



15

%







Other (income)/expense, net

5



(6)



N.M.


Interest expense, net

134



105



28

%

Loss on extinguishment of debt



60



N.M.


Earnings before income taxes

1,700



1,444



18

%







Provision for income taxes

604



524



15

%

Net earnings

1,096



920



19

%







Less: Net earnings attributable to noncontrolling interests

(1)





N.M.


Net earnings attributable to Cardinal Health, Inc.

$

1,095



$

920



19

%







Earnings per common share attributable to Cardinal Health, Inc.:






Basic

$

3.33



$

2.77



20

%

Diluted

3.30



2.74



20

%







Weighted-average number of common shares outstanding:






Basic

328



332




Diluted

331



336




 

 

 


Schedule 3


Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)


(in millions)

March 31,
 2016


June 30,
 2015





Assets




Current assets:




Cash and equivalents

$

2,598



$

4,616


Trade receivables, net

7,292



6,523


Inventories, net

10,910



9,211


Prepaid expenses and other

1,491



1,402


Total current assets

22,291



21,752






Property and equipment, net

1,683



1,506


Goodwill and other intangibles, net

9,150



6,018


Other assets

931



866


Total assets

$

34,055



$

30,142






Liabilities, Redeemable Noncontrolling Interests, and Shareholders' Equity




Current liabilities:




Accounts payable

$

17,340



$

14,368


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

351



281


Other accrued liabilities

1,694



2,594


Total current liabilities

19,385



17,243






Long-term obligations, less current portion

5,195



5,211


Deferred income taxes and other liabilities

2,628



1,432






Redeemable noncontrolling interests

117








Total Cardinal Health, Inc. shareholders' equity

6,713



6,256


Noncontrolling interests

17




Total shareholders' equity

6,730



6,256


Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$

34,055



$

30,142


 

 

 


Schedule 4


Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)



Third Quarter


Year-to-Date

(in millions)

2016


2015


2016


2015

Cash flows from operating activities:








Net earnings

$

386



$

365



$

1,096



$

920










Adjustments to reconcile net earnings to net cash provided by operating activities:








Depreciation and amortization

159



116



465



336


Loss on extinguishment of debt







60


Gain on sale of other investments







(5)


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



(1)



17



(19)


Share-based compensation

26



27



82



80


Provision for bad debts

16



16



51



42


Change in fair value of contingent consideration obligation

(2)





(16)




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








Increase in trade receivables

(328)



(427)



(721)



(718)


Decrease/(increase) in inventories

108



287



(1,457)



(850)


Increase in accounts payable

408



219



2,839



1,657


Other accrued liabilities and operating items, net

146



56



(26)



169


Net cash provided by operating activities

919



658



2,330



1,672










Cash flows from investing activities:








Acquisition of subsidiaries, net of cash acquired

(99)



(233)



(3,383)



(319)


Additions to property and equipment

(109)



(56)



(284)



(139)


Purchase of available-for-sale securities and other investments

(62)



(27)



(150)



(134)


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

42



22



99



129


Proceeds from maturities of available-for-sale securities

18



8



37



24


Proceeds from divestitures and disposal of held for sale assets







53


Net cash used in investing activities

(210)



(286)



(3,681)



(386)










Cash flows from financing activities:








Payment of contingent consideration obligation



(3)



(23)



(3)


Net change in short-term borrowings

(5)



9



34



(9)


Purchase of noncontrolling interests

(10)





(10)




Reduction of long-term obligations

(1)



(1)



(5)



(1,221)


Proceeds from long-term obligations, net of issuance costs







1,182


Net proceeds/(tax withholdings) from share-based compensation

4



24



(3)



59


Excess tax benefits from share-based compensation

1



14



33



56


Dividends on common shares

(127)



(113)



(386)



(346)


Purchase of treasury shares

(300)





(300)



(686)


Net cash used in financing activities

(438)



(70)



(660)



(968)










Effect of exchange rate changes on cash and equivalents

3





(7)












Net increase/(decrease) in cash and equivalents

274



302



(2,018)



318


Cash and equivalents at beginning of period

2,324



2,881



4,616



2,865


Cash and equivalents at end of period

$

2,598



$

3,183



$

2,598



$

3,183


 

 

 


Schedule 5


Cardinal Health, Inc. and Subsidiaries

Total Company Business Analysis





Non-GAAP


Third Quarter


Third Quarter

(in millions)

2016


2015


2016


2015

Revenue








Amount

$

30,662



$

25,375






Growth rate

21%



18%














Gross Margin








Amount1

$

1,689



$

1,459



$

1,702



$

1,459


Growth rate

16%



12%



17%



12%










Operating earnings








Amount

$

656



$

591



$

788



$

657


Growth rate

11%



16%



20%



17%










Net earnings attributable to Cardinal Health, Inc.








Amount

$

386



$

365



$

472



$

396


Growth rate

6%



16%



19%



13%










Return on equity

23%



23.4%



28.1%



25.4%










Effective tax rate

36.9%



34.6%



36.6%



36.5%










Debt to total capital

45%



39%






Net debt to capital





31%



11%













Non-GAAP


Year-to-Date


Year-to-Date

(in millions)

2016


2015


2016


2015

Revenue








Amount

$

90,162



$

74,983






Growth rate

20%



10%














Gross Margin








Amount1

$

4,877



$

4,254



$

4,929



$

4,254


Growth rate

15%



9%



16%



9%










Operating earnings








Amount

$

1,839



$

1,603



$

2,251



$

1,861


Growth rate

15%



7%



21%



11%










Net earnings attributable to Cardinal Health, Inc.








Amount

$

1,095



$

920



$

1,361



$

1,136


Growth rate

19%



(1)%



20%



9%










Return on equity

22.3%



19.5%



27.7%



24.1%










Effective tax rate

35.5%



36.3%



35.6%



35.6%




1     GAAP gross margin includes the negative impact of a $12 million LIFO charge in the third quarter of fiscal 2016 ($51 million year-to-date).


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



Third Quarter



Third Quarter

(in millions)

2016


2015


(in millions)

2016


2015

Pharmaceutical





Medical













Revenue





Revenue




Amount

$

27,527



$

22,605



Amount

$

3,138



$

2,774


Growth rate

22%



20%



Growth rate

13%



4%











Segment profit





Segment profit




Amount

$

660



$

567



Amount

$

128



$

102


Growth rate

16%



25%



Growth rate1

26%



(8)%


Segment profit margin

2.40%



2.51%



Segment profit margin

4.08%



3.66%




1    Segment profit includes a $21 million impact from the roll-out of the inventory fair value step up related to the Cordis acquisition for the three months ended March 31, 2016. Excluding the impact of the inventory fair value step up, Medical segment profit would have increased 47% for the three months ended March 31, 2016.


Refer to definitions for an explanation of calculations.


Total consolidated revenue for the three months ended March 31, 2016 was $30,662 million, which included total segment revenue of $30,665 million and Corporate revenue of $(3) million. Total consolidated revenue for the three months ended March 31, 2015 was $25,375 million, which included total segment revenue of $25,379 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 March 31, 2016 were $656 million, which included total segment profit of $788 million and Corporate costs of $(132) million. Total consolidated operating earnings for the three months ended March 31, 2015 were $591 million, which included total segment profit of $669 million and Corporate costs of $(78) 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

Segment Business Analysis



Year-to-Date



Year-to-Date

(in millions)

2016


2015


(in millions)

2016


2015

Pharmaceutical





Medical













Revenue





Revenue




Amount

$

80,954



$

66,440



Amount

$

9,220



$

8,540


Growth rate

22%



11%



Growth rate

8%



5%











Segment profit





Segment profit




Amount

$

1,945



$

1,559



Amount

$

335



$

330


Growth rate

25%



14%



Growth rate1

1%



(5)%


Segment profit margin

2.40%



2.35%



Segment profit margin

3.63%



3.86%




1    Segment profit includes a $43 million impact from the roll-out of the inventory fair value step up related to the Cordis acquisition for the nine months ended March 31, 2016. Excluding the impact of the inventory fair value step up, Medical segment profit growth would have been 14% for the nine months ended March 31, 2016.


Refer to definitions for an explanation of calculations.


Total consolidated revenue for the nine months ended March 31, 2016 was $90,162 million, which included total segment revenue of $90,174 million and Corporate revenue of $(12) million. Total consolidated revenue for the nine months ended March 31, 2015 was $74,983 million, which included total segment revenue of $74,980 million and Corporate revenue of $3 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 nine months ended March 31, 2016 were $1,839 million, which included total segment profit of $2,280 million and Corporate costs of $(441) million. Total consolidated operating earnings for the nine months ended March 31, 2015 were $1,603 million, which included total segment profit of $1,889 million and Corporate costs of $(286) 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 8


Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation










Net Earnings

Diluted

Diluted EPS



Gross


Operating

Earnings

Provision

Net Earnings

attributable

EPS

attributable



Margin


Earnings

Before

for

attributable

to Cardinal

attributable

to Cardinal


Gross

Growth

Operating

Growth

Income

Income

to Cardinal

Health, Inc.

to Cardinal

Health, Inc.

(in millions, except per common share amounts)

Margin

Rate

Earnings

Rate

Taxes

Taxes

Health, Inc.

Growth Rate

Health, Inc.

Growth Rate

Third Quarter 2016

GAAP

$

1,689


16%

$

656


11%

$

612


$

226


$

386


6%

$

1.17


7%

LIFO charges/(credits)

12



12



12


4


8



0.02



Restructuring and employee severance



6



6


2


4



0.01



Amortization and other acquisition-related costs



108



108


37


71



0.21



Impairments and (gain)/loss on disposal of assets











Litigation (recoveries)/charges, net



5



5


2


3



0.01



Non-GAAP

$

1,702


17%

$

788


20%

$

744


$

272


$

472


19%

$

1.43


20%













Third Quarter 2015

GAAP

$

1,459


12%

$

591


16%

$

558


$

193


$

365


16%

$

1.09


20%

Restructuring and employee severance



7



7


3


4



0.01



Amortization and other acquisition-related costs



77



77


29


48



0.15



Impairments and (gain)/loss on disposal of assets



(1)



(1)


(1)






Litigation (recoveries)/charges, net



(18)



(18)


3


(21)



(0.07)



Non-GAAP

$

1,459


12%

$

657


17%

$

624


$

228


$

396


13%

$

1.19


18%











Net Earnings

Diluted

Diluted EPS



Gross


Operating

Earnings

Provision

Net Earnings

attributable

EPS

attributable



Margin


Earnings

Before

for

attributable

to Cardinal

attributable

to Cardinal


Gross

Growth

Operating

Growth

Income

Income

to Cardinal

Health, Inc.

to Cardinal

Health, Inc.

(in millions, except per common share amounts)

Margin

Rate

Earnings

Rate

Taxes

Taxes

Health, Inc.

Growth Rate

Health, Inc.

Growth Rate

Year-to-Date 2016

GAAP

$

4,877


15%

$

1,839


15%

$

1,700


$

604


$

1,095


19%

$

3.30


20%

LIFO charges/(credits)

51



51



51


20


31



0.10



Restructuring and employee severance



19



19


7


12



0.04



Amortization and other acquisition-related costs



327



327


115


212



0.64



Impairments and (gain)/loss on disposal of assets



17



17


7


10



0.03



Litigation (recoveries)/charges, net



(3)



(3)


(3)






Non-GAAP

$

4,929


16%

$

2,251


21%

$

2,112


$

751


$

1,361


20%

$

4.10


21%













Year-to-Date 2015

GAAP

$

4,254


9%

$

1,603


7%

$

1,444


$

524


$

920


(1)%

$

2.74


2%

Restructuring and employee severance



33



33


12


21



0.06



Amortization and other acquisition-related costs



190



190


69


121



0.36



Impairments and (gain)/loss on disposal of assets



(19)



(19)


(10)


(9)



(0.03)



Litigation (recoveries)/charges, net



54



54


8


46



0.14



Loss on extinguishment of debt





60


23


37



0.11



Non-GAAP

$

4,254


9%

$

1,861


11%

$

1,763


$

627


$

1,136


9%

$

3.38


12%


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



Third Quarter



(in millions)

2016




2015



GAAP return on equity

23%





23.4%












Non-GAAP return on equity








Net earnings attributable to Cardinal Health, Inc.

$

386





$

365




LIFO charges/(credits), net of tax

8








Restructuring and employee severance, net of tax

4





4




Amortization and other acquisition-related costs, net of tax

71





48




Litigation (recoveries)/charges, net, net of tax

3





(21)




Adjusted net earnings attributable to Cardinal Health, Inc.

$

472





$

396




Annualized

$

1,889





$

1,584













Third


Second


Third


Second


Quarter


Quarter


Quarter


Quarter


2016


2016


2015


2015

Total Cardinal Health, Inc. shareholders' equity

$

6,713



$

6,711



$

6,369



$

6,100


Divided by average Cardinal Health, Inc. shareholders' equity

$

6,712





$

6,235




Non-GAAP return on equity

28.1%





25.4%





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 10


Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation



Year-to-Date







(in millions)

2016








2015







GAAP return on equity

22.3%









19.5%
























Non-GAAP return on equity
















Net earnings attributable to Cardinal Health, Inc.

$

1,095









$

920








LIFO charges/(credits), net of tax

31
















Restructuring and employee severance, net of tax

12









21








Amortization and other acquisition-related costs, net of tax

212









121








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

10









(9)








Litigation (recoveries)/charges, net, net of tax









46








Loss on extinguishment of debt, net of tax









37








Adjusted net earnings attributable to Cardinal Health, Inc.

$

1,361









$

1,136








Annualized

$

1,815









$

1,515

























Third


Second


First


Fourth


Third


Second


First


Fourth


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


2016


2016


2016


2015


2015


2015


2015


2014

Total Cardinal Health, Inc. shareholders' equity

$

6,713



$

6,711



$

6,505



$

6,256



$

6,369



$

6,100



$

6,256



$

6,401


Divided by average Cardinal Health, Inc. shareholders' equity

$

6,546









$

6,281








Non-GAAP return on equity

27.7%









24.1%









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.

 

 

 

Schedule 11


Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation



Third Quarter


Year-to-Date

(in millions)

2016


2015


2016


2015

GAAP effective tax rate

36.9

%


34.6

%


35.5

%


36.3

%









Non-GAAP effective tax rate








Earnings before income taxes

$

612



$

558



$

1,700



$

1,444


LIFO charges/(credits)

12





51




Restructuring and employee severance

6



7



19



33


Amortization and other acquisition-related costs

108



77



327



190


Impairments and (gain)/loss on disposal of assets



(1)



17



(19)


Litigation (recoveries)/charges, net

5



(18)



(3)



54


Loss on extinguishment of debt







60


Adjusted earnings before income taxes

$

744



$

624



$

2,112



$

1,763










Provision for income taxes

$

226



$

193



$

604



$

524


LIFO charges/(credits) tax benefit

4





20




Restructuring and employee severance tax benefit

2



3



7



12


Amortization and other acquisition-related costs tax benefit

37



29



115



69


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



(1)



7



(10)


Litigation (recoveries)/charges, net tax benefit/(expense)

2



3



(3)



8


Loss on extinguishment of debt tax benefit







23


Adjusted provision for income taxes

$

272



$

228



$

751



$

627










Non-GAAP effective tax rate

36.6

%


36.5

%


35.6

%


35.6

%










Third Quarter






2016


2015





Debt to total capital

45

%


39

%













Net debt to capital








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

$

351



$

283






Long-term obligations, less current portion

5,195



3,720






Debt

$

5,546



$

4,003






Cash and equivalents

(2,598)



(3,183)






Net debt

$

2,948



$

820






Total Cardinal Health, Inc. shareholders' equity

6,713



6,369






Capital

$

9,661



$

7,189






Net debt to capital

31

%


11

%






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 net earnings attributable to Cardinal Health, Inc. and non-GAAP effective tax rate (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 net earnings attributable to Cardinal Health, Inc. and effective tax rate. 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 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 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.

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 Cardinal Health, Inc. 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 Cardinal Health, Inc. shareholders' equity).

Non-GAAP Diluted EPS attributable to Cardinal Health, Inc. or "Non-GAAP Diluted EPS" or "Non-GAAP Diluted Earnings Per Share": non-GAAP net earnings attributable to Cardinal Health, Inc. divided by diluted weighted-average shares outstanding.

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

Non-GAAP Effective Tax Rate: (provision for income taxes adjusted for (1) LIFO charges/(credits)1, (2) restructuring and employee severance2, (3) amortization and other acquisition-related costs3, (4) impairments and (gain)/loss on disposal of assets4, (5) litigation (recoveries)/charges, net5, and (6) loss on extinguishment of debt6) divided by (earnings before income taxes adjusted for the same six items).

Non-GAAP Gross Margin: Gross margin excluding LIFO charges/(credits).

Non-GAAP Net Earnings attributable to Cardinal Health, Inc. or "Non-GAAP Net Earnings": 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 Earnings from Continuing Operations: earnings from continuing operations 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 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 Return on Equity: (annualized current period 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) divided by average Cardinal Health, Inc. shareholders' equity.

Return on Equity: annualized current period net earnings attributable to Cardinal Health, Inc. divided by average Cardinal Health, Inc. 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    

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.



2     

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).



3      

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.



4       

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 condensed consolidated statements of earnings.



5        

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



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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