Investor Relations

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CAH 68.90 -2.52 -3.53% Volume: 1,743,144 12/7/16 10:57

Investor Relations

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Cardinal Health Reports Second-Quarter Results For Fiscal 2016

Feb 1, 2016

- 23 percent increase in revenue to $31.4 billion
- 14 percent increase in non-GAAP1 operating earnings to $726 million
- 8 percent increase in non-GAAP diluted earnings per share to $1.30
- Reaffirms fiscal 2016 non-GAAP diluted earnings per share guidance range of $5.15 to $5.35

DUBLIN, Ohio, Feb. 1, 2016 /PRNewswire/ -- Cardinal Health today reported fiscal year 2016 second-quarter results, with revenue of $31.4 billion, an increase of 23 percent, and non-GAAP operating earnings of $726 million, an increase of 14 percent. Non-GAAP diluted earnings per share (EPS) increased 8 percent to $1.30. On a GAAP basis, operating earnings increased 3 percent to $563 million, and diluted EPS increased 14 percent to $0.98.

"Our performance in the second quarter of our fiscal 2016 reflects our deep commitment to serving a health system experiencing powerful changes," said George Barrett, chairman and chief executive officer of Cardinal Health. "We achieved strong revenue and operating growth. Both of our reporting segments continue to demonstrate very solid fundamentals and growth in our base of customers. Our organization continues to demonstrate discipline in executing on our priorities while strategically positioning us for the future."

Barrett noted that the company was reaffirming its fiscal 2016 non-GAAP diluted earnings per share guidance of $5.15 to $5.35, representing an 18 to 22 percent growth rate compared to fiscal 2015.

Q2 FY16 SUMMARY

 


Q2 FY16

Q2 FY15

Y/Y

Revenue

$31.4 billion

$25.5 billion

23%





Operating Earnings

 

$563 million

 

$546 million

 

3%

Non-GAAP Operating Earnings

 

$726 million

 

$639 million

 

14%





Net Earnings attributable to Cardinal Health, Inc.

 

$326 million

 

$289 million

 

13%

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

 

$430 million

 

$400 million

 

7%





Diluted EPS attributable to Cardinal Health, Inc.

$0.98

$0.86

14%

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

 

$1.30

 

$1.20

 

8%

 

SEGMENT RESULTS

Pharmaceutical segment

Second-quarter revenue for the Pharmaceutical segment increased 25 percent to $28.3 billion.  

Segment profit for the quarter increased 16 percent to $627 million. The drivers for both segment revenue and profit were growth from existing and new customers as well as acquisitions.

 


Q2 FY16

Q2 FY15

Y/Y

Revenue

$28.3 billion

$22.6 billion

25%

Segment Profit

$627 million

$542 million

16%

 

Medical segment

Second-quarter revenue for the Medical segment increased 9 percent to $3.2 billion. This growth was primarily due to the net contribution from acquisitions and growth in the Cardinal Health at Home platform.

Segment profit declined 8 percent to $106 million. This includes the impact of the Cordis-related inventory fair value step-up. Excluding the step-up of $21 million, year-over-year Medical segment profit growth was 10 percent.

 


Q2 FY16

Q2 FY15

Y/Y

Revenue

$3.2 billion

$2.9 billion

9%

Segment Profit

$106 million

$115 million

(8)%

 

ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS 

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss second-quarter results. To access the call and corresponding slide presentation, go to ir.cardinalhealth.com.  Alternatively, participants can call 913.905.3226 and use passcode 852145.

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 audio replay will also be available until Feb. 8 by dialing 719.457.0820, passcode 852145.

UPCOMING WEBCASTED INVESTOR EVENTS

  • Leerink Partners Fifth Annual Global Healthcare Conference on Feb. 10 at 8:50 a.m. Eastern in New York

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
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. 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 more than 36,000 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 at ir.cardinalhealth.com. In addition, the website allows investors and other interested persons to sign up automatically to receive e-mail alerts when the company posts news releases, SEC filings and certain other information on its website.

Cautions Concerning Forward-Looking Statements

This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results 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 Feb. 1, 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)






Second Quarter



(in millions, except per common share amounts)

2016


2015


% Change

Revenue

$

31,445



$

25,537



23

%

Cost of products sold

29,836



24,083



24

%

Gross margin

1,609



1,454



11

%







Operating expenses:






Distribution, selling, general, and administrative expenses

922



815



13

%

Restructuring and employee severance

2



7



N.M.


Amortization and other acquisition-related costs

114



60



N.M.


Impairments and (gain)/loss on disposal of assets

17



(18)



N.M.


Litigation (recoveries)/charges, net

(9)



44



N.M.


Operating earnings

563



546



3

%







Other income, net

(2)



(1)



N.M.


Interest expense, net

45



36



24

%

Loss on extinguishment of debt



60



N.M.


Earnings before income taxes

520



451



15

%







Provision for income taxes

194



162



20

%

Net earnings

326



289



12

%







Less: Net earnings attributable to noncontrolling interests





N.M.


Net earnings attributable to Cardinal Health, Inc.

$

326



$

289



13

%







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






Basic

$

0.99



$

0.87



14

%

Diluted

0.98



0.86



14

%







Weighted-average number of common shares outstanding:






Basic

329



331




Diluted

332



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

$

59,499



$

49,607



20

%

Cost of products sold

56,311



46,813



20

%

Gross margin

3,188



2,794



14

%







Operating expenses:






Distribution, selling, general, and administrative expenses

1,764



1,590



11

%

Restructuring and employee severance

14



26



N.M.


Amortization and other acquisition-related costs

219



112



N.M.


Impairments and (gain)/loss on disposal of assets

17



(18)



N.M.


Litigation (recoveries)/charges, net

(9)



72



N.M.


Operating earnings

1,183



1,012



17

%







Other (income)/expense, net

6



(4)



N.M.


Interest expense, net

90



70



28

%

Loss on extinguishment of debt



60



N.M.


Earnings before income taxes

1,087



886



23

%







Provision for income taxes

377



331



14

%

Net earnings

710



555



28

%







Less: Net earnings attributable to noncontrolling interests

(1)





N.M.


Net earnings attributable to Cardinal Health, Inc.

$

709



$

555



28

%







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






Basic

$

2.16



$

1.66



30

%

Diluted

2.14



1.65



30

%







Weighted-average number of common shares outstanding:






Basic

329



333




Diluted

332



337




 

 


Schedule 3





Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets





(in millions)

December 31,
 2015


June 30,
 2015


(Unaudited)



Assets




Current assets:




Cash and equivalents

$

2,324



$

4,616


Trade receivables, net

6,980



6,523


Inventories, net

11,007



9,211


Prepaid expenses and other

1,518



1,402


Total current assets

21,829



21,752






Property and equipment, net

1,651



1,506


Goodwill and other intangibles, net

9,113



6,018


Other assets

914



866


Total assets

$

33,507



$

30,142






Liabilities, Redeemable Noncontrolling Interests, and Shareholders' Equity




Current liabilities:




Accounts payable

$

16,919



$

14,368


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

354



281


Other accrued liabilities

1,606



2,594


Total current liabilities

18,879



17,243






Long-term obligations, less current portion

5,171



5,211


Deferred income taxes and other liabilities

2,609



1,432






Redeemable noncontrolling interests

120








Total Cardinal Health, Inc. shareholders' equity

6,711



6,256


Noncontrolling interests

17




Total shareholders' equity

6,728



6,256


Total liabilities, redeemable noncontrolling interests, and shareholders' equity

$

33,507



$

30,142


 

 


Schedule 4





Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)






Second Quarter


Year-to-Date

(in millions)

2016


2015


2016


2015

Cash flows from operating activities:








Net earnings

$

326



$

289



$

710



$

555










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








Depreciation and amortization

169



112



306



220


Loss on extinguishment of debt



60





60


Gain on sale of other investments







(5)


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

17



(18)



17



(18)


Share-based compensation

26



28



56



53


Provision for bad debts

18



14



35



26


Change in fair value of contingent consideration obligation

(13)





(14)




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








Increase in trade receivables

(45)





(393)



(291)


Increase in inventories

(1,070)



(1,336)



(1,565)



(1,137)


Increase in accounts payable

2,006



1,595



2,431



1,438


Other accrued liabilities and operating items, net

29



209



(172)



113


Net cash provided by operating activities

1,463



953



1,411



1,014










Cash flows from investing activities:








Acquisition of subsidiaries, net of cash acquired

(1,885)



(25)



(3,284)



(86)


Additions to property and equipment

(92)



(47)



(175)



(83)


Purchase of available-for-sale securities and other investments

(62)



(32)



(88)



(107)


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

32



16



57



107


Proceeds from maturities of available-for-sale securities

14



16



19



16


Proceeds from divestitures and disposal of held for sale assets



53





53


Net cash used in investing activities

(1,993)



(19)



(3,471)



(100)










Cash flows from financing activities:








Payment of contingent consideration obligation





(23)




Net change in short-term borrowings

3



(58)



39



(18)


Reduction of long-term obligations



(1,220)



(4)



(1,220)


Proceeds from long-term obligations, net of issuance costs



1,182





1,182


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

14



10



(7)



35


Tax proceeds from share-based compensation

1



4



32



42


Dividends on common shares

(128)



(114)



(259)



(233)


Purchase of treasury shares



(326)





(686)


Net cash used in financing activities

(110)



(522)



(222)



(898)










Effect of exchange rate changes on cash and equivalents

(10)





(10)












Net increase/(decrease) in cash and equivalents

(650)



412



(2,292)



16


Cash and equivalents at beginning of period

2,974



2,469



4,616



2,865


Cash and equivalents at end of period

$

2,324



$

2,881



$

2,324



$

2,881


 

 


Schedule 5





Cardinal Health, Inc. and Subsidiaries

Total Company Business Analysis








Non-GAAP


Second Quarter


Second Quarter

(in millions)

2016


2015


2016


2015

Revenue








Amount

$

31,445



$

25,537






Growth rate

23

%


15

%













Gross Margin








Amount1

$

1,609



$

1,454



$

1,648



$

1,454


Growth rate

11

%


8

%


13

%


8

%









Operating earnings








Amount

$

563



$

546



$

726



$

639


Growth rate

3

%


5

%


14

%


10

%









Net earnings attributable to Cardinal Health, Inc.








Amount

$

326



$

289



$

430



$

400


Growth rate

13

%


5

%


7

%


28

%









Return on equity

19.7

%


18.7

%


26.0

%


25.9

%









Effective tax rate

37.3

%


36.0

%


37.1

%


33.8

%









Debt to total capital

45

%


39

%





Net debt to capital





32

%


15

%












Non-GAAP


Year-to-Date


Year-to-Date

(in millions)

2016


2015


2016


2015

Revenue








Amount

$

59,499



$

49,607






Growth rate

20

%


6

%













Gross Margin








Amount1

$

3,188



$

2,794



$

3,227



$

2,794


Growth rate

14

%


7

%


15

%


7

%









Operating earnings








Amount

$

1,183



$

1,012



$

1,463



$

1,204


Growth rate

17

%


2

%


22

%


8

%









Net earnings attributable to Cardinal Health, Inc.








Amount

$

709



$

555



$

889



$

740


Growth rate

28

%


(10)

%


20

%


7

%









Return on equity

21.8

%


17.8

%


27.4

%


23.7

%









Effective tax rate

34.7

%


37.4

%


35.0

%


35.0

%



1

Gross margin includes the negative impact of a $39 million LIFO charge in the second quarter.



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







Second Quarter



Second Quarter

(in millions)

2016


2015


(in millions)

2016


2015

Pharmaceutical





Medical













Revenue





Revenue




Amount

$

28,287



$

22,627



Amount

$

3,162



$

2,914


Growth rate

25

%


16

%


Growth rate

9

%


4

%










Segment profit





Segment profit




Amount

$

627



$

542



Amount

$

106



$

115


Growth rate

16

%


12

%


Growth rate1

(8)

%


(12)

%

Segment profit margin

2.22

%


2.39

%


Segment profit margin

3.36

%


3.96

%



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 December 31, 2015. Excluding the impact of the inventory fair value step up, Medical segment profit would have increased 10% for the three months ended December 31, 2015.



Refer to definitions for an explanation of calculations.


Total consolidated revenue for the three months ended December 31, 2015 was $31,445 million, which included total segment revenue of $31,449 million and Corporate revenue of $(4) million. Total consolidated revenue for the three months ended December 31, 2014 was $25,537 million, which included total segment revenue of $25,541 million and Corporate revenue of $(4) million. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments. 


Total consolidated operating earnings for the three months ended December 31, 2015 were $563 million, which included total segment profit of $733 million and Corporate costs of $(170) million. Total consolidated operating earnings for the three months ended December 31, 2014 were $546 million, which included total segment profit of $657 million and Corporate costs of $(111) 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

$

53,427



$

43,836



Amount

$

6,081



$

5,766


Growth rate

22

%


6

%


Growth rate

5

%


5

%










Segment profit





Segment profit




Amount

$

1,285



$

992



Amount

$

207



$

229


Growth rate

29

%


8

%


Growth rate1

(10)

%


(4)

%

Segment profit margin

2.41

%


2.26

%


Segment profit margin

3.40

%


3.96

%



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 six months ended December 31, 2015. Excluding the impact of the inventory fair value step up, Medical segment profit growth would have been flat for the six months ended December 31, 2015.



 Refer to definitions for an explanation of calculations.



Total consolidated revenue for the six months ended December 31, 2015 was $59,499 million, which included total segment revenue of $59,508 million and Corporate revenue of $(9) million. Total consolidated revenue for the six months ended December 31, 2014 was $49,607 million, which included total segment revenue of $49,602 million and Corporate revenue of $5 million.  Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.



Total consolidated operating earnings for the six months ended December 31, 2015 were $1,183 million, which included total segment profit of $1,492 million and Corporate costs of $(309) million. Total consolidated operating earnings for the six months ended December 31, 2014 were $1,012 million, which included total segment profit of $1,221 million and Corporate costs of $(209) 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.


Margin

Rate

Earnings

Rate

Taxes

Taxes

Health, Inc.

Growth Rate

Health, Inc.

Growth Rate1

(in millions, except per common share amounts)

Second Quarter 2016

GAAP

$

1,609


11

%

$

563


3

%

$

520


$

194


$

326


13

%

$

0.98


14

%

LIFO charges/(credits)

39



39



39


15


24



0.07



Restructuring and employee severance



2



2


1


1





Amortization and other acquisition-related costs



114



114


41


73



0.22



Impairments and (gain)/loss on disposal of assets



17



17


7


10



0.03



Litigation (recoveries)/charges, net



(9)



(9)


(5)


(4)



(0.01)



Non-GAAP

$

1,648


13

%

$

726


14

%

$

683


$

253


$

430


7

%

$

1.30


8

%













Second Quarter 2015

GAAP

$

1,454


8

%

$

546


5

%

$

451


$

162


$

289


5

%

$

0.86


9

%

Restructuring and employee severance



7



7


3


4



0.01



Amortization and other acquisition-related costs



60



60


22


38



0.11



Impairments and (gain)/loss on disposal of assets



(18)



(18)


(10)


(8)



(0.03)



Litigation (recoveries)/charges, net



44



44


4


40



0.12



Loss on extinguishment of debt





60


23


37



0.11



Non-GAAP

$

1,454


8

%

$

639


10

%

$

604


$

204


$

400


28

%

$

1.20


33

%




















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.


Margin

Rate

Earnings

Rate

Taxes

Taxes

Health, Inc.

Growth Rate

Health, Inc.

Growth Rate

(in millions, except per common share amounts)

Year-to-Date 2016

GAAP

$

3,188


14

%

$

1,183


17

%

$

1,087


$

377


$

709


28

%

$

2.14


30

%

LIFO charges/(credits)

39



39



39


15


24



0.07



Restructuring and employee severance



14



14


5


9



0.02



Amortization and other acquisition-related costs



219



219


78


141



0.42



Impairments and (gain)/loss on disposal of assets



17



17


7


10



0.03



Litigation (recoveries)/charges, net



(9)



(9)


(5)


(4)



(0.01)



Non-GAAP

$

3,227


15

%

$

1,463


22

%

$

1,368


$

479


$

889


20

%

$

2.68


22

%













Year-to-Date 2015

GAAP

$

2,794


7

%

$

1,012


2

%

$

886


$

331


$

555


(10)

%

$

1.65


(7)

%

Restructuring and employee severance



26



26


9


17



0.05



Amortization and other acquisition-related costs



112



112


41


71



0.21



Impairments and (gain)/loss on disposal of assets



(18)



(18)


(10)


(8)



(0.02)



Litigation (recoveries)/charges, net



72



72


4


68



0.20



Loss on extinguishment of debt





60


23


37



0.11



Non-GAAP

$

2,794


7

%

$

1,204


8

%

$

1,138


$

399


$

740


7

%

$

2.19


10

%


       1 The $56 million remeasurement of unrecognized tax benefits reduced, for fiscal 2014 second quarter, both diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations by $0.16. The fiscal 2015 second quarter growth rates for diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations, excluding the impact of the tax remeasurement, would have been (10) percent and 13 percent, respectively.


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






Second Quarter



(in millions)

2016




2015



GAAP return on equity

19.7

%




18.7

%











Non-GAAP return on equity








Net earnings attributable to Cardinal Health, Inc.

$

326





$

289




LIFO charges/(credits), net of tax

24








Restructuring and employee severance, net of tax

1





4




Amortization and other acquisition-related costs, net of tax

73





38




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

10





(8)




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

(4)





40




Loss on extinguishment of debt, net of tax





37




Adjusted net earnings attributable to Cardinal Health, Inc.

$

430





$

400




Annualized

$

1,720





$

1,600













Second


First


Second


First


Quarter


Quarter


Quarter


Quarter


2016


2016


2015


2015

Total Cardinal Health, Inc. shareholders' equity

$

6,711



$

6,505



$

6,100



$

6,256


Divided by average Cardinal Health, Inc. shareholders' equity

$

6,608





$

6,178




Non-GAAP return on equity

26.0

%




25.9

%



















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

21.8

%






17.8

%

















Non-GAAP return on equity












Net earnings attributable to Cardinal Health, Inc.

$

709







$

555






LIFO charges/(credits), net of tax

24












Restructuring and employee severance, net of tax

9







17






Amortization and other acquisition-related costs, net of tax

141







71






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

10







(8)






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

(4)







68






Loss on extinguishment of debt, net of tax







37






Adjusted net earnings attributable to Cardinal Health, Inc.

$

889







$

740






Annualized

$

1,778







$

1,480



















Second


First


Fourth


Second


First


Fourth


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


2016


2016


2015


2015


2015


2014

Total Cardinal Health, Inc. shareholders' equity

$

6,711



$

6,505



$

6,256



$

6,100



$

6,256



$

6,401


Divided by average Cardinal Health, Inc. shareholders' equity

$

6,491







$

6,252






Non-GAAP return on equity

27.4

%






23.7

%





























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






Second Quarter


Year-to-Date

(in millions)

2016


2015


2016


2015

GAAP effective tax rate

37.3

%


36.0

%


34.7

%


37.4

%









Non-GAAP effective tax rate








Earnings before income taxes

$

520



$

451



$

1,087



$

886


LIFO charges/(credits)

39





39




Restructuring and employee severance

2



7



14



26


Amortization and other acquisition-related costs

114



60



219



112


Impairments and (gain)/loss on disposal of assets

17



(18)



17



(18)


Litigation (recoveries)/charges, net

(9)



44



(9)



72


Loss on extinguishment of debt



60





60


Adjusted earnings before income taxes

$

683



$

604



$

1,368



$

1,138










Provision for income taxes

$

194



$

162



$

377



$

331


LIFO charges/(credits) tax benefit

15





15




Restructuring and employee severance tax benefit

1



3



5



9


Amortization and other acquisition-related costs tax benefit

41



22



78



41


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

7



(10)



7



(10)


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

(5)



4



(5)



4


Loss on extinguishment of debt tax benefit



23





23


Adjusted provision for income taxes

$

253



$

204



$

479



$

399










Non-GAAP effective tax rate

37.1

%


33.8

%


35.0

%


35.0

%










Second Quarter






2016


2015





Debt to total capital

45

%


39

%













Net debt to capital








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

$

354



$

270






Long-term obligations, less current portion

5,171



3,706






Debt

$

5,525



$

3,976






Cash and equivalents

(2,324)



(2,881)






Net debt

$

3,201



$

1,095






Total Cardinal Health, Inc. shareholders' equity

6,711



6,100






Capital

$

9,912



$

7,195






Net debt to capital

32

%


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 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.

 


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.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cardinal-health-reports-second-quarter-results-for-fiscal-2016-300212712.html

SOURCE Cardinal Health

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