CARDINAL HEALTH, INC. 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 $386 million $365 million 6%
Cardinal
Health, Inc.
-------------
Non-GAAP Net
Earnings $472 million $396 million
attributable
to Cardinal
Health, Inc. 19%
------------ ---
Diluted EPS
attributable
to $1.17 $1.09 7%
Cardinal
Health, Inc.
-------------
Non-GAAP
Diluted EPS $1.43 $1.19 20%
attributable
to Cardinal
Health,
Inc.
----
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
-- Announced agreement to acquire Curaspan Health Group Inc., a leader in
discharge planning and care transitions technology for hospitals, health
systems and post-acute providers
-- Recognized as one of the Top Companies for Female Executives by the
National Association for Female Executives
-- Launched Cardinal Health MedSync Advantage(TM), 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 36(th) 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, June 30,
2016 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
Amount(1) $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
Amount(1) $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 rate(1) 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 rate(1) 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
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2016 2015
Debt to total capital 45% 39%
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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%
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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 severance(2), (3) amortization and other acquisition-related costs(3), (4) impairments and (gain)/loss on disposal of assets(4), (5) litigation (recoveries)/charges, net(5), and (6) loss on extinguishment of debt(6)) 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.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cardinal-health-reports-strong-third-quarter-results-for-fiscal-year-2016-300259256.html
SOURCE Cardinal Health
