Attached files
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| 8-K - CURRENT REPORT - CARDINAL HEALTH INC | a15q3_8kx33115xform8-kxnew.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Media: Debbie Mitchell
(614) 757-6225
debbie.mitchell@cardinalhealth.com
Investors: Sally Curley
(614) 757-7115
sally.curley@cardinalhealth.com
CARDINAL HEALTH REPORTS FISCAL 2015 THIRD-QUARTER RESULTS
• | Revenue increased 18 percent to $25.4 billion |
• | Non-GAAP1 operating earnings increased 17 percent to $657 million |
• | Non-GAAP diluted earnings per share from continuing operations increased 18 percent to $1.19 |
DUBLIN, Ohio, April 30, 2015 - Cardinal Health today reported fiscal year 2015 third-quarter revenue of $25.4 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $1.19. Non-GAAP operating earnings increased 17 percent to $657 million. On a GAAP basis, operating earnings increased 16 percent to $591 million, and diluted EPS from continuing operations increased 20 percent to $1.09.
“We're pleased to report strong overall results for the third quarter while continuing to make the moves to lead and create value in today's dynamic healthcare environment," said George Barrett, chairman and chief executive officer of Cardinal Health. "During this past quarter, we announced our plan to acquire Cordis, significantly enhancing our scale, product line, and capabilities in the cardiovascular area. This move aligns squarely with our strategy around physician preference items. Further, our recent acquisition of the specialty distribution business of Metro Medical expands our scale in specialty pharma and extends our reach into additional therapeutic areas.”
He continued, "In light of our performance to date, we are increasingly comfortable with the upper half of the guidance range of $4.28 to $4.38 for our fiscal 2015 non-GAAP diluted earnings per share from continuing operations."
Q3 FY15 SUMMARY
Q3 FY15 | Q3 FY14 | Y/Y | |||||||
Revenue | $ | 25.4 | billion | $ | 21.4 | billion | 18% | ||
Operating earnings | $ | 591 | million | $ | 508 | million | 16% | ||
Non-GAAP operating earnings | $ | 657 | million | $ | 561 | million | 17% | ||
Earnings from continuing operations | $ | 365 | million | $ | 315 | million | 16% | ||
Non-GAAP earnings from continuing operations | $ | 396 | million | $ | 349 | million | 13% | ||
Diluted EPS from continuing operations | $ | 1.09 | $ | 0.91 | 20% | ||||
Non-GAAP diluted EPS from continuing operations | $ | 1.19 | $ | 1.01 | 18% | ||||
SEGMENT RESULTS
Pharmaceutical Segment
Revenue for the Pharmaceutical segment increased 20 percent to $22.6 billion, due to growth from existing customers and new customers. Segment profit increased 25 percent to $567 million, driven by strong performance under the company's generics program, which includes the net benefit of Red Oak Sourcing as well as the growth from existing and new customers.
Q3 FY15 | Q3 FY14 | Y/Y | |||||||
Revenue | $ | 22.6 | billion | $ | 18.8 | billion | 20% | ||
Segment profit | $ | 567 | million | $ | 452 | million | 25% | ||
Medical Segment
Revenue for the Medical segment was up 4 percent to $2.8 billion, primarily due to contributions from acquisitions. Segment profit decreased 8 percent to $102 million as a result of reduced contribution from national brand distribution and the continued impact of market pressures in Canada.
Q3 FY15 | Q3 FY14 | Y/Y | |||||||
Revenue | $ | 2.8 | billion | $ | 2.7 | billion | 4% | ||
Segment profit | $ | 102 | million | $ | 111 | million | (8)% | ||
ADDITIONAL THIRD-QUARTER AND RECENT HIGHLIGHTS
• | Announced intent to acquire Cordis, a worldwide leader in cardiovascular medical products |
Cardinal Health
Page 2
• | Acquired the specialty distribution business of Metro Medical Inc., expanding scale and deepening reach into rheumatology, oncology and nephrology segments |
• | Named one of the "Top 50 Companies for Executive Women" by the National Association for Female Executives |
• | Ohio Children's Hospitals' Solutions for Patient Safety, a national program supported by Cardinal Health, announced estimated savings of more than $60 million and prevention of serious harm for 2,500 children |
CONFERENCE CALL
The company will host a webcast and conference call today at 8:30 a.m. Eastern to discuss the results. To access the call and corresponding slide presentation, go to the Investors page at ir.cardinalhealth.com or dial 913.312.0400, using conference ID# 9697371. There is no access code required for the call.
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 May 29 by dialing 719.457.0820, passcode 9697371.
UPCOMING WEBCASTED INVESTOR EVENTS
• | Bank of America Merrill Lynch 2015 Health Care Conference on May 13 at 8:00 a.m. local time in Las Vegas |
• | Goldman Sachs 36th Annual Global Healthcare Conference on June 10 at 10:00 a.m. local time in Rancho Palos Verdes, Calif. |
At these events, Cardinal Health executives will discuss the company's diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, go to the Investors page at ir.cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $91 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers, clinical laboratories and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #22 on the Fortune 500, Cardinal Health employs 34,000 people worldwide. More information about the company may be found at www.cardinalhealth.com and @CardinalHealth on Twitter.
1 | See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures. |
Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, financial information, earnings and analyst presentations, and information about upcoming presentations and events is routinely posted and accessible on the Investors page at ir.cardinalhealth.com. In addition, our website allows investors and other interested persons to sign up automatically to receive e-mail alerts when we post news releases, SEC filings and certain other information on our website.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health's various lines of business; the ability to achieve the expected benefits from the generic sourcing venture with CVS Health; the frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the ability to successfully complete the acquisition of Cordis on a timely basis and if completed to achieve the anticipated results from the Cordis acquisition; the 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; the ability to achieve anticipated results from the AccessClosure acquisition; uncertainties due to government health care reform including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; and changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This news release reflects management's views as of April 30, 2015. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Schedule 1
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
Third Quarter | ||||||||||
(in millions, except per common share amounts) | 2015 | 2014 | % Change | |||||||
Revenue | $ | 25,375 | $ | 21,427 | 18 | % | ||||
Cost of products sold | 23,916 | 20,130 | 19 | % | ||||||
Gross margin | 1,459 | 1,297 | 12 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 803 | 736 | 9 | % | ||||||
Restructuring and employee severance | 7 | 5 | N.M. | |||||||
Amortization and other acquisition-related costs | 77 | 56 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | (1 | ) | — | N.M. | ||||||
Litigation (recoveries)/charges, net | (18 | ) | (8 | ) | N.M. | |||||
Operating earnings | 591 | 508 | 16 | % | ||||||
Other income, net | (2 | ) | (33 | ) | N.M. | |||||
Interest expense, net | 35 | 34 | 4 | % | ||||||
Earnings before income taxes and discontinued operations | 558 | 507 | 10 | % | ||||||
Provision for income taxes | 193 | 192 | — | % | ||||||
Earnings from continuing operations | 365 | 315 | 16 | % | ||||||
Earnings from discontinued operations, net of tax | — | — | N.M. | |||||||
Net earnings | $ | 365 | $ | 315 | 16 | % | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 1.10 | $ | 0.92 | 20 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net basic earnings per common share | $ | 1.10 | $ | 0.92 | 20 | % | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 1.09 | $ | 0.91 | 20 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net diluted earnings per common share | $ | 1.09 | $ | 0.91 | 20 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 330 | 342 | ||||||||
Diluted | 334 | 347 | ||||||||
Schedule 2
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
Year-to-Date | ||||||||||
(in millions, except per common share amounts) | 2015 | 2014 | % Change | |||||||
Revenue | $ | 74,983 | $ | 68,190 | 10 | % | ||||
Cost of products sold | 70,729 | 64,285 | 10 | % | ||||||
Gross margin | 4,254 | 3,905 | 9 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 2,393 | 2,233 | 7 | % | ||||||
Restructuring and employee severance | 33 | 25 | N.M. | |||||||
Amortization and other acquisition-related costs | 190 | 160 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | (19 | ) | 10 | N.M. | ||||||
Litigation (recoveries)/charges, net | 54 | (21 | ) | N.M. | ||||||
Operating earnings | 1,603 | 1,498 | 7 | % | ||||||
Other income, net | (6 | ) | (43 | ) | N.M. | |||||
Interest expense, net | 105 | 100 | 5 | % | ||||||
Loss on extinguishment of debt | 60 | — | N.M. | |||||||
Earnings before income taxes and discontinued operations | 1,444 | 1,441 | — | % | ||||||
Provision for income taxes | 524 | 512 | 2 | % | ||||||
Earnings from continuing operations | 920 | 929 | (1 | )% | ||||||
Earnings from discontinued operations, net of tax | — | 3 | N.M. | |||||||
Net earnings | $ | 920 | $ | 932 | (1 | )% | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 2.77 | $ | 2.72 | 2 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net basic earnings per common share | $ | 2.77 | $ | 2.73 | 1 | % | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 2.74 | $ | 2.69 | 2 | % | ||||
Discontinued operations | — | 0.01 | N.M. | |||||||
Net diluted earnings per common share | $ | 2.74 | $ | 2.70 | 1 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 332 | 341 | ||||||||
Diluted | 336 | 346 | ||||||||
Schedule 3
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions) | March 31, 2015 | June 30, 2014 | |||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 3,183 | $ | 2,865 | |||
Trade receivables, net | 6,095 | 5,380 | |||||
Inventories, net | 9,163 | 8,266 | |||||
Prepaid expenses and other | 1,190 | 1,428 | |||||
Total current assets | 19,631 | 17,939 | |||||
Property and equipment, net | 1,407 | 1,459 | |||||
Goodwill and other intangibles, net | 6,033 | 5,870 | |||||
Other assets | 817 | 765 | |||||
Total assets | $ | 27,888 | $ | 26,033 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 13,851 | $ | 12,149 | |||
Current portion of long-term obligations and other short-term borrowings | 283 | 801 | |||||
Other accrued liabilities | 2,261 | 2,165 | |||||
Total current liabilities | 16,395 | 15,115 | |||||
Long-term obligations, less current portion | 3,720 | 3,171 | |||||
Deferred income taxes and other liabilities | 1,404 | 1,346 | |||||
Total shareholders’ equity | 6,369 | 6,401 | |||||
Total liabilities and shareholders’ equity | $ | 27,888 | $ | 26,033 | |||
Schedule 4
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
Third Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Cash flows from operating activities: | |||||||||||||||
Net earnings | $ | 365 | $ | 315 | $ | 920 | $ | 932 | |||||||
Earnings from discontinued operations, net of tax | — | — | — | (3 | ) | ||||||||||
Earnings from continuing operations | 365 | 315 | 920 | 929 | |||||||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | |||||||||||||||
Depreciation and amortization | 116 | 110 | 336 | 344 | |||||||||||
Loss on extinguishment of debt | — | — | 60 | — | |||||||||||
Gain on sale of other investments | — | (32 | ) | (5 | ) | (32 | ) | ||||||||
Impairments and (gain)/loss on disposal of assets | (1 | ) | — | (19 | ) | 10 | |||||||||
Share-based compensation | 27 | 24 | 80 | 72 | |||||||||||
Provision for bad debts | 16 | 2 | 42 | 31 | |||||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||||||||||
Decrease/(increase) in trade receivables | (427 | ) | 53 | (718 | ) | 1,473 | |||||||||
Decrease/(increase) in inventories | 287 | 450 | (850 | ) | 350 | ||||||||||
Increase/(decrease) in accounts payable | 219 | (304 | ) | 1,657 | (1,392 | ) | |||||||||
Other accrued liabilities and operating items, net | 56 | 202 | 169 | 23 | |||||||||||
Net cash provided by operating activities | 658 | 820 | 1,672 | 1,808 | |||||||||||
Cash flows from investing activities: | |||||||||||||||
Acquisition of subsidiaries, net of cash acquired | (233 | ) | (118 | ) | (319 | ) | (168 | ) | |||||||
Additions to property and equipment | (56 | ) | (48 | ) | (139 | ) | (138 | ) | |||||||
Purchase of available-for-sale securities and other investments | (27 | ) | (27 | ) | (134 | ) | (27 | ) | |||||||
Proceeds from sale of available-for-sale securities and other investments | 22 | 47 | 129 | 47 | |||||||||||
Proceeds from maturities of available-for-sale securities | 8 | — | 24 | — | |||||||||||
Proceeds from divestitures and disposal of held for sale assets | — | — | 53 | — | |||||||||||
Net cash used in investing activities | (286 | ) | (146 | ) | (386 | ) | (286 | ) | |||||||
Cash flows from financing activities: | |||||||||||||||
Payment of contingent consideration obligation | (3 | ) | — | (3 | ) | — | |||||||||
Net change in short-term borrowings | 9 | (8 | ) | (9 | ) | 65 | |||||||||
Reduction of long-term obligations | (1 | ) | — | (1,221 | ) | (1 | ) | ||||||||
Proceeds from long-term obligations, net of issuance costs | — | — | 1,182 | — | |||||||||||
Net proceeds from issuance of common shares | 24 | 80 | 59 | 219 | |||||||||||
Tax proceeds/(disbursements) from share-based compensation | 14 | (3 | ) | 56 | 36 | ||||||||||
Dividends on common shares | (113 | ) | (104 | ) | (346 | ) | (312 | ) | |||||||
Purchase of treasury shares | — | (339 | ) | (686 | ) | (389 | ) | ||||||||
Net cash used in financing activities | (70 | ) | (374 | ) | (968 | ) | (382 | ) | |||||||
Net increase in cash and equivalents | 302 | 300 | 318 | 1,140 | |||||||||||
Cash and equivalents at beginning of period | 2,881 | 2,741 | 2,865 | 1,901 | |||||||||||
Cash and equivalents at end of period | $ | 3,183 | $ | 3,041 | $ | 3,183 | $ | 3,041 | |||||||
Schedule 5
Cardinal Health, Inc. and Subsidiaries
Total Company Business Analysis
Non-GAAP | |||||||||||||||
Third Quarter | Third Quarter | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 25,375 | $ | 21,427 | |||||||||||
Growth rate | 18 | % | (13 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 591 | $ | 508 | $ | 657 | $ | 561 | |||||||
Growth rate | 16 | % | 7 | % | 17 | % | (3 | )% | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 365 | $ | 315 | $ | 396 | $ | 349 | |||||||
Growth rate | 16 | % | (9 | )% | 13 | % | (15 | )% | |||||||
Return on equity | 23.4 | % | 19.2 | % | 25.4 | % | 21.3 | % | |||||||
Effective tax rate from continuing operations | 34.6 | % | 38.0 | % | 36.5 | % | 37.7 | % | |||||||
Debt to total capital | 39 | % | 38 | % | |||||||||||
Net debt to total capital | 11 | % | 12 | % | |||||||||||
Non-GAAP | |||||||||||||||
Year-to-Date | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 74,983 | $ | 68,190 | |||||||||||
Growth rate1 | 10 | % | (10 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 1,603 | $ | 1,498 | $ | 1,861 | $ | 1,672 | |||||||
Growth rate | 7 | % | 4 | % | 11 | % | 6 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 920 | $ | 929 | $ | 1,136 | $ | 1,040 | |||||||
Growth rate | (1 | )% | 1 | % | 9 | % | 3 | % | |||||||
Return on equity | 19.5 | % | 19.6 | % | 24.1 | % | 21.9 | % | |||||||
Effective tax rate from continuing operations | 36.3 | % | 35.5 | % | 35.6 | % | 35.6 | % | |||||||
1 | Revenue from Walgreens was $3.3 billion for the nine months ended March 31, 2014. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 year-to-date revenue growth rate would have been 16 percent. |
Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.
Schedule 6
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
Third Quarter | Third Quarter | |||||||||||||||
(in millions) | 2015 | 2014 | (in millions) | 2015 | 2014 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 22,605 | $ | 18,762 | Amount | $ | 2,774 | $ | 2,657 | |||||||
Growth rate | 20 | % | (15 | )% | Growth rate | 4 | % | 7 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 567 | $ | 452 | Amount | $ | 102 | $ | 111 | |||||||
Growth rate | 25 | % | (9 | )% | Growth rate | (8 | )% | 11 | % | |||||||
Segment profit margin | 2.51 | % | 2.41 | % | Segment profit margin | 3.66 | % | 4.16 | % | |||||||
Refer to definitions for an explanation of calculations.
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. Total consolidated revenue for the three months ended March 31, 2014 was $21,427 million, which included total segment revenue of $21,419 million and Corporate revenue of $8 million. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.
Total consolidated operating earnings for the three months ended March 31, 2015 were $591 million, which included total segment profit of $669 million and Corporate costs of $(78) million. Total consolidated operating earnings for the three months ended March 31, 2014 were $508 million, which included total segment profit of $563 million and Corporate costs of (55) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.
Schedule 7
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
Year-to-Date | Year-to-Date | |||||||||||||||
(in millions) | 2015 | 2014 | (in millions) | 2015 | 2014 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 66,440 | $ | 60,018 | Amount | $ | 8,540 | $ | 8,168 | |||||||
Growth rate1 | 11 | % | (12 | )% | Growth rate | 5 | % | 11 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 1,559 | $ | 1,368 | Amount | $ | 330 | $ | 348 | |||||||
Growth rate | 14 | % | 2 | % | Growth rate | (5 | )% | 30 | % | |||||||
Segment profit margin | 2.35 | % | 2.28 | % | Segment profit margin | 3.86 | % | 4.26 | % | |||||||
1 | Revenue from Walgreens was $3.3 billion for the nine months ended March 31, 2014. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 year-to-date Pharmaceutival segment revenue growth rate would have been 17 percent. |
Refer to definitions for an explanation of calculations.
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. Total consolidated revenue for the nine months ended March 31, 2014 was $68,190 million, which included total segment revenue of $68,186 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 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. Total consolidated operating earnings for the nine months ended March 31, 2014 were $1,498 million, which included total segment profit of $1,716 million and Corporate costs of $(218) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.
Schedule 8
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Third Quarter 2015 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
(in millions, except per common share amounts) | Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | |||||||||||||
Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate | ||||||||||||||
GAAP | $ | 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 | $ | 657 | 17 | % | $ | 624 | $ | 228 | $ | 396 | 13 | % | $ | 1.19 | 18 | % | |||||
Third Quarter 2014 | |||||||||||||||||||||
GAAP | $ | 508 | 7 | % | $ | 507 | $ | 192 | $ | 315 | (9 | )% | $ | 0.91 | (9 | )% | |||||
Restructuring and employee severance | 5 | 5 | 2 | 3 | 0.01 | ||||||||||||||||
Amortization and other acquisition-related costs | 56 | 56 | 20 | 36 | 0.10 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | — | — | — | — | ||||||||||||||||
Litigation (recoveries)/charges, net | (8 | ) | (8 | ) | (3 | ) | (5 | ) | (0.01 | ) | |||||||||||
Non-GAAP | $ | 561 | (3 | )% | $ | 560 | $ | 211 | $ | 349 | (15 | )% | $ | 1.01 | (16 | )% | |||||
Year-to-Date 2015 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
(in millions, except per common share amounts) | Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | |||||||||||||
Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate | ||||||||||||||
GAAP | $ | 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 | $ | 1,861 | 11 | % | $ | 1,763 | $ | 627 | $ | 1,136 | 9 | % | $ | 3.38 | 12 | % | |||||
Year-to-Date 2014 | |||||||||||||||||||||
GAAP | $ | 1,498 | 4 | % | $ | 1,441 | $ | 512 | $ | 929 | 1 | % | $ | 2.69 | — | % | |||||
Restructuring and employee severance | 25 | 25 | 9 | 16 | 0.05 | ||||||||||||||||
Amortization and other acquisition-related costs | 160 | 160 | 58 | 102 | 0.30 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | 10 | 10 | 4 | 6 | 0.02 | ||||||||||||||||
Litigation (recoveries)/charges, net | (21 | ) | (21 | ) | (8 | ) | (13 | ) | (0.04 | ) | |||||||||||
Loss on extinguishment of debt | — | — | — | — | — | ||||||||||||||||
Non-GAAP | $ | 1,672 | 6 | % | $ | 1,615 | $ | 575 | $ | 1,040 | 3 | % | $ | 3.01 | 2 | % | |||||
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) | 2015 | 2014 | |||||||||||||
GAAP return on equity | 23.4 | % | 19.2 | % | |||||||||||
Non-GAAP return on equity | |||||||||||||||
Net earnings | $ | 365 | $ | 315 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 4 | 3 | |||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 48 | 36 | |||||||||||||
Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations | — | — | |||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | (21 | ) | (5 | ) | |||||||||||
Adjusted net earnings | $ | 396 | $ | 349 | |||||||||||
Annualized | $ | 1,584 | $ | 1,396 | |||||||||||
Third | Second | Third | Second | ||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||
2015 | 2015 | 2014 | 2014 | ||||||||||||
Total shareholders' equity | $ | 6,369 | $ | 6,100 | $ | 6,532 | $ | 6,589 | |||||||
Divided by average shareholders' equity | $ | 6,235 | $ | 6,560 | |||||||||||
Non-GAAP return on equity | 25.4 | % | 21.3 | % | |||||||||||
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) | 2015 | 2014 | |||||||||||||||||||||||||||||
GAAP return on equity | 19.5 | % | 19.6 | % | |||||||||||||||||||||||||||
Non-GAAP return on equity | |||||||||||||||||||||||||||||||
Net earnings | $ | 920 | $ | 932 | |||||||||||||||||||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 21 | 16 | |||||||||||||||||||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 121 | 102 | |||||||||||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations | (9 | ) | 6 | ||||||||||||||||||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | 46 | (13 | ) | ||||||||||||||||||||||||||||
Loss on extinguishment of debt, net of tax, in continuing operations | 37 | — | |||||||||||||||||||||||||||||
Adjusted net earnings | $ | 1,136 | $ | 1,043 | |||||||||||||||||||||||||||
Annualized | $ | 1,515 | $ | 1,391 | |||||||||||||||||||||||||||
Third | Second | First | Fourth | Third | Second | First | Fourth | ||||||||||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | Quarter | ||||||||||||||||||||||||
2015 | 2015 | 2015 | 2014 | 2014 | 2014 | 2014 | 2013 | ||||||||||||||||||||||||
Total shareholders' equity | $ | 6,369 | $ | 6,100 | $ | 6,256 | $ | 6,401 | $ | 6,532 | $ | 6,589 | $ | 6,297 | $ | 5,975 | |||||||||||||||
Divided by average shareholders' equity | $ | 6,281 | $ | 6,348 | |||||||||||||||||||||||||||
Non-GAAP return on equity | 24.1 | % | 21.9 | % | |||||||||||||||||||||||||||
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
Schedule 11
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Third Quarter | Year-to-Date | ||||||||||||||
(in millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||
GAAP effective tax rate from continuing operations | 34.6 | % | 38.0 | % | 36.3 | % | 35.5 | % | |||||||
Non-GAAP effective tax rate from continuing operations | |||||||||||||||
Earnings before income taxes and discontinued operations | $ | 558 | $ | 507 | $ | 1,444 | $ | 1,441 | |||||||
Restructuring and employee severance | 7 | 5 | 33 | 25 | |||||||||||
Amortization and other acquisition-related costs | 77 | 56 | 190 | 160 | |||||||||||
Impairments and (gain)/loss on disposal of assets | (1 | ) | — | (19 | ) | 10 | |||||||||
Litigation (recoveries)/charges, net | (18 | ) | (8 | ) | 54 | (21 | ) | ||||||||
Loss on extinguishment of debt | — | — | 60 | — | |||||||||||
Adjusted earnings before income taxes and discontinued operations | $ | 624 | $ | 560 | $ | 1,763 | $ | 1,615 | |||||||
Provision for income taxes | $ | 193 | $ | 192 | $ | 524 | $ | 512 | |||||||
Restructuring and employee severance tax benefit | 3 | 2 | 12 | 9 | |||||||||||
Amortization and other acquisition-related costs tax benefit | 29 | 20 | 69 | 58 | |||||||||||
Impairments and (gain)/loss on disposal of assets tax benefit/(expense) | (1 | ) | — | (10 | ) | 4 | |||||||||
Litigation (recoveries)/charges, net tax benefit/(expense) | 3 | (3 | ) | 8 | (8 | ) | |||||||||
Loss on extinguishment of debt tax benefit | — | — | 23 | — | |||||||||||
Adjusted provision for income taxes | $ | 228 | $ | 211 | $ | 627 | $ | 575 | |||||||
Non-GAAP effective tax rate from continuing operations | 36.5 | % | 37.7 | % | 35.6 | % | 35.6 | % | |||||||
Third Quarter | |||||||||||||||
2015 | 2014 | ||||||||||||||
Debt to total capital | 39 | % | 38 | % | |||||||||||
Net debt to capital | |||||||||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 283 | $ | 241 | |||||||||||
Long-term obligations, less current portion | 3,720 | 3,679 | |||||||||||||
Debt | $ | 4,003 | $ | 3,920 | |||||||||||
Cash and equivalents | (3,183 | ) | (3,041 | ) | |||||||||||
Net debt | $ | 820 | $ | 879 | |||||||||||
Total shareholders' equity | 6,369 | 6,532 | |||||||||||||
Capital | $ | 7,189 | $ | 7,411 | |||||||||||
Net debt to capital | 11 | % | 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.
Forward-Looking Non-GAAP Financial Measures
We present non-GAAP earnings from continuing operations and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures, including per share calculations) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from continuing operations and effective tax rate from continuing operations. We are unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because we cannot reliably forecast restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net, LIFO charges/(credits) and loss on extinguishment of debt, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact our future financial results.
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the measures exclude items and charges that (i) management does not believe reflect Cardinal Health, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.
In fiscal 2015, the Company began excluding last-in, first-out ("LIFO") inventory charges/(credits)5 from its non-GAAP earnings, for consistency with the presentation by some of its peers. The Company did not record any LIFO charges or credits in the first, second or third quarters of fiscal 2015 or 2014, respectively. In the second quarter of fiscal 2015, the Company excluded the loss on extinguishment of debt6 related to the early redemption of debt that occurred in December 2014 from its non-GAAP earnings.
Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.
The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.
Definitions
Debt: long-term obligations plus short-term borrowings.
Debt to Total Capital: debt divided by (debt plus total shareholders’ equity).
Net Debt: a Non-GAAP measure defined as debt minus (cash and equivalents).
Net Debt to Capital: a Non-GAAP measure defined as net debt divided by (net debt plus total shareholders’ equity).
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding.
Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) amortization and other acquisition-related costs2, (3) impairments and (gain)/loss on disposal of assets3, (4) litigation (recoveries)/charges, net4, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax.
Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt) divided by (earnings before income taxes and discontinued operations adjusted for the same six items).
Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net and (5) LIFO charges/(credits).
Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax) divided by average shareholders’ equity.
Return on Equity: annualized current period net earnings divided by average shareholders’ equity.
Segment Profit: segment revenue minus (segment cost of products sold and segment distribution, selling, general and administrative expenses).
Segment Profit Margin: segment profit divided by segment revenue.
1 | Programs by which the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including realignment of the management structure of a business unit in response to changing market conditions). |
2 | Costs that consist primarily of amortization of acquisition-related intangible assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations. |
3 | Asset impairments and (gains)/losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and (gain)/loss on disposal of assets within the condensed consolidated statements of earnings. |
4 | Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters. |
5 | The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market. These charges or credits are included in cost of products sold, and represent changes in the Company's LIFO inventory reserve. |
6 | Charges related to the make-whole premium on the redemption of notes. |