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8-K - CURRENT REPORT - CARDINAL HEALTH INCa15q3_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.