Form 8-K |
Ohio | 1-11373 | 31-0958666 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
7000 Cardinal Place, Dublin, Ohio 43017 | ||
(Address of principal executive offices) (Zip Code) | ||
(614) 757-5000 | ||
(Registrant's telephone number, including area code) | ||
Exhibit Number | Exhibit Description |
99.1 | News release issued by the Company on October 31, 2013 announcing first quarter results. |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | October 31, 2013 | By: | /s/ Stuart G. Laws |
Stuart G. Laws | |||
Senior Vice President and Chief Accounting Officer |
Exhibit Number | Exhibit Description |
99.1 | News release issued by the Company on October 31, 2013 announcing first quarter results. |
• | Non-GAAP diluted earnings per share from continuing operations1 increase 36 percent to $1.10, including an $0.18 EPS tax benefit |
• | Non-GAAP operating earnings increase 13 percent to $532 million |
• | Fiscal 2014 outlook for non-GAAP diluted earnings per share raised to $3.62 to $3.72, reflecting strength of operating earnings performance |
• | New $1 billion share repurchase authorization approved |
Q1 FY14 | Q1 FY13 | Y/Y | |||||||
Revenue | $ | 24.5 | billion | $ | 25.9 | billion | (5)% | ||
Operating earnings | $ | 471 | million | $ | 457 | million | 3% | ||
Non-GAAP operating earnings | $ | 532 | million | $ | 469 | million | 13% | ||
Earnings from continuing operations | $ | 340 | million | $ | 272 | million | 25% | ||
Non-GAAP earnings from continuing operations | $ | 378 | million | $ | 281 | million | 35% | ||
Diluted EPS from continuing operations | $ | 0.99 | $ | 0.79 | 25% | ||||
Non-GAAP diluted EPS from continuing operations | $ | 1.10 | $ | 0.81 | 36% |
Q1 FY14 | Q1 FY13 | Y/Y | |||||||
Revenue | $ | 21.8 | billion | $ | 23.5 | billion | (7)% | ||
Segment profit | $ | 433 | million | $ | 400 | million | 8% |
Q1 FY14 | Q1 FY13 | Y/Y | |||||||
Revenue | $ | 2.7 | billion | $ | 2.4 | billion | 13% | ||
Segment profit | $ | 106 | million | $ | 74 | million | 43% |
• | Patricia A. Hemingway Hall, president and CEO of Health Care Service Corp., elected to board of directors |
• | Launched the Specialty Pharmacy Alliance, a new suite of services that makes it easier for community pharmacies to improve their patients' access to, and compliance with, specialty medications |
• | Launched service for retail pharmacies to give their customers convenient access to more than 40,000 home medical products through AssuraMed’s Independence Medical |
• | Announced strategic alignment with FedEx to offer health care third-party logistics solutions |
• | Annual Meeting of Shareholders at 8 a.m. Eastern on Nov. 6 at the company headquarters in Dublin, Ohio |
• | Investor and Analyst Day at 8 a.m. Eastern on Dec. 10 in New York |
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. |
First Quarter | ||||||||||
(in millions, except per common share amounts) | 2014 | 2013 | % Change | |||||||
Revenue | $ | 24,523 | $ | 25,889 | (5 | )% | ||||
Cost of products sold | 23,259 | 24,730 | (6 | )% | ||||||
Gross margin | 1,264 | 1,159 | 9 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 732 | 690 | 6 | % | ||||||
Restructuring and employee severance | 11 | 5 | N.M. | |||||||
Amortization and other acquisition-related costs | 49 | 28 | N.M. | |||||||
Impairments and loss on disposal of assets | — | 1 | N.M. | |||||||
Litigation (recoveries)/charges, net | 1 | (22 | ) | N.M. | ||||||
Operating earnings | 471 | 457 | 3 | % | ||||||
Other income, net | (4 | ) | (8 | ) | N.M. | |||||
Interest expense, net | 33 | 26 | 28 | % | ||||||
Earnings before income taxes and discontinued operations | 442 | 439 | 1 | % | ||||||
Provision for income taxes | 102 | 167 | (39 | )% | ||||||
Earnings from continuing operations | 340 | 272 | 25 | % | ||||||
Loss from discontinued operations, net of tax | (1 | ) | (1 | ) | N.M. | |||||
Net earnings | $ | 339 | $ | 271 | 25 | % | ||||
Basic earnings per common share: | ||||||||||
Continuing operations | $ | 1.00 | $ | 0.80 | 25 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net basic earnings per common share | $ | 1.00 | $ | 0.80 | 25 | % | ||||
Diluted earnings per common share: | ||||||||||
Continuing operations | $ | 0.99 | $ | 0.79 | 25 | % | ||||
Discontinued operations | — | — | N.M. | |||||||
Net diluted earnings per common share | $ | 0.99 | $ | 0.79 | 25 | % | ||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 340 | 341 | ||||||||
Diluted | 344 | 344 |
(in millions) | September 30, 2013 | June 30, 2013 | |||||
(Unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,753 | $ | 1,901 | |||
Trade receivables, net | 4,898 | 6,304 | |||||
Inventories, net | 7,275 | 8,373 | |||||
Prepaid expenses and other | 1,111 | 1,192 | |||||
Total current assets | 16,037 | 17,770 | |||||
Property and equipment, net | 1,445 | 1,489 | |||||
Goodwill and other intangibles, net | 5,570 | 5,574 | |||||
Other assets | 764 | 986 | |||||
Total assets | $ | 23,816 | $ | 25,819 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 10,442 | $ | 12,295 | |||
Current portion of long-term obligations and other short-term borrowings | 190 | 168 | |||||
Other accrued liabilities | 1,875 | 2,127 | |||||
Total current liabilities | 12,507 | 14,590 | |||||
Long-term obligations, less current portion | 3,693 | 3,686 | |||||
Deferred income taxes and other liabilities | 1,319 | 1,568 | |||||
Total shareholders’ equity | 6,297 | 5,975 | |||||
Total liabilities and shareholders’ equity | $ | 23,816 | $ | 25,819 |
First Quarter | |||||||
(in millions) | 2014 | 2013 | |||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 339 | $ | 271 | |||
Loss from discontinued operations, net of tax | 1 | 1 | |||||
Earnings from continuing operations | 340 | 272 | |||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | |||||||
Depreciation and amortization | 117 | 88 | |||||
Impairments and loss on disposal of assets | — | 1 | |||||
Share-based compensation | 24 | 24 | |||||
Provision for bad debts | 12 | 1 | |||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
Decrease/(increase) in trade receivables | 1,395 | (71 | ) | ||||
Decrease/(increase) in inventories | 1,098 | (207 | ) | ||||
Increase/(decrease) in accounts payable | (1,852 | ) | 464 | ||||
Other accrued liabilities and operating items, net | (183 | ) | (4 | ) | |||
Net cash provided by operating activities | 951 | 568 | |||||
Cash flows from investing activities: | |||||||
Acquisition of subsidiaries, net of cash acquired | (25 | ) | (100 | ) | |||
Additions to property and equipment | (26 | ) | (26 | ) | |||
Proceeds from maturities of held-to-maturity securities | — | 23 | |||||
Net cash used in investing activities | (51 | ) | (103 | ) | |||
Cash flows from financing activities: | |||||||
Net change in short-term borrowings | 20 | (10 | ) | ||||
Reduction of long-term obligations | — | (4 | ) | ||||
Proceeds from issuance of common shares | 102 | 21 | |||||
Net tax disbursements from share-based compensation | (15 | ) | (22 | ) | |||
Dividends on common shares | (105 | ) | (84 | ) | |||
Purchase of treasury shares | (50 | ) | (200 | ) | |||
Net cash used in financing activities | (48 | ) | (299 | ) | |||
Net increase in cash and equivalents | 852 | 166 | |||||
Cash and equivalents at beginning of period | 1,901 | 2,274 | |||||
Cash and equivalents at end of period | $ | 2,753 | $ | 2,440 |
Non-GAAP | |||||||||||||||
First Quarter | First Quarter | ||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenue | |||||||||||||||
Amount | $ | 24,523 | $ | 25,889 | |||||||||||
Growth rate | (5 | )% | (3 | )% | |||||||||||
Operating earnings | |||||||||||||||
Amount | $ | 471 | $ | 457 | $ | 532 | $ | 469 | |||||||
Growth rate | 3 | % | 11 | % | 13 | % | 6 | % | |||||||
Earnings from continuing operations | |||||||||||||||
Amount | $ | 340 | $ | 272 | $ | 378 | $ | 281 | |||||||
Growth rate | 25 | % | 15 | % | 35 | % | 9 | % |
First Quarter | First Quarter | |||||||||||||||
(in millions) | 2014 | 2013 | (in millions) | 2014 | 2013 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 21,813 | $ | 23,498 | Amount | $ | 2,711 | $ | 2,393 | |||||||
Growth rate | (7 | )% | (4 | )% | Growth rate | 13 | % | 1 | % | |||||||
Mix | 89 | % | 91 | % | Mix | 11 | % | 9 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 433 | $ | 400 | Amount | $ | 106 | $ | 74 | |||||||
Growth rate | 8 | % | 10 | % | Growth rate | 43 | % | (6 | )% | |||||||
Mix | 80 | % | 84 | % | Mix | 20 | % | 16 | % | |||||||
Segment profit margin | 1.99 | % | 1.70 | % | Segment profit margin | 3.92 | % | 3.11 | % |
First Quarter | |||||||
(in millions, except per common share amounts) | 2014 | 2013 | |||||
Restructuring and employee severance | $ | (11 | ) | $ | (5 | ) | |
Tax benefit | 4 | 2 | |||||
Restructuring and employee severance, net of tax | $ | (7 | ) | $ | (3 | ) | |
Decrease to diluted EPS from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | |
Amortization and Other Acquisition-Related Costs | |||||||
Amortization of acquisition-related intangible assets | $ | (45 | ) | $ | (21 | ) | |
Tax benefit | 17 | 8 | |||||
Amortization of acquisition-related intangible assets, net of tax | $ | (28 | ) | $ | (13 | ) | |
Decrease to diluted EPS from continuing operations | $ | (0.08 | ) | $ | (0.04 | ) | |
Other acquisition-related costs | $ | (3 | ) | $ | (7 | ) | |
Tax benefit | 1 | 2 | |||||
Other acquisition-related costs, net of tax | $ | (2 | ) | $ | (5 | ) | |
Decrease to diluted EPS from continuing operations | $ | (0.01 | ) | $ | (0.01 | ) | |
Total amortization and other acquisition-related costs1 | $ | (49 | ) | $ | (28 | ) | |
Tax benefit1 | 18 | 10 | |||||
Total amortization and other acquisition-related costs, net of tax1 | $ | (31 | ) | $ | (18 | ) | |
Decrease to diluted EPS from continuing operations1 | $ | (0.09 | ) | $ | (0.05 | ) | |
Impairments and loss on disposal of assets | $ | — | $ | (1 | ) | ||
Tax benefit | — | — | |||||
Impairments and loss on disposal of assets, net of tax | $ | — | $ | (1 | ) | ||
Decrease to diluted EPS from continuing operations | $ | — | $ | — | |||
Litigation recoveries/(charges), net | $ | (1 | ) | $ | 22 | ||
Tax expense | — | (9 | ) | ||||
Litigation recoveries/(charges), net, net of tax | $ | (1 | ) | $ | 13 | ||
Increase to diluted EPS from continuing operations | $ | — | $ | 0.04 | |||
Weighted-average number of diluted shares outstanding | 344 | 344 |
1 | The sum of the components may not equal the total due to rounding. |
First Quarter | |||||
2014 | 2013 | ||||
Debt to total capital | 38 | % | 31 | % | |
Net debt to capital | 15 | % | 7 | % | |
Return on equity | 22.1 | % | 17.3 | % | |
Non-GAAP return on equity | 24.7 | % | 17.9 | % | |
Effective tax rate from continuing operations1 | 23.2 | % | 38.1 | % | |
Non-GAAP effective tax rate from continuing operations1 | 24.7 | % | 37.8 | % |
1 | The settlement of federal and state tax controversies favorably impacted, for fiscal 2014 first quarter, both the effective tax rate from continuing operations and non-GAAP effective tax rate from continuing operations by 14.3 and 12.6 percentage points, respectively. The fiscal 2014 first quarter non-GAAP effective tax rate from continuing operations, excluding the impact of the tax settlement, would have been 37.3%. |
First Quarter 2014 | |||||||||||||||||||||
Operating | Earnings Before | Provision | Earnings | Earnings from | Diluted EPS | Diluted EPS | |||||||||||||||
Earnings | Income Taxes | for | from | Continuing | from | from Continuing | |||||||||||||||
Operating | Growth | and Discontinued | Income | Continuing | Operations | Continuing | Operations | ||||||||||||||
(in millions, except per common share amounts) | Earnings | Rate | Operations | Taxes | Operations | Growth Rate | Operations | Growth Rate | |||||||||||||
GAAP | $ | 471 | 3 | % | $ | 442 | $ | 102 | $ | 340 | 25 | % | $ | 0.99 | 25 | % | |||||
Restructuring and employee severance | 11 | 11 | 4 | 7 | 0.02 | ||||||||||||||||
Amortization and other acquisition-related costs | 49 | 49 | 18 | 31 | 0.09 | ||||||||||||||||
Impairments and loss on disposal of assets | — | — | — | — | — | ||||||||||||||||
Litigation (recoveries)/charges, net | 1 | 1 | — | 1 | — | ||||||||||||||||
Non-GAAP | $ | 532 | 13 | % | $ | 503 | $ | 124 | $ | 378 | 35 | % | $ | 1.10 | 36 | % | |||||
First Quarter 2013 | |||||||||||||||||||||
GAAP | $ | 457 | 11 | % | $ | 439 | $ | 167 | $ | 272 | 15 | % | $ | 0.79 | 16 | % | |||||
Restructuring and employee severance | 5 | 5 | 2 | 3 | 0.01 | ||||||||||||||||
Amortization and other acquisition-related costs | 28 | 28 | 10 | 18 | 0.05 | ||||||||||||||||
Impairments and loss on disposal of assets | 1 | 1 | — | 1 | — | ||||||||||||||||
Litigation (recoveries)/charges, net | (22 | ) | (22 | ) | (9 | ) | (13 | ) | (0.04 | ) | |||||||||||
Non-GAAP | $ | 469 | 6 | % | $ | 451 | $ | 170 | $ | 281 | 9 | % | $ | 0.81 | 11 | % |
First Quarter | |||||||||||||||
(in millions) | 2014 | 2013 | |||||||||||||
GAAP return on equity | 22.1 | % | 17.3 | % | |||||||||||
Non-GAAP return on equity | |||||||||||||||
Net earnings | $ | 339 | $ | 271 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations | 7 | 3 | |||||||||||||
Amortization and other acquisition-related costs, net of tax, in continuing operations | 31 | 18 | |||||||||||||
Impairments and loss on disposal of assets, net of tax, in continuing operations | — | 1 | |||||||||||||
Litigation (recoveries)/charges, net, net of tax, in continuing operations | 1 | (13 | ) | ||||||||||||
Adjusted net earnings | $ | 378 | $ | 280 | |||||||||||
Annualized | $ | 1,512 | $ | 1,120 | |||||||||||
First | Fourth | First | Fourth | ||||||||||||
Quarter | Quarter | Quarter | Quarter | ||||||||||||
2014 | 2013 | 2013 | 2012 | ||||||||||||
Total shareholders' equity | $ | 6,297 | $ | 5,975 | $ | 6,281 | $ | 6,244 | |||||||
Divided by average shareholders' equity | $ | 6,136 | $ | 6,263 | |||||||||||
Non-GAAP return on equity | 24.7 | % | 17.9 | % |
First Quarter | |||||||
(in millions) | 2014 | 2013 | |||||
GAAP effective tax rate from continuing operations1 | 23.2 | % | 38.1 | % | |||
Non-GAAP effective tax rate from continuing operations | |||||||
Earnings before income taxes and discontinued operations | $ | 442 | $ | 439 | |||
Restructuring and employee severance | 11 | 5 | |||||
Amortization and other acquisition-related costs | 49 | 28 | |||||
Impairments and loss on disposal of assets | — | 1 | |||||
Litigation (recoveries)/charges, net | 1 | (22 | ) | ||||
Adjusted earnings before income taxes and discontinued operations | $ | 503 | $ | 451 | |||
Provision for income taxes | $ | 102 | $ | 167 | |||
Restructuring and employee severance tax benefit | 4 | 2 | |||||
Amortization and other acquisition-related costs tax benefit | 18 | 10 | |||||
Impairments and loss on disposal of assets tax benefit | — | — | |||||
Litigation (recoveries)/charges, net tax expense | — | (9 | ) | ||||
Adjusted provision for income taxes | $ | 124 | $ | 170 | |||
Non-GAAP effective tax rate from continuing operations1 | 24.7 | % | 37.8 | % | |||
First Quarter | |||||||
2014 | 2013 | ||||||
Debt to total capital | 38 | % | 31 | % | |||
Net debt to capital | |||||||
Current portion of long-term obligations and other short-term borrowings | $ | 190 | $ | 471 | |||
Long-term obligations, less current portion | 3,693 | 2,408 | |||||
Debt | $ | 3,883 | $ | 2,879 | |||
Cash and equivalents | (2,753 | ) | (2,440 | ) | |||
Net debt | $ | 1,130 | $ | 439 | |||
Total shareholders' equity | 6,297 | 6,281 | |||||
Capital | $ | 7,427 | $ | 6,720 | |||
Net debt to capital | 15 | % | 7 | % |
1 | The settlement of federal and state tax controversies favorably impacted, for fiscal 2014 first quarter, both the effective tax rate from continuing operations and non-GAAP effective tax rate from continuing operations by 14.3 and 12.6 percentage points, respectively. The fiscal 2014 first quarter non-GAAP effective tax rate from continuing operations, excluding the impact of the tax settlement, would have been 37.3%. |
1 | Programs whereby 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 substantial 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 losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and 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. |
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