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, 2016 announcing first-quarter results. |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | October 31, 2016 | 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, 2016 announcing first-quarter results. |
Media: | Ellen Barry | Investors: | Lisa Capodici | |
(614) 553-3858 | (614) 757-5035 | |||
ellen.barry@cardinalhealth.com | lisa.capodici@cardinalhealth.com |
• | Revenue increased 14 percent to $32 billion |
• | GAAP1 operating earnings decreased 14 percent to $535 million, and non-GAAP operating earnings decreased 9 percent to $669 million |
• | GAAP diluted earnings per share decreased 17 percent to $0.96, and non-GAAP diluted earnings per share decreased 10 percent to $1.24 |
• | Fiscal 2017 earnings per share guidance adjusted |
Q1 FY17 | Q1 FY16 | Y/Y | |||||||
Revenue | $ | 32.0 | billion | $ | 28.1 | billion | 14% | ||
Operating earnings | $ | 535 | million | $ | 620 | million | (14)% | ||
Non-GAAP operating earnings | $ | 669 | million | $ | 737 | million | (9)% | ||
Net earnings attributable to Cardinal Health Inc. | $ | 309 | million | $ | 383 | million | (19)% | ||
Non-GAAP net earnings attributable to Cardinal Health Inc. | $ | 399 | million | $ | 458 | million | (13)% | ||
Diluted EPS attributable to Cardinal Health Inc. | $ | 0.96 | $ | 1.15 | (17)% | ||||
Non-GAAP diluted EPS attributable to Cardinal Health Inc. | $ | 1.24 | $ | 1.38 | (10)% |
Q1 FY17 | Q1 FY16 | Y/Y | |||||||
Revenue | $ | 28.8 | billion | $ | 25.1 | billion | 14% | ||
Segment profit | $ | 534 | million | $ | 657 | million | (19)% |
Q1 FY17 | Q1 FY16 | Y/Y | |||||||
Revenue | $ | 3.3 | billion | $ | 2.9 | billion | 12% | ||
Segment profit | $ | 127 | million | $ | 101 | million | 26% |
• | Onboarded Medical segment customer Kaiser Permanente |
• | Expanded the existing distribution agreement between Cordis and Biosensors, enabling Cordis to be the exclusive distributor for Biosensors' coronary interventional products in Japan |
• | Acquired TelePharm, a company that focuses on establishing telepharmacies in rural areas |
• | Granted Cardinal Health Foundation funds to 17 community-based non-profit organizations nationwide to combat prescription drug misuse |
• | 2016 Annual Meeting of Shareholders on Nov. 3 at 8 a.m. Eastern |
• | Credit Suisse 25th Annual Healthcare Conference on Nov. 8 at 8:30 a.m. Mountain |
1. | GAAP refers to U.S. generally accepted accounting principles. This news release includes GAAP financial measures as well as non-GAAP financial measures, which are financial measures not calculated in accordance with GAAP. See “Use of non-GAAP Measures” following the attached schedules for definitions of the non-GAAP financial measures presented in this news release, and see the attached schedules for 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) | 2017 | 2016 | % Change | |||||||
Revenue | $ | 32,039 | $ | 28,055 | 14 | % | ||||
Cost of products sold | 30,449 | 26,476 | 15 | % | ||||||
Gross margin | 1,590 | 1,579 | 1 | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general, and administrative expenses | 920 | 842 | 9 | % | ||||||
Restructuring and employee severance | 9 | 12 | N.M. | |||||||
Amortization and other acquisition-related costs | 122 | 105 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets | 3 | — | N.M. | |||||||
Litigation (recoveries)/charges, net | 1 | — | N.M. | |||||||
Operating earnings | 535 | 620 | (14 | )% | ||||||
Other (income)/expense, net | (3 | ) | 8 | N.M. | ||||||
Interest expense, net | 44 | 44 | — | % | ||||||
Earnings before income taxes | 494 | 568 | (13 | )% | ||||||
Provision for income taxes | 184 | 184 | — | % | ||||||
Net earnings | 310 | 384 | (19 | )% | ||||||
Less: Net earnings attributable to noncontrolling interests | (1 | ) | (1 | ) | N.M. | |||||
Net earnings attributable to Cardinal Health, Inc. | $ | 309 | $ | 383 | (19 | )% | ||||
Earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Basic | $ | 0.97 | $ | 1.17 | (17 | )% | ||||
Diluted | 0.96 | 1.15 | (17 | )% | ||||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 320 | 328 | ||||||||
Diluted | 322 | 331 |
(in millions) | September 30, 2016 | June 30, 2016 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,001 | $ | 2,356 | |||
Trade receivables, net | 7,708 | 7,405 | |||||
Inventories, net | 10,917 | 10,615 | |||||
Prepaid expenses and other | 1,657 | 1,580 | |||||
Total current assets | 22,283 | 21,956 | |||||
Property and equipment, net | 1,823 | 1,796 | |||||
Goodwill and other intangibles, net | 9,427 | 9,426 | |||||
Other assets | 873 | 944 | |||||
Total assets | $ | 34,406 | $ | 34,122 | |||
Liabilities, Redeemable Noncontrolling Interests, and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 17,597 | $ | 17,306 | |||
Current portion of long-term obligations and other short-term borrowings | 616 | 587 | |||||
Other accrued liabilities | 1,788 | 1,808 | |||||
Total current liabilities | 20,001 | 19,701 | |||||
Long-term obligations, less current portion | 4,916 | 4,952 | |||||
Deferred income taxes and other liabilities | 2,842 | 2,781 | |||||
Redeemable noncontrolling interests | 116 | 117 | |||||
Total Cardinal Health, Inc. shareholders' equity | 6,512 | 6,554 | |||||
Noncontrolling interests | 19 | 17 | |||||
Total shareholders’ equity | 6,531 | 6,571 | |||||
Total liabilities, redeemable noncontrolling interests, and shareholders’ equity | $ | 34,406 | $ | 34,122 |
First Quarter | |||||||
(in millions) | 2017 | 2016 | |||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 310 | $ | 384 | |||
Adjustments to reconcile net earnings to net cash provided by/(used in) operating activities: | |||||||
Depreciation and amortization | 173 | 137 | |||||
Impairments and loss on disposal of assets, net | 3 | — | |||||
Share-based compensation | 23 | 30 | |||||
Provision for bad debts | 7 | 17 | |||||
Change in fair value of contingent consideration obligation | — | (1 | ) | ||||
Change in operating assets and liabilities, net of effects from acquisitions: | |||||||
Increase in trade receivables | (306 | ) | (348 | ) | |||
Increase in inventories | (298 | ) | (495 | ) | |||
Increase in accounts payable | 279 | 425 | |||||
Other accrued liabilities and operating items, net | (87 | ) | (201 | ) | |||
Net cash provided by/(used in) operating activities | 104 | (52 | ) | ||||
Cash flows from investing activities: | |||||||
Acquisition of subsidiaries, net of cash acquired | (9 | ) | (1,399 | ) | |||
Additions to property and equipment | (100 | ) | (83 | ) | |||
Purchase of available-for-sale securities and other investments | (52 | ) | (26 | ) | |||
Proceeds from sale of available-for-sale securities and other investments | 34 | 25 | |||||
Proceeds from maturities of available-for-sale securities | 17 | 5 | |||||
Net cash used in investing activities | (110 | ) | (1,478 | ) | |||
Cash flows from financing activities: | |||||||
Payment of contingent consideration obligation | — | (23 | ) | ||||
Net change in short-term borrowings | 25 | 36 | |||||
Net purchase of noncontrolling interests | (10 | ) | — | ||||
Reduction of long-term obligations | (1 | ) | (4 | ) | |||
Proceeds from interest rate swap terminations | 14 | — | |||||
Net tax withholdings from share-based compensation | (9 | ) | (21 | ) | |||
Excess tax benefits from share-based compensation | 30 | 31 | |||||
Dividends on common shares | (149 | ) | (131 | ) | |||
Purchase of treasury shares | (250 | ) | — | ||||
Net cash used in financing activities | (350 | ) | (112 | ) | |||
Effect of exchange rate changes on cash and equivalents | 1 | — | |||||
Net decrease in cash and equivalents | (355 | ) | (1,642 | ) | |||
Cash and equivalents at beginning of period | 2,356 | 4,616 | |||||
Cash and equivalents at end of period | $ | 2,001 | $ | 2,974 |
First Quarter | First Quarter | |||||||||||||||
(in millions) | 2017 | 2016 | (in millions) | 2017 | 2016 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 28,762 | $ | 25,140 | Amount | $ | 3,279 | $ | 2,919 | |||||||
Growth rate | 14 | % | 19 | % | Growth rate | 12 | % | 2 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 534 | $ | 657 | Amount | $ | 127 | $ | 101 | |||||||
Growth rate | (19 | )% | 46 | % | Growth rate | 26 | % | (11 | )% | |||||||
Segment profit margin | 1.86 | % | 2.62 | % | Segment profit margin | 3.87 | % | 3.45 | % |
First Quarter 2017 | |||||||||||||||||||||
Operating | Earnings | Provision | |||||||||||||||||||
Earnings | Before | for | Net | Diluted | |||||||||||||||||
(in millions, except per common share amounts) | Operating | Growth | Income | Income | Net | Earnings2 | Diluted | EPS2 | |||||||||||||
Earnings | Rate | Taxes | Taxes | Earnings2 | Growth Rate | EPS2 | Growth Rate | ||||||||||||||
GAAP | $ | 535 | (14 | )% | $ | 494 | $ | 184 | $ | 309 | (19 | )% | $ | 0.96 | (17 | )% | |||||
Restructuring and employee severance | 9 | 9 | 4 | 5 | 0.02 | ||||||||||||||||
Amortization and other acquisition-related costs | 122 | 122 | 40 | 82 | 0.25 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | 3 | 3 | 1 | 2 | 0.01 | ||||||||||||||||
Litigation (recoveries)/charges, net | 1 | 1 | — | 1 | — | ||||||||||||||||
Non-GAAP | $ | 669 | (9 | )% | $ | 629 | $ | 229 | $ | 399 | (13 | )% | $ | 1.24 | (10 | )% | |||||
First Quarter 2016 | |||||||||||||||||||||
GAAP | $ | 620 | 33 | % | $ | 568 | $ | 184 | $ | 383 | 44 | % | $ | 1.15 | 47 | % | |||||
Restructuring and employee severance | 12 | 12 | 5 | 7 | 0.02 | ||||||||||||||||
Amortization and other acquisition-related costs | 105 | 105 | 37 | 68 | 0.21 | ||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | — | — | — | — | ||||||||||||||||
Litigation (recoveries)/charges, net | — | — | — | — | — | ||||||||||||||||
Non-GAAP | $ | 737 | 30 | % | $ | 685 | $ | 226 | $ | 458 | 35 | % | $ | 1.38 | 38 | % |
• | LIFO charges and credits, which we began excluding in fiscal 2015 because the factors that drive last-in first-out ("LIFO") inventory charges or credits such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end), are largely out of our control and cannot be accurately predicted. We also believe that exclusion of LIFO charges from non-GAAP metrics allows for better comparison of our current financial results to our historical financial results and to our peer group companies; |
• | restructuring and employee severance costs, which include charges for programs in which we fundamentally change our operations and are excluded because they are not part of the ongoing operations of our underlying business, which includes normal levels of reinvestment in the business; |
• | amortization and other acquisition-related costs. We exclude amortization costs primarily for consistency with the presentation of the financial results of our peer group companies. Additionally, these non-cash amounts are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion allows for better comparison of forecasted, current and historical financial results. We exclude other acquisition-related costs because they are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity’s initial balance sheet as part of the purchase price allocation. They are also significantly impacted by the timing and size of acquisitions; |
• | impairments and gains or loss on disposal of assets, which are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and their exclusion results in a metric that more meaningfully reflects the sustainability of our operating performance; |
• | litigation recoveries or charges, net, which often relate to events that may have occurred in prior or multiple periods, do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount; and |
• | loss on extinguishment of debt, which does not typically occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of these types of charges is not consistent and is significantly impacted by the timing and size of debt financing transactions. |
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