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 |
Cardinal Health, Inc. | |||
(Registrant) | |||
Date: | November 8, 2018 | By: | /s/ Jorge M. Gomez |
Jorge M. Gomez | |||
Chief Financial Officer |
Media: | Ellen Barry | Investors: | Lisa Capodici | |
(614) 553-3858 | (614) 757-5035 | |||
ellen.barry@cardinalhealth.com | lisa.capodici@cardinalhealth.com |
• | Revenue increased 8 percent to $35.2 billion |
• | GAAP1 operating earnings increased 211 percent to $816 million, including a $508 million gain on sale of naviHealth; non-GAAP operating earnings decreased 11 percent to $542 million |
• | GAAP diluted earnings per share increased 439 percent to $1.94, and non-GAAP diluted earnings per share increased 18 percent to $1.29 |
• | Company reaffirmed outlook for fiscal 2019; board of directors approved new $1 billion share repurchase authorization and declared quarterly dividend of $0.4763 per common share |
Q1 FY19 | Q1 FY18 | Y/Y | ||||||||
Revenue | $ | 35.2 | billion | $ | 32.6 | billion | 8% | |||
Operating earnings | $ | 816 | million | $ | 262 | million | 211% | |||
Non-GAAP operating earnings | $ | 542 | million | $ | 610 | million | (11)% | |||
Net earnings attributable to Cardinal Health, Inc. | $ | 593 | million | $ | 115 | million | 416% | |||
Non-GAAP net earnings attributable to Cardinal Health, Inc. | $ | 396 | million | $ | 346 | million | 14% | |||
Diluted EPS attributable to Cardinal Health, Inc. | $ | 1.94 | $ | 0.36 | 439% | |||||
Non-GAAP diluted EPS attributable to Cardinal Health, Inc. | $ | 1.29 | $ | 1.09 | 18% |
Q1 FY19 | Q1 FY18 | Y/Y | |||||||
Revenue | $ | 31.4 | billion | $ | 28.9 | billion | 9% | ||
Segment profit | $ | 409 | million | $ | 467 | million | (12)% |
Q1 FY19 | Q1 FY18 | Y/Y | |||||||
Revenue | $ | 3.8 | billion | $ | 3.7 | billion | 2% | ||
Segment profit | $ | 135 | million | $ | 129 | million | 5% |
• |
• | Announced Victor Crawford will join the company as chief executive officer of the Pharmaceutical segment on November 12 |
• | Exited transition services agreement (TSA) with Medtronic for the Europe, Middle East and Africa region during the last week of October and on track for TSA exits in the remaining regions in early 2019 |
• | The Cardinal Health board of directors approved a quarterly dividend of $0.4763 per share. The dividend will be payable on January 15, 2019 to shareholders of record at the close of business on January 2, 2019 |
• | Recently completed a $600 million share repurchase program, and this week, the board of directors approved a three-year authorization to repurchase up to an additional $1 billion of Cardinal Health common shares, which will expire on December 31, 2021. The company is now authorized to repurchase up to $1.3 billion of its common shares |
• | Sponsored inaugural Women Pharmacist Day on October 12, in conjunction with National Pharmacist Month, to recognize the important contributions women pharmacists make to delivering quality care to patients |
• | Credit Suisse 27th Annual Healthcare Conference on November 14 at 8:35 a.m. Mountain in Scottsdale, Ariz. |
• | 37th Annual J.P. Morgan Healthcare Conference on January 7-10, 2019 in San Francisco, Calif. |
First Quarter | ||||||||||
(in millions, except per common share amounts) | 2019 | 2018 | % Change | |||||||
Revenue | $ | 35,213 | $ | 32,641 | 8 | % | ||||
Cost of products sold | 33,546 | 30,969 | 8 | % | ||||||
Gross margin | 1,667 | 1,672 | — | % | ||||||
Operating expenses: | ||||||||||
Distribution, selling, general and administrative expenses | 1,155 | 1,062 | 9 | % | ||||||
Restructuring and employee severance | 32 | 132 | N.M. | |||||||
Amortization and other acquisition-related costs | 156 | 183 | N.M. | |||||||
Impairments and (gain)/loss on disposal of assets, net | (511 | ) | 1 | N.M. | ||||||
Litigation (recoveries)/charges, net | 19 | 32 | N.M. | |||||||
Operating earnings | 816 | 262 | 211 | % | ||||||
Other (income)/expense, net | 3 | 2 | N.M. | |||||||
Interest expense, net | 77 | 81 | (5 | )% | ||||||
Loss on extinguishment of debt | — | 1 | N.M. | |||||||
Earnings before income taxes | 736 | 178 | 313 | % | ||||||
Provision for income taxes | 142 | 61 | 133 | % | ||||||
Net earnings | 594 | 117 | 408 | % | ||||||
Less: Net earnings attributable to noncontrolling interests | (1 | ) | (2 | ) | N.M. | |||||
Net earnings attributable to Cardinal Health, Inc. | $ | 593 | $ | 115 | 416 | % | ||||
Earnings per common share attributable to Cardinal Health, Inc.: | ||||||||||
Basic | $ | 1.95 | $ | 0.36 | 442 | % | ||||
Diluted | 1.94 | 0.36 | 439 | % | ||||||
Weighted-average number of common shares outstanding: | ||||||||||
Basic | 305 | 316 | ||||||||
Diluted | 306 | 318 |
(in millions) | September 30, 2018 | June 30, 2018 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and equivalents | $ | 2,045 | $ | 1,763 | |||
Trade receivables, net | 8,082 | 7,800 | |||||
Inventories, net | 12,481 | 12,308 | |||||
Prepaid expenses and other | 1,837 | 1,926 | |||||
Assets held for sale | — | 756 | |||||
Total current assets | 24,445 | 24,553 | |||||
Property and equipment, net | 2,436 | 2,487 | |||||
Goodwill and other intangibles, net | 12,093 | 12,229 | |||||
Investments | 394 | 50 | |||||
Other assets | 643 | 632 | |||||
Total assets | $ | 40,011 | $ | 39,951 | |||
Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 20,236 | $ | 19,677 | |||
Current portion of long-term obligations and other short-term borrowings | 1,002 | 1,001 | |||||
Other accrued liabilities | 1,819 | 2,002 | |||||
Liabilities related to assets held for sale | — | 213 | |||||
Total current liabilities | 23,057 | 22,893 | |||||
Long-term obligations, less current portion | 7,999 | 8,012 | |||||
Deferred income taxes and other liabilities | 3,042 | 2,975 | |||||
Redeemable noncontrolling interests | — | 12 | |||||
Total shareholders’ equity | 5,913 | 6,059 | |||||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity | $ | 40,011 | $ | 39,951 |
First Quarter | |||||||
(in millions) | 2019 | 2018 | |||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 594 | $ | 117 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 245 | 229 | |||||
Impairments and (gain)/loss on sale of investments | 2 | 6 | |||||
Impairments and (gain)/loss on disposal of assets, net | (511 | ) | 1 | ||||
Share-based compensation | 19 | 17 | |||||
Provision for bad debts | 21 | 16 | |||||
Change in operating assets and liabilities, net of effects from acquisitions and divestitures: | |||||||
(Increase)/decrease in trade receivables | (302 | ) | (359 | ) | |||
(Increase)/decrease in inventories | (178 | ) | (381 | ) | |||
Increase/(decrease) in accounts payable | 559 | 1,296 | |||||
Other accrued liabilities and operating items, net | (84 | ) | 239 | ||||
Net cash provided by operating activities | 365 | 1,181 | |||||
Cash flows from investing activities: | |||||||
Acquisition of subsidiaries, net of cash acquired | — | (6,139 | ) | ||||
Additions to property and equipment | (58 | ) | (67 | ) | |||
Purchase of available-for-sale securities and other investments | (4 | ) | (3 | ) | |||
Proceeds from sale of available-for-sale securities and other investments | 1 | 64 | |||||
Proceeds from divestitures, net of cash sold, and disposal of property and equipment | 740 | 1 | |||||
Net cash provided by/(used in) investing activities | 679 | (6,144 | ) | ||||
Cash flows from financing activities: | |||||||
Payment of contingent consideration obligation | — | (15 | ) | ||||
Net change in short-term borrowings | — | (6 | ) | ||||
Purchase of noncontrolling interests | — | (3 | ) | ||||
Reduction of long-term obligations | (1 | ) | (402 | ) | |||
Net tax proceeds/(withholdings) from share-based compensation | (13 | ) | (18 | ) | |||
Dividends on common shares | (150 | ) | (150 | ) | |||
Purchase of treasury shares | (600 | ) | (150 | ) | |||
Net cash used in financing activities | (764 | ) | (744 | ) | |||
Effect of exchange rates changes on cash and equivalents | 2 | 9 | |||||
Net increase/(decrease) in cash and equivalents | 282 | (5,698 | ) | ||||
Cash and equivalents at beginning of period | 1,763 | 6,879 | |||||
Cash and equivalents at end of period | $ | 2,045 | $ | 1,181 |
First Quarter | First Quarter | |||||||||||||||
(in millions) | 2019 | 2018 | (in millions) | 2019 | 2018 | |||||||||||
Pharmaceutical | Medical | |||||||||||||||
Revenue | Revenue | |||||||||||||||
Amount | $ | 31,416 | $ | 28,920 | Amount | $ | 3,801 | $ | 3,724 | |||||||
Growth rate | 9 | % | 1 | % | Growth rate | 2 | % | 14 | % | |||||||
Segment profit | Segment profit | |||||||||||||||
Amount | $ | 409 | $ | 467 | Amount1 | $ | 135 | $ | 129 | |||||||
Growth rate | (12 | )% | (13 | )% | Growth rate | 5 | % | 1 | % | |||||||
Segment profit margin | 1.30 | % | 1.61 | % | Segment profit margin | 3.55 | % | 3.45 | % |
Operating | Earnings | Provision | ||||||||||||||||||||||||||
SG&A2 | Earnings | Before | for | Net | Effective | Diluted | ||||||||||||||||||||||
Growth | Operating | Growth | Income | Income | Net | Earnings3 | Tax | Diluted | EPS3 | |||||||||||||||||||
(in millions, except per common share amounts) | SG&A2 | Rate | Earnings | Rate | Taxes | Taxes | Earnings3 | Growth Rate | Rate | EPS3 | Growth Rate | |||||||||||||||||
First Quarter Fiscal 2019 | ||||||||||||||||||||||||||||
GAAP | $ | 1,155 | 9 | % | $ | 816 | 211 | % | $ | 736 | $ | 142 | $ | 593 | 416 | % | 19.4 | % | $ | 1.94 | 439 | % | ||||||
State opioid assessment related to prior fiscal years | (29 | ) | 29 | 29 | 8 | 21 | 0.07 | |||||||||||||||||||||
Restructuring and employee severance | — | 32 | 32 | 8 | 24 | 0.08 | ||||||||||||||||||||||
Amortization and other acquisition-related costs | — | 156 | 156 | 36 | 120 | 0.39 | ||||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets4 | — | (511 | ) | (511 | ) | (134 | ) | (377 | ) | (1.23 | ) | |||||||||||||||||
Litigation (recoveries)/charges, net | — | 19 | 19 | 5 | 14 | 0.05 | ||||||||||||||||||||||
Non-GAAP | $ | 1,126 | 6 | % | $ | 542 | (11 | )% | $ | 461 | $ | 65 | $ | 396 | 14 | % | 14.0 | % | $ | 1.29 | 18 | % | ||||||
First Quarter Fiscal 2018 | ||||||||||||||||||||||||||||
GAAP | $ | 1,062 | 15 | % | $ | 262 | (51 | )% | $ | 178 | $ | 61 | $ | 115 | (63 | )% | 34.2 | % | $ | 0.36 | (63 | )% | ||||||
Restructuring and employee severance | — | 132 | 132 | 47 | 85 | 0.27 | ||||||||||||||||||||||
Amortization and other acquisition-related costs | — | 183 | 183 | 58 | 125 | 0.40 | ||||||||||||||||||||||
Impairments and (gain)/loss on disposal of assets | — | 1 | 1 | — | 1 | — | ||||||||||||||||||||||
Litigation (recoveries)/charges, net | — | 32 | 32 | 13 | 19 | 0.06 | ||||||||||||||||||||||
Loss on extinguishment of debt | — | — | 1 | 1 | — | — | ||||||||||||||||||||||
Non-GAAP | $ | 1,062 | 15 | % | $ | 610 | (9 | )% | $ | 527 | $ | 180 | $ | 346 | (13 | )% | 34.1 | % | $ | 1.09 | (12 | )% |
• | LIFO charges and credits are excluded 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. The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies’ financial results. |
• | State opioid assessment related to prior fiscal years is the portion of the New York State assessment for prescription opioid medications that were sold or distributed in periods prior to fiscal 2019 and is excluded from non-GAAP financial measures because it relates to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying, ongoing business. Additionally, while the New York law will require us to make payments on an ongoing basis, the portion of the assessment related to sales in periods prior to fiscal 2019 is a one-time, nonrecurring item. |
• | Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business. |
• | Amortization and other acquisition-related costs, which include transaction costs, integration costs, and changes in the fair value of contingent consideration obligations, are excluded primarily for consistency with the presentation of the financial results of our peer group companies. Additionally, costs for amortization of acquisition-related intangible assets are non-cash amounts, which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion facilitates comparison of historical, current and forecasted financial results. We also exclude other acquisition-related costs, which 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. These costs are also significantly impacted by the timing, complexity and size of acquisitions. |
• | Impairments and gain or loss on disposal of assets are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and are inherently unpredictable in timing and amount, and in the case of impairments, are non-cash amounts, so their exclusion facilitates comparison of historical, current and forecasted financial results. |
• | Litigation recoveries or charges, net are excluded because they 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. |
• | Loss on extinguishment of debt is excluded because it 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 this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions. |
• | Transitional tax benefit, net related to the Tax Cuts and Jobs Act is excluded because it results from the one-time impact during the one-year measurement period of a very significant change in the U.S. federal corporate tax rate and, due to the significant size of the benefit, obscures analysis of trends and financial performance. The transitional tax benefit includes the initial estimate and measurement period adjustments for the re-measurement of deferred tax assets and liabilities due to the reduction of the U.S. federal corporate income tax rate and the repatriation tax on undistributed foreign earnings, both of which are subject to adjustment through December 2018. |
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