|
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Ohio
|
31-0958666
|
(State or other jurisdiction of
incorporation or organization)
|
(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)
|
Cardinal Health
Q2 Fiscal 2018 Form 10-Q
|
|
|
Page
|
|
|
|
1
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Overview
|
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
2
|
MD&A
|
Overview
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
GAAP operating earnings
|
$
|
399
|
|
|
$
|
542
|
|
|
(26
|
)%
|
|
$
|
661
|
|
|
$
|
1,076
|
|
|
(39
|
)%
|
LIFO charges/(credits)
|
—
|
|
|
9
|
|
|
|
|
—
|
|
|
9
|
|
|
|
||||||
Restructuring and employee severance
|
21
|
|
|
7
|
|
|
|
|
153
|
|
|
16
|
|
|
|
||||||
Amortization and other acquisition-related costs
|
184
|
|
|
115
|
|
|
|
|
368
|
|
|
237
|
|
|
|
||||||
Impairments and (gain)/loss on disposal of assets
|
68
|
|
|
9
|
|
|
|
|
68
|
|
|
12
|
|
|
|
||||||
Litigation (recoveries)/charges, net
|
58
|
|
|
19
|
|
|
|
|
90
|
|
|
20
|
|
|
|
||||||
Non-GAAP operating earnings
|
$
|
730
|
|
|
$
|
701
|
|
|
4
|
%
|
|
$
|
1,340
|
|
|
$
|
1,370
|
|
|
(2
|
)%
|
3
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Overview
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
($ per share)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
GAAP
(1)
|
$
|
3.33
|
|
|
$
|
1.02
|
|
|
226
|
%
|
|
$
|
3.68
|
|
|
$
|
1.97
|
|
|
87
|
%
|
LIFO charges/(credits)
|
—
|
|
|
0.02
|
|
|
|
|
—
|
|
|
0.02
|
|
|
|
||||||
Restructuring and employee severance
|
0.07
|
|
|
0.01
|
|
|
|
|
0.34
|
|
|
0.03
|
|
|
|
||||||
Amortization and other acquisition-related costs
|
0.46
|
|
|
0.24
|
|
|
|
|
0.85
|
|
|
0.49
|
|
|
|
||||||
Impairments and (gain)/loss on disposal of assets
|
0.35
|
|
|
0.02
|
|
|
|
|
0.35
|
|
|
0.02
|
|
|
|
||||||
Litigation (recoveries)/charges, net
|
0.13
|
|
|
0.04
|
|
|
|
|
0.19
|
|
|
0.04
|
|
|
|
||||||
Transitional tax benefit, net
|
(2.83
|
)
|
|
—
|
|
|
|
|
(2.82
|
)
|
|
—
|
|
|
|
||||||
Non-GAAP
(1)
|
$
|
1.51
|
|
|
$
|
1.34
|
|
|
13
|
%
|
|
$
|
2.60
|
|
|
$
|
2.57
|
|
|
1
|
%
|
(1)
|
diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS")
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
4
|
MD&A
|
Overview
|
|
|
|
5
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Results of Operations
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Pharmaceutical
|
$
|
31,146
|
|
|
$
|
29,743
|
|
|
5
|
%
|
|
$
|
60,066
|
|
|
$
|
58,505
|
|
|
3
|
%
|
Medical
|
4,044
|
|
|
3,410
|
|
|
19
|
%
|
|
7,768
|
|
|
6,690
|
|
|
16
|
%
|
||||
Total segment revenue
|
35,190
|
|
|
33,153
|
|
|
6
|
%
|
|
67,834
|
|
|
65,195
|
|
|
4
|
%
|
||||
Corporate
|
(4
|
)
|
|
(3
|
)
|
|
33
|
%
|
|
(7
|
)
|
|
(6
|
)
|
|
17
|
%
|
||||
Total revenue
|
$
|
35,186
|
|
|
$
|
33,150
|
|
|
6
|
%
|
|
$
|
67,827
|
|
|
$
|
65,189
|
|
|
4
|
%
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
6
|
MD&A
|
Results of Operations
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Gross margin
|
$
|
1,861
|
|
|
$
|
1,602
|
|
|
16
|
%
|
|
$
|
3,533
|
|
|
$
|
3,192
|
|
|
11
|
%
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
SG&A expenses
|
$
|
1,131
|
|
|
$
|
910
|
|
|
24
|
%
|
|
$
|
2,193
|
|
|
$
|
1,831
|
|
|
20
|
%
|
7
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Results of Operations
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Pharmaceutical
|
$
|
514
|
|
|
$
|
537
|
|
|
(4
|
)%
|
|
$
|
981
|
|
|
$
|
1,071
|
|
|
(8
|
)%
|
Medical
|
220
|
|
|
159
|
|
|
38
|
%
|
|
348
|
|
|
286
|
|
|
22
|
%
|
||||
Total segment profit
|
734
|
|
|
696
|
|
|
5
|
%
|
|
1,329
|
|
|
1,357
|
|
|
(2
|
)%
|
||||
Corporate
|
(335
|
)
|
|
(154
|
)
|
|
118
|
%
|
|
(668
|
)
|
|
(281
|
)
|
|
138
|
%
|
||||
Total consolidated operating earnings
|
$
|
399
|
|
|
$
|
542
|
|
|
(26
|
)%
|
|
$
|
661
|
|
|
$
|
1,076
|
|
|
(39
|
)%
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
8
|
MD&A
|
Results of Operations
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Restructuring and employee severance
|
$
|
21
|
|
|
$
|
7
|
|
|
$
|
153
|
|
|
$
|
16
|
|
Amortization and other acquisition-related costs
|
184
|
|
|
115
|
|
|
368
|
|
|
237
|
|
||||
Impairments and (gain)/loss on disposal of assets, net
|
68
|
|
|
9
|
|
|
68
|
|
|
12
|
|
||||
Litigation (recoveries)/charges, net
|
58
|
|
|
19
|
|
|
90
|
|
|
20
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
Change
|
|
2017
|
|
2016
|
|
Change
|
||||||||||
Other (income)/expense, net
|
$
|
(5
|
)
|
|
$
|
7
|
|
|
N.M.
|
|
|
$
|
(4
|
)
|
|
$
|
3
|
|
|
N.M.
|
|
Interest expense, net
|
$
|
87
|
|
|
$
|
44
|
|
|
96
|
%
|
|
$
|
168
|
|
|
$
|
88
|
|
|
91
|
%
|
Loss on extinguishment of debt
|
$
|
—
|
|
|
$
|
—
|
|
|
N.M.
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
N.M.
|
|
|
9
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Liquidity and Capital Resources
|
|
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
10
|
MD&A
|
Liquidity and Capital Resources
|
|
|
11
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
MD&A
|
Other Items
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
12
|
Explanation and Reconciliation of Non-GAAP Financial Measures
|
|
|
•
|
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 from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies’ financial results.
|
•
|
Restructuring and employee severance costs
are excluded because they relate to programs in which we fundamentally change our operations and because they are not part of the ongoing operations of our underlying business.
|
•
|
Amortization and other acquisition-related costs
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 financing 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 estimate 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 during an up to 12 month measurement period.
|
13
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Explanation and Reconciliation of Non-GAAP Financial Measures
|
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
14
|
Explanation and Reconciliation of Non-GAAP Financial Measures
|
|
|
(in millions, except per common share amounts)
|
Operating Earnings
|
Operating Earnings Growth Rate
|
Earnings Before Income Taxes
|
Provision for/(Benefit from) Income Taxes
|
Net Earnings
1
|
Net Earnings
1
Growth Rate
|
Diluted EPS
1
|
Diluted EPS
1
Growth Rate
|
|||||||||||||
|
Three Months Ended December 31, 2017
|
||||||||||||||||||||
GAAP
|
$
|
399
|
|
(26
|
)%
|
$
|
317
|
|
$
|
(736
|
)
|
$
|
1,053
|
|
225
|
%
|
$
|
3.33
|
|
226
|
%
|
Restructuring and employee severance
|
21
|
|
|
21
|
|
(2
|
)
|
23
|
|
|
0.07
|
|
|
||||||||
Amortization and other acquisition-related costs
|
184
|
|
|
184
|
|
41
|
|
143
|
|
|
0.46
|
|
|
||||||||
Impairments and loss on disposal of assets
|
68
|
|
|
68
|
|
(43
|
)
|
111
|
|
|
0.35
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
58
|
|
|
58
|
|
17
|
|
41
|
|
|
0.13
|
|
|
||||||||
Transitional tax benefit, net
2
|
—
|
|
|
—
|
|
894
|
|
(894
|
)
|
|
(2.83
|
)
|
|
||||||||
Non-GAAP
|
$
|
730
|
|
4
|
%
|
$
|
648
|
|
$
|
171
|
|
$
|
478
|
|
12
|
%
|
$
|
1.51
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended December 31, 2016
|
||||||||||||||||||||
GAAP
|
$
|
542
|
|
(4
|
)%
|
$
|
491
|
|
$
|
167
|
|
$
|
324
|
|
—
|
%
|
$
|
1.02
|
|
4
|
%
|
LIFO charges/(credits)
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
||||||||
Restructuring and employee severance
|
7
|
|
|
7
|
|
2
|
|
5
|
|
|
0.01
|
|
|
||||||||
Amortization and other acquisition-related costs
|
115
|
|
|
115
|
|
39
|
|
76
|
|
|
0.24
|
|
|
||||||||
Impairments and loss on disposal of assets
|
9
|
|
|
9
|
|
3
|
|
6
|
|
|
0.02
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
19
|
|
|
19
|
|
7
|
|
12
|
|
|
0.04
|
|
|
||||||||
Non-GAAP
|
$
|
701
|
|
(4
|
)%
|
$
|
650
|
|
$
|
222
|
|
$
|
427
|
|
(1
|
)%
|
$
|
1.34
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Six Months Ended December 31, 2017
|
||||||||||||||||||||
GAAP
|
$
|
661
|
|
(39
|
)%
|
$
|
495
|
|
$
|
(675
|
)
|
$
|
1,168
|
|
85
|
%
|
$
|
3.68
|
|
87
|
%
|
Restructuring and employee severance
|
153
|
|
|
153
|
|
45
|
|
108
|
|
|
0.34
|
|
|
||||||||
Amortization and other acquisition-related costs
|
368
|
|
|
368
|
|
98
|
|
270
|
|
|
0.85
|
|
|
||||||||
Impairments and loss on disposal of assets
|
68
|
|
|
68
|
|
(43
|
)
|
111
|
|
|
0.35
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
90
|
|
|
90
|
|
30
|
|
60
|
|
|
0.19
|
|
|
||||||||
Loss on extinguishment of debt
|
—
|
|
|
2
|
|
1
|
|
1
|
|
|
—
|
|
|
||||||||
Transitional tax benefit, net
2
|
—
|
|
|
—
|
|
894
|
|
(894
|
)
|
|
(2.82
|
)
|
|
||||||||
Non-GAAP
|
$
|
1,340
|
|
(2
|
)%
|
$
|
1,175
|
|
$
|
350
|
|
$
|
823
|
|
—
|
%
|
$
|
2.60
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Six Months Ended December 31, 2016
|
||||||||||||||||||||
GAAP
|
$
|
1,076
|
|
(9
|
)%
|
$
|
985
|
|
$
|
351
|
|
$
|
633
|
|
(11
|
)%
|
$
|
1.97
|
|
(8
|
)%
|
LIFO charges/(credits)
|
9
|
|
|
9
|
|
4
|
|
5
|
|
|
0.02
|
|
|
||||||||
Restructuring and employee severance
|
16
|
|
|
16
|
|
6
|
|
10
|
|
|
0.03
|
|
|
||||||||
Amortization and other acquisition-related costs
|
237
|
|
|
237
|
|
79
|
|
158
|
|
|
0.49
|
|
|
||||||||
Impairments and (gain)/loss on disposal of assets
|
12
|
|
|
12
|
|
4
|
|
8
|
|
|
0.02
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
20
|
|
|
20
|
|
8
|
|
12
|
|
|
0.04
|
|
|
||||||||
Non-GAAP
|
$
|
1,370
|
|
(6
|
)%
|
$
|
1,279
|
|
$
|
452
|
|
$
|
826
|
|
(7
|
)%
|
$
|
2.57
|
|
(4
|
)%
|
1
|
attributable to Cardinal Health, Inc.
|
2
|
Reflects the estimated net transitional benefit from the remeasurement of our deferred tax assets and liabilities partially offset by the repatriation tax on cash and earnings of foreign subsidiaries. We have not yet completed our analysis of the impact of the Tax Act and, as such, these amounts are provisional estimates and we may record additional provisional amounts or adjustments to the provisional amounts in future periods. See
Note 8
of the "Notes to Condensed Consolidated Financial Statements" for more information on the Tax Act.
|
15
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Other
|
|
Period
|
Total Number
of Shares Purchased (1) |
|
Average Price Paid per Share
|
|
Total Number of Shares
Purchased as Part of Publicly Announced Program (2) |
|
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under the Program (2)
(in millions)
|
||||||
October 2017
|
144
|
|
|
$
|
66.06
|
|
|
—
|
|
|
$
|
293
|
|
November 2017
|
148
|
|
|
59.38
|
|
|
—
|
|
|
293
|
|
||
December 2017
|
177
|
|
|
61.50
|
|
|
—
|
|
|
293
|
|
||
Total
|
469
|
|
|
$
|
62.23
|
|
|
—
|
|
|
$
|
293
|
|
(1)
|
Reflects
144
,
148
and
177
common shares purchased in October, November and December 2017, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.
|
(2)
|
On May 4, 2016, our Board of Directors approved a $1.0 billion share repurchase program that expires on December 31, 2019. On February 7, 2018, our Board of Directors approved a new $1.0 billion share repurchase program that expires on December 31, 2020.
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
16
|
Financial Statements
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||
(in millions, except per common share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Revenue
|
$
|
35,186
|
|
|
$
|
33,150
|
|
|
$
|
67,827
|
|
|
$
|
65,189
|
|
Cost of products sold
|
33,325
|
|
|
31,548
|
|
|
64,294
|
|
|
61,997
|
|
||||
Gross margin
|
1,861
|
|
|
1,602
|
|
|
3,533
|
|
|
3,192
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Distribution, selling, general and administrative expenses
|
1,131
|
|
|
910
|
|
|
2,193
|
|
|
1,831
|
|
||||
Restructuring and employee severance
|
21
|
|
|
7
|
|
|
153
|
|
|
16
|
|
||||
Amortization and other acquisition-related costs
|
184
|
|
|
115
|
|
|
368
|
|
|
237
|
|
||||
Impairments and loss on disposal of assets, net
|
68
|
|
|
9
|
|
|
68
|
|
|
12
|
|
||||
Litigation (recoveries)/charges, net
|
58
|
|
|
19
|
|
|
90
|
|
|
20
|
|
||||
Operating earnings
|
399
|
|
|
542
|
|
|
661
|
|
|
1,076
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other (income)/expense, net
|
(5
|
)
|
|
7
|
|
|
(4
|
)
|
|
3
|
|
||||
Interest expense, net
|
87
|
|
|
44
|
|
|
168
|
|
|
88
|
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Earnings before income taxes
|
317
|
|
|
491
|
|
|
495
|
|
|
985
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Provision for/(benefit from) income taxes
|
(736
|
)
|
|
167
|
|
|
(675
|
)
|
|
351
|
|
||||
Net earnings
|
1,053
|
|
|
324
|
|
|
1,170
|
|
|
634
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Less: Net earnings attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
||||
Net earnings attributable to Cardinal Health, Inc.
|
$
|
1,053
|
|
|
$
|
324
|
|
|
$
|
1,168
|
|
|
$
|
633
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
3.35
|
|
|
$
|
1.02
|
|
|
$
|
3.70
|
|
|
$
|
1.99
|
|
Diluted
|
3.33
|
|
|
1.02
|
|
|
3.68
|
|
|
1.97
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
315
|
|
|
318
|
|
|
315
|
|
|
319
|
|
||||
Diluted
|
316
|
|
|
319
|
|
|
317
|
|
|
321
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends declared per common share
|
$
|
0.4624
|
|
|
$
|
0.4489
|
|
|
$
|
0.9248
|
|
|
$
|
0.8978
|
|
17
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Financial Statements
|
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net earnings
|
$
|
1,053
|
|
|
$
|
324
|
|
|
$
|
1,170
|
|
|
$
|
634
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive income/(loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments and other
|
(9
|
)
|
|
(78
|
)
|
|
31
|
|
|
(80
|
)
|
||||
Net unrealized gain/(loss) on derivative instruments, net of tax
|
—
|
|
|
24
|
|
|
(1
|
)
|
|
26
|
|
||||
Total other comprehensive income/(loss), net of tax
|
(9
|
)
|
|
(54
|
)
|
|
30
|
|
|
(54
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Total comprehensive income
|
1,044
|
|
|
270
|
|
|
1,200
|
|
|
580
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Less: comprehensive income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
||||
Total comprehensive income attributable to Cardinal Health, Inc.
|
$
|
1,044
|
|
|
$
|
270
|
|
|
$
|
1,198
|
|
|
$
|
579
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
18
|
Financial Statements
|
|
|
(in millions)
|
December 31, 2017
|
|
June 30, 2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
1,249
|
|
|
$
|
6,879
|
|
Trade receivables, net
|
7,664
|
|
|
8,048
|
|
||
Inventories, net
|
12,087
|
|
|
11,301
|
|
||
Prepaid expenses and other
|
1,972
|
|
|
2,117
|
|
||
Assets held for sale
|
2,216
|
|
|
—
|
|
||
Total current assets
|
25,188
|
|
|
28,345
|
|
||
|
|
|
|
||||
Property and equipment, net
|
2,547
|
|
|
1,879
|
|
||
Goodwill and other intangibles, net
|
14,366
|
|
|
9,207
|
|
||
Other assets
|
804
|
|
|
681
|
|
||
Total assets
|
$
|
42,905
|
|
|
$
|
40,112
|
|
|
|
|
|
||||
Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
19,194
|
|
|
$
|
17,906
|
|
Current portion of long-term obligations and other short-term borrowings
|
702
|
|
|
1,327
|
|
||
Other accrued liabilities
|
1,890
|
|
|
1,988
|
|
||
Liabilities related to assets held for sale
|
1,339
|
|
|
—
|
|
||
Total current liabilities
|
23,125
|
|
|
21,221
|
|
||
|
|
|
|
||||
Long-term obligations, less current portion
|
9,057
|
|
|
9,068
|
|
||
Deferred income taxes and other liabilities
|
3,091
|
|
|
2,877
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests
|
13
|
|
|
118
|
|
||
|
|
|
|
||||
Shareholders’ equity:
|
|
|
|
||||
Preferred shares, without par value:
|
|
|
|
||||
Authorized—
500 thousand
shares, Issued—
none
|
—
|
|
|
—
|
|
||
Common shares, without par value:
|
|
|
|
||||
Authorized—
755 million
shares, Issued—327 million shares at
December 31, 2017
and June 30, 2017, respectively
|
2,694
|
|
|
2,697
|
|
||
Retained earnings
|
5,848
|
|
|
4,967
|
|
||
Common shares in treasury, at cost:
12 million
shares and 11 million shares at
December 31, 2017
and June 30, 2017, respectively
|
(848
|
)
|
|
(731
|
)
|
||
Accumulated other comprehensive loss
|
(95
|
)
|
|
(125
|
)
|
||
Total Cardinal Health, Inc. shareholders' equity
|
7,599
|
|
|
6,808
|
|
||
Noncontrolling interests
|
20
|
|
|
20
|
|
||
Total shareholders’ equity
|
7,619
|
|
|
6,828
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
42,905
|
|
|
$
|
40,112
|
|
19
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Financial Statements
|
|
|
|
Six Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net earnings
|
$
|
1,170
|
|
|
$
|
634
|
|
|
|
|
|
||||
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
520
|
|
|
339
|
|
||
Loss on extinguishment of debt
|
2
|
|
|
—
|
|
||
Impairments and loss on sale of other investments
|
6
|
|
|
3
|
|
||
Impairments and loss on disposal of assets, net
|
68
|
|
|
12
|
|
||
Share-based compensation
|
40
|
|
|
47
|
|
||
Provision for bad debts
|
49
|
|
|
29
|
|
||
Change in operating assets and liabilities, net of effects from acquisitions:
|
|
|
|
||||
Increase in trade receivables
|
(617
|
)
|
|
(146
|
)
|
||
Increase in inventories
|
(995
|
)
|
|
(1,294
|
)
|
||
Increase in accounts payable
|
2,107
|
|
|
1,563
|
|
||
Other accrued liabilities and operating items, net
|
(890
|
)
|
|
(529
|
)
|
||
Net cash provided by operating activities
|
1,460
|
|
|
658
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of subsidiaries, net of cash acquired
|
(6,141
|
)
|
|
(11
|
)
|
||
Additions to property and equipment
|
(168
|
)
|
|
(213
|
)
|
||
Purchase of available-for-sale securities and other investments
|
(6
|
)
|
|
(125
|
)
|
||
Proceeds from sale of available-for-sale securities and other investments
|
65
|
|
|
72
|
|
||
Proceeds from maturities of available-for-sale securities
|
—
|
|
|
39
|
|
||
Proceeds from divestitures and disposal of property and equipment and held for sale assets
|
1
|
|
|
1
|
|
||
Net cash used in investing activities
|
(6,249
|
)
|
|
(237
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Payment of contingent consideration obligation
|
(17
|
)
|
|
—
|
|
||
Net change in short-term borrowings
|
155
|
|
|
33
|
|
||
Purchase of noncontrolling interests
|
(106
|
)
|
|
(12
|
)
|
||
Proceeds from long-term obligations, net of issuance costs
|
3
|
|
|
—
|
|
||
Reduction of long-term obligations
|
(403
|
)
|
|
(60
|
)
|
||
Proceeds from interest rate swap terminations
|
—
|
|
|
14
|
|
||
Net tax proceeds/(withholdings) from share-based compensation
|
(16
|
)
|
|
—
|
|
||
Excess tax benefits from share-based compensation
|
—
|
|
|
32
|
|
||
Dividends on common shares
|
(296
|
)
|
|
(293
|
)
|
||
Purchase of treasury shares
|
(150
|
)
|
|
(600
|
)
|
||
Net cash used in financing activities
|
(830
|
)
|
|
(886
|
)
|
||
|
|
|
|
||||
Effect of exchange rates changes on cash and equivalents
|
7
|
|
|
(10
|
)
|
||
Cash reclassified to assets held for sale
|
(18
|
)
|
|
—
|
|
||
|
|
|
|
||||
Net decrease in cash and equivalents
|
(5,630
|
)
|
|
(475
|
)
|
||
Cash and equivalents at beginning of period
|
6,879
|
|
|
2,356
|
|
||
Cash and equivalents at end of period
|
$
|
1,249
|
|
|
$
|
1,881
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
20
|
Notes to Financial Statements
|
|
|
21
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Notes to Financial Statements
|
|
|
(in millions)
|
Patient Recovery Business
|
||
Identifiable intangible assets:
|
|
||
Customer relationships (1)
|
$
|
1,733
|
|
Trade names (2)
|
187
|
|
|
Developed technology and other (3)
|
732
|
|
|
Total identifiable intangible assets acquired
|
2,652
|
|
|
|
|
||
Cash and equivalents
|
22
|
|
|
Inventories
|
426
|
|
|
Prepaid expenses and other
|
249
|
|
|
Property and equipment, net
|
752
|
|
|
Other accrued liabilities
|
(307
|
)
|
|
Deferred income taxes and other liabilities
|
(851
|
)
|
|
Total identifiable net assets acquired/(liabilities assumed)
|
2,943
|
|
|
Goodwill
|
3,137
|
|
|
Total net assets acquired
|
$
|
6,080
|
|
(1)
|
The range of useful lives for customer relationships is
10
to
18
years.
|
(2)
|
The useful life of trade names is
15
years.
|
(3)
|
The useful life of developed technology is
15
years.
|
|
Three Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Employee-related costs (1)
|
$
|
15
|
|
|
$
|
6
|
|
Facility exit and other costs (2)
|
6
|
|
|
1
|
|
||
Total restructuring and employee severance
|
$
|
21
|
|
|
$
|
7
|
|
|
Six Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Employee-related costs (1)
|
$
|
19
|
|
|
$
|
13
|
|
Facility exit and other costs (2)
|
134
|
|
|
3
|
|
||
Total restructuring and employee severance
|
$
|
153
|
|
|
$
|
16
|
|
(1)
|
Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated and duplicate payroll costs during transition periods.
|
(2)
|
Facility exit and other costs primarily consist of product distribution and lease contract termination costs, accelerated depreciation, equipment relocation costs, project consulting fees and costs associated with restructuring our delivery of information technology infrastructure services.
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
22
|
Notes to Financial Statements
|
|
|
(in millions)
|
Employee-
Related Costs
|
|
Facility Exit
and Other Costs
|
|
Total
|
||||||
Balance at June 30, 2017
|
$
|
41
|
|
|
$
|
—
|
|
|
$
|
41
|
|
Additions
|
11
|
|
|
130
|
|
|
141
|
|
|||
Payments and other adjustments
|
(16
|
)
|
|
(66
|
)
|
|
(82
|
)
|
|||
Balance at December 31, 2017
|
$
|
36
|
|
|
$
|
64
|
|
|
$
|
100
|
|
(in millions)
|
|
December 31, 2017
|
||
Trade Receivables, net
|
|
$
|
952
|
|
Inventories, net
|
|
622
|
|
|
Goodwill and other intangibles, net
|
|
448
|
|
|
Other assets
|
|
261
|
|
|
Impairment of assets held for sale
|
|
(67
|
)
|
|
Total assets held for sale
|
|
2,216
|
|
|
|
|
|
||
Accounts Payable
|
|
818
|
|
|
Current portion of long-term obligations and other short term borrowings
|
|
397
|
|
|
Other liabilities
|
|
124
|
|
|
Total liabilities related to assets held for sale
|
|
$
|
1,339
|
|
(in millions)
|
Pharmaceutical
|
|
Medical
|
|
Total
|
||||||
Balance at June 30, 2017
|
$
|
2,939
|
|
|
$
|
4,282
|
|
|
$
|
7,221
|
|
Goodwill acquired, net of purchase price adjustments
|
1
|
|
|
3,187
|
|
|
3,188
|
|
|||
Foreign currency translation adjustments and other
|
14
|
|
|
9
|
|
|
23
|
|
|||
Reclassified to assets held for sale
|
(333
|
)
|
|
(54
|
)
|
|
(387
|
)
|
|||
Balance at December 31, 2017
|
$
|
2,621
|
|
|
$
|
7,424
|
|
|
$
|
10,045
|
|
23
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Notes to Financial Statements
|
|
|
|
December 31, 2017
|
||||||||||||
(in millions)
|
Gross
Intangible
|
|
Accumulated
Amortization
|
|
Net
Intangible
|
|
Weighted- Average Remaining Amortization Period (Years)
|
||||||
Indefinite-life intangibles:
|
|
|
|
|
|
|
|
||||||
IPR&D, trademarks and other
|
$
|
62
|
|
|
$
|
—
|
|
|
$
|
62
|
|
|
N/A
|
Total indefinite-life intangibles
|
62
|
|
|
—
|
|
|
62
|
|
|
N/A
|
|||
|
|
|
|
|
|
|
|
||||||
Definite-life intangibles:
|
|
|
|
|
|
|
|
||||||
Customer relationships
|
3,614
|
|
|
1,074
|
|
|
2,540
|
|
|
13
|
|||
Trademarks, trade names and patents
|
686
|
|
|
224
|
|
|
462
|
|
|
14
|
|||
Developed technology and other
|
1,648
|
|
|
391
|
|
|
1,257
|
|
|
12
|
|||
Total definite-life intangibles
|
5,948
|
|
|
1,689
|
|
|
4,259
|
|
|
13
|
|||
Total other intangible assets
|
$
|
6,010
|
|
|
$
|
1,689
|
|
|
$
|
4,321
|
|
|
N/A
|
|
June 30, 2017
|
||||||||||
(in millions)
|
Gross
Intangible
|
|
Accumulated
Amortization
|
|
Net
Intangible
|
||||||
Indefinite-life intangibles:
|
|
|
|
|
|
||||||
IPR&D, trademarks and other
|
$
|
61
|
|
|
$
|
—
|
|
|
$
|
61
|
|
Total indefinite-life intangibles
|
61
|
|
|
—
|
|
|
61
|
|
|||
|
|
|
|
|
|
||||||
Definite-life intangibles:
|
|
|
|
|
|
||||||
Customer relationships
|
1,966
|
|
|
967
|
|
|
999
|
|
|||
Trademarks, trade names and patents
|
509
|
|
|
195
|
|
|
314
|
|
|||
Developed technology and other
|
916
|
|
|
304
|
|
|
612
|
|
|||
Total definite-life intangibles
|
3,391
|
|
|
1,466
|
|
|
1,925
|
|
|||
Total other intangible assets
|
$
|
3,452
|
|
|
$
|
1,466
|
|
|
$
|
1,986
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
24
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
25
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
26
|
Notes to Financial Statements
|
|
|
|
December 31, 2017
|
||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale securities (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other investments (3)
|
122
|
|
|
—
|
|
|
—
|
|
|
122
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Forward contracts (1)
|
—
|
|
|
(33
|
)
|
|
—
|
|
|
(33
|
)
|
||||
Contingent consideration (4)
|
—
|
|
|
—
|
|
|
(21
|
)
|
|
(21
|
)
|
|
June 30, 2017
|
||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
739
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
739
|
|
Available-for-sale securities (2)
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
||||
Other investments (3)
|
116
|
|
|
—
|
|
|
—
|
|
|
116
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Forward contracts (1)
|
—
|
|
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
||||
Contingent consideration (4)
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
(32
|
)
|
(1)
|
The fair value of interest rate swaps, foreign currency contracts and commodity contracts is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. The fair value of these derivative contracts, which are subject to master netting arrangements under certain circumstances, is presented on a gross basis in the condensed consolidated balance sheets.
|
(2)
|
We invest in marketable securities, which are classified as available-for-sale and are carried at fair value in the condensed consolidated balance sheets. Observable Level 2 inputs such as quoted prices for similar securities, interest rate spreads, yield curves and credit risk are used to determine the fair value. See
Note 6
for additional information regarding available-for-sale securities.
|
(3)
|
The other investments balance includes investments in mutual funds, which are used to offset fluctuations in deferred compensation liabilities. These mutual funds primarily invest in the equity securities of companies with large market capitalization and high quality fixed income debt securities. The fair value of these investments is determined using quoted market prices.
|
(4)
|
Contingent consideration represents the obligations incurred in connection with acquisitions. We do not deem the fair value of the contingent consideration obligations under any single acquisition to be significant. The estimate of fair value of the contingent consideration obligations requires subjective assumptions to be made regarding future business results, discount rates, discount periods, and probabilities assigned to various potential business result scenarios and was determined using probability assessments with respect to the likelihood of reaching various targets or of achieving certain milestones. The fair value measurement is based on significant inputs unobservable in the market and thus represents a Level 3 measurement. Changes in current expectations of progress could change the probability of achieving the targets within the measurement periods and result in an increase or decrease in the fair value of the contingent consideration obligation.
|
27
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Notes to Financial Statements
|
|
|
(in millions)
|
Contingent Consideration Obligation
|
||
Balance at June 30, 2017
|
$
|
32
|
|
Additions from acquisitions
|
5
|
|
|
Changes in fair value of contingent consideration (1)
|
—
|
|
|
Payment of contingent consideration
|
(17
|
)
|
|
Balance at December 31, 2017
|
$
|
21
|
|
(1)
|
Amount is included in amortization and other acquisition-related costs in the condensed consolidated statements of earnings.
|
(in millions)
|
December 31, 2017
|
|
June 30, 2017
|
||||
Estimated fair value
|
$
|
9,801
|
|
|
$
|
10,713
|
|
Carrying amount
|
9,759
|
|
|
10,395
|
|
(in millions)
|
Redeemable Noncontrolling Interest
|
||
Balance at June 30, 2017
|
$
|
118
|
|
Net earnings attributable to redeemable noncontrolling interests
|
2
|
|
|
Net purchase of redeemable noncontrolling interests
|
(103
|
)
|
|
Adjustment of redeemable noncontrolling interests to redemption value
|
(4
|
)
|
|
Balance at December 31, 2017
|
$
|
13
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
28
|
Notes to Financial Statements
|
|
|
(in millions)
|
Foreign
Currency
Translation
Adjustments
|
|
Unrealized
Gain/(Loss) on
Derivatives,
net of tax
|
|
Accumulated Other
Comprehensive
Loss
|
||||||
Balance at June 30, 2017
|
$
|
(148
|
)
|
|
$
|
23
|
|
|
$
|
(125
|
)
|
Other comprehensive income/(loss), before reclassifications
|
31
|
|
|
(1
|
)
|
|
30
|
|
|||
Amounts reclassified to earnings
|
—
|
|
|
—
|
|
|
—
|
|
|||
Other comprehensive income/(loss), net of tax
|
31
|
|
|
(1
|
)
|
|
30
|
|
|||
Balance at December 31, 2017
|
$
|
(117
|
)
|
|
$
|
22
|
|
|
$
|
(95
|
)
|
|
Three Months Ended December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||
Weighted-average common shares–basic
|
315
|
|
|
318
|
|
Effect of dilutive securities:
|
|
|
|
||
Employee stock options, restricted share units and performance share units
|
1
|
|
|
1
|
|
Weighted-average common shares–diluted
|
316
|
|
|
319
|
|
|
Six Months Ended December 31,
|
||||
(in millions)
|
2017
|
|
2016
|
||
Weighted-average common shares–basic
|
315
|
|
|
319
|
|
Effect of dilutive securities:
|
|
|
|
||
Employee stock options, restricted share units and performance share units
|
2
|
|
|
2
|
|
Weighted-average common shares–diluted
|
317
|
|
|
321
|
|
|
Three Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Pharmaceutical
|
$
|
31,146
|
|
|
$
|
29,743
|
|
Medical
|
4,044
|
|
|
3,410
|
|
||
Total segment revenue
|
35,190
|
|
|
33,153
|
|
||
Corporate (1)
|
(4
|
)
|
|
(3
|
)
|
||
Total revenue
|
$
|
35,186
|
|
|
$
|
33,150
|
|
|
Six Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Pharmaceutical
|
$
|
60,066
|
|
|
$
|
58,505
|
|
Medical
|
7,768
|
|
|
6,690
|
|
||
Total segment revenue
|
67,834
|
|
|
65,195
|
|
||
Corporate (1)
|
(7
|
)
|
|
(6
|
)
|
||
Total revenue
|
$
|
67,827
|
|
|
$
|
65,189
|
|
(1)
|
Corporate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.
|
29
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Notes to Financial Statements
|
|
|
|
Three Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Pharmaceutical
|
$
|
514
|
|
|
$
|
537
|
|
Medical
|
220
|
|
|
159
|
|
||
Total segment profit
|
734
|
|
|
696
|
|
||
Corporate
|
(335
|
)
|
|
(154
|
)
|
||
Total operating earnings
|
$
|
399
|
|
|
$
|
542
|
|
|
Six Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Pharmaceutical
|
$
|
981
|
|
|
$
|
1,071
|
|
Medical
|
348
|
|
|
286
|
|
||
Total segment profit
|
1,329
|
|
|
1,357
|
|
||
Corporate
|
(668
|
)
|
|
(281
|
)
|
||
Total operating earnings
|
$
|
661
|
|
|
$
|
1,076
|
|
(in millions)
|
December 31,
2017 |
|
June 30,
2017 |
||||
Pharmaceutical
|
$
|
23,014
|
|
|
$
|
21,848
|
|
Medical
|
17,993
|
|
|
10,688
|
|
||
Corporate
|
1,898
|
|
|
7,576
|
|
||
Total assets
|
$
|
42,905
|
|
|
$
|
40,112
|
|
|
Three Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Restricted share unit expense
|
$
|
16
|
|
|
$
|
17
|
|
Employee stock option expense
|
5
|
|
|
5
|
|
||
Performance share unit expense
|
2
|
|
|
2
|
|
||
Total share-based compensation
|
$
|
23
|
|
|
$
|
24
|
|
|
Six Months Ended December 31,
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Restricted share unit expense
|
$
|
34
|
|
|
$
|
34
|
|
Employee stock option expense
|
10
|
|
|
10
|
|
||
Performance share unit expense
|
(4
|
)
|
|
3
|
|
||
Total share-based compensation
|
$
|
40
|
|
|
$
|
47
|
|
(in millions, except per share amounts)
|
Restricted Share Units
|
|
Weighted-Average
Grant Date Fair
Value per Share
|
|||
Nonvested at June 30, 2017
|
2
|
|
|
$
|
76.72
|
|
Granted
|
1
|
|
|
66.10
|
|
|
Vested
|
(1
|
)
|
|
79.80
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Nonvested at December 31, 2017
|
2
|
|
|
$
|
67.92
|
|
(in millions, except per share amounts)
|
Stock
Options
|
|
Weighted-Average
Exercise Price per
Common Share
|
|||
Outstanding at June 30, 2017
|
6
|
|
|
$
|
63.44
|
|
Granted
|
2
|
|
|
66.44
|
|
|
Exercised
|
—
|
|
|
—
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Outstanding at December 31, 2017
|
8
|
|
|
$
|
64.28
|
|
Exercisable at December 31, 2017
|
5
|
|
|
$
|
59.14
|
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
30
|
Notes to Financial Statements
|
|
|
(in millions)
|
December 31, 2017
|
|
June 30, 2017
|
||||
Aggregate intrinsic value of outstanding options at period end
|
$
|
47
|
|
|
$
|
109
|
|
Aggregate intrinsic value of exercisable options at period end
|
47
|
|
|
106
|
|
(in years)
|
December 31, 2017
|
|
June 30, 2017
|
Weighted-average remaining contractual life of outstanding options
|
7
|
|
7
|
Weighted-average remaining contractual life of exercisable options
|
6
|
|
6
|
(in millions, except per share amounts)
|
Performance
Share Units
|
|
Weighted-Average
Grant Date Fair
Value per Share
|
|||
Nonvested at June 30, 2017
|
0.6
|
|
|
$
|
77.83
|
|
Granted
|
0.2
|
|
|
66.43
|
|
|
Vested (1)
|
(0.2
|
)
|
|
71.57
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Nonvested at December 31, 2017
|
0.6
|
|
|
$
|
75.14
|
|
31
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Exhibits
|
|
|
Exhibit
Number
|
Exhibit Description
|
2.1
|
|
2.2
|
|
3.1
|
|
3.2
|
|
10.1
|
|
10.2
|
|
10.3
|
|
10.4
|
|
12.1
|
|
31.1
|
|
31.2
|
|
32.1
|
|
99.1
|
|
101.INS
|
XBRL Instance Document
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF
|
XBRL Taxonomy Definition Linkbase Document
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
32
|
Form 10-Q Cross Reference Index
|
|
|
Item Number
|
|
Page
|
|
|
|
|
Part I. Financial Information
|
|
Item 1
|
||
Item 2
|
||
Item 3
|
||
Item 4
|
||
|
|
|
|
Part II. Other Information
|
|
Item 1
|
||
Item 1A
|
||
Item 2
|
||
Item 3
|
Defaults Upon Senior Securities
|
N/A
|
Item 4
|
Mine Safety Disclosures
|
N/A
|
Item 5
|
Other Information
|
N/A
|
Item 6
|
||
|
N/A
|
Not applicable
|
|
33
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
|
Additional Information
|
|
|
|
|
Cardinal Health, Inc.
|
|
|
|
Date:
|
February 8, 2018
|
/s/ MICHAEL C. KAUFMANN
|
|
|
Michael C. Kaufmann
|
|
|
Chief Executive Officer
|
|
|
|
|
|
/s/ JORGE M. GOMEZ
|
|
|
Jorge M. Gomez
|
|
|
Chief Financial Officer
|
|
Cardinal Health
|
Q2
Fiscal 2018 Form 10-Q
|
34
|
A.
|
Cardinal Health, Inc. (“Cardinal Health”) previously adopted and currently maintains the Cardinal Health Deferred Compensation Plan (the “Plan”) for the benefit of a select group of management and highly compensated employees of Cardinal Health and its subsidiaries and affiliates.
|
B.
|
The Cardinal Health, Inc. Benefits Policy Committee (the “BPC”) oversees the administration of the Plan and, pursuant to Section 7.1 of the Plan, is authorized to approve certain amendments to the Plan in accordance with authority delegated by the Human Resources and Compensation Committee of the Board of Directors of Cardinal Health.
|
C.
|
The BPC desires to amend the Plan to modify plan governance processes and amendment authority and make other technical and conforming changes. The aforementioned changes fall within the BPC’s delegated authority.
|
D.
|
Section 7.1 of the Plan permits the amendment of the Plan at any time.
|
1.
|
Section 1.1(b) of the Plan is hereby amended in its entirety to read as follows:
|
2.
|
The first sentence of Section 1.1(l) of the Plan is hereby amended to read as follows:
|
3.
|
Section 1.1(t) of the Plan is hereby amended in its entirety to read as follows:
|
4.
|
The last sentence of Section 1.1(aa) of the Plan is hereby amended to read as follows:
|
5.
|
The fifth sentence of Section 3.3 of the Plan is hereby amended to read as follows:
|
A.
|
To determine all questions relating to the rights and status of Eligible Employees and Participants, the value of a Participant’s Account, and the nonforfeitable percentage of each Participant’s Account;
|
B.
|
To adopt rules and procedures necessary for the proper and efficient administration of the Plan, provided the rules and procedures are not inconsistent with the terms of this Plan;
|
C.
|
To construe, interpret and enforce the terms of the Plan and the rules and regulations it adopts, including the discretionary authority to interpret the Plan documents, documents related to the Plan’s operation, and findings of fact;
|
D.
|
To review and render decisions respecting claims (including appeals of denied claims) in accordance with the Plan’s claims procedures;
|
E.
|
To furnish an Employer with information that the Employer may require for tax or other purposes;
|
F.
|
To engage such legal, accounting, recordkeeping, clerical, investment and/or administrative services that it may deem necessary or appropriate for the proper administration or operation of the Plan;
|
G.
|
To engage the services of agents whom it may deem advisable to assist it with the performance of its duties;
|
H.
|
To delegate responsibility (including the responsibilities described in this Section 6.2) to others, including, but not limited to benefits staff of the Company and third parties engaged to provide services to the Plan;
|
I.
|
To keep such records, books of account, data and other documents as may be necessary for the proper administration of the Plan;
|
J.
|
To prepare and distribute to Participants and Beneficiaries information concerning the Plan and their rights under the Plan;
|
K.
|
To determine the times and places for holding meetings of the Administrative Committee and the notice to be given of such meetings; and
|
L.
|
To do all things necessary or appropriate to operate and administer the Plan in accordance with its provisions and in compliance with applicable provisions of law.
|
A.
|
the Administrative Committee, with respect to any amendment that: (i) is required to comply with a change in applicable law, or (ii) when aggregated with any other amendment or amendments approved on the same date, is reasonably expected to have an annual financial impact on the Company of $5 million or less;
|
B.
|
the CHRO of the Company, with respect to any amendment that, when aggregated with any other amendment or amendments approved on the same date, is reasonably expected to have an annual financial impact on the Company of $20 million or less; and
|
C.
|
the Chief Executive Officer of the Company.
|
If to Executive:
|
|
At the most recent address on file for Executive at the Company
|
|
|
|
|
|
If to the Company:
|
|
Cardinal Health, Inc.
|
|
|
|
7000 Cardinal Place
|
|
|
|
Dublin, Ohio 43017
|
|
|
|
Attention: Chief Legal and Compliance Officer
|
|
|
Exhibit 12.1
|
(in millions, except ratios)
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Six months ended December 31, 2017
|
||||||||||
Earnings before income taxes
|
$
|
1,798
|
|
|
$
|
1,967
|
|
|
$
|
2,276
|
|
|
$
|
1,924
|
|
|
$
|
495
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Plus fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
129
|
|
|
137
|
|
|
178
|
|
|
187
|
|
|
168
|
|
|||||
Capitalized interest
|
1
|
|
|
2
|
|
|
6
|
|
|
9
|
|
|
2
|
|
|||||
Amortization of debt offering costs
|
4
|
|
|
8
|
|
|
6
|
|
|
6
|
|
|
5
|
|
|||||
Interest portion of rent expense
|
10
|
|
|
10
|
|
|
12
|
|
|
14
|
|
|
8
|
|
|||||
Fixed charges (1)
|
144
|
|
|
156
|
|
|
201
|
|
|
217
|
|
|
183
|
|
|||||
Plus: amortization of capitalized interest
|
3
|
|
|
2
|
|
|
3
|
|
|
4
|
|
|
2
|
|
|||||
Less: capitalized interest
|
(1
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
(2
|
)
|
|||||
Earnings (1)
|
$
|
1,944
|
|
|
$
|
2,124
|
|
|
$
|
2,473
|
|
|
$
|
2,135
|
|
|
$
|
678
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges (1) (2)
|
14
|
|
|
14
|
|
|
12
|
|
|
10
|
|
|
4
|
|
(1)
|
The sum of the components may not equal the total due to rounding.
|
(2)
|
The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings from continuing operations before income taxes plus fixed charges and capitalized interest. Fixed charges include interest expense, amortization of debt offering costs and the portion of rent expense that is deemed to be representative of the interest factor. Interest expense recorded on tax exposures has been recorded in income tax expense and has therefore been excluded from the calculation.
|
|
|
Exhibit 31.1
|
1.
|
I have reviewed this Form 10-Q of Cardinal Health, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ M
ICHAEL
C. K
AUFMANN
|
|
Michael C. Kaufmann
|
|
Chief Executive Officer
|
|
|
|
Exhibit 31.2
|
1.
|
I have reviewed this Form 10-Q of Cardinal Health, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ J
ORGE
M. G
OMEZ
|
|
Jorge M. Gomez
|
|
Chief Financial Officer
|
|
|
|
Exhibit 32.1
|
(1)
|
the Quarterly Report on Form 10-Q for the quarter ended
December 31, 2017
containing the financial statements of the Company (the “Periodic Report”), which this statement accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
|
(2)
|
the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ M
ICHAEL
C. K
AUFMANN
|
|
Michael C. Kaufmann
|
|
Chief Executive Officer
|
|
/s/ J
ORGE
M. G
OMEZ
|
|
Jorge M. Gomez
|
|
Chief Financial Officer
|
|
|
Exhibit 99.1
|
•
|
competitive pressures in the markets in which we operate, including pricing pressures;
|
•
|
uncertainties relating to the pricing of generic pharmaceuticals;
|
•
|
uncertainties relating to the timing, frequency and profitability of generic pharmaceutical launches;
|
•
|
our ability to maintain the benefits of our generic pharmaceutical sourcing venture with CVS Health Corporation;
|
•
|
with respect to our distribution services agreements with branded pharmaceutical manufacturers, changes in the amount of service fees we receive or, in cases where part of our compensation under these agreements is based on branded pharmaceutical price appreciation, changes in the frequency or magnitude of such price appreciation;
|
•
|
changes in the timing or frequency of the introduction of branded pharmaceuticals;
|
•
|
actions of regulatory bodies and other governmental authorities, including the U.S. Drug Enforcement Administration, certain agencies within the U.S. Department of Health and Human Services (including the U.S. Food and Drug Administration, Centers for Medicare and Medicaid Services, the Office of Inspector General and the Office for Civil Rights), the U.S. Nuclear Regulatory Commission, the U.S. Federal Trade Commission, the U.S. Customs and Border Protection, various state boards of pharmacy, state controlled substance authorities, state health departments, state insurance departments, state Medicaid departments or comparable regulatory bodies or governmental authorities or foreign equivalents that, in each case, could delay, limit or suspend product development, manufacturing, distribution, importation or sales or result in warning letters, recalls, seizures, injunctions or monetary sanctions;
|
•
|
any compromise of our information systems or of those of a third-party service provider, including unauthorized access to or use or disclosure of company or customer information, and ancillary risks associated with our ability to effectively manage any issues arising from any such compromise;
|
•
|
possible losses, damage to reputation and other effects that may arise from the defense and resolution of the lawsuits and investigations in which we have been named relating to the distribution of prescription opioid pain medication;
|
•
|
risks and uncertainties relating to the acquisition of the Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency businesses from Medtronic plc (the "Patient Recovery Business"), including the ability to retain the acquired business' customers and employees; the ability to successfully integrate the acquired business into our operations; the ability to achieve the expected synergies and accretion in earnings; unforeseen internal control, regulatory or compliance issues; and additional risks relating to regulatory matters, legal proceedings, tax laws or positions or foreign exchange rate volatility;
|
•
|
difficulties or delays in the development, production, manufacturing, sourcing and marketing of new or existing products and services, including difficulties or delays associated with obtaining requisite regulatory consents or approvals associated with those activities;
|
•
|
risks arising from possible violations of healthcare fraud and abuse laws;
|
•
|
costs or claims resulting from potential errors or defects in our manufacturing of medical devices or other products or in our compounding, repackaging, information systems or pharmacy management services that may injure persons or damage property or operations, including costs from remediation efforts or recalls and related product liability claims and lawsuits, including class action lawsuits;
|
•
|
risks arising from possible violations of the U.S. Foreign Corrupt Practices Act and other similar anti-corruption laws in other jurisdictions and U.S. and foreign export control, trade embargo and customs laws;
|
•
|
risks arising from our collecting, handling and maintaining patient-identifiable health information and other sensitive personal and financial information, which are subject to federal, state and foreign laws that regulate the use and disclosure of such information;
|
•
|
risks arising from certain of our businesses being Medicare-certified suppliers or participating in other federal and state healthcare programs, such as state Medicaid programs and the federal 340B drug pricing program, which businesses are subject to accreditation and quality standards and other rules and regulations, including applicable reporting, billing, payment and record-keeping requirements;
|
•
|
risks arising from certain of our businesses manufacturing pharmaceutical and medical products or repackaging pharmaceuticals that are purchased or reimbursed through, or are otherwise governed by, federal or state healthcare programs, which businesses are subject to federal and state laws that establish eligibility for reimbursement by such programs and other applicable standards and regulations;
|
•
|
changes in laws or changes in the interpretation or application of laws or regulations, as well as possible failures to comply with applicable laws or regulations, including as a result of possible misinterpretations or misapplications;
|
•
|
material reductions in purchases, non-renewal or early termination of contracts, or delinquencies or defaults by key customers;
|
•
|
unfavorable changes to the terms of key customer or supplier relationships, or changes in customer mix;
|
•
|
risks arising from changes in U.S. or foreign tax laws, including our ability to effectively implement and account for the recently enacted Tax Cuts and Jobs Act, unfavorable challenges to our tax positions and payments to settle these challenges, or failure to permanently repeal the U.S. medical device tax;
|
•
|
uncertainties due to government healthcare reform, including possible repeal or replacement of major parts of the Patient Protection and Affordable Care Act;
|
•
|
reductions or limitations on governmental funding at the state or federal level or efforts by healthcare insurance companies to limit payments for products and services;
|
•
|
changes in manufacturers' pricing, selling, inventory, distribution or supply policies or practices;
|
•
|
changes in legislation or regulations governing prescription drug pricing, healthcare services or mandated benefits;
|
•
|
changes in hospital buying groups or hospital buying practices;
|
•
|
changes in distribution or sourcing models for pharmaceutical and medical and surgical products, including an increase in direct and limited distribution;
|
•
|
the risks of counterfeit products in the supply chain;
|
•
|
changes to the prescription drug reimbursement formula and related reporting requirements for generic pharmaceuticals under Medicaid;
|
•
|
increasing consolidation in the healthcare industry, which could give the resulting enterprises greater bargaining power and may increase pressure on prices for our products and services or result in the loss of customers;
|
•
|
disruption, damage or lack of access to, or failure of, our or our third-party service providers' information systems, our critical facilities, including our national logistics center, or our distribution networks;
|
•
|
manufacturing disruptions, whether due to regulatory action, production quality deviations, safety issues or raw material shortages or defects, or because a key product is manufactured at a single manufacturing facility with limited alternate facilities;
|
•
|
risks to our business and information and controls systems in the event that the Pharmaceutical segment's multi-year systems replacement project or other business process improvements, infrastructure modernizations or initiatives to use third-party service providers for key systems and processes are not effectively implemented;
|
•
|
the results, costs, effects or timing of any commercial disputes, government contract compliance matters, product liability claims or lawsuits, patent infringement claims,
qui tam
actions or other legal proceedings;
|
•
|
possible losses relating to product liability lawsuits and claims regarding products for which we cannot obtain product liability insurance or for which such insurance may not be adequate to cover our losses, including the product liability lawsuits we are currently defending relating to alleged personal injuries associated with the use of Cordis inferior vena cava filter products;
|
•
|
our ability to maintain adequate intellectual property protections;
|
•
|
the costs, difficulties and uncertainties related to the integration of acquired businesses, including liabilities relating to the operations or activities of such businesses prior to their acquisition, and uncertainties relating to our ability to achieve the anticipated results from acquisitions;
|
•
|
increased costs for commodities and other materials used in the Medical segment manufacturing, including various components, compounds, raw materials or energy such as oil-based resins, pulp, cotton, latex and other commodities;
|
•
|
shortages in commodities, components, compounds, raw materials or energy used by our businesses, including supply disruptions of radioisotopes;
|
•
|
the loss of, or default by, one or more key suppliers for which alternative suppliers may not be readily available;
|
•
|
bankruptcy, insolvency or other credit failure of a customer or supplier that owes us a substantial amount;
|
•
|
risks associated with global operations, including the effect of local economic environments, inflation, recession, currency volatility and global competition, in addition to risks associated with compliance with U.S. and international laws relating to global operations;
|
•
|
risks associated with our use of and reliance on the global capital and credit markets, including our ability to access credit and our cost of credit, which may adversely affect our ability to efficiently fund our operations or undertake certain expenditures;
|
•
|
our ability to introduce and market new products and our ability to keep pace with advances in technology;
|
•
|
the costs, effects, timing or success of restructuring programs or plans;
|
•
|
significant charges to earnings if goodwill or intangible assets become impaired;
|
•
|
uncertainties relating to general political, business, industry, regulatory and market conditions; and
|
•
|
other factors described in the “Risk Factors” section of the 2017 Form 10-K.
|