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þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Ohio
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31-0958666
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(State or other jurisdiction of
incorporation or organization)
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(IRS Employer
Identification No.)
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7000 Cardinal Place, Dublin, Ohio
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43017
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(Address of principal executive offices)
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(Zip Code)
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(614) 757-5000
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(Registrant’s telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered
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Common shares (without par value)
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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Cardinal Health
Fiscal 2018 Form 10-K
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Page
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1
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Cardinal Health
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Fiscal 2018 Form 10-K
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Introduction
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Cardinal Health
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Fiscal 2018 Form 10-K
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2
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MD&A
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Results of Operations
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3
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Cardinal Health
|
Fiscal 2018 Form 10-K
|
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MD&A
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Results of Operations
|
|
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(in millions)
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2018
|
|
2017
|
|
Change
|
|||||
GAAP
|
$
|
126
|
|
|
$
|
2,120
|
|
|
(94
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)%
|
Restructuring and employee severance
|
176
|
|
|
56
|
|
|
|
|||
Amortization and other acquisition-related costs
|
707
|
|
|
527
|
|
|
|
|||
Impairments and (gain)/loss on disposal of assets
|
1,417
|
|
|
18
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|
|
|
|||
Litigation (recoveries)/charges, net
|
159
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|
|
48
|
|
|
|
|||
Non-GAAP
|
$
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2,585
|
|
|
$
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2,769
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(7
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)%
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Cardinal Health
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Fiscal 2018 Form 10-K
|
4
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MD&A
|
Results of Operations
|
|
($ per share)
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2018
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2017
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|
Change
|
|||||
GAAP
|
$
|
0.81
|
|
|
$
|
4.03
|
|
|
(80
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)%
|
Restructuring and employee severance
|
0.48
|
|
|
0.11
|
|
|
|
|||
Amortization and other acquisition-related costs
|
1.69
|
|
|
1.13
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|
|
|
|||
Impairments and (gain)/loss on disposal of assets
|
4.64
|
|
|
0.04
|
|
|
|
|||
Litigation (recoveries)/charges, net
|
0.35
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|
|
0.09
|
|
|
|
|||
Transitional tax benefit, net
|
(2.97
|
)
|
|
$
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—
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|
|
|
||
Non-GAAP
|
$
|
5.00
|
|
|
$
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5.40
|
|
|
(7
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)%
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5
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Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Results of Operations
|
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Cardinal Health
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Fiscal 2018 Form 10-K
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6
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MD&A
|
Results of Operations
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Revenue
|
|
Change
|
||||||||||||||
(in millions)
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2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
Pharmaceutical
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$
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121,241
|
|
|
$
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116,463
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|
|
$
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109,131
|
|
|
4
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%
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|
7
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%
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Medical
|
15,581
|
|
|
13,524
|
|
|
12,430
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|
|
15
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%
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|
9
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%
|
|||
Total segment revenue
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136,822
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|
|
129,987
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|
|
121,561
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|
|
5
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%
|
|
7
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%
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|||
Corporate
|
(13
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)
|
|
(11
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)
|
|
(15
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)
|
|
N.M.
|
|
|
N.M.
|
|
|||
Total revenue
|
$
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136,809
|
|
|
$
|
129,976
|
|
|
$
|
121,546
|
|
|
5
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%
|
|
7
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%
|
|
|
|
7
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Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Results of Operations
|
|
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Consolidated Gross Margin
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|
Change
|
||||||||||||||
(in millions)
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2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
Gross margin
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$
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7,181
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|
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$
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6,544
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|
|
$
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6,543
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|
|
10
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%
|
|
—
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%
|
|
|
|
|
SG&A Expenses
|
|
Change
|
||||||||||||||
(in millions)
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2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
SG&A expenses
|
$
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4,596
|
|
|
$
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3,775
|
|
|
$
|
3,648
|
|
|
22
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%
|
|
3
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%
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
8
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MD&A
|
Results of Operations
|
|
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Segment Profit and Operating Earnings
|
|
Change
|
||||||||||||||
(in millions)
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2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
Pharmaceutical
|
$
|
1,992
|
|
|
$
|
2,187
|
|
|
$
|
2,488
|
|
|
(9
|
)%
|
|
(12
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)%
|
Medical
|
662
|
|
|
572
|
|
|
457
|
|
|
16
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%
|
|
25
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%
|
|||
Total segment profit
|
2,654
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|
|
2,759
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|
|
2,945
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(4
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)%
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(6
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)%
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|||
Corporate
|
(2,528
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)
|
|
(639
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)
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(486
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)
|
|
296
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%
|
|
31
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%
|
|||
Total consolidated operating earnings
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$
|
126
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|
|
$
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2,120
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|
|
$
|
2,459
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|
|
(94
|
)%
|
|
(14
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)%
|
|
|
9
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Results of Operations
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Restructuring and employee severance
|
$
|
176
|
|
|
$
|
56
|
|
|
$
|
25
|
|
Amortization and other acquisition-related costs
|
707
|
|
|
527
|
|
|
459
|
|
|||
Impairments and (gain)/loss on disposal of assets, net
|
1,417
|
|
|
18
|
|
|
21
|
|
|||
Litigation (recoveries)/charges, net
|
159
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|
|
48
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|
|
(69
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)
|
|
|
Earnings/(loss) Before Income Taxes
|
|
Change
|
||||||||||||||
(in millions)
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
||||||||
Other (income)/expense, net
|
$
|
23
|
|
|
$
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(5
|
)
|
|
$
|
5
|
|
|
N.M.
|
|
|
N.M.
|
|
Interest expense, net
|
329
|
|
|
201
|
|
|
178
|
|
|
64
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%
|
|
13
|
%
|
|||
Loss on extinguishment of debt
|
2
|
|
|
—
|
|
|
—
|
|
|
N.M.
|
|
|
N.M.
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
10
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MD&A
|
Results of Operations
|
|
|
|
2018 (1)
|
|
2017 (2)
|
|
2016 (2)
|
|||
Provision at Federal statutory rate
|
28.1
|
%
|
|
35.0
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%
|
|
35.0
|
%
|
State and local income taxes, net of federal benefit
|
(16.0
|
)
|
|
1.0
|
|
|
1.5
|
|
Foreign tax rate differential
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(48.4
|
)
|
|
(7.3
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)
|
|
(0.6
|
)
|
Nondeductible/nontaxable items
|
(10.2
|
)
|
|
0.2
|
|
|
1.0
|
|
Goodwill impairment
|
(124.7
|
)
|
|
—
|
|
|
—
|
|
Tax Act
|
410.9
|
|
|
—
|
|
|
—
|
|
Capital loss
|
71.4
|
|
|
—
|
|
|
—
|
|
Change in valuation allowances
|
(76.9
|
)
|
|
7.7
|
|
|
0.1
|
|
Foreign tax credits
|
27.3
|
|
|
(1.6
|
)
|
|
(0.1
|
)
|
China tax
|
(25.8
|
)
|
|
—
|
|
|
—
|
|
Other
|
(21.9
|
)
|
|
(2.3
|
)
|
|
0.2
|
|
Effective income tax rate
|
213.8
|
%
|
|
32.7
|
%
|
|
37.1
|
%
|
(1)
|
The effective income tax rate for fiscal 2018 represents an income tax benefit tax rate.
|
(2)
|
The effective income tax rates for fiscal 2017 and 2016 represents income tax expense tax rates.
|
|
|
11
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Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Liquidity and Capital Resources
|
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
12
|
MD&A
|
Liquidity and Capital Resources
|
|
|
13
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Other
|
|
(in millions)
|
2019
|
|
2020 to 2021
|
|
2022 to 2023
|
|
There-after
|
|
Total
|
||||||||||
Long-term debt and short-term borrowings (1)
|
$
|
999
|
|
|
$
|
964
|
|
|
$
|
2,259
|
|
|
$
|
4,783
|
|
|
$
|
9,005
|
|
Interest on long-term debt
|
303
|
|
|
531
|
|
|
420
|
|
|
2,068
|
|
|
3,322
|
|
|||||
Capital lease obligations (2)
|
2
|
|
|
4
|
|
|
2
|
|
|
—
|
|
|
8
|
|
|||||
Operating leases (3)
|
113
|
|
|
174
|
|
|
99
|
|
|
103
|
|
|
489
|
|
|||||
Purchase obligations and other payments (4)
|
534
|
|
|
501
|
|
|
382
|
|
|
196
|
|
|
1,613
|
|
|||||
Total contractual obligations (5)
|
$
|
1,951
|
|
|
$
|
2,174
|
|
|
$
|
3,162
|
|
|
$
|
7,150
|
|
|
$
|
14,437
|
|
(1)
|
Represents maturities of our long-term debt obligations and other short-term borrowings excluding capital lease obligations described below. See
Note 7
of the “Notes to Consolidated Financial Statements” for further information.
|
(2)
|
Represents maturities of our capital lease obligations included within long-term obligations in our consolidated balance sheets.
|
(3)
|
Represents minimum rental payments for operating leases having initial or remaining non-cancelable lease terms as described in
Note 9
of the “Notes to Consolidated Financial Statements.”
|
(4)
|
A purchase obligation is defined as an agreement to purchase goods or services that is legally enforceable and specifies all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and approximate timing of the transaction. The purchase obligation amounts disclosed above represent estimates of the minimum for which we are obligated and the time period in which cash outflows will occur. Purchase orders and authorizations to purchase that involve no firm commitment from either party are excluded from the above table. In addition, contracts that can be unilaterally canceled with no termination fee or with proper notice are excluded from our total purchase obligations except for the amount of the termination fee or the minimum amount of goods that must be purchased during the requisite notice period. Purchase obligations and other payments also includes quarterly payments of $45.6 million that we are required to pay CVS Health Corporation ("CVS") in connection with Red Oak Sourcing and will be in place for the remaining six years of the agreement. See
Note 9
of the “Notes to Consolidated Financial Statements” for additional information.
|
(5)
|
Long-term liabilities, such as unrecognized tax benefits, deferred taxes and other tax liabilities, have been excluded from the above table due to the inherent uncertainty of the underlying tax positions or because of the inability to reasonably estimate the timing of any cash outflows. See
Note 8
of the "Notes to Consolidated Financial Statements" for further discussion of income taxes.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
14
|
MD&A
|
Critical Accounting Policies and Sensitive Accounting Estimates
|
|
|
(in millions, except percentages)
|
2018
|
|
2017
|
|
2016
|
||||||
Allowance for doubtful accounts at beginning of period
|
$
|
137
|
|
|
$
|
135
|
|
|
$
|
135
|
|
Charged to costs and expenses
|
114
|
|
|
60
|
|
|
74
|
|
|||
Reduction to allowance for customer deductions and write-offs
|
(111
|
)
|
|
(58
|
)
|
|
(74
|
)
|
|||
Allowance for doubtful accounts at end of period
|
$
|
139
|
|
|
$
|
137
|
|
|
$
|
135
|
|
Allowance as a percentage of customer receivables
|
1.8
|
%
|
|
1.7
|
%
|
|
1.8
|
%
|
|||
Allowance as a percentage of revenue
|
0.10
|
%
|
|
0.11
|
%
|
|
0.11
|
%
|
|
15
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Critical Accounting Policies and Sensitive Accounting Estimates
|
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
16
|
MD&A
|
Critical Accounting Policies and Sensitive Accounting Estimates
|
|
|
|
17
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
MD&A
|
Critical Accounting Policies and Sensitive Accounting Estimates
|
|
|
(in millions)
|
2018
|
|
2017
|
||||
Total deferred income tax assets (1)
|
$
|
848
|
|
|
$
|
692
|
|
Valuation allowance for deferred income tax assets (2)
|
(412
|
)
|
|
(237
|
)
|
||
Net deferred income tax assets
|
436
|
|
|
455
|
|
||
Total deferred income tax liabilities
|
(2,213
|
)
|
|
(2,331
|
)
|
||
Net deferred income tax liability
|
$
|
(1,777
|
)
|
|
$
|
(1,876
|
)
|
(1)
|
Total deferred income tax assets included
$526 million
and
$378 million
of loss and tax credit carryforwards at
June 30, 2018
and
2017
, respectively.
|
(2)
|
The valuation allowance primarily relates to federal, state and international loss and credit carryforwards for which the ultimate realization of future benefits is uncertain.
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
18
|
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 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.
|
•
|
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 during an up to 12 month measurement period.
|
19
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Explanation and Reconciliation of Non-GAAP Financial Measures
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
20
|
Explanation and Reconciliation of Non-GAAP Financial Measures
|
|
|
(in millions, except per common share amounts)
|
Operating Earnings
|
Operating Earnings Growth Rate
|
Earnings/(Loss) Before Income Taxes
|
Provision for Income Taxes
|
Net Earnings
1,2
|
Net Earnings/(Loss)
1,2
Growth Rate
|
Diluted EPS
1,2
|
Diluted EPS
1,2
Growth Rate
|
|||||||||||||
|
Fiscal Year 2018
|
||||||||||||||||||||
GAAP
|
$
|
126
|
|
(94
|
)%
|
$
|
(228
|
)
|
$
|
(487
|
)
|
$
|
259
|
|
(80
|
)%
|
$
|
0.81
|
|
(80
|
)%
|
Restructuring and employee severance
|
176
|
|
|
176
|
|
25
|
|
151
|
|
|
0.48
|
|
|
||||||||
Amortization and other acquisition-related costs
|
707
|
|
|
707
|
|
176
|
|
531
|
|
|
1.69
|
|
|
||||||||
Impairments and loss on disposal of assets
4
|
1,417
|
|
|
1,417
|
|
(44
|
)
|
1,461
|
|
|
4.64
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
159
|
|
|
159
|
|
48
|
|
111
|
|
|
0.35
|
|
|
||||||||
Loss on extinguishment of debt
|
—
|
|
|
2
|
|
1
|
|
1
|
|
|
—
|
|
|
||||||||
Transitional tax benefit, net
3
|
—
|
|
|
—
|
|
936
|
|
(936
|
)
|
|
(2.97
|
)
|
|
||||||||
Non-GAAP
|
$
|
2,585
|
|
(7
|
)%
|
$
|
2,233
|
|
$
|
655
|
|
$
|
1,578
|
|
(9
|
)%
|
$
|
5.00
|
|
(7
|
)%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fiscal Year 2017
|
||||||||||||||||||||
GAAP
|
$
|
2,120
|
|
(14
|
)%
|
$
|
1,924
|
|
$
|
630
|
|
$
|
1,288
|
|
(10
|
)%
|
$
|
4.03
|
|
(7
|
)%
|
Restructuring and employee severance
|
56
|
|
|
56
|
|
20
|
|
36
|
|
|
0.11
|
|
|
||||||||
Amortization and other acquisition-related costs
|
527
|
|
|
527
|
|
165
|
|
362
|
|
|
1.13
|
|
|
||||||||
Impairments and loss on disposal of assets
|
18
|
|
|
18
|
|
6
|
|
12
|
|
|
0.04
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
48
|
|
|
48
|
|
19
|
|
29
|
|
|
0.09
|
|
|
||||||||
Non-GAAP
|
$
|
2,769
|
|
(4
|
)%
|
$
|
2,572
|
|
$
|
839
|
|
$
|
1,727
|
|
—
|
%
|
$
|
5.40
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fiscal Year 2016
|
||||||||||||||||||||
GAAP
|
$
|
2,459
|
|
14
|
%
|
$
|
2,276
|
|
$
|
845
|
|
$
|
1,427
|
|
18
|
%
|
$
|
4.32
|
|
20
|
%
|
Restructuring and employee severance
|
25
|
|
|
25
|
|
9
|
|
16
|
|
|
0.05
|
|
|
||||||||
Amortization and other acquisition-related costs
|
459
|
|
|
459
|
|
143
|
|
316
|
|
|
0.96
|
|
|
||||||||
Impairments and (gain)/loss on disposal of assets
|
21
|
|
|
21
|
|
6
|
|
15
|
|
|
0.04
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
(69
|
)
|
|
(69
|
)
|
(27
|
)
|
(42
|
)
|
|
(0.13
|
)
|
|
||||||||
Non-GAAP
|
$
|
2,895
|
|
17
|
%
|
$
|
2,711
|
|
$
|
976
|
|
$
|
1,732
|
|
18
|
%
|
$
|
5.24
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fiscal Year 2015
|
||||||||||||||||||||
GAAP
|
$
|
2,161
|
|
15
|
%
|
$
|
1,967
|
|
$
|
755
|
|
$
|
1,212
|
|
4
|
%
|
$
|
3.61
|
|
7
|
%
|
Restructuring and employee severance
|
44
|
|
|
44
|
|
15
|
|
29
|
|
|
0.09
|
|
|
||||||||
Amortization and other acquisition-related costs
|
281
|
|
|
281
|
|
100
|
|
181
|
|
|
0.54
|
|
|
||||||||
Impairments and (gain)/loss on disposal of assets
|
(19
|
)
|
|
(19
|
)
|
(10
|
)
|
(9
|
)
|
|
(0.03
|
)
|
|
||||||||
Litigation (recoveries)/charges, net
|
5
|
|
|
5
|
|
(14
|
)
|
19
|
|
|
0.06
|
|
|
||||||||
Loss on extinguishment of debt
|
—
|
|
|
60
|
|
23
|
|
37
|
|
|
0.11
|
|
|
||||||||
Non-GAAP
|
$
|
2,472
|
|
16
|
%
|
$
|
2,339
|
|
$
|
870
|
|
$
|
1,469
|
|
11
|
%
|
$
|
4.38
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Fiscal Year 2014
|
||||||||||||||||||||
GAAP
|
$
|
1,885
|
|
89
|
%
|
$
|
1,798
|
|
$
|
635
|
|
$
|
1,163
|
|
247
|
%
|
$
|
3.37
|
|
247
|
%
|
Restructuring and employee severance
|
31
|
|
|
31
|
|
11
|
|
20
|
|
|
0.06
|
|
|
||||||||
Amortization and other acquisition-related costs
|
223
|
|
|
223
|
|
79
|
|
144
|
|
|
0.42
|
|
|
||||||||
Impairments and (gain)/loss on disposal of assets
|
15
|
|
|
15
|
|
5
|
|
10
|
|
|
0.03
|
|
|
||||||||
Litigation (recoveries)/charges, net
|
(21
|
)
|
|
(21
|
)
|
(8
|
)
|
(13
|
)
|
|
(0.04
|
)
|
|
||||||||
Non-GAAP
|
$
|
2,133
|
|
4
|
%
|
$
|
2,047
|
|
$
|
722
|
|
$
|
1,324
|
|
3
|
%
|
$
|
3.84
|
|
3
|
%
|
1
|
from continuing operations
|
2
|
attributable to Cardinal Health, Inc.
|
3
|
Reflects the estimated net transitional benefit from the re-measurement 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.
|
4
|
Fiscal year 2018 includes a goodwill impairment charge of $1.4 billion related to our Medical segment. There was no tax benefit related to this goodwill impairment charge.
|
21
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Selected Financial Data
|
|
|
(in millions, except per common share amounts)
|
2018
1,2
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Earnings Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue
|
$
|
136,809
|
|
|
$
|
129,976
|
|
|
$
|
121,546
|
|
|
$
|
102,531
|
|
|
$
|
91,084
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating earnings
|
126
|
|
|
2,120
|
|
|
2,459
|
|
|
2,161
|
|
|
1,885
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings from continuing operations
|
259
|
|
|
1,294
|
|
|
1,431
|
|
|
1,212
|
|
|
1,163
|
|
|||||
Earnings/(loss) from discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
|||||
Net earnings
|
259
|
|
|
1,294
|
|
|
1,431
|
|
|
1,215
|
|
|
1,166
|
|
|||||
Less: Net earnings attributable to noncontrolling interests
|
(3
|
)
|
|
(6
|
)
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||||
Net earnings attributable to Cardinal Health, Inc.
|
$
|
256
|
|
|
$
|
1,288
|
|
|
$
|
1,427
|
|
|
$
|
1,215
|
|
|
$
|
1,166
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic earnings per common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
0.82
|
|
|
$
|
4.06
|
|
|
$
|
4.36
|
|
|
$
|
3.65
|
|
|
$
|
3.41
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|||||
Net basic earnings per common share attributable to Cardinal Health, Inc.
|
$
|
0.82
|
|
|
$
|
4.06
|
|
|
$
|
4.36
|
|
|
$
|
3.66
|
|
|
$
|
3.42
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Diluted earnings per common share attributable to Cardinal Health, Inc.:
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
$
|
0.81
|
|
|
$
|
4.03
|
|
|
$
|
4.32
|
|
|
$
|
3.61
|
|
|
$
|
3.37
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|
0.01
|
|
|||||
Net diluted earnings per common share attributable to Cardinal Health, Inc.
|
$
|
0.81
|
|
|
$
|
4.03
|
|
|
$
|
4.32
|
|
|
$
|
3.62
|
|
|
$
|
3.38
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared per common share
|
$
|
1.8635
|
|
|
$
|
1.8091
|
|
|
$
|
1.6099
|
|
|
$
|
1.4145
|
|
|
$
|
1.2500
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
39,951
|
|
|
$
|
40,112
|
|
|
$
|
34,122
|
|
|
$
|
30,142
|
|
|
$
|
26,033
|
|
Long-term obligations, less current portion
|
8,012
|
|
|
9,068
|
|
|
4,952
|
|
|
5,211
|
|
|
3,171
|
|
|||||
Total Cardinal Health, Inc. shareholders' equity
|
6,059
|
|
|
6,808
|
|
|
6,554
|
|
|
6,256
|
|
|
6,401
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
22
|
Disclosures about Market Risk
|
|
|
|
23
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Disclosures about Market Risk
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
24
|
Business
|
|
|
|
|
•
|
distributes branded and generic pharmaceutical and over-the-counter healthcare and consumer products through its Pharmaceutical Distribution division to retailers (including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers), hospitals and other healthcare providers. This division:
|
•
|
maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our retail, hospital and other healthcare provider customers;
|
•
|
provides services to pharmaceutical manufacturers, including distribution, inventory management, data reporting, new product launch support and chargeback administration;
|
•
|
provides pharmacy management services to hospitals as well as medication therapy management and patient outcomes services to hospitals, other healthcare providers and payers, and operates pharmacies in community health centers; and
|
•
|
repackages generic pharmaceuticals and over-the-counter healthcare products;
|
•
|
through its Specialty Solutions division, distributes specialty pharmaceutical products to hospitals and other healthcare providers and provides consulting, patient support and other services for specialty pharmaceutical products to pharmaceutical manufacturers and healthcare providers; and
|
•
|
operates nuclear pharmacies and manufacturing facilities through its Nuclear Pharmacy Services division, which manufactures, prepares and delivers radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and physician offices. This division also contract manufactures a radiopharmaceutical treatment (Xofigo) and holds the North American rights to manufacture and distribute Lymphoseek, a radiopharmaceutical diagnostic imaging agent.
|
25
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Business
|
|
|
|
|
Date
|
Company
|
Location
|
Lines
of Business
|
Acquisition
Price
(in billions)
|
|
07/17
|
Patient Recovery Business of Medtronic, plc
|
Mansfield, MA
|
Patient Care, Deep Vein Thrombosis and Nutritional Insufficiency
|
$6.1
|
|
10/15
|
Cordis business of Johnson & Johnson
|
Fremont, CA
|
Cardiovascular and endovascular products
|
$1.9
|
|
07/15
|
The Harvard Drug Group
|
Livonia, MI
|
Pharmaceutical product distribution
|
$1.1
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
26
|
Business
|
|
|
|
|
|
|
|
27
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Business
|
|
|
|
•
|
the U.S. Drug Enforcement Administration (the “DEA”);
|
•
|
certain agencies within the U.S. Department of Health and Human Services, including the U.S. Food and Drug Administration (the “FDA”), the Centers for Medicare and Medicaid Services, the Office of Inspector General and the Office for Civil Rights;
|
•
|
state health departments, insurance departments, Medicaid departments or other comparable state agencies;
|
•
|
state boards of pharmacy and other controlled substance authorities;
|
•
|
the U.S. Nuclear Regulatory Commission (the “NRC”);
|
•
|
the U.S. Federal Trade Commission (the "FTC");
|
•
|
U.S. Customs and Border Protection; and
|
•
|
agencies comparable to those listed above in markets outside the United States.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
28
|
Business
|
|
|
29
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Business
|
|
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
30
|
Risk Factors
|
|
|
31
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Risk Factors
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
32
|
Risk Factors
|
|
|
•
|
facilitate the purchase and distribution of inventory items from numerous distribution centers;
|
•
|
receive, process and ship orders on a timely basis;
|
•
|
manage accurate billing and collections for thousands of customers;
|
•
|
process payments to suppliers;
|
•
|
facilitate manufacturing and assembly of medical products; and
|
•
|
generate financial information.
|
33
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Risk Factors
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
34
|
Risk Factors
|
|
|
35
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Properties and Legal Proceedings
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
36
|
Market for Registrant's Common Equity
|
|
|
|
High
|
|
Low
|
|
Dividends Declared
|
||||||
Fiscal 2017
|
|
|
|
|
|
||||||
Quarter Ended:
|
|
|
|
|
|
||||||
September 30, 2016
|
$
|
84.92
|
|
|
$
|
75.26
|
|
|
$
|
0.4489
|
|
December 31, 2016
|
76.71
|
|
|
65.17
|
|
|
0.4489
|
|
|||
March 31, 2017
|
83.80
|
|
|
72.47
|
|
|
0.4489
|
|
|||
June 30, 2017
|
82.71
|
|
|
71.18
|
|
|
0.4624
|
|
|||
|
|
|
|
|
|
||||||
Fiscal 2018
|
|
|
|
|
|
||||||
Quarter Ended:
|
|
|
|
|
|
||||||
September 30, 2017
|
$
|
78.69
|
|
|
$
|
64.36
|
|
|
$
|
0.4624
|
|
December 31, 2017
|
68.24
|
|
|
55.00
|
|
|
0.4624
|
|
|||
March 31, 2018
|
75.23
|
|
|
61.22
|
|
|
0.4624
|
|
|||
June 30, 2018
|
65.82
|
|
|
48.83
|
|
|
0.4763
|
|
|||
|
|
|
|
|
|
||||||
Fiscal 2019
|
$
|
50.80
|
|
|
$
|
48.80
|
|
|
$
|
—
|
|
Period
|
Total Number
of Shares Purchased (1) |
|
Average Price Paid per Share
|
|
Total Number of Shares
Purchased as Part of Publicly Announced Programs (2) |
|
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under the Programs (2)
(in millions)
|
||||||
April 2018
|
292
|
|
|
$
|
63.07
|
|
|
—
|
|
|
$
|
993
|
|
May 2018
|
449,113
|
|
|
52.22
|
|
|
448,675
|
|
|
970
|
|
||
June 2018
|
1,433,537
|
|
|
53.41
|
|
|
1,433,244
|
|
|
893
|
|
||
Total
|
1,882,942
|
|
|
$
|
53.13
|
|
|
1,881,919
|
|
|
$
|
893
|
|
(1)
|
Reflects
292
,
438
and
293
common shares purchased in April, May and June
2018
, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.
|
(2)
|
On February 7, 2018 our Board of Directors approved a $1.0 billion share repurchase program that expires on December 31, 2020. During the three months ended
June 30, 2018
, we repurchased
two million
common shares under this program at June 30, 2018. We have
$893 million
available under this program. On August 16, 2018 we entered into an ASR program to purchase shares of our common stock for an aggregate purchase price of $
600 million
and received an initial delivery of
9.5 million
shares of common stock using a reference price of $
50.45
. The program is expected to conclude in the second quarter of fiscal 2019.
|
37
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Market for Registrant's Common Equity
|
|
|
|
June 30
|
|||||||||||||||||
|
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
||||||||||||
Cardinal Health, Inc.
|
$
|
100.00
|
|
$
|
148.12
|
|
$
|
183.83
|
|
$
|
174.87
|
|
$
|
178.80
|
|
$
|
115.63
|
|
S&P 500 Index
|
100.00
|
|
124.60
|
|
133.84
|
|
139.17
|
|
164.06
|
|
187.62
|
|
||||||
S&P 500 Healthcare Index
|
100.00
|
|
130.09
|
|
161.53
|
|
158.26
|
|
177.99
|
|
190.64
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
38
|
Reports
|
|
|
39
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Reports
|
|
|
/s/ Ernst & Young LLP
|
|
Grandview Heights, Ohio
|
August 22, 2018
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
40
|
Reports
|
|
|
/s/ Ernst & Young LLP
|
We have served as the Company's auditor since 2002.
|
Grandview Heights, Ohio
|
August 22, 2018
|
41
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Financial Statements
|
|
|
|
Page
|
|
|
Consolidated Financial Statements and Schedule:
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
42
|
Financial Statements
|
|
|
(in millions, except per common share amounts)
|
2018
|
|
2017
|
|
2016
|
||||||
Revenue
|
$
|
136,809
|
|
|
$
|
129,976
|
|
|
$
|
121,546
|
|
Cost of products sold
|
129,628
|
|
|
123,432
|
|
|
115,003
|
|
|||
Gross margin
|
7,181
|
|
|
6,544
|
|
|
6,543
|
|
|||
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
||||||
Distribution, selling, general and administrative expenses
|
4,596
|
|
|
3,775
|
|
|
3,648
|
|
|||
Restructuring and employee severance
|
176
|
|
|
56
|
|
|
25
|
|
|||
Amortization and other acquisition-related costs
|
707
|
|
|
527
|
|
|
459
|
|
|||
Impairments and (gain)/loss on disposal of assets, net
|
1,417
|
|
|
18
|
|
|
21
|
|
|||
Litigation (recoveries)/charges, net
|
159
|
|
|
48
|
|
|
(69
|
)
|
|||
Operating earnings
|
126
|
|
|
2,120
|
|
|
2,459
|
|
|||
|
|
|
|
|
|
||||||
Other (income)/expense, net
|
23
|
|
|
(5
|
)
|
|
5
|
|
|||
Interest expense, net
|
329
|
|
|
201
|
|
|
178
|
|
|||
Loss on extinguishment of debt
|
2
|
|
|
—
|
|
|
—
|
|
|||
Earnings/(loss) before income taxes
|
(228
|
)
|
|
1,924
|
|
|
2,276
|
|
|||
|
|
|
|
|
|
||||||
Provision for/(benefit from) income taxes
|
(487
|
)
|
|
630
|
|
|
845
|
|
|||
Net earnings
|
259
|
|
|
1,294
|
|
|
1,431
|
|
|||
|
|
|
|
|
|
||||||
Less: Net earnings attributable to noncontrolling interests
|
(3
|
)
|
|
(6
|
)
|
|
(4
|
)
|
|||
Net earnings attributable to Cardinal Health, Inc.
|
$
|
256
|
|
|
$
|
1,288
|
|
|
$
|
1,427
|
|
|
|
|
|
|
|
||||||
Earnings per common share attributable to Cardinal Health, Inc.
|
|
|
|
|
|
||||||
Basic
|
$
|
0.82
|
|
|
$
|
4.06
|
|
|
$
|
4.36
|
|
Diluted
|
0.81
|
|
|
4.03
|
|
|
4.32
|
|
|||
|
|
|
|
|
|
||||||
Weighted-average number of common shares outstanding:
|
|
|
|
|
|
||||||
Basic
|
313
|
|
|
317
|
|
|
327
|
|
|||
Diluted
|
315
|
|
|
320
|
|
|
330
|
|
43
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Net earnings
|
$
|
259
|
|
|
$
|
1,294
|
|
|
$
|
1,431
|
|
|
|
|
|
|
|
||||||
Other comprehensive income/(loss):
|
|
|
|
|
|
||||||
Foreign currency translation adjustments and other
|
58
|
|
|
(25
|
)
|
|
(82
|
)
|
|||
Amounts reclassified to earnings
|
(23
|
)
|
|
—
|
|
|
—
|
|
|||
Net unrealized gain/(loss) on derivative instruments, net of tax
|
(2
|
)
|
|
16
|
|
|
(11
|
)
|
|||
Total other comprehensive income/(loss), net of tax
|
33
|
|
|
(9
|
)
|
|
(93
|
)
|
|||
|
|
|
|
|
|
||||||
Total comprehensive income
|
292
|
|
|
1,285
|
|
|
1,338
|
|
|||
|
|
|
|
|
|
||||||
Less: comprehensive income attributable to noncontrolling interests
|
(3
|
)
|
|
(6
|
)
|
|
(4
|
)
|
|||
Total comprehensive income attributable to Cardinal Health, Inc.
|
$
|
289
|
|
|
$
|
1,279
|
|
|
$
|
1,334
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
44
|
Financial Statements
|
|
|
|
June 30
|
||||||
(in millions)
|
2018
|
|
2017
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
1,763
|
|
|
$
|
6,879
|
|
Trade receivables, net
|
7,800
|
|
|
8,048
|
|
||
Inventories, net
|
12,308
|
|
|
11,301
|
|
||
Prepaid expenses and other
|
1,926
|
|
|
2,117
|
|
||
Assets held for sale
|
756
|
|
|
—
|
|
||
Total current assets
|
24,553
|
|
|
28,345
|
|
||
|
|
|
|
||||
Property and equipment, net
|
2,487
|
|
|
1,879
|
|
||
Goodwill and other intangibles, net
|
12,229
|
|
|
9,207
|
|
||
Other assets
|
682
|
|
|
681
|
|
||
Total assets
|
$
|
39,951
|
|
|
$
|
40,112
|
|
|
|
|
|
||||
Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
19,677
|
|
|
$
|
17,906
|
|
Current portion of long-term obligations and other short-term borrowings
|
1,001
|
|
|
1,327
|
|
||
Other accrued liabilities
|
2,002
|
|
|
$
|
1,988
|
|
|
Liabilities related to assets held for sale
|
213
|
|
|
—
|
|
||
Total current liabilities
|
22,893
|
|
|
21,221
|
|
||
|
|
|
|
||||
Long-term obligations, less current portion
|
8,012
|
|
|
9,068
|
|
||
Deferred income taxes and other liabilities
|
2,975
|
|
|
2,877
|
|
||
|
|
|
|
||||
Redeemable noncontrolling interests
|
12
|
|
|
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
June 30, 2018
and June 30, 2017, respectively
|
2,730
|
|
|
2,697
|
|
||
Retained earnings
|
4,645
|
|
|
4,967
|
|
||
Common shares in treasury, at cost:
18 million
shares and 11 million shares at
June 30, 2018
and June 30, 2017, respectively
|
(1,224
|
)
|
|
(731
|
)
|
||
Accumulated other comprehensive loss
|
(92
|
)
|
|
(125
|
)
|
||
Total Cardinal Health, Inc. shareholders' equity
|
6,059
|
|
|
6,808
|
|
||
Noncontrolling interests
|
—
|
|
|
20
|
|
||
Total shareholders’ equity
|
6,059
|
|
|
6,828
|
|
||
Total liabilities, redeemable noncontrolling interests and shareholders’ equity
|
$
|
39,951
|
|
|
$
|
40,112
|
|
45
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Financial Statements
|
|
|
|
Common Shares
|
|
|
|
Treasury Shares
|
|
Accumulated Other
Comprehensive Income/(Loss) |
|
Noncontrolling Interests
|
|
Total
Shareholders’ Equity |
||||||||||||||||||
(in millions)
|
Shares Issued
|
|
Amount
|
|
Retained
Earnings |
|
Shares
|
|
Amount
|
|
|
|
|||||||||||||||||
Balance at June 30, 2015
|
364
|
|
|
$
|
3,003
|
|
|
$
|
5,521
|
|
|
(36
|
)
|
|
$
|
(2,245
|
)
|
|
$
|
(23
|
)
|
|
$
|
—
|
|
|
$
|
6,256
|
|
Net earnings
|
|
|
|
|
1,427
|
|
|
|
|
|
|
|
|
3
|
|
|
1,430
|
|
|||||||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
(93
|
)
|
|
|
|
(93
|
)
|
||||||||||||
Purchase of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
|
(7
|
)
|
||||||||||||
Employee stock plans activity, including tax benefit of $33 million
|
—
|
|
|
7
|
|
|
|
|
2
|
|
|
137
|
|
|
|
|
|
|
144
|
|
|||||||||
Treasury shares acquired
|
|
|
|
|
|
|
(8
|
)
|
|
(651
|
)
|
|
|
|
|
|
(651
|
)
|
|||||||||||
Dividends declared
|
|
|
|
|
(529
|
)
|
|
|
|
|
|
|
|
|
|
(529
|
)
|
||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
21
|
|
|||||||||||
Balance at June 30, 2016
|
364
|
|
|
3,010
|
|
|
6,419
|
|
|
(42
|
)
|
|
(2,759
|
)
|
|
(116
|
)
|
|
17
|
|
|
6,571
|
|
||||||
Net earnings
|
|
|
|
|
1,288
|
|
|
|
|
|
|
|
|
2
|
|
|
1,290
|
|
|||||||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
|
|
(9
|
)
|
||||||||||||
Purchase of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||||||||
Employee stock plans activity, including tax benefit of $34 million
|
—
|
|
|
(11
|
)
|
|
|
|
2
|
|
|
167
|
|
|
|
|
|
|
156
|
|
|||||||||
Treasury shares acquired
|
|
|
|
|
|
|
(8
|
)
|
|
(600
|
)
|
|
|
|
|
|
(600
|
)
|
|||||||||||
Dividends declared
|
|
|
|
|
(580
|
)
|
|
|
|
|
|
|
|
|
|
(580
|
)
|
||||||||||||
Other
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
2
|
|
|
1
|
|
|||||||||||
Retirement of Treasury Shares
|
(37
|
)
|
|
(302
|
)
|
|
(2,159
|
)
|
|
37
|
|
|
2,461
|
|
|
|
|
|
|
—
|
|
||||||||
Balance at June 30, 2017
|
327
|
|
|
2,697
|
|
|
4,967
|
|
|
(11
|
)
|
|
(731
|
)
|
|
(125
|
)
|
|
20
|
|
|
6,828
|
|
||||||
Net earnings
|
|
|
|
|
256
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
255
|
|
|||||||||||
Other comprehensive loss, net of tax
|
|
|
|
|
|
|
|
|
|
|
33
|
|
|
|
|
33
|
|
||||||||||||
Purchase and divestiture of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
(19
|
)
|
|
(19
|
)
|
||||||||||||
Employee stock plans activity, including tax benefit of $10 million
|
—
|
|
|
33
|
|
|
|
|
1
|
|
|
57
|
|
|
|
|
|
|
90
|
|
|||||||||
Treasury shares acquired
|
|
|
|
|
|
|
(8
|
)
|
|
(550
|
)
|
|
|
|
|
|
(550
|
)
|
|||||||||||
Dividends declared
|
|
|
|
|
(584
|
)
|
|
|
|
|
|
|
|
|
|
(584
|
)
|
||||||||||||
Other
|
|
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
6
|
|
||||||||||||
Balance at June 30, 2018
|
327
|
|
|
$
|
2,730
|
|
|
$
|
4,645
|
|
|
(18
|
)
|
|
$
|
(1,224
|
)
|
|
$
|
(92
|
)
|
|
$
|
—
|
|
|
$
|
6,059
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
46
|
Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net earnings
|
$
|
259
|
|
|
$
|
1,294
|
|
|
$
|
1,431
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
1,032
|
|
|
717
|
|
|
641
|
|
|||
Loss on extinguishment of debt
|
2
|
|
|
—
|
|
|
—
|
|
|||
Impairments and loss on sale of other investments
|
6
|
|
|
4
|
|
|
—
|
|
|||
Impairments and loss on disposal of assets, net
|
1,417
|
|
|
18
|
|
|
21
|
|
|||
Share-based compensation
|
85
|
|
|
96
|
|
|
111
|
|
|||
Provision for/(benefit from) deferred income taxes
|
(1,012
|
)
|
|
291
|
|
|
87
|
|
|||
Provision for bad debts
|
111
|
|
|
63
|
|
|
73
|
|
|||
Change in fair value of contingent consideration obligation
|
(2
|
)
|
|
(5
|
)
|
|
(16
|
)
|
|||
Change in operating assets and liabilities, net of effects from acquisitions and divestitures:
|
|
|
|
|
|
||||||
Increase in trade receivables
|
(871
|
)
|
|
(665
|
)
|
|
(866
|
)
|
|||
Increase in inventories
|
(1,211
|
)
|
|
(673
|
)
|
|
(1,179
|
)
|
|||
Increase in accounts payable
|
2,574
|
|
|
564
|
|
|
2,815
|
|
|||
Other accrued liabilities and operating items, net
|
378
|
|
|
(520
|
)
|
|
(147
|
)
|
|||
Net cash provided by operating activities
|
2,768
|
|
|
1,184
|
|
|
2,971
|
|
|||
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Acquisition of subsidiaries, net of cash acquired
|
(6,142
|
)
|
|
(132
|
)
|
|
(3,614
|
)
|
|||
Additions to property and equipment
|
(384
|
)
|
|
(387
|
)
|
|
(465
|
)
|
|||
Purchase of available-for-sale securities and other investments
|
(9
|
)
|
|
(194
|
)
|
|
(200
|
)
|
|||
Proceeds from sale of available-for-sale securities and other investments
|
65
|
|
|
228
|
|
|
136
|
|
|||
Proceeds from maturities of available-for-sale securities
|
—
|
|
|
77
|
|
|
50
|
|
|||
Proceeds from divestitures, net of cash sold, and disposal of property and equipment
|
862
|
|
|
3
|
|
|
13
|
|
|||
Net cash used in investing activities
|
(5,608
|
)
|
|
(405
|
)
|
|
(4,080
|
)
|
|||
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Payment of contingent consideration obligation
|
(35
|
)
|
|
(3
|
)
|
|
(25
|
)
|
|||
Net change in short-term borrowings
|
(50
|
)
|
|
3
|
|
|
26
|
|
|||
Purchase of noncontrolling interests
|
(106
|
)
|
|
(12
|
)
|
|
(10
|
)
|
|||
Reduction of long-term obligations
|
(954
|
)
|
|
(310
|
)
|
|
(6
|
)
|
|||
Proceeds from interest rate swap terminations
|
—
|
|
|
14
|
|
|
—
|
|
|||
Proceeds from long-term obligations, net of issuance costs
|
3
|
|
|
5,171
|
|
|
—
|
|
|||
Net tax proceeds/(withholding) from share-based compensation
|
(3
|
)
|
|
26
|
|
|
6
|
|
|||
Excess tax benefits from share-based compensation
|
—
|
|
|
34
|
|
|
33
|
|
|||
Dividends on common shares
|
(581
|
)
|
|
(577
|
)
|
|
(512
|
)
|
|||
Purchase of treasury shares
|
(550
|
)
|
|
(600
|
)
|
|
(651
|
)
|
|||
Net cash provided by/(used in) financing activities
|
(2,276
|
)
|
|
3,746
|
|
|
(1,139
|
)
|
|||
Effect of exchange rates changes on cash and equivalents
|
4
|
|
|
(2
|
)
|
|
(12
|
)
|
|||
Cash reclassified to assets held for sale
|
(4
|
)
|
|
—
|
|
|
—
|
|
|||
Net increase/(decrease) in cash and equivalents
|
(5,116
|
)
|
|
4,523
|
|
|
(2,260
|
)
|
|||
Cash and equivalents at beginning of period
|
6,879
|
|
|
2,356
|
|
|
4,616
|
|
|||
Cash and equivalents at end of period
|
$
|
1,763
|
|
|
$
|
6,879
|
|
|
$
|
2,356
|
|
Supplemental Information:
|
|
|
|
|
|
||||||
Cash payments for interest
|
$
|
320
|
|
|
$
|
200
|
|
|
$
|
174
|
|
Cash payments for income taxes
|
425
|
|
|
686
|
|
|
635
|
|
47
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
48
|
Notes to Financial Statements
|
|
|
|
Percent of Revenue
|
|
Percent of Gross Trade Receivables at June 30
|
|||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2018
|
|
2017
|
|||||
CVS
|
25
|
%
|
|
23
|
%
|
|
25
|
%
|
|
22
|
%
|
|
20
|
%
|
OptumRx
|
11
|
%
|
|
11
|
%
|
|
7
|
%
|
|
4
|
%
|
|
1
|
%
|
(in millions)
|
2018
|
|
2017
|
||||
Land, building and improvements
|
$
|
2,115
|
|
|
$
|
1,637
|
|
Machinery and equipment
|
3,006
|
|
|
2,860
|
|
||
Furniture and fixtures
|
139
|
|
|
130
|
|
||
Total property and equipment, at cost
|
5,260
|
|
|
4,627
|
|
||
Accumulated depreciation and amortization
|
(2,773
|
)
|
|
(2,748
|
)
|
||
Property and equipment, net
|
$
|
2,487
|
|
|
$
|
1,879
|
|
49
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
50
|
Notes to Financial Statements
|
|
|
51
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
52
|
Notes to Financial Statements
|
|
|
Level 1 -
|
Observable prices in active markets for identical assets and liabilities.
|
Level 2 -
|
Observable inputs other than quoted prices in active markets for identical assets and liabilities.
|
Level 3 -
|
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
|
53
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
54
|
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
|
425
|
|
|
Prepaid expenses and other
|
252
|
|
|
Property and equipment, net
|
741
|
|
|
Other accrued liabilities
|
(322
|
)
|
|
Deferred income taxes and other liabilities
|
(982
|
)
|
|
Total identifiable net assets acquired/(liabilities assumed)
|
2,788
|
|
|
Goodwill
|
3,292
|
|
|
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.
|
55
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Employee-related costs (1)
|
$
|
34
|
|
|
$
|
51
|
|
|
$
|
15
|
|
Facility exit and other costs (2)
|
142
|
|
|
5
|
|
|
10
|
|
|||
Total restructuring and employee severance
|
$
|
176
|
|
|
$
|
56
|
|
|
$
|
25
|
|
(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.
|
(in millions)
|
Employee-
Related Costs
|
|
Facility Exit
and Other Costs
|
|
Total
|
||||||
Balance at June 30, 2016
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
16
|
|
Additions
|
43
|
|
|
1
|
|
|
44
|
|
|||
Payments and other adjustments
|
(17
|
)
|
|
(2
|
)
|
|
(19
|
)
|
|||
Balance at June 30, 2017
|
41
|
|
|
—
|
|
|
41
|
|
|||
Additions
|
19
|
|
|
131
|
|
|
150
|
|
|||
Payments and other adjustments
|
(36
|
)
|
|
(127
|
)
|
|
(163
|
)
|
|||
Balance at June 30, 2018
|
$
|
24
|
|
|
$
|
4
|
|
|
$
|
28
|
|
(in millions)
|
|
June 30, 2018
|
||
Trade Receivables, net
|
|
$
|
74
|
|
Goodwill and other intangibles, net
|
|
642
|
|
|
Other assets
|
|
40
|
|
|
Total assets held for sale
|
|
$
|
756
|
|
Deferred revenue
|
|
35
|
|
|
Deferred income taxes
|
|
38
|
|
|
Other liabilities
|
|
140
|
|
|
Total liabilities related to assets held for sale
|
|
$
|
213
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
56
|
Notes to Financial Statements
|
|
|
(in millions)
|
Pharmaceutical (1)
|
|
Medical (2)
|
|
Total
|
||||||
Balance at June 30, 2016
|
$
|
2,919
|
|
|
$
|
4,248
|
|
|
$
|
7,167
|
|
Goodwill acquired, net of purchase price adjustments
|
29
|
|
|
35
|
|
|
64
|
|
|||
Foreign currency translation adjustments and other
|
(9
|
)
|
|
(1
|
)
|
|
(10
|
)
|
|||
Balance at June 30, 2017
|
2,939
|
|
|
4,282
|
|
|
7,221
|
|
|||
Goodwill acquired, net of purchase price adjustments
|
1
|
|
|
3,342
|
|
|
3,343
|
|
|||
Foreign currency translation adjustments and other
|
28
|
|
|
6
|
|
|
34
|
|
|||
Goodwill divested with the sale of our China distribution business
|
(347
|
)
|
|
(54
|
)
|
|
(401
|
)
|
|||
naviHealth goodwill reclassified to assets held for sale
|
—
|
|
|
(509
|
)
|
|
(509
|
)
|
|||
Impairment
|
—
|
|
|
(1,372
|
)
|
|
(1,372
|
)
|
|||
Balance at June 30, 2018
|
$
|
2,621
|
|
|
$
|
5,695
|
|
|
$
|
8,316
|
|
(1)
|
At
June 30, 2018
and 2017, the Pharmaceutical segment accumulated goodwill impairment loss was
$829 million
.
|
(2)
|
At
June 30, 2018
, the Medical segment accumulated goodwill impairment loss was
$1.4 billion
. The Medical segment had no accumulated goodwill impairment loss at June 30, 2017.
|
|
2018
|
||||||||||||
(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
|
3,513
|
|
|
1,191
|
|
|
2,322
|
|
|
15
|
|||
Trademarks, trade names and patents
|
667
|
|
|
246
|
|
|
421
|
|
|
15
|
|||
Developed technology and other
|
1,562
|
|
|
454
|
|
|
1,108
|
|
|
12
|
|||
Total definite-life intangibles
|
5,742
|
|
|
1,891
|
|
|
3,851
|
|
|
14
|
|||
Total other intangible assets
|
$
|
5,804
|
|
|
$
|
1,891
|
|
|
$
|
3,913
|
|
|
N/A
|
|
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
|
|
57
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
(in millions) (1)
|
2018
|
|
2017
|
||||
1.7% Notes due 2018
|
$
|
—
|
|
|
$
|
400
|
|
1.95% Notes due 2018
|
—
|
|
|
547
|
|
||
1.948% Notes due 2019
|
998
|
|
|
996
|
|
||
2.4% Notes due 2019
|
448
|
|
|
453
|
|
||
4.625% Notes due 2020
|
514
|
|
|
519
|
|
||
2.616% Notes due 2022
|
1,143
|
|
|
1,142
|
|
||
3.2% Notes due 2022
|
243
|
|
|
248
|
|
||
Floating Rate Notes due 2022
|
348
|
|
|
347
|
|
||
3.2% Notes due 2023
|
525
|
|
|
544
|
|
||
3.079% Notes due 2024
|
742
|
|
|
744
|
|
||
3.5% Notes due 2024
|
390
|
|
|
396
|
|
||
3.75% Notes due 2025
|
460
|
|
|
481
|
|
||
3.41% Notes due 2027
|
1,340
|
|
|
1,340
|
|
||
4.6% Notes due 2043
|
346
|
|
|
346
|
|
||
4.5% Notes due 2044
|
342
|
|
|
341
|
|
||
4.9% Notes due 2045
|
445
|
|
|
445
|
|
||
4.368% Notes due 2047
|
594
|
|
|
594
|
|
||
7.0% Debentures due 2026
|
124
|
|
|
124
|
|
||
Other obligations
|
11
|
|
|
388
|
|
||
Total
|
9,013
|
|
|
10,395
|
|
||
Less: current portion of long-term obligations and other short-term borrowings
|
1,001
|
|
|
1,327
|
|
||
Long-term obligations, less current portion
|
$
|
8,012
|
|
|
$
|
9,068
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
58
|
Notes to Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
U.S. operations
|
$
|
391
|
|
|
$
|
1,772
|
|
|
$
|
2,050
|
|
Non-U.S. operations
|
(619
|
)
|
|
152
|
|
|
226
|
|
|||
Earnings/(loss) before income taxes
|
$
|
(228
|
)
|
|
$
|
1,924
|
|
|
$
|
2,276
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Current:
|
|
|
|
|
|
||||||
Federal
|
$
|
341
|
|
|
$
|
273
|
|
|
$
|
633
|
|
State and local
|
41
|
|
|
10
|
|
|
52
|
|
|||
Non-U.S.
|
143
|
|
|
56
|
|
|
73
|
|
|||
Total current
|
$
|
525
|
|
|
$
|
339
|
|
|
$
|
758
|
|
|
|
|
|
|
|
||||||
Deferred:
|
|
|
|
|
|
||||||
Federal
|
$
|
(1,003
|
)
|
|
$
|
258
|
|
|
$
|
96
|
|
State and local
|
16
|
|
|
37
|
|
|
12
|
|
|||
Non-U.S.
|
(25
|
)
|
|
(4
|
)
|
|
(21
|
)
|
|||
Total deferred
|
(1,012
|
)
|
|
291
|
|
|
87
|
|
|||
Provision for/(benefit from) income taxes
|
$
|
(487
|
)
|
|
$
|
630
|
|
|
$
|
845
|
|
59
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
2018 (1)
|
|
2017 (2)
|
|
2016 (2)
|
|||
Provision at Federal statutory rate
|
28.1
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State and local income taxes, net of federal benefit
|
(16.0
|
)
|
|
1.0
|
|
|
1.5
|
|
Foreign tax rate differential
|
(48.4
|
)
|
|
(7.3
|
)
|
|
(0.6
|
)
|
Nondeductible/nontaxable items
|
(10.2
|
)
|
|
0.2
|
|
|
1.0
|
|
Goodwill impairment
|
(124.7
|
)
|
|
—
|
|
|
—
|
|
Tax Act
|
410.9
|
|
|
—
|
|
|
—
|
|
Capital loss
|
71.4
|
|
|
—
|
|
|
—
|
|
Change in valuation allowances
|
(76.9
|
)
|
|
7.7
|
|
|
0.1
|
|
Foreign tax credits
|
27.3
|
|
|
(1.6
|
)
|
|
(0.1
|
)
|
China tax related to divestiture
|
(25.8
|
)
|
|
—
|
|
|
—
|
|
Other
|
(21.9
|
)
|
|
(2.3
|
)
|
|
0.2
|
|
Effective income tax rate
|
213.8
|
%
|
|
32.7
|
%
|
|
37.1
|
%
|
(1)
|
The effective income tax rate for fiscal 2018 represents an income tax benefit tax rate.
|
(2)
|
The effective income tax rates for fiscal 2017 and 2016 represents income tax expense tax rates.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
60
|
Notes to Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
||||
Deferred income tax assets:
|
|
|
|
||||
Receivable basis difference
|
$
|
41
|
|
|
$
|
42
|
|
Accrued liabilities
|
110
|
|
|
125
|
|
||
Share-based compensation
|
40
|
|
|
53
|
|
||
Loss and tax credit carryforwards
|
526
|
|
|
378
|
|
||
Deferred tax assets related to uncertain tax positions
|
30
|
|
|
51
|
|
||
Other
|
101
|
|
|
43
|
|
||
Total deferred income tax assets
|
848
|
|
|
692
|
|
||
Valuation allowance for deferred income tax assets
|
(412
|
)
|
|
(237
|
)
|
||
Net deferred income tax assets
|
$
|
436
|
|
|
$
|
455
|
|
|
|
|
|
||||
Deferred income tax liabilities:
|
|
|
|
||||
Inventory basis differences
|
$
|
(1,103
|
)
|
|
$
|
(1,578
|
)
|
Property-related
|
(176
|
)
|
|
(183
|
)
|
||
Goodwill and other intangibles
|
(934
|
)
|
|
(570
|
)
|
||
Total deferred income tax liabilities
|
$
|
(2,213
|
)
|
|
$
|
(2,331
|
)
|
Net deferred income tax liability
|
$
|
(1,777
|
)
|
|
$
|
(1,876
|
)
|
(in millions)
|
2018
|
|
2017
|
||||
Noncurrent deferred income tax asset (1)
|
37
|
|
|
73
|
|
||
Noncurrent deferred income tax liability (2)
|
(1,814
|
)
|
|
(1,949
|
)
|
||
Net deferred income tax liability
|
$
|
(1,777
|
)
|
|
$
|
(1,876
|
)
|
(1)
|
Included in other assets in the consolidated balance sheets.
|
(2)
|
Included in deferred income taxes and other liabilities in the consolidated balance sheets.
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Balance at beginning of fiscal year
|
$
|
417
|
|
|
$
|
527
|
|
|
$
|
542
|
|
Additions for tax positions of the current year
|
15
|
|
|
29
|
|
|
22
|
|
|||
Additions for tax positions of prior years (1)
|
141
|
|
|
23
|
|
|
42
|
|
|||
Reductions for tax positions of prior years
|
(40
|
)
|
|
(8
|
)
|
|
(48
|
)
|
|||
Settlements with tax authorities (1)
|
(99
|
)
|
|
(154
|
)
|
|
(30
|
)
|
|||
Expiration of the statute of limitations (1)
|
(11
|
)
|
|
—
|
|
|
(1
|
)
|
|||
Balance at end of fiscal year
|
$
|
423
|
|
|
$
|
417
|
|
|
$
|
527
|
|
(1)
|
Included in additions for tax positions of prior years is
$110 million
related to exposures acquired as part of the Patient Recovery Business for which we are indemnified. Settlements of
$81 million
related to the Patient Recovery Business as well as
$11 million
of statute expirations.
|
61
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
62
|
Notes to Financial Statements
|
|
|
|
2018
|
||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
200
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
200
|
|
Other investments (2)
|
117
|
|
|
—
|
|
|
—
|
|
|
117
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration (3)
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Forward contracts (4)
|
—
|
|
|
(76
|
)
|
|
—
|
|
|
(76
|
)
|
|
2017
|
||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Cash equivalents
|
$
|
739
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
739
|
|
Available-for-sale securities (1)
|
—
|
|
|
65
|
|
|
—
|
|
|
65
|
|
||||
Other investments (2)
|
116
|
|
|
—
|
|
|
—
|
|
|
116
|
|
||||
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Contingent consideration (3)
|
—
|
|
|
—
|
|
|
(32
|
)
|
|
(32
|
)
|
||||
Forward contracts (4)
|
—
|
|
|
(21
|
)
|
|
—
|
|
|
(21
|
)
|
(1)
|
We invest in marketable securities, which are classified as available-for-sale and are carried at fair value in the 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.
|
(2)
|
Level 1 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.
|
(3)
|
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.
|
63
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
(4)
|
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 consolidated balance sheets.
|
(in millions)
|
Contingent Consideration Obligation
|
||
Balance at June 30, 2016
|
$
|
19
|
|
Additions from acquisitions
|
21
|
|
|
Changes in fair value of contingent consideration (1)
|
(5
|
)
|
|
Payment of contingent consideration
|
(3
|
)
|
|
Balance at June 30, 2017
|
32
|
|
|
Additions from acquisitions
|
5
|
|
|
Changes in fair value of contingent consideration (1)
|
(2
|
)
|
|
Payment of contingent consideration
|
(35
|
)
|
|
Balance at June 30, 2018
|
$
|
1
|
|
(1)
|
Amount is included in amortization and other acquisition-related costs in the consolidated statements of earnings.
|
(in millions)
|
2018
|
|
2017
|
||||
Assets:
|
|
|
|
||||
Foreign currency contracts (1)
|
$
|
3
|
|
|
$
|
3
|
|
Commodity contracts (1)
|
2
|
|
|
—
|
|
||
Total assets
|
$
|
5
|
|
|
$
|
3
|
|
|
|
|
|
||||
Liabilities:
|
|
|
|
||||
Foreign currency contracts (3)
|
$
|
3
|
|
|
$
|
2
|
|
Pay-floating interest rate swaps (2)
|
78
|
|
|
19
|
|
||
Pay-floating interest rate swaps (3)
|
$
|
—
|
|
|
$
|
2
|
|
Commodity contracts (3)
|
—
|
|
|
1
|
|
||
Total liabilities
|
$
|
81
|
|
|
$
|
24
|
|
(2)
|
Included in deferred income taxes and other liabilities in the consolidated balance sheets.
|
(3)
|
Included in other accrued liabilities in the consolidated balance sheets.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
64
|
Notes to Financial Statements
|
|
|
|
2018
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Pay-floating interest rate swaps
|
$
|
2,313
|
|
|
Nov 2019
|
-
|
Sep 2025
|
|
2017
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Pay-floating interest rate swaps
|
$
|
1,813
|
|
|
Jun 2018
|
-
|
Sep 2025
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pay-floating interest rate swaps (1)
|
$
|
11
|
|
|
$
|
17
|
|
|
$
|
23
|
|
Fixed-rate debt (1)
|
(11
|
)
|
|
(17
|
)
|
|
(23
|
)
|
|
2018
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Foreign currency contracts
|
$
|
124
|
|
|
Jul 2018
|
-
|
Jun 2019
|
Commodity contracts
|
12
|
|
|
Jul 2018
|
-
|
Oct 2020
|
|
2017
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Foreign currency contracts
|
$
|
162
|
|
|
Jul 2017
|
-
|
Jun 2018
|
Commodity contracts
|
17
|
|
|
Jul 2017
|
-
|
Apr 2020
|
(in millions)
|
2018
|
|
2017
|
||
Commodity contracts
|
2
|
|
|
(1
|
)
|
Foreign currency contracts
|
(2
|
)
|
|
—
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Foreign currency contracts (1)
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
1
|
|
Foreign currency contracts (2)
|
—
|
|
|
(1
|
)
|
|
5
|
|
|||
Foreign currency contracts (3)
|
(2
|
)
|
|
2
|
|
|
(3
|
)
|
|||
Commodity contracts (3)
|
—
|
|
|
(3
|
)
|
|
(5
|
)
|
(1)
|
Included in revenue in the consolidated statements of earnings.
|
(2)
|
Included in cost of products sold in the consolidated statements of earnings.
|
(3)
|
Included in SG&A expenses in the consolidated statements of earnings.
|
|
2018
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Foreign currency contracts
|
$
|
550
|
|
|
Jul 2018
|
-
|
Jun 2019
|
65
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
|
2017
|
||||||
(in millions)
|
Notional Amount
|
|
Maturity Date
|
||||
Foreign currency contracts
|
$
|
558
|
|
|
Jul 2017
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Foreign currency contracts (1)
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
|
$
|
(17
|
)
|
(1)
|
Included in other income, net in the consolidated statements of earnings.
|
(in millions)
|
2018
|
|
2017
|
||||
Estimated fair value
|
$
|
8,852
|
|
|
$
|
10,713
|
|
Carrying amount
|
9,013
|
|
|
10,395
|
|
|
2018
|
|
2017
|
||||||||||||
(in millions)
|
Notional
Amount |
|
Fair Value
Gain/(Loss) |
|
Notional
Amount |
|
Fair Value
Gain/(Loss) |
||||||||
Pay-floating interest rate swaps
|
$
|
2,313
|
|
|
$
|
(78
|
)
|
|
$
|
1,813
|
|
|
$
|
(19
|
)
|
Foreign currency contracts
|
674
|
|
|
—
|
|
|
720
|
|
|
1
|
|
||||
Commodity contracts
|
12
|
|
|
—
|
|
|
17
|
|
|
(1
|
)
|
(in millions)
|
Redeemable Noncontrolling Interests
|
||
Balance at June 30, 2016
|
$
|
117
|
|
Net earnings attributable to redeemable noncontrolling interests
|
4
|
|
|
Net purchase of redeemable noncontrolling interests
|
(3
|
)
|
|
Balance at June 30, 2017
|
118
|
|
|
Net earnings attributable to redeemable noncontrolling interest
|
2
|
|
|
Net purchase of redeemable noncontrolling interests
|
(103
|
)
|
|
Adjustment of redeemable noncontrolling interests to redemption value
|
(5
|
)
|
|
Balance at June 30, 2018
|
$
|
12
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
66
|
Notes to Financial Statements
|
|
|
(in millions)
|
Foreign
Currency
Translation
Adjustments and other
|
|
Unrealized
Gain/(Loss) on
Derivatives,
net of tax
|
|
Accumulated Other
Comprehensive
Income/(Loss)
|
||||||
Balance at June 30, 2016
|
$
|
(123
|
)
|
|
$
|
7
|
|
|
$
|
(116
|
)
|
Other comprehensive income/(loss), net before reclassifications
|
(25
|
)
|
|
19
|
|
|
(6
|
)
|
|||
Amounts reclassified to earnings
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
|||
Total other comprehensive loss attributable to Cardinal Health, Inc., net of tax of $9 million
|
(25
|
)
|
|
16
|
|
|
(9
|
)
|
|||
Balance at June 30, 2017
|
(148
|
)
|
|
23
|
|
|
(125
|
)
|
|||
Other comprehensive income/(loss), before reclassifications
|
58
|
|
|
—
|
|
|
58
|
|
|||
Amounts reclassified to earnings
|
(23
|
)
|
|
(2
|
)
|
|
(25
|
)
|
|||
Total comprehensive income/(loss) attributable to Cardinal Health, Inc., net of tax of $1 million
|
35
|
|
|
(2
|
)
|
|
33
|
|
|||
Balance at June 30, 2018
|
$
|
(113
|
)
|
|
$
|
21
|
|
|
$
|
(92
|
)
|
(in millions, except per share amounts)
|
2018
|
|
2017
|
|
2016
|
||||||
Net earnings
|
$
|
259
|
|
|
$
|
1,294
|
|
|
$
|
1,431
|
|
Net earnings attributable to noncontrolling interest
|
(3
|
)
|
|
(6
|
)
|
|
(4
|
)
|
|||
Net earnings attributable to Cardinal Health, Inc.
|
$
|
256
|
|
|
$
|
1,288
|
|
|
$
|
1,427
|
|
Weighted-average common shares–basic
|
313
|
|
|
317
|
|
|
327
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
||||||
Employee stock options, restricted share units, and performance share units
|
2
|
|
|
3
|
|
|
3
|
|
|||
Weighted-average common shares–diluted
|
315
|
|
|
320
|
|
|
330
|
|
|||
Basic earnings per common share attributable to Cardinal Health, Inc.:
|
$
|
0.82
|
|
|
$
|
4.06
|
|
|
$
|
4.36
|
|
Diluted earnings per common share attributable to Cardinal Health, Inc.:
|
0.81
|
|
|
4.03
|
|
|
4.32
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pharmaceutical
|
$
|
121,241
|
|
|
$
|
116,463
|
|
|
$
|
109,131
|
|
Medical
|
15,581
|
|
|
13,524
|
|
|
12,430
|
|
|||
Total segment revenue
|
136,822
|
|
|
129,987
|
|
|
121,561
|
|
|||
Corporate (1)
|
(13
|
)
|
|
(11
|
)
|
|
(15
|
)
|
|||
Total revenue
|
$
|
136,809
|
|
|
$
|
129,976
|
|
|
$
|
121,546
|
|
(1)
|
Corporate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.
|
67
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pharmaceutical
|
$
|
1,992
|
|
|
$
|
2,187
|
|
|
$
|
2,488
|
|
Medical
|
662
|
|
|
572
|
|
|
457
|
|
|||
Total segment profit
|
2,654
|
|
|
2,759
|
|
|
2,945
|
|
|||
Corporate
|
(2,528
|
)
|
|
(639
|
)
|
|
(486
|
)
|
|||
Total operating earnings
|
$
|
126
|
|
|
$
|
2,120
|
|
|
$
|
2,459
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pharmaceutical
|
$
|
156
|
|
|
$
|
122
|
|
|
$
|
128
|
|
Medical
|
278
|
|
|
156
|
|
|
136
|
|
|||
Corporate
|
598
|
|
|
439
|
|
|
377
|
|
|||
Total depreciation and amortization
|
$
|
1,032
|
|
|
$
|
717
|
|
|
$
|
641
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pharmaceutical
|
$
|
58
|
|
|
$
|
50
|
|
|
$
|
88
|
|
Medical
|
127
|
|
|
123
|
|
|
96
|
|
|||
Corporate
|
199
|
|
|
214
|
|
|
281
|
|
|||
Total additions to property and equipment
|
$
|
384
|
|
|
$
|
387
|
|
|
$
|
465
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Pharmaceutical
|
$
|
21,421
|
|
|
$
|
21,848
|
|
|
$
|
20,662
|
|
Medical
|
16,066
|
|
|
10,688
|
|
|
10,236
|
|
|||
Corporate
|
2,464
|
|
|
7,576
|
|
|
3,224
|
|
|||
Total assets
|
$
|
39,951
|
|
|
$
|
40,112
|
|
|
$
|
34,122
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
United States
|
$
|
132,526
|
|
|
$
|
125,006
|
|
|
$
|
116,864
|
|
International
|
4,283
|
|
|
4,970
|
|
|
4,682
|
|
|||
Total revenue
|
$
|
136,809
|
|
|
$
|
129,976
|
|
|
$
|
121,546
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
United States
|
$
|
1,950
|
|
|
$
|
1,623
|
|
|
$
|
1,558
|
|
International
|
537
|
|
|
256
|
|
|
238
|
|
|||
Property and equipment, net
|
$
|
2,487
|
|
|
$
|
1,879
|
|
|
$
|
1,796
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Restricted share unit expense
|
$
|
73
|
|
|
$
|
69
|
|
|
$
|
69
|
|
Employee stock option expense
|
22
|
|
|
19
|
|
|
21
|
|
|||
Performance share unit expense
|
(10
|
)
|
|
8
|
|
|
21
|
|
|||
Total share-based compensation expense
|
$
|
85
|
|
|
$
|
96
|
|
|
$
|
111
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
68
|
Notes to Financial Statements
|
|
|
(in millions, except per share amounts)
|
Restricted Share Units
|
|
Weighted-Average
Grant Date Fair
Value per Share
|
|||
Nonvested at June 30, 2016
|
2
|
|
|
$
|
71.73
|
|
Granted
|
1
|
|
|
82.34
|
|
|
Vested
|
(1
|
)
|
|
69.23
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Nonvested at June 30, 2017
|
2
|
|
|
76.72
|
|
|
Granted
|
1
|
|
|
65.97
|
|
|
Vested
|
(1
|
)
|
|
78.92
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Nonvested at June 30, 2018
|
2
|
|
|
$
|
71.58
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Total compensation cost, net of estimated forfeitures, related to nonvested restricted share and share unit awards not yet recognized, pre-tax
|
$
|
78
|
|
|
$
|
73
|
|
|
$
|
79
|
|
Weighted-average period in years over which restricted share and share unit cost is expected to be recognized (in years)
|
2
|
|
|
2
|
|
|
2
|
|
|||
Total fair value of shares vested during the year
|
$
|
65
|
|
|
$
|
64
|
|
|
$
|
65
|
|
(in millions, except per share amounts)
|
Stock
Options
|
|
Weighted-Average
Exercise Price per
Common Share
|
|||
Outstanding at June 30, 2016
|
7
|
|
|
$
|
54.09
|
|
Granted
|
1
|
|
|
83.09
|
|
|
Exercised
|
(2
|
)
|
|
37.79
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Outstanding at June 30, 2017
|
6
|
|
|
63.44
|
|
|
Granted
|
2
|
|
|
66.39
|
|
|
Exercised
|
(1
|
)
|
|
43.12
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Outstanding at June 30, 2018
|
7
|
|
|
$
|
64.50
|
|
Exercisable at June 30, 2018
|
5
|
|
|
$
|
59.60
|
|
(in millions, except per share amounts)
|
2018
|
|
2017
|
|
2016
|
||||||
Aggregate intrinsic value of outstanding options at period end
|
$
|
13
|
|
|
$
|
109
|
|
|
$
|
181
|
|
Aggregate intrinsic value of exercisable options at period end
|
13
|
|
|
106
|
|
|
161
|
|
|||
Aggregate intrinsic value of exercised options
|
14
|
|
|
73
|
|
|
63
|
|
|||
Net proceeds/(withholding) from share-based compensation
|
(3
|
)
|
|
26
|
|
|
6
|
|
|||
Excess tax benefits from share based compensation
|
10
|
|
|
34
|
|
|
33
|
|
|||
Total compensation cost, net of estimated forfeitures, related to unvested stock options not yet recognized, pre-tax
|
17
|
|
|
22
|
|
|
22
|
|
|||
Total fair value of shares vested during the year
|
19
|
|
|
19
|
|
|
20
|
|
|||
Weighted-average grant date fair value per stock option
|
13.50
|
|
|
16.67
|
|
|
17.40
|
|
(in years)
|
2018
|
|
2017
|
|
2016
|
Weighted-average remaining contractual life of outstanding options
|
7
|
|
7
|
|
6
|
Weighted-average remaining contractual life of exercisable options
|
5
|
|
6
|
|
5
|
Weighted-average period over which stock option compensation cost is expected to be recognized
|
2
|
|
2
|
|
2
|
|
2018
|
|
2017
|
|
2016
|
||||||
Risk-free interest rate
|
2.1%
|
|
1.4%
|
-
|
2.0%
|
|
1.5%
|
-
|
1.9%
|
||
Expected volatility
|
25%
|
|
24%
|
|
23%
|
||||||
Dividend yield
|
2.7%
|
-
|
2.8%
|
|
2.2%
|
-
|
2.5%
|
|
1.8%
|
-
|
2.0%
|
Expected life in years
|
7
|
|
7
|
|
7
|
69
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Notes to Financial Statements
|
|
|
(in millions, except per share amounts)
|
Performance
Share Units
|
|
Weighted-Average
Grant Date Fair
Value per Share
|
|||
Nonvested at June 30, 2016
|
0.8
|
|
|
$
|
63.96
|
|
Granted
|
0.2
|
|
|
83.19
|
|
|
Vested (1)
|
(0.4
|
)
|
|
51.49
|
|
|
Canceled and forfeited
|
—
|
|
|
—
|
|
|
Nonvested at June 30, 2017
|
0.6
|
|
|
77.83
|
|
|
Granted
|
0.2
|
|
|
66.43
|
|
|
Vested (2)
|
(0.2
|
)
|
|
71.57
|
|
|
Canceled and forfeited
|
(0.2
|
)
|
|
—
|
|
|
Nonvested at June 30, 2018
|
0.4
|
|
|
$
|
66.13
|
|
(in millions)
|
2018
|
|
2017
|
|
2016
|
||||||
Total compensation cost, net of estimated forfeitures, related to nonvested performance share units not yet recognized, pre-tax
|
$
|
1
|
|
|
$
|
13
|
|
|
$
|
17
|
|
Weighted-average period over which performance share unit cost is expected to be recognized (in years)
|
2
|
|
|
2
|
|
|
2
|
|
|||
Total fair value of shares vested during the year
|
$
|
14
|
|
|
$
|
19
|
|
|
$
|
16
|
|
(in millions, except per common share amounts)
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
||||||||
Fiscal 2018
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
32,641
|
|
|
$
|
35,186
|
|
|
$
|
33,633
|
|
|
$
|
35,349
|
|
Gross margin (1)
|
1,672
|
|
|
1,861
|
|
|
1,913
|
|
|
1,735
|
|
||||
Distribution, selling, general and administrative expenses
|
1,062
|
|
|
1,131
|
|
|
1,132
|
|
|
1,270
|
|
||||
Net earnings/(loss) (2)
|
117
|
|
|
1,053
|
|
|
255
|
|
|
(1,166
|
)
|
||||
Less: Net earnings attributable to noncontrolling interests
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net earnings/(loss) attributable to Cardinal Health, Inc.
|
115
|
|
|
1,053
|
|
|
255
|
|
|
(1,166
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net earnings/(loss) attributable to Cardinal Health, Inc. per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.36
|
|
|
$
|
3.35
|
|
|
$
|
0.81
|
|
|
$
|
(3.76
|
)
|
Diluted (3)
|
0.36
|
|
|
3.33
|
|
|
0.81
|
|
|
(3.76
|
)
|
(1)
|
Gross margin was not impacted by LIFO benefit/(charges) in fiscal 2018.
|
(2)
|
During the fourth quarter of fiscal 2018, we recognized a goodwill impairment charge of $
1.4 billion
related to our Medical segment. There was no tax benefit related to this goodwill impairment charge.
|
(3)
|
Due to the net loss during the fourth quarter of fiscal 2018, dilutive potential common shares have not been included in the denominator of the dilutive per share computation due to their antidilutive effect.
|
(in millions, except per common share amounts)
|
First
Quarter |
|
Second
Quarter |
|
Third
Quarter |
|
Fourth
Quarter |
||||||||
Fiscal 2017
|
|
|
|
|
|
|
|
||||||||
Revenue
|
$
|
32,039
|
|
|
$
|
33,150
|
|
|
$
|
31,821
|
|
|
$
|
32,966
|
|
Gross margin (4)
|
1,590
|
|
|
1,602
|
|
|
1,728
|
|
|
1,623
|
|
||||
Distribution, selling, general and administrative expenses
|
920
|
|
|
910
|
|
|
960
|
|
|
983
|
|
||||
Net earnings
|
310
|
|
|
324
|
|
|
382
|
|
|
278
|
|
||||
Less: Net earnings attributable to noncontrolling interests
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(4
|
)
|
||||
Net earnings attributable to Cardinal Health, Inc.
|
309
|
|
|
324
|
|
|
381
|
|
|
274
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net earnings attributable to Cardinal Health, Inc. per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.97
|
|
|
$
|
1.02
|
|
|
$
|
1.21
|
|
|
$
|
0.87
|
|
Diluted
|
0.96
|
|
|
1.02
|
|
|
1.20
|
|
|
0.86
|
|
(4)
|
Gross margin is impacted by LIFO benefit/(charges) of $
9 million
and
$(9) million
in the second and third quarter, respectively. We did not have LIFO benefits/(charges) in the fourth quarter.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
70
|
Notes to Financial Statements
|
|
|
71
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Schedule II
|
Valuation and Qualifying Accoun
ts
|
|
(in millions)
|
Balance at
Beginning of Period
|
|
Charged to Costs
and Expenses (1)
|
|
Charged to
Other Accounts (2)
|
|
Deductions (3)
|
|
Balance at
End of Period
|
||||||||||
Fiscal 2018
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts receivable
|
$
|
137
|
|
|
$
|
113
|
|
|
$
|
1
|
|
|
$
|
(111
|
)
|
|
$
|
139
|
|
Finance notes receivable
|
9
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
7
|
|
|||||
Sales returns and allowances
|
347
|
|
|
2,402
|
|
|
—
|
|
|
(2,270
|
)
|
|
479
|
|
|||||
Other
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
|
$
|
494
|
|
|
$
|
2,513
|
|
|
$
|
1
|
|
|
$
|
(2,381
|
)
|
|
$
|
626
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fiscal 2017
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts receivable
|
$
|
135
|
|
|
$
|
59
|
|
|
$
|
1
|
|
|
$
|
(58
|
)
|
|
$
|
137
|
|
Finance notes receivable
|
19
|
|
|
3
|
|
|
—
|
|
|
(13
|
)
|
|
9
|
|
|||||
Sales returns and allowances
|
386
|
|
|
2,285
|
|
|
—
|
|
|
(2,324
|
)
|
|
347
|
|
|||||
Other
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
|
$
|
541
|
|
|
$
|
2,347
|
|
|
$
|
1
|
|
|
$
|
(2,395
|
)
|
|
$
|
494
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fiscal 2016
|
|
|
|
|
|
|
|
|
|
||||||||||
Accounts receivable
|
$
|
135
|
|
|
$
|
72
|
|
|
$
|
2
|
|
|
$
|
(74
|
)
|
|
$
|
135
|
|
Finance notes receivable
|
14
|
|
|
6
|
|
|
—
|
|
|
(1
|
)
|
|
19
|
|
|||||
Sales returns and allowances
|
305
|
|
|
2,207
|
|
|
—
|
|
|
(2,126
|
)
|
|
386
|
|
|||||
Other
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
|
$
|
455
|
|
|
$
|
2,285
|
|
|
$
|
2
|
|
|
$
|
(2,201
|
)
|
|
$
|
541
|
|
(1)
|
Fiscal
2018
,
2017
and
2016
include
$3 million
,
$5 million
and
$5 million
, respectively, for reserves related to customer pricing disputes, excluded from provision for bad debts on the consolidated statements of cash flows and classified as a reduction in revenue in the consolidated statements of earnings.
|
(2)
|
Recoveries of amounts provided for or written off in prior years were
$1 million
,
$1 million
and
$2 million
for fiscal
2018
,
2017
and
2016
, respectively.
|
(3)
|
Write-off of uncollectible accounts or actual sales returns.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
72
|
Directors, Executive Officers, and Corporate Governance
|
|
|
Name
|
Age
|
Position
|
George S. Barrett
|
63
|
Executive Chairman of the Board
|
Michael C. Kaufmann
|
55
|
Chief Executive Officer
|
Jorge M. Gomez
|
50
|
Chief Financial Officer
|
Jon L. Giacomin
|
53
|
Chief Executive Officer, Medical segment
|
Michele A. M. Holcomb
|
50
|
Executive Vice President, Strategy and Corporate Development
|
Pamela O. Kimmet
|
60
|
Chief Human Resources Officer
|
Craig S. Morford
|
59
|
Chief Legal and Compliance Officer
|
Patricia B. Morrison
|
59
|
Executive Vice President, Customer Support Services and Chief Information Officer
|
73
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
|
Equity Compensation Plan Information
|
|||||||||||
Plan Category
|
|
Common Shares
to be Issued
Upon Exercise of Outstanding Options and Rights (#)
|
Weighted Average
Exercise Price of Outstanding Options ($)
|
Common Shares
Remaining Available
for Future Issuance
Under Equity
Compensation Plans (excluding securities
reflected in column (a)) (#)
|
|||||||
|
|
(a)
|
(b)
|
(c)
|
|||||||
Equity compensation plans approved by shareholders
|
|
10,320,017
|
|
(1)
|
$
|
64.50
|
|
(1)
|
19,305,951
|
|
(2)
|
Equity compensation plans not approved by shareholders
|
|
4,203
|
|
(3)
|
—
|
|
(3)
|
—
|
|
|
|
Total at June 30, 2018
|
|
10,324,220
|
|
|
|
|
19,305,951
|
|
|
(1)
|
In addition to stock options outstanding under the Amended Cardinal Health, Inc. 2011 Long-Term Incentive Plan (the "2011 LTIP") and the Cardinal Health, Inc. 2005 Long-Term Incentive Plan (the "2005 LTIP"), also includes 827,766 PSUs and 2,165,340 RSUs outstanding under the 2011 LTIP, 10,241 PSUs and 61,861 RSUs outstanding under the 2005 LTIP, and 165,024 RSUs outstanding under the 2007 Nonemployee Directors Equity Incentive Plan that are payable solely in common shares. PSUs and RSUs do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price. PSUs granted in fiscal 2015 are not reported in this table because they expired without any shares vesting. PSUs granted in fiscal 2016 and 2017 are reported in this table at the maximum payout level (200% of target) in accordance with SEC rules.
|
(2)
|
Reflects common shares available under the 2011 LTIP in the form of stock options and other stock-based awards. Under the 2011 LTIP's fungible share counting provisions, stock options are counted against the plan as one share for every common share issued; awards other than stock options are counted against the plan as two and one-half shares for every common share issued. This means that only 7,722,380 shares could be issued under awards other than stock options while 19,305,951 shares could be issued under stock options.
|
(3)
|
RSUs outstanding under the Cardinal Health, Inc. Amended and Restated Outside Directors Equity Incentive Plan that are payable solely in common shares. RSUs do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price.
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
74
|
Exhibits
|
|
|
|
Page
|
|
|
Consolidated Financial Statements and Schedule:
|
|
Exhibit
Number
|
Exhibit Description
|
2.1.1
|
|
2.1.2
|
|
2.1.3
|
|
3.1
|
|
3.2
|
|
4.1
|
|
4.2.1
|
|
4.2.2
|
|
4.2.3
|
|
4.2.4
|
|
4.2.5
|
|
4.2.6
|
|
4.2.7
|
|
4.2.8
|
|
4.2.9
|
|
4.2.10
|
|
4.2.11
|
75
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Exhibits
|
|
|
4.2.12
|
|
4.2.13
|
|
4.2.14
|
|
4.2.15
|
|
4.2.16
|
|
4.2.17
|
|
4.2.18
|
|
4.3
|
|
10.1.1
|
|
10.1.2
|
|
10.1.3
|
|
10.1.4
|
|
10.1.5
|
|
10.1.6
|
|
10.1.7
|
|
10.1.8
|
|
10.2.1
|
|
10.2.2
|
|
10.2.3
|
|
10.2.4
|
|
10.2.5
|
|
10.2.6
|
|
10.3.1
|
|
10.3.2
|
|
10.3.3
|
|
10.3.4
|
|
10.4.1
|
|
10.4.2
|
|
10.4.3
|
|
10.5.1
|
|
10.5.2
|
|
10.5.3
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
76
|
Exhibits
|
|
|
10.6
|
|
10.7.1
|
|
10.7.2
|
|
10.7.3
|
|
10.7.4
|
|
10.8.1
|
|
10.8.2
|
|
10.9
|
|
10.10
|
|
10.11
|
|
10.12.1
|
|
10.12.2
|
|
10.13.1
|
|
10.13.2
|
|
10.14.1
|
|
10.14.2
|
|
10.14.3
|
|
10.14.4
|
|
10.14.5
|
|
10.14.6
|
|
10.14.7
|
|
10.14.8
|
|
10.14.9
|
|
10.14.10
|
|
10.14.11
|
|
10.14.12
|
|
10.14.13
|
|
10.14.14
|
|
10.14.15
|
|
10.14.16
|
|
10.14.17
|
77
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Exhibits
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
78
|
Form 10-K Cross Reference Index
|
|
|
Item
|
|
Page(s)
|
|
|
|
|
Part 1
|
|
1
|
||
1A
|
||
1B
|
Unresolved Staff Comments
|
N/A
|
2
|
||
3
|
||
4
|
Mine Safety Disclosures
|
N/A
|
|
|
|
|
|
|
|
Part II
|
|
5
|
||
6
|
||
7
|
||
7A
|
||
8
|
||
9
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
N/A
|
9A
|
||
9B
|
Other Information
|
N/A
|
|
|
|
|
Part III
|
|
10
|
||
11
|
Executive Compensation
|
(a)
|
12
|
||
13
|
Certain Relationships and Related Transactions, and Director Independence
|
(b)
|
14
|
Principal Accounting Fees and Services
|
(c)
|
|
|
|
|
Part IV
|
|
15
|
||
16
|
Form 10-K Summary
|
N/A
|
|
N/A
|
Not applicable
|
|
(a)
|
The information called for by Item 11 of Form 10-K is incorporated by reference to our 2018 Proxy Statement under the captions “Corporate Governance” and “Executive Compensation.”
|
|
(b)
|
The information called for by Item 13 of Form 10-K is incorporated by reference to our 2018 Proxy Statement under the caption "Corporate Governance."
|
|
(c)
|
The information called for by Item 14 of Form 10-K is incorporated by reference to our 2018 Proxy Statement under the caption “Audit Committee Matters.”
|
79
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
|
Signatures
|
|
|
|
Cardinal Health, Inc.
|
|
|
|
|
|
By:
|
/s/ MICHAEL C. KAUFMANN
|
|
|
MICHAEL C. KAUFMANN
|
|
|
Chief Executive Officer
|
Name
|
|
Title
|
/s/ MICHAEL C. KAUFMANN
|
|
Chief Executive Officer and Director (principal executive officer)
|
Michael C. Kaufmann
|
|
|
|
|
|
/s/ JORGE M. GOMEZ
|
|
Chief Financial Officer (principal financial officer)
|
Jorge M. Gomez
|
|
|
|
|
|
/s/ STUART G. LAWS
|
|
Senior Vice President and Chief Accounting Officer (principal accounting officer)
|
Stuart G. Laws
|
|
|
|
|
|
/s/ GEORGE S. BARRETT
|
|
Executive Chairman of the Board
|
George S. Barrett
|
|
|
|
|
|
/s/ DAVID J. ANDERSON
|
|
Director
|
David J. Anderson
|
|
|
|
|
|
/s/ COLLEEN F. ARNOLD
|
|
Director
|
Colleen F. Arnold
|
|
|
|
|
|
/s/ CARRIE S. COX
|
|
Director
|
Carrie S. Cox
|
|
|
|
|
|
/s/ CALVIN DARDEN
|
|
Director
|
Calvin Darden
|
|
|
|
|
|
/s/ BRUCE L. DOWNEY
|
|
Director
|
Bruce L. Downey
|
|
|
|
|
|
/s/ PATRICIA A. HEMINGWAY HALL
|
|
Director
|
Patricia A. Hemingway Hall
|
|
|
|
|
|
/s/ AKHIL JOHRI
|
|
Director
|
Akhil Johri
|
|
|
|
|
|
/s/ CLAYTON M. JONES
|
|
Director
|
Clayton M. Jones
|
|
|
|
|
|
/s/ GREGORY B. KENNY
|
|
Director
|
Gregory B. Kenny
|
|
|
|
|
|
/s/ NANCY KILLEFER
|
|
Director
|
Nancy Killefer
|
|
|
|
|
|
/s/ DAVID P. KING
|
|
Director
|
David P. King
|
|
|
|
Cardinal Health
|
Fiscal 2018 Form 10-K
|
80
|
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, OH
|
|
Attn: Chief Legal and Compliance Officer
|
|
|
Exhibit 12.1
|
(in millions, except ratios)
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
||||||||||
Earnings/(loss) from continuing operations before income taxes
|
$
|
1,798
|
|
|
$
|
1,967
|
|
|
$
|
2,276
|
|
|
$
|
1,924
|
|
|
$
|
(228
|
)
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Plus fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
129
|
|
|
137
|
|
|
178
|
|
|
187
|
|
|
328
|
|
|||||
Capitalized interest
|
1
|
|
|
2
|
|
|
6
|
|
|
9
|
|
|
4
|
|
|||||
Amortization of debt offering costs
|
4
|
|
|
8
|
|
|
6
|
|
|
6
|
|
|
11
|
|
|||||
Interest portion of rent expense
|
10
|
|
|
10
|
|
|
12
|
|
|
14
|
|
|
16
|
|
|||||
Fixed charges (1)
|
144
|
|
|
156
|
|
|
201
|
|
|
217
|
|
|
359
|
|
|||||
Plus: amortization of capitalized interest
|
3
|
|
|
2
|
|
|
3
|
|
|
4
|
|
|
4
|
|
|||||
Less: capitalized interest
|
(1
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
(9
|
)
|
|
(4
|
)
|
|||||
Earnings (1)
|
$
|
1,944
|
|
|
$
|
2,124
|
|
|
$
|
2,473
|
|
|
$
|
2,135
|
|
|
$
|
131
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges (1) (2)
|
13.5
|
|
|
13.6
|
|
|
12.3
|
|
|
9.9
|
|
|
0.4
|
|
(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/(loss) from continuing operations before income taxes plus fixed charges and amortization of capitalized interest less 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.
|
Subsidiary Name
|
|
State/Jurisdiction
of Incorporation
|
A+ Secure Packaging, LLC
|
|
Tennessee
|
Access Closure, Inc.
|
|
California
|
Aero-Med, Ltd.
|
|
Connecticut
|
Allegiance Corporation
|
|
Delaware
|
AssuraMed, Inc.
|
|
Delaware
|
Bellwether Oncology Alliance, Inc.
|
|
Tennessee
|
Cardinal Health 2, LLC
|
|
Nevada
|
Cardinal Health 3, LLC
|
|
Delaware
|
Cardinal Health 5, LLC
|
|
Delaware
|
Cardinal Health 6, Inc.
|
|
Nevada
|
Cardinal Health 7, LLC
|
|
Delaware
|
Cardinal Health 100, Inc.
|
|
Indiana
|
Cardinal Health 104 LP
|
|
Ohio
|
Cardinal Health 105, Inc.
|
|
Ohio
|
Cardinal Health 107, LLC
|
|
Ohio
|
Cardinal Health 108, LLC
|
|
Delaware
|
Cardinal Health 110, LLC
|
|
Delaware
|
Cardinal Health 112, LLC
|
|
Delaware
|
Cardinal Health 113, LLC
|
|
Wisconsin
|
Cardinal Health 114, Inc.
|
|
Delaware
|
Cardinal Health 115, LLC
|
|
Ohio
|
Cardinal Health 116, LLC
|
|
Delaware
|
Cardinal Health 118, LLC
|
|
Delaware
|
Cardinal Health 119, LLC
|
|
Delaware
|
Cardinal Health 121, LLC
|
|
Delaware
|
Cardinal Health 122, LLC
|
|
Delaware
|
Cardinal Health 123, LLC
|
|
Delaware
|
Cardinal Health 124, LLC
|
|
Delaware
|
Cardinal Health 126, LLC
|
|
Delaware
|
Cardinal Health 127, Inc.
|
|
Kansas
|
Cardinal Health 200, LLC
|
|
Delaware
|
Cardinal Health 201, Inc.
|
|
Delaware
|
Cardinal Health 222 (Thailand) Ltd.
|
|
Thailand
|
Cardinal Health 247, Inc.
|
|
Colorado
|
Cardinal Health 249, LLC
|
|
Delaware
|
Cardinal Health 414, LLC
|
|
Delaware
|
Cardinal Health Australia 503 Pty. Ltd.
|
|
Australia
|
Cardinal Health Austria 504 GmbH
|
|
Austria
|
Cardinal Health Belgium 505 BVBA
|
|
Belgium
|
Cardinal Health Canada Inc.
|
|
Canada
|
Cardinal Health Canada Holdings Cooperative U.A.
|
|
Netherlands
|
Cardinal Health Colombia S.A.S.
|
|
Colombia
|
Cardinal Health do Brasil Ltd.
|
|
Brazil
|
Cardinal Health D.R. 203 II Ltd.
|
|
Bermuda
|
Cardinal Health Denmark ApS
|
|
Denmark
|
Cardinal Health Finland Oy
|
|
Finland
|
Cardinal Health Foundation
|
|
Ohio
|
Subsidiary Name
|
|
State/Jurisdiction
of Incorporation
|
Cardinal Health France 506 SAS
|
|
France
|
Cardinal Health Funding, LLC
|
|
Nevada
|
Cardinal Health Germany 507 GmbH
|
|
Germany
|
Cardinal Health Germany Manufacturing GmbH
|
|
Germany
|
Cardinal Health International Philippines, Inc.
|
|
Philippines
|
Cardinal Health IPS, LLC
|
|
Delaware
|
Cardinal Health Ireland 419 Designated Activity Company
|
|
Ireland
|
Cardinal Health Ireland 508 Limited
|
|
Ireland
|
Cardinal Health Ireland Unlimited Company
|
|
Ireland
|
Cardinal Health Italy 509 Srl
|
|
Italy
|
Cardinal Health Japan G.K.
|
|
Japan
|
Cardinal Health Korea Limited
|
|
Korea
|
Cardinal Health Malaysia 211 Sdn. Bhd.
|
|
Malaysia
|
Cardinal Health Malta 212 Limited
|
|
Malta
|
Cardinal Health Managed Care Services, LLC
|
|
Delaware
|
Cardinal Health Medical Products India Private Limited
|
|
India
|
Cardinal Health Mexico 244 S. de R.L. de C.V.
|
|
Mexico
|
Cardinal Health Mexico 514 S. de R.L. de C.V.
|
|
Mexico
|
Cardinal Health Middle East FZ-LLC
|
|
United Arab Emirates
|
Cardinal Health Netherlands 502 B.V.
|
|
Netherlands
|
Cardinal Health Norway AS
|
|
Norway
|
Cardinal Health Pharmaceutical Contracting, LLC
|
|
Delaware
|
Cardinal Health Pharmacy Services, LLC
|
|
Delaware
|
Cardinal Health Poland Spółlka z ograniczonąa odpowiedzialnośsciąa
|
|
Poland
|
Cardinal Health Portugal 513 Unipessoal Lda.
|
|
Portugal
|
Cardinal Health P.R. 120, Inc.
|
|
Puerto Rico
|
Cardinal Health P.R. 218, Inc.
|
|
Puerto Rico
|
Cardinal Health P.R. 220, LLC
|
|
Puerto Rico
|
Cardinal Health Singapore 225 Pte. Ltd.
|
|
Singapore
|
Cardinal Health Spain 511 S.L.
|
|
Spain
|
Cardinal Health Specialty Pharmacy, LLC
|
|
Delaware
|
Cardinal Health Sweden 512 A.B.
|
|
Sweden
|
Cardinal Health Switzerland 515 GmbH
|
|
Switzerland
|
Cardinal Health Systems, Inc.
|
|
Ohio
|
Cardinal Health Technologies, LLC
|
|
Nevada
|
Cardinal Health Technologies Switzerland GmbH
|
|
Switzerland
|
Cardinal Health U.K. 432 Limited
|
|
United Kingdom
|
Cardinal Health Medical Equipment Consulting (Shanghai) Co., Ltd.
|
|
China
|
Cirpro de Delicias S.A. de C.V.
|
|
Mexico
|
Convertors de Mexico S.A. de C.V.
|
|
Mexico
|
Cordis Cashel Company Unlimited
|
|
Ireland
|
Cordis Corporation
|
|
Florida
|
Cordis (Shanghai) Medical Devices Co., Ltd.
|
|
China
|
Cornerstone Partners G.P.O., L.P.
|
|
Tennessee
|
Subsidiary Name
|
|
State/Jurisdiction
of Incorporation
|
Covidien Ireland Limited
|
|
Ireland
|
Covidien Manufacturing Solutions, S.A.
|
|
Costa Rica
|
Curaspan Health Group, Inc.
|
|
Delaware
|
EPIC Insurance Company
|
|
Vermont
|
Especialidades Medicas Kenmex S.A. de C.V.
|
|
Mexico
|
Griffin Capital, LLC
|
|
Nevada
|
Innovative Therapies, Inc.
|
|
Delaware
|
Instant Diagnostic Systems, Inc.
|
|
Alabama
|
Kendall Patient Recovery BVBA
|
|
Belgiuum
|
Kendall-Gammatron Limited
|
|
Thailand
|
KPR Australia Pty. Ltd.
|
|
Australia
|
KPR Italia S.r.l.
|
|
Italy
|
KPR Switzerland Sales Gmbh
|
|
Switzerland
|
KPR U.S., LLC
|
|
Delaware
|
Leader Drugstores, Inc.
|
|
Delaware
|
Limited Liability Company "Cardinal Health Russia"
|
|
Russian Federation
|
Marin Apothecaries
|
|
California
|
Medicine Shoppe International, Inc.
|
|
Delaware
|
Mediquip Sdn. Bhd.
|
|
Malaysia
|
NaviHealth, Inc.
|
|
Delaware
|
Nippon Covidien Ltd.
|
|
Japan
|
One Cloverleaf, LLC
|
|
Delaware
|
Outcomes Incorporated
|
|
Iowa
|
Pinnacle Intellectual Property Services, Inc.
|
|
Nevada
|
Pinnacle Intellectual Property Services-International, Inc.
|
|
Nevada
|
Post-Acute Care Center for Research, LLC
|
|
Delaware
|
Quiroproductos de Cuauhtemoc S. de R.L. de C.V.
|
|
Mexico
|
R Cubed, Inc.
|
|
Tennessee
|
RainTree GPO, LLC
|
|
Delaware
|
Renal Purchasing Group, LLC
|
|
Tennessee
|
RGH Enterprises, Inc.
|
|
Ohio
|
RightCare Solutions, Inc.
|
|
Delaware
|
Rxealtime, Inc.
|
|
Nevada
|
Sonexus Health, LLC
|
|
Texas
|
TelePharm, LLC
|
|
Iowa
|
The Harvard Drug Group, L.L.C.
|
|
Michigan
|
Tradex International, Inc.
|
|
Ohio
|
UroMed, Inc.
|
|
Georgia
|
WaveMark, Inc.
|
|
Delaware
|
|
|
Exhibit 23.1
|
(1)
|
Registration Statement on Form S-3 No. 333-215935 of Cardinal Health, Inc.,
|
(2)
|
Registration Statements on Form S-4 No. 333-62938 and No. 333-74761 of Cardinal Health, Inc., and
|
(3)
|
Registration Statements on Form S-8 No. 33-42357, No. 333-90423, No. 333-38192, No. 333-38198, No. 333-56010, No. 333-129725, No. 333-149107, No. 333-155156, No. 333-163128, No. 333-164736, No. 333-177728, No. 333-183471, No. 333-206339, No. 333-206340, No. 333-214412 and No. 333-219892 of Cardinal Health, Inc.;
|
/s/ Ernst & Young LLP
|
|
|
|
Grandview Heights, Ohio
|
|
August 22, 2018
|
|
|
|
Exhibit 31.1
|
1.
|
I have reviewed this Form 10-K 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;
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(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;
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(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
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(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
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5.
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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
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(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.
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/s/ M
ICHAEL
C. K
AUFMANN
|
|
Michael C. Kaufmann
|
|
Chief Executive Officer
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|
|
|
Exhibit 31.2
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1.
|
I have reviewed this Form 10-K of Cardinal Health, Inc.;
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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;
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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;
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4.
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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
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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.
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/s/ J
ORGE
M. G
OMEZ
|
|
Jorge M. Gomez
|
|
Chief Financial Officer
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|
|
|
Exhibit 32.1
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(1)
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the Annual Report on Form 10-K for the fiscal year ended
June 30, 2018
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
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(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
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•
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competitive pressures in the markets in which we operate, including pricing pressures;
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•
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uncertainties relating to the pricing of generic pharmaceuticals;
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•
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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;
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•
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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;
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•
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changes in manufacturer approaches to pricing branded pharmaceutical products and risks related to our compensation under contractual arrangements with manufacturers being set as a percentage of the wholesale acquisition cost of branded pharmaceuticals;
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•
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changes in the timing or frequency of the introduction of branded pharmaceuticals;
|
•
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our high sales concentration with certain key customers, including CVS Health Corporation and OptumRx;
|
•
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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;
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•
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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;
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•
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possible losses that may arise or expenses that we may incur from the resolution and defense of the lawsuits and investigations in which we have been named relating to the distribution of prescription opioid pain medication;
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•
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potential damage to our reputation, adverse operational impacts or other effects that may result from the national opioid epidemic and the allegations that have been made about our role in such epidemic;
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•
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potential adverse impact to our financial results resulting from enacted and proposed state taxes or other assessments on the sale and distribution of opioid medications;
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•
|
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;
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•
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uncertainties related to our ability to manage inventory and cost challenges within the Cordis business and to stop the decline in Cordis' performance;
|
•
|
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;
|
•
|
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 arising from possible violations of healthcare fraud and abuse laws;
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•
|
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;
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•
|
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, pricing changes, non-renewal, early termination, or delinquencies or defaults under contracts with 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 and unfavorable challenges to our tax positions and payments to settle these challenges;
|
•
|
uncertainties due to government healthcare reform, including possible repeal or replacement of major parts of the Patient Protection and Affordable Care Act;
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•
|
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;
|
•
|
risks to our business and information and controls systems in the event that 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, patent infringement claims,
qui tam
actions, government investigations 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;
|
•
|
our ability to manage and complete divestitures or other strategic business combination transactions, including our ability to find buyers or other strategic exit opportunities and risks associated with the possibility that we could experience greater dis-synergies than anticipated or otherwise fail to achieve our strategic objectives;
|
•
|
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 including currently proposed tariffs;
|
•
|
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 2018 Form 10-K.
|