01—Abstract
Summary
Summary of the 10-K filed August 10, 2017. Cited figures are marked; the original filing is the authoritative source.
Cardinal Health, Inc. reported robust revenue growth of 7% to $130.0 billiona for fiscal year 2017, driven primarily by its Pharmaceutical segment.
However, operating earnings saw a decrease of 14% on a GAAP basis and 4% on a non-GAAP basis, attributed to generic pharmaceutical customer pricing changes and the loss of a major distribution customer. Despite the earnings dip, the company maintained a strong financial position with cash and equivalents increasing significantly due to debt issuance and operating cash flow, partially offset by strategic investments. A major development during the year was the acquisition of Medtronic's Patient Recovery Business for $6.1 billionb, which is expected to bolster the Medical segment's portfolio and revenue in the upcoming fiscal year, although it also introduced increased amortization and interest expenses.
The company demonstrated a commitment to shareholder returns through a 16%c increase in quarterly dividends and ongoing share repurchases. Looking ahead, Cardinal Health anticipates continued challenges in its Pharmaceutical segment due to pricing pressures but expects the Medtronic acquisition to drive growth in the Medical segment. The company's risk factors highlight competitive pressures, regulatory scrutiny, and the potential impact of economic conditions and customer concentration, particularly with its largest customer, CVS.
02—Key points
Key Highlights
- Total revenue reached $130.0 billion, a 7% increase year-over-year, mainly driven by pharmaceutical distribution customers.
- GAAP operating earnings decreased by 14% to $2.1 billion, while non-GAAP operating earnings decreased by 4% to $2.8 billion, primarily due to generic pricing changes and the loss of a large customer.
- GAAP diluted EPS decreased by 7% to $4.03, while non-GAAP diluted EPS increased by 3% to $5.40.
- The company completed a significant acquisition of Medtronic's Patient Recovery Business for $6.1 billion, expanding its Medical segment.
- Cash and equivalents increased substantially to $6.9 billion at fiscal year-end 2017, boosted by a $5.2 billion debt issuance.
- Dividends declared per common share increased by 16% to $1.80, and $600 million was used for share repurchases.
- The Pharmaceutical segment profit declined by 12% due to generic pharmaceutical customer pricing changes and customer loss, while the Medical segment profit increased by 25%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Cardinal Health Inc kept $0.01.
- Revenue$129.98B100.0%
- Cost of revenue−$123.43B95.0%
- Gross profit$6.54B5.0%
- Operating costs−$4.42B3.4%
- Operating income$2.12B1.6%
- Interest, other & tax−$832.0M0.6%
- Net income$1.29B1.0%
Where FY2017 revenue went
$129.98B- Cost of revenue: $123.43B, 95% of revenue
- Net income: $1.29B, 1.0% of revenue
- SG&A: $3.77B, 2.9% of revenue
- Interest, other & tax: $832.0M, 0.6% of revenue
Kept 1.0% as net incomeNet income $1.29B · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed August 10, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $129.98B$121.55B | +6.9% |
| Cost of Revenue | $123.43B$115.00B | +7.3% |
| Gross Profit | $6.54B$6.54B | 0.0% |
| SG&A Expenses | $3.77B$3.65B | +3.5% |
| Operating Income | $2.12B$2.46B | −13.8% |
| Interest Expense | $201.00M$178.00M | +12.9% |
| Net Income | $1.29B$1.43B | −9.7% |
| EPS (Basic) | $4.06$4.36 | −6.9% |
| EPS (Diluted) | $4.03$4.32 | −6.7% |
| Shares Outstanding (Basic) | 317.00M327.00M | −3.1% |
| Shares Outstanding (Diluted) | 320.00M330.00M | −3.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of Cardinal Health's revenue growth in fiscal year 2017?
Cardinal Health's revenue grew by 7% to $130.0 billion in fiscal year 2017, primarily driven by sales growth from pharmaceutical distribution customers. The Medical segment also contributed to this growth through sales from new and existing customers and contributions from acquisitions.
Why did Cardinal Health's operating earnings decrease in fiscal year 2017?
Both GAAP and non-GAAP operating earnings decreased in fiscal year 2017 primarily due to unfavorable generic pharmaceutical customer pricing changes and the previously disclosed loss of a large pharmaceutical distribution customer. Additionally, GAAP operating earnings were impacted by changes in litigation charges and amortization of acquisition-related intangible assets from the Cordis acquisition.
What is the significance of the Medtronic acquisition for Cardinal Health?
Cardinal Health acquired Medtronic's Patient Recovery Business for $6.1 billion. This strategic acquisition significantly expands the Medical segment's portfolio of self-manufactured products and is expected to substantially increase the Medical segment's revenue and profit in fiscal year 2018. However, it also led to an increase in amortization and acquisition-related costs, as well as higher interest expenses due to the debt used to finance the deal.
How did Cardinal Health manage its cash and liquidity during fiscal year 2017?
Cardinal Health's cash and equivalents increased significantly to $6.9 billion by the end of fiscal year 2017. This increase was mainly due to proceeds from a $5.2 billion debt issuance and cash generated from operating activities, which helped fund share repurchases, dividends, capital expenditures, and debt repayments. The company also has access to a $1.75 billion revolving credit facility and a $700 million receivables sales facility program.
06—Continue