10-KPeriod: FY2019

CARDINAL HEALTH INC Annual Report, Year Ended Jun 30, 2019

Filed August 20, 2019For Securities:CAH

Summary

Cardinal Health, Inc. reported total revenue of $145.5 billion for fiscal year 2019, representing a 6% increase from the prior year, largely driven by its Pharmaceutical segment. While overall revenue grew, the company's non-GAAP operating earnings saw a 9% decline, attributed to challenges in the Pharmaceutical segment's generics program and customer contract renewals, alongside performance issues in the Medical segment's branded products. Despite the decline in non-GAAP operating earnings, Cardinal Health's Non-GAAP diluted EPS increased by 6% to $5.28, benefiting from a lower effective tax rate and reduced share count. The company generated strong operating cash flow of $2.7 billion and ended the year with a robust cash balance of $2.5 billion. Significant events during the year included the divestiture of its naviHealth business, contributing a pre-tax gain of $508 million, and the company's ongoing efforts in cost-saving initiatives, with expected charges of $120-145 million in fiscal year 2020. Investors should note the ongoing opioid litigation as a significant risk factor, with potential material adverse effects on the company's financial condition and operations.

Financial Highlights

49 data points
Beta

Revenue

$145.53B

4.7% Gross Margin

Net Income

$1.36B

0.9% Net Margin

EPS (Diluted)

$4.53

Total Assets

$40.96B

Cash & Equivalents

$2.53B

Free Cash Flow

$2.39B

Financial Statements
Beta
Revenue$145.53B
Cost of Revenue$138.70B
Gross Profit$6.83B
SG&A Expenses$4.48B
Operating Income$2.06B
Interest Expense$294.00M
Net Income$1.36B
EPS (Basic)$4.55
EPS (Diluted)$4.53
Shares Outstanding (Basic)300.00M
Shares Outstanding (Diluted)301.00M

Key Highlights

  • 1Total revenue for fiscal 2019 reached $145.5 billion, a 6% increase year-over-year, primarily driven by pharmaceutical distribution and specialty pharmaceutical customers.
  • 2Non-GAAP operating earnings decreased by 9% to $2.4 billion, impacted by the Pharmaceutical segment's generics program, customer contract renewals, and Medical segment branded product performance.
  • 3Non-GAAP diluted EPS increased by 6% to $5.28, boosted by a lower effective tax rate and share repurchases.
  • 4The company generated $2.7 billion in net cash provided by operating activities and ended the fiscal year with $2.5 billion in cash and cash equivalents.
  • 5Cardinal Health completed the divestiture of its naviHealth business, recognizing a pre-tax gain of $508 million.
  • 6The company is implementing cost-saving initiatives expected to result in restructuring charges of $120 million to $145 million, primarily in fiscal year 2020.
  • 7Significant legal proceedings related to opioid distribution continue, posing a material risk to the company's operations and financial condition.

Frequently Asked Questions

Cardinal Health reported total revenue of $145.5 billion, a 6% increase from the prior year. However, non-GAAP operating earnings declined by 9% to $2.4 billion due to challenges in its pharmaceutical generics program and customer contract renewals. Non-GAAP diluted EPS saw a 6% increase to $5.28, aided by a lower tax rate and share buybacks.

Revenue growth was primarily driven by increased sales in pharmaceutical distribution and specialty pharmaceutical customers. The decline in non-GAAP operating earnings was mainly attributed to negative impacts from the Pharmaceutical segment's generics program, adverse effects of customer contract renewals, and weaker performance in the Medical segment's Cardinal Health Brand products.

Cardinal Health generated $2.7 billion in net cash from operating activities and ended the fiscal year with $2.5 billion in cash and equivalents. The company also repaid $1.1 billion in debt and repurchased $600 million of its common shares. It maintained adequate capital resources and had $1.3 billion authorized for future share repurchases.

The most significant event was the divestiture of its 98% ownership interest in naviHealth in August 2018, which resulted in a pre-tax gain of $508 million in fiscal year 2019. The company also completed several smaller acquisitions during the year, with a total cash outlay of $82 million.

A significant risk factor is the ongoing opioid litigation, where Cardinal Health is a defendant in numerous lawsuits. The company acknowledges that the defense and resolution of these matters could have a material adverse effect on its results of operations, financial condition, and liquidity. Additionally, regulatory requirements and potential changes in healthcare policies are noted risks.