10-KPeriod: FY2020

CARDINAL HEALTH INC Annual Report, Year Ended Jun 30, 2020

Filed August 13, 2020For Securities:CAH

Summary

Cardinal Health, Inc. reported a significant shift in its financial performance for the fiscal year ended June 29, 2020. While the company saw a 5% increase in total revenue to $152.9 billion, primarily driven by its Pharmaceutical segment, its reported GAAP operating loss widened considerably to $4.1 billion. This substantial loss was largely attributed to a $5.63 billion pre-tax charge related to an estimated liability for lawsuits and claims concerning the distribution of prescription opioid pain medications. Despite this significant one-time charge, the company's non-GAAP operating earnings saw a slight increase of 1% to $2.38 billion, reflecting ongoing cost-saving measures and growth in specialty solutions, partially offset by customer contract renewals and the impact of COVID-19. Operationally, the Pharmaceutical segment experienced revenue growth, while the Medical segment saw a slight decline, impacted by the pandemic's effect on elective medical procedures. Cardinal Health maintained a solid liquidity position, with cash and equivalents increasing to $2.8 billion. The company also continued its capital deployment strategies, including dividend payments and share repurchases. However, the substantial opioid litigation charge presents a significant financial overhang and a key area of focus for investors moving forward.

Financial Highlights

49 data points
Beta

Revenue

$152.92B

4.5% Gross Margin

Net Income

-$3.70B

-2.4% Net Margin

EPS (Diluted)

$-12.61

Total Assets

$40.77B

Cash & Equivalents

$2.77B

Free Cash Flow

$1.58B

Financial Statements
Beta
Revenue$152.92B
Cost of Revenue$146.05B
Gross Profit$6.87B
SG&A Expenses$4.57B
Operating Income-$4.10B
Interest Expense$238.00M
Net Income-$3.70B
EPS (Basic)$-12.61
EPS (Diluted)$-12.61
Shares Outstanding (Basic)293.00M
Shares Outstanding (Diluted)293.00M

Key Highlights

  • 1Total revenue increased by 5% to $152.9 billion, driven by pharmaceutical distribution and specialty solutions.
  • 2Reported a GAAP operating loss of $4.1 billion, primarily due to a $5.63 billion pre-tax charge for opioid litigation.
  • 3Non-GAAP operating earnings increased by 1% to $2.38 billion, showing resilience in underlying operations.
  • 4Pharmaceutical segment revenue grew 6%, while Medical segment revenue decreased 1%, impacted by COVID-19.
  • 5Cash and equivalents increased to $2.8 billion, indicating a strong liquidity position.
  • 6The company continued to return capital to shareholders through dividends and share repurchases.
  • 7The COVID-19 pandemic had an estimated net negative impact of $100 million on operating earnings for fiscal year 2020.

Frequently Asked Questions

The primary driver of the GAAP operating loss of $4.1 billion was a substantial $5.63 billion pre-tax charge recognized for the estimated liability associated with lawsuits and claims brought against Cardinal Health by states and political subdivisions related to the distribution of prescription opioid pain medications.

The COVID-19 pandemic had a mixed impact. While it significantly increased demand for certain personal protective equipment (PPE) in the Medical segment, leading to higher sales volumes for those products, it also led to the cancellation or deferral of elective medical procedures, negatively impacting sales in the Medical segment and the Nuclear and Precision Health Solutions division of the Pharmaceutical segment. Overall, the company estimated a net negative impact to operating earnings of approximately $100 million in fiscal 2020 due to the pandemic.

Cardinal Health agreed in principle to a global settlement framework in October 2019 to resolve lawsuits and claims by states and political subdivisions. This framework includes a cash component of up to $5.56 billion over eighteen years. However, the definitive terms are still under negotiation, and there is no assurance that the settlement will be finalized or that the contingencies will be satisfied. The company has accrued $5.56 billion for the cash component as of June 30, 2020.

On a non-GAAP basis, which excludes significant items like the opioid litigation charge, Cardinal Health's operating earnings increased by 1% to $2.38 billion. This growth was attributed to cost-saving measures, a favorable mix of branded pharmaceutical sales, and growth in specialty solutions, partially offset by challenges in customer contract renewals and the impact of COVID-19. This indicates that the core business operations remained relatively stable or showed modest improvement.