10-QPeriod: Q1 FY2017

CARDINAL HEALTH INC Quarterly Report for Q1 Ended Sep 30, 2016

Filed November 2, 2016For Securities:CAH

Summary

Cardinal Health Inc. (CAH) reported its first quarter fiscal year 2017 results, ending September 30, 2016. The company saw a significant 14% increase in total revenue, reaching $32.0 billion, primarily driven by growth in its Pharmaceutical segment from new and existing customers. However, both GAAP and non-GAAP operating earnings and diluted EPS experienced a decline compared to the prior year. This decrease was attributed to factors such as generic pharmaceutical customer pricing changes, reduced branded pharmaceutical inflation, and the loss of a significant pharmaceutical distribution customer. Despite the decline in profitability metrics, the company's Medical segment showed a strong 26% increase in profit, bolstered by acquisitions, including the notable Cordis acquisition in the prior year, and contributions from its own branded products. The company also provided an updated outlook, now expecting fiscal 2017 Pharmaceutical segment profit to be less than fiscal 2016 profit, reflecting the ongoing challenges in the pharmaceutical distribution landscape. Investors should monitor the impact of pharmaceutical pricing changes and customer dynamics on future earnings.

Financial Highlights

47 data points
Beta

Revenue

$32.04B

5.0% Gross Margin

Net Income

$309.00M

1.0% Net Margin

Total Assets

$34.41B

Cash & Equivalents

$2.00B

Free Cash Flow

$4.00M

Financial Statements
Beta
Revenue$32.04B
Cost of Revenue$30.45B
Gross Profit$1.59B
SG&A Expenses$920.00M
Operating Income$535.00M
Interest Expense$44.00M
Net Income$309.00M
Shares Outstanding (Basic)320.00M
Shares Outstanding (Diluted)322.00M

Key Highlights

  • 1Total revenue increased by 14% to $32.0 billion, driven by the Pharmaceutical segment's strong customer growth.
  • 2GAAP operating earnings decreased by 14% to $535 million, and non-GAAP operating earnings decreased by 9% to $669 million.
  • 3GAAP diluted EPS declined by 17% to $0.96, and non-GAAP diluted EPS decreased by 10% to $1.24, due to pricing pressures and customer changes in the Pharmaceutical segment.
  • 4The Medical segment's profit grew by 26% to $127 million, benefiting from acquisitions like Cordis and internal product contributions.
  • 5The company repurchased $250 million of its common shares during the quarter and had $793 million remaining under its share repurchase program.
  • 6Cash and equivalents decreased to $2.0 billion from $2.4 billion, partly due to share repurchases, dividends, and capital expenditures.
  • 7Cardinal Health now expects fiscal 2017 Pharmaceutical segment profit to be lower than fiscal 2016, citing ongoing pricing pressures and customer dynamics.

Frequently Asked Questions

Revenue growth was primarily driven by increases in the Pharmaceutical segment, fueled by sales from new and existing pharmaceutical distribution customers, including the on-boarding of a new mail order customer. The Medical segment also contributed through acquisitions and sales growth from new and existing customers.

The decline in earnings and EPS was primarily due to specific challenges within the Pharmaceutical segment. These included changes in generic pharmaceutical customer pricing, reduced levels of branded pharmaceutical inflation, and the loss of a significant pharmaceutical distribution customer. These factors outweighed positive contributions from other aspects of the generics program.

Cardinal Health now anticipates that its Pharmaceutical segment profit for fiscal year 2017 will be less than fiscal year 2016. This revised outlook reflects the negative impacts observed in the first quarter, particularly concerning pharmaceutical customer pricing changes and customer dynamics.

During the three months ended September 30, 2016, Cardinal Health deployed $250 million for share repurchases, $149 million for cash dividends, and $100 million for capital expenditures. Net cash provided by operating activities was $104 million. The company also has access to a $1.75 billion revolving credit facility and a $700 million committed receivables sales facility program.