What was the primary driver of revenue growth in the quarter?

Revenue growth of 6% to $35.2 billion was primarily driven by sales growth from pharmaceutical distribution and specialty pharmaceutical customers, as well as contributions from Medical segment acquisitions, notably the Patient Recovery Business acquisition.

Why did GAAP operating earnings decline so significantly?

The significant decline in GAAP operating earnings was primarily due to several factors including increased amortization of acquisition-related intangible assets, a write-down of assets held for sale related to the China distribution business divestiture, litigation charges associated with inferior vena cava (IVC) filter product liability claims, costs for replacing Pharmaceutical segment IT systems, and performance in the Pharmaceutical segment generics program.

How did the Tax Cuts and Jobs Act impact the company's financial results?

The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a significant provisional tax benefit, primarily due to the reduction in the U.S. federal corporate tax rate from 35% to 21%. This remeasurement of deferred tax assets and liabilities, along with a provisional tax expense for repatriation, led to a substantial benefit impacting net earnings and diluted EPS.

What is the company's current liquidity position?

Cardinal Health's cash and equivalents balance decreased substantially to $1.2 billion at December 31, 2017, from $6.9 billion at June 30, 2017. This reduction was mainly due to $6.1 billion spent on acquisitions. The company has access to a $2.0 billion commercial paper program backed by a revolving credit facility, and reported compliance with its financial covenants.

What are the key legal risks facing the company?

Cardinal Health is involved in significant litigation related to the distribution of prescription opioid pain medications, facing lawsuits from numerous counties, states, and other entities. Additionally, the company is defending against product liability claims concerning inferior vena cava (IVC) filter products, for which it has accrued $184 million.

CAH 10-Q Quarterly Report Q2 FY2018 — Revenue, Net Income, EPS

Summary

Cardinal Health, Inc. reported its second quarter fiscal year 2018 results, ending December 31, 2017. The company saw a revenue increase of 6% to $35.2 billion for the quarter and 4% to $67.8 billion for the first six months, driven primarily by growth in pharmaceutical distribution and medical segment acquisitions. Despite revenue growth, GAAP operating earnings saw a significant decline of 26% for the quarter and 39% for the six months. This was largely due to increased acquisition-related costs, litigation charges (specifically for IVC filter product liability claims), and costs associated with IT system replacements. Non-GAAP operating earnings showed more resilience, increasing by 4% for the quarter but declining slightly by 2% for the six-month period, reflecting adjustments for these one-time or non-operational items. A significant factor impacting net earnings and EPS was the provisional benefit from the U.S. Tax Cuts and Jobs Act, which lowered corporate tax rates and resulted in a substantial one-time tax benefit. Cash flow from operations remained positive, but the company's cash balance decreased significantly due to the $6.1 billion acquisition of the Patient Recovery Business. Cardinal Health also completed the divestiture of its China distribution business in February 2018. Investors should note the ongoing litigation related to opioid distribution and IVC filters, which represents a material contingent liability.

Financial Highlights

46 data points

Beta

Revenue

$35.19B

0.1% Gross Margin

Net Income

$1.05B

0.0% Net Margin

Total Assets

$42.91B

Cash & Equivalents

$1.25B

Free Cash Flow

$178.00M

Financial Statements

Beta

Revenue	$35.19B
Cost of Revenue	$33.33B
Gross Profit	$1.86B
SG&A Expenses	$1.13B
Operating Income	$399.00M
Interest Expense	$87.00M
Net Income	$1.05B
Shares Outstanding (Basic)	315.00M
Shares Outstanding (Diluted)	316.00M

Key Highlights

1Revenue increased by 6% to $35.2 billion for the quarter ended December 31, 2017, driven by pharmaceutical distribution and medical segment acquisitions.
2GAAP operating earnings decreased by 26% for the quarter and 39% for the six months due to significant one-time charges including acquisition-related costs, litigation, and IT system project costs.
3Non-GAAP operating earnings showed a modest 4% increase for the quarter but a 2% decrease for the six-month period, excluding certain charges.
4The company recognized a significant provisional tax benefit from the U.S. Tax Cuts and Jobs Act, which positively impacted net earnings and EPS.
5Cash and equivalents decreased significantly from $6.9 billion to $1.2 billion due to $6.1 billion spent on the acquisition of the Patient Recovery Business.
6The divestiture of the China distribution business was completed in February 2018 for net proceeds of approximately $800 million.
7Cardinal Health is facing significant litigation related to opioid distribution and product liability for IVC filters, with accruals made for IVC filter lawsuits but outcomes for opioid lawsuits remaining unpredictable.

CARDINAL HEALTH INC Quarterly Report for Q2 Ended Dec 31, 2017

Summary

Financial Highlights

Key Highlights

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