10-QPeriod: Q3 FY2019

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2019

Filed May 9, 2019For Securities:CAH

Summary

Cardinal Health, Inc. reported its third-quarter fiscal year 2019 results, showcasing revenue growth driven by its pharmaceutical distribution and specialty pharmaceutical customers. Total revenue increased by 5% to $35.2 billion for the quarter and by 7% to $108.2 billion for the nine months ended March 31, 2019. Despite revenue growth, GAAP operating earnings saw a decline of 21% for the quarter, primarily due to decreased segment profit in Pharmaceutical and Medical segments and increased restructuring costs. However, for the nine-month period, GAAP operating earnings surged by 45%, largely boosted by a significant gain from the divestiture of the naviHealth business. The company's liquidity remains strong, with cash and equivalents increasing to $3.4 billion at the end of the quarter. This increase was supported by operating activities and proceeds from the naviHealth sale, partially offset by share repurchases and dividend payments. Looking ahead, the company plans to use its cash on hand to repay a $1.0 billion note maturing in June 2019. Overall, the report indicates a mixed financial performance with solid revenue top-line growth and improved cash position, but facing pressures on profitability due to segment-specific challenges and restructuring expenses.

Financial Highlights

46 data points
Beta

Revenue

$35.23B

5.0% Gross Margin

Net Income

$296.00M

0.8% Net Margin

Total Assets

$40.81B

Cash & Equivalents

$3.44B

Free Cash Flow

$1.40B

Financial Statements
Beta
Revenue$35.23B
Cost of Revenue$33.46B
Gross Profit$1.76B
SG&A Expenses$1.10B
Operating Income$432.00M
Interest Expense$75.00M
Net Income$296.00M
Shares Outstanding (Basic)298.00M
Shares Outstanding (Diluted)299.00M

Key Highlights

  • 1Revenue increased by 5% to $35.2 billion for the third quarter of fiscal 2019 and by 7% to $108.2 billion for the nine months ended March 31, 2019.
  • 2GAAP operating earnings decreased by 21% for the quarter but increased by 45% for the nine-month period, significantly impacted by the gain from the naviHealth divestiture.
  • 3Non-GAAP operating earnings decreased by 15% for the quarter and by 13% for the nine-month period.
  • 4GAAP diluted EPS increased by 22% for the quarter to $0.99 but decreased by 14% for the nine months to $3.88.
  • 5Non-GAAP diluted EPS increased by 14% for the quarter to $1.59 and by 5% for the nine months to $4.17.
  • 6Cash and equivalents increased to $3.4 billion as of March 31, 2019, up from $1.8 billion at June 30, 2018.
  • 7The company announced the renewal of pharmaceutical distribution contracts with CVS Health for a four-year term through June 2023.

Frequently Asked Questions

The revenue increase was primarily driven by sales growth from pharmaceutical distribution and specialty pharmaceutical customers. This growth was partially offset by the divestiture of the company's China distribution business in February 2018.

The decrease in GAAP operating earnings was primarily due to a decline in profit from the Pharmaceutical and Medical segments, coupled with an increase in restructuring costs. Performance issues with the Pharmaceutical segment's generics program, Medical segment's Cardinal Health Brand products, and adverse impacts from Pharmaceutical segment customer contract renewals contributed to this decline.

The divestiture of naviHealth in August 2018 significantly boosted the nine-month GAAP operating earnings by providing a pre-tax gain of $508 million. It also contributed to an increase in cash and equivalents through the $737 million in cash proceeds received.

Cardinal Health maintained a strong liquidity position with $3.4 billion in cash and equivalents as of March 31, 2019. The company plans to use $1.0 billion of its available cash to repay outstanding notes that mature in June 2019. Additionally, the company repurchased $600 million of its common shares and paid $435 million in dividends during the nine-month period.