10-QPeriod: Q2 FY2021

CARDINAL HEALTH INC Quarterly Report for Q2 Ended Dec 31, 2020

Filed February 5, 2021For Securities:CAH

Summary

Cardinal Health Inc. (CAH) reported its second quarter fiscal year 2021 results, demonstrating revenue growth driven by its Pharmaceutical segment. Total revenue increased by 5% year-over-year for both the three and six months ended December 31, 2020, reaching $41.5 billion and $80.6 billion, respectively. This growth was primarily attributed to higher sales from pharmaceutical distribution and specialty solutions customers. While revenue showed a positive trend, the company's GAAP operating earnings presented a mixed picture. For the three months ended December 31, 2020, GAAP operating earnings saw a significant increase of 38% to $461 million, largely due to a favorable comparison to prior year recall costs. However, for the six months ended December 31, 2020, the company reported a GAAP operating loss of $163 million, significantly improved from a $4.9 billion loss in the prior year period, primarily due to substantial charges related to opioid litigation in the prior year. Non-GAAP operating earnings, which exclude certain charges, showed more stable performance, increasing slightly for the six-month period while decreasing marginally for the three-month period.

Financial Highlights

46 data points
Beta

Revenue

$41.54B

4.3% Gross Margin

Net Income

$629.00M

1.5% Net Margin

Total Assets

$44.72B

Cash & Equivalents

$3.74B

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$41.54B
Cost of Revenue$39.77B
Gross Profit$1.78B
SG&A Expenses$1.15B
Operating Income$461.00M
Interest Expense$46.00M
Net Income$629.00M
Shares Outstanding (Basic)294.00M
Shares Outstanding (Diluted)295.00M

Key Highlights

  • 1Total revenue for the quarter increased 5% to $41.5 billion, driven by pharmaceutical distribution and specialty solutions.
  • 2GAAP operating earnings for the three months improved significantly by 38% to $461 million due to a favorable comparison to prior year recall costs.
  • 3GAAP operating loss for the six months improved from $4.9 billion to $163 million, largely due to reduced opioid litigation charges compared to the prior year.
  • 4Non-GAAP operating earnings remained relatively stable, with a slight increase of 2% to $1.25 billion for the six-month period.
  • 5Non-GAAP diluted EPS increased by 14% for the quarter to $1.74 and by 16% for the six-month period to $3.26, benefiting from discrete tax items.
  • 6Cash and equivalents increased to $3.7 billion at December 31, 2020, up from $2.8 billion at June 30, 2020.
  • 7The company continues to be involved in opioid litigation, with $6.59 billion accrued as of December 31, 2020, while settlement negotiations are ongoing.

Frequently Asked Questions

Cardinal Health's revenue growth was primarily driven by increased sales from its pharmaceutical distribution and specialty solutions customers.

The significant difference between GAAP and Non-GAAP operating earnings is largely due to large charges related to opioid litigation and, in the current quarter, a favorable comparison to prior year surgical gown recall costs. Non-GAAP earnings provide a view of the company's ongoing operational performance excluding these significant, often non-recurring, items.

Cardinal Health has accrued $6.59 billion for opioid litigation as of December 31, 2020, and continues to negotiate a global settlement framework with state attorneys general. While the company disputes the allegations, ongoing negotiations aim to resolve pending and future claims with states and political subdivisions.

The COVID-19 pandemic had a negative impact on consolidated operating earnings, particularly in the Pharmaceutical segment due to volume declines in its generics program. However, the Medical segment saw benefits from higher volumes in its laboratory business and increased demand for personal protective equipment (PPE), partially offset by reduced demand for surgical products due to deferred elective procedures.