10-QPeriod: Q2 FY2022

CARDINAL HEALTH INC Quarterly Report for Q2 Ended Dec 31, 2021

Filed February 3, 2022For Securities:CAH

Summary

Cardinal Health, Inc. reported its financial results for the second quarter of fiscal year 2022, ending December 31, 2021. The company experienced a revenue increase of 9% to $45.5 billion for the quarter, driven primarily by growth in pharmaceutical distribution and specialty pharmaceutical customers. However, the company reported a GAAP operating loss of $950 million for the quarter, largely due to a significant $1.3 billion pre-tax non-cash goodwill impairment charge related to its Medical segment. Despite the GAAP loss, non-GAAP operating earnings decreased by 26% to $467 million, reflecting challenges in the Medical segment stemming from increased inflationary pressures, global supply chain constraints, and the divestiture of the Cordis business. The Pharmaceutical segment showed modest growth in profit. Investors should note the ongoing opioid litigation settlement developments, which have a substantial financial impact, and the continued inflationary pressures impacting the Medical segment's profitability. The company maintains sufficient liquidity and is actively managing its capital resources and debt.

Financial Highlights

46 data points
Beta

Revenue

$45.46B

3.6% Gross Margin

Net Income

$49.00M

0.1% Net Margin

Total Assets

$43.68B

Cash & Equivalents

$3.16B

Free Cash Flow

$1.12B

Financial Statements
Beta
Revenue$45.46B
Cost of Revenue$43.84B
Gross Profit$1.62B
SG&A Expenses$1.15B
Operating Income-$950.00M
Interest Expense$37.00M
Net Income$49.00M
Shares Outstanding (Basic)279.00M
Shares Outstanding (Diluted)281.00M

Key Highlights

  • 1Revenue increased by 9% to $45.5 billion in Q2 FY22, driven by pharmaceutical distribution and specialty pharmaceutical sales.
  • 2Reported a GAAP operating loss of $950 million in Q2 FY22, primarily due to a $1.3 billion goodwill impairment charge in the Medical segment.
  • 3Non-GAAP operating earnings decreased by 26% to $467 million, impacted by Medical segment headwinds and the Cordis divestiture.
  • 4Pharmaceutical segment profit increased by 3% to $426 million, aided by generic program performance and an intellectual property claim judgment.
  • 5Medical segment profit significantly declined by 79% to $50 million, affected by inflation, supply chain issues, and the Cordis sale.
  • 6The company has accrued $6.68 billion related to the proposed opioid litigation settlement.
  • 7Cash and equivalents stood at $3.2 billion as of December 31, 2021, with strong liquidity and credit facilities available.

Frequently Asked Questions

The company reported a GAAP operating loss of $950 million primarily due to a $1.3 billion pre-tax non-cash goodwill impairment charge related to its Medical segment. This impairment was driven by ongoing inflationary impacts and global supply chain constraints affecting the segment's financial performance.

The Pharmaceutical segment reported a 3% increase in profit to $426 million for the quarter. This growth was primarily driven by the performance of its generics program, including improved volumes compared to the prior year, and a $16 million judgment for lost profits from an intellectual property rights claim.

Cardinal Health, along with two other distributors, has negotiated a proposed settlement agreement to resolve the vast majority of opioid lawsuits filed by state and local governmental entities. The company has accrued $6.68 billion as of December 31, 2021, with payments to be spread over 18 years if the settlement becomes effective in April 2022. While the settlement process is advancing, it remains subject to contingencies.

The Medical segment's profit declined significantly due to increased inflationary impacts (commodities and transportation), global supply chain constraints, the adverse impact of the prior year's personal protective equipment (PPE) net positive impact, and the divestiture of the Cordis business. These factors are expected to continue impacting segment profit.