10-QPeriod: Q3 FY2022

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2022

Filed May 5, 2022For Securities:CAH

Summary

Cardinal Health Inc. reported a significant increase in revenue for the third quarter of fiscal year 2022, with a 14% rise to $44.8 billion, driven by strong performance in pharmaceutical distribution. However, the company experienced a GAAP operating loss of $97 million, primarily due to substantial goodwill impairment charges in the Medical segment totaling $474 million. This impairment was largely attributed to increased inflationary pressures and ongoing global supply chain constraints impacting the Medical segment. Despite the GAAP loss, non-GAAP operating earnings decreased by 21% to $545 million, also affected by the Medical segment's performance. The company made significant progress on its opioid litigation settlement, with the agreement becoming effective in April 2022, involving a commitment of up to $6.0 billion over 18 years. Cardinal Health also repurchased $1.0 billion of its common stock during the nine-month period, demonstrating a commitment to returning capital to shareholders.

Financial Highlights

46 data points
Beta

Revenue

$44.84B

3.8% Gross Margin

Net Income

-$1.39B

-3.1% Net Margin

Total Assets

$42.11B

Cash & Equivalents

$2.36B

Free Cash Flow

-$501.00M

Financial Statements
Beta
Revenue$44.84B
Cost of Revenue$43.15B
Gross Profit$1.68B
SG&A Expenses$1.14B
Operating Income-$97.00M
Interest Expense$38.00M
Net Income-$1.39B
Shares Outstanding (Basic)275.00M
Shares Outstanding (Diluted)275.00M

Key Highlights

  • 1Total revenue increased by 14% year-over-year to $44.8 billion for the three months ended March 31, 2022.
  • 2GAAP operating loss of $97 million for the quarter, primarily due to $474 million in goodwill impairment charges for the Medical segment.
  • 3Non-GAAP operating earnings decreased by 21% to $545 million for the quarter, impacted by inflationary pressures and supply chain constraints in the Medical segment.
  • 4The company's comprehensive opioid litigation settlement agreement became effective in April 2022, with Cardinal Health committed to paying up to $6.0 billion over 18 years.
  • 5Cash and equivalents decreased to $2.4 billion from $3.4 billion at the prior fiscal year-end, with $1.0 billion deployed for share repurchases.
  • 6The divestiture of the Cordis business in August 2021 continued to impact Medical segment revenue and profit negatively.
  • 7Company reiterates its belief that it has adequate capital resources to fund its needs, including opioid settlement payments.

Frequently Asked Questions

The goodwill impairment charges of $474 million in the Medical segment were primarily driven by ongoing inflationary impacts, particularly related to transportation and commodities, and persistent global supply chain constraints. These factors adversely affected the segment's financial results.

Cardinal Health, along with two other distributors, reached a settlement agreement that became effective in April 2022, resolving the vast majority of opioid lawsuits filed by states and political subdivisions. Under this agreement, Cardinal Health is committed to paying up to approximately $6.0 billion over 18 years. The company has accrued $6.70 billion for opioid litigation as of March 31, 2022.

Cardinal Health expects inflationary impacts and global supply chain constraints to continue to adversely impact Medical segment profit. The company is implementing price increases and investing in supply chain capacity to mitigate these effects, but acknowledges that significant cost increases or continued supply chain disruptions could further impact results.

The divestiture of the Cordis business in August 2021 has adversely impacted Medical segment revenue and profit as anticipated. The company expects this divestiture to decrease Medical segment revenue by approximately $700 million and adversely impact Medical segment profit by approximately $70 million in fiscal 2022.