8-KFinancial EventsRegulation FDOther Events+1

CARDINAL HEALTH INC 8-K Report, Exit or Disposal Costs (Mar 12, 2021)

Filed March 12, 2021For Securities:CAH

Summary

Cardinal Health, Inc. (CAH) announced on March 12, 2021, a definitive agreement to sell its Cordis business. This planned divestiture is expected to result in significant charges for the company. Specifically, Cardinal Health anticipates incurring up to $125 million in costs associated with exit or disposal activities, primarily in fiscal years 2021 and 2022. These costs include professional fees, employee-related expenses, and facility exit costs, with a majority expected to result in future cash expenditures. Furthermore, in connection with the sale, the Cordis business will be classified as held for sale, and the company expects to record a pre-tax loss not exceeding $120 million due to the write-down of net assets to fair value less costs to sell. This impairment charge is not anticipated to result in future cash outlays. Investors should note that these are estimates and are subject to change. The filing also disclosed that the company received a subpoena from the SEC on February 26, 2021, requesting documents related to Cordis inventory and goodwill analysis, to which the company is cooperating.

Key Highlights

  • 1Cardinal Health has entered into a definitive agreement to sell its Cordis business.
  • 2The company expects to incur up to $125 million in costs related to this divestiture, spread across fiscal years 2021 and 2022.
  • 3A significant portion of the estimated exit costs ($83 million) are for professional and project management services.
  • 4The majority of the estimated exit costs are expected to result in future cash expenditures.
  • 5A pre-tax loss not exceeding $120 million is anticipated due to the write-down of Cordis assets to fair value less costs to sell.
  • 6This impairment loss is not expected to involve future cash expenditures.
  • 7Cardinal Health is cooperating with an SEC subpoena received on February 26, 2021, concerning Cordis inventory and goodwill.

Frequently Asked Questions

Cardinal Health expects to incur up to $125 million in exit and disposal costs and a pre-tax loss not exceeding $120 million from the write-down of assets related to the Cordis business. The exit costs are anticipated to be recognized primarily in fiscal years 2021 and 2022, with most resulting in future cash expenditures, while the impairment loss is not expected to require future cash outlays.

The costs associated with exit or disposal activities are expected to be recorded primarily during Cardinal Health's fiscal years 2021 and 2022. The impairment loss related to the write-down of net assets will be recognized in the quarter ended March 31, 2021.

On February 26, 2021, Cardinal Health received a subpoena from the U.S. Securities and Exchange Commission requesting documents from 2015 through 2019 related to inventory in the Cordis business, analysis of goodwill for the Medical segment, and other matters. The company is cooperating with this inquiry.

The filing states that all estimates described in Items 2.05 and 2.06 may change in the future. The company is also subject to risks and uncertainties that could cause actual results to differ from expectations, including the possibility that costs and impairment losses could be greater than currently expected.