Cardinal Health Reports Strong Q4 And Record Fiscal Year-End Non-GAAP Operating Earnings Results

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$27.5 billion

$22.9 billion

20%

$102.5 billion

$91.1 billion

13%

Operating Earnings

$558 million

$387 million

44%

$2,161 million

$1,885 million

15%

Non-GAAP Operating Earnings

$611 million

$461 million

33%

$2,472 million

$2,133 million

16%

Earnings from Continuing Operations

$293 million

$234 million

25%

$1,212 million

$1,163 million

4%

Non-GAAP Earnings from Continuing Operations

$333 million

$284 million

17%

$1,469 million

$1,324 million

11%

Diluted EPS from Continuing Operations

$0.88

$0.68

29%

$3.61

$3.37

7%

Non-GAAP Diluted EPS from Continuing Operations

$1.00

$0.83

20%

$4.38

$3.84

14%

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$24.7 billion

$20.1 billion

23%

$91.1 billion

$80.1 billion

14%

Segment Profit

   $535 million

$377 million

42%

$2.1 billion

$1.7 billion

20%

Q4 FY15

Q4 FY14

Y/Y

FY15

FY14

Y/Y

Revenue

$2.9 billion

$2.8 billion

2%

$11.4.billion

$11.0 billion

4%

Segment Profit

$103 million

$96 million

7%

$433 million

$444 million

Schedule 1

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)

Fourth Quarter

(in millions, except per common share amounts)

2015

2014

% Change

Revenue

$

27,547

$

22,894

20

%

Cost of products sold

26,089

21,638

21

%

Gross margin

1,458

1,256

16

%

Operating expenses:

Distribution, selling, general and administrative expenses

847

795

7

%

Restructuring and employee severance

11

6

N.M.

Amortization and other acquisition-related costs

91

63

N.M.

Impairments and (gain)/loss on disposal of assets

—

4

N.M.

Litigation (recoveries)/charges, net

(49)

1

N.M.

Operating earnings

558

387

44

%

Other income, net

(1)

(3)

N.M.

Interest expense, net

36

33

9

%

Earnings before income taxes and discontinued operations

523

357

46

%

Provision for income taxes

230

123

87

%

Earnings from continuing operations

293

234

25

%

Earnings from discontinued operations, net of tax

2

—

N.M.

Net earnings

$

295

$

234

26

%

Basic earnings per common share:

Continuing operations

$

0.89

$

0.69

29

%

Discontinued operations

—

—

N.M.

Net basic earnings per common share

$

0.89

$

0.69

29

%

Diluted earnings per common share:

Continuing operations

$

0.88

$

0.68

29

%

Discontinued operations

—

—

N.M.

Net diluted earnings per common share

$

0.88

$

0.68

29

%

Weighted-average number of common shares outstanding:

Basic

330

339

Diluted

333

343

Schedule 2

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

Fiscal Year

(in millions, except per common share amounts)

2015

2014

% Change

(Unaudited)

Revenue

$

102,531

$

91,084

13

%

Cost of products sold

96,819

85,923

13

%

Gross margin

5,712

5,161

11

%

Operating expenses:

Distribution, selling, general and administrative expenses

3,240

3,028

7

%

Restructuring and employee severance

44

31

N.M.

Amortization and other acquisition-related costs

281

223

N.M.

Impairments and (gain)/loss on disposal of assets

(19)

15

N.M.

Litigation (recoveries)/charges, net

5

(21)

N.M.

Operating earnings

2,161

1,885

15

%

Other income, net

(7)

(46)

N.M.

Interest expense, net

141

133

6

%

Loss on extinguishment of debt

60

—

N.M.

Earnings before income taxes and discontinued operations

1,967

1,798

9

%

Provision for income taxes

755

635

19

%

Earnings from continuing operations

1,212

1,163

4

%

Earnings from discontinued operations, net of tax

3

3

N.M.

Net earnings

$

1,215

$

1,166

4

%

Basic earnings per common share:

Continuing operations

$

3.65

$

3.41

7

%

Discontinued operations

0.01

0.01

N.M.

Net basic earnings per common share

$

3.66

$

3.42

7

%

Diluted earnings per common share:

Continuing operations

$

3.61

$

3.37

7

%

Discontinued operations

0.01

0.01

N.M.

Net diluted earnings per common share

$

3.62

$

3.38

7

%

Weighted-average number of common shares outstanding:

Basic

332

341

Diluted

335

345

Schedule 3

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions)

June 30,
 2015

June 30,
 2014

(Unaudited)

Assets

Current assets:

Cash and equivalents

$

4,616

$

2,865

Trade receivables, net

6,523

5,380

Inventories, net

9,211

8,266

Prepaid expenses and other

1,402

1,428

Total current assets

21,752

17,939

Property and equipment, net

1,506

1,459

Goodwill and other intangibles, net

6,018

5,870

Other assets

866

765

Total assets

$

30,142

$

26,033

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$

14,368

$

12,149

Current portion of long-term obligations and other short-term borrowings

281

801

Other accrued liabilities

2,594

2,165

Total current liabilities

17,243

15,115

Long-term obligations, less current portion

5,211

3,171

Deferred income taxes and other liabilities

1,432

1,346

Total shareholders' equity

6,256

6,401

Total liabilities and shareholders' equity

$

30,142

$

26,033

Schedule 4

Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Fourth Quarter

Fiscal Year

(in millions)

2015

2014

2015

2014

(Unaudited)

(Unaudited)

(Unaudited)

Cash flows from operating activities:

Net earnings

$

295

$

234

$

1,215

$

1,166

Earnings from discontinued operations, net of tax

(2)

—

(3)

(3)

Earnings from continuing operations

293

234

1,212

1,163

Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities:

Depreciation and amortization

115

115

451

459

Loss on extinguishment of debt

—

—

60

—

Gain on sale of other investments

—

—

(5)

(32)

Impairments and (gain)/loss on disposal of assets, net

—

4

(19)

15

Share-based compensation

30

24

110

96

Provision for deferred income taxes

219

26

219

26

Provision for bad debts

10

11

52

42

Change in fair value of contingent consideration obligation

8

—

8

—

Change in operating assets and liabilities, net of effects from acquisitions:

Decrease/(increase) in trade receivables

(152)

(548)

(870)

925

Decrease/(increase) in inventories

71

(208)

(779)

142

Increase/(decrease) in accounts payable

291

1,196

1,948

(196)

Other accrued liabilities and operating items, net

(17)

(138)

153

(116)

Net cash provided by operating activities

868

716

2,540

2,524

Cash flows from investing activities:

Acquisition of subsidiaries, net of cash acquired

(184)

(351)

(503)

(519)

Additions to property and equipment

(161)

(111)

(300)

(249)

Purchase of available-for-sale securities and other investments

(208)

(102)

(342)

(129)

Proceeds from sale of available-for-sale securities and other investments

77

—

206

47

Proceeds from maturities of available-for-sale securities

13

—

37

—

Proceeds from divestitures and disposal of held for sale assets

—

—

53

—

Net cash used in investing activities

(463)

(564)

(849)

(850)

Cash flows from financing activities:

Payment of contingent consideration obligation

(4)

—

(7)

—

Net change in short-term borrowings

(3)

49

(12)

114

Reduction of long-term obligations

—

(1)

(1,221)

(2)

Proceeds from long-term obligations, net of issuance costs

1,490

—

2,672

—

Net proceeds from issuance of common shares

13

8

72

227

Tax proceeds/(disbursements) from share-based compensation

(4)

3

52

39

Dividends on common shares

(114)

(103)

(460)

(415)

Purchase of treasury shares

(350)

(284)

(1,036)

(673)

Net cash provided by/(used in) financing activities

1,028

(328)

60

(710)

Net increase/(decrease) in cash and equivalents

1,433

(176)

1,751

964

Cash and equivalents at beginning of period

3,183

3,041

2,865

1,901

Cash and equivalents at end of period

$

4,616

$

2,865

$

4,616

$

2,865

Schedule 5

Cardinal Health, Inc. and Subsidiaries

Total Company Business Analysis

Non-GAAP

Fourth Quarter

Fourth Quarter

(in millions)

2015

2014

2015

2014

Revenue

Amount

$

27,547

$

22,894

Growth rate

20

%

(10)

%

Operating earnings

Amount

$

558

$

387

$

611

$

461

Growth rate

44

%

N.M.

33

%

(2)

%

Earnings from continuing operations

Amount

$

293

$

234

$

333

$

284

Growth rate

25

%

N.M.

17

%

4

%

Return on equity

18.7

%

14.5

%

21.3

%

17.6

%

Effective tax rate from continuing operations

44.1

%

34.4

%

42.2

%

34.2

%

Debt to total capital

47

%

38

%

Net debt to total capital

12

%

15

%

Non-GAAP

Fiscal Year

Fiscal Year

(in millions)

2015

2014

2015

2014

Revenue

Amount

$

102,531

$

91,084

Growth rate¹

13

%

(10)

%

Operating earnings

Amount

$

2,161

$

1,885

$

2,472

$

2,133

Growth rate

15

%

89

%

16

%

4

%

Earnings from continuing operations

Amount

$

1,212

$

1,163

$

1,469

$

1,324

Growth rate

4

%

247

%

11

%

3

%

Return on equity

19.4

%

18.3

%

23.4

%

20.9

%

Effective tax rate from continuing operations

38.4

%

35.3

%

37.2

%

35.3

%

Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.

Schedule 6

Cardinal Health, Inc. and Subsidiaries

Segment Business Analysis

Fourth Quarter

Fourth Quarter

(in millions)

2015

2014

(in millions)

2015

2014

Pharmaceutical

Medical

Revenue

Revenue

Amount

$

24,676

$

20,092

Amount

$

2,855

$

2,794

Growth rate

23

%

(12)

%

Growth rate

2

%

4

%

Segment profit

Segment profit

Amount

$

535

$

377

Amount

$

103

$

96

Growth rate

42

%

(5)

%

Growth rate

7

%

(8)

%

Segment profit margin

2.17

%

1.88

%

Segment profit margin

3.59

%

3.43

%

Refer to definitions for an explanation of calculations.

Total consolidated revenue for the three months ended June 30, 2015 was $27,547 million, which included total segment revenue of $27,531 million and Corporate revenue of $16 million. Total consolidated revenue for the three months ended June 30, 2014 was $22,894 million, which included total segment revenue of $22,886 million and Corporate revenue of $8 million.  Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.

Total consolidated operating earnings for the three months ended June 30, 2015 were $558 million, which included total segment profit of $638 million and Corporate costs of $(80) million. Total consolidated operating earnings for the three months ended June 30, 2014 were $387 million, which included total segment profit of $473 million and Corporate costs of $(86) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.

Schedule 7

Cardinal Health, Inc. and Subsidiaries

Segment Business Analysis

Fiscal Year

Fiscal Year

(in millions)

2015

2014

(in millions)

2015

2014

Pharmaceutical

Medical

Revenue

Revenue

Amount

$

91,116

$

80,110

Amount

$

11,395

$

10,962

Growth rate¹

14

%

(12)

%

Growth rate

4

%

9

%

Segment profit

Segment profit

Amount

$

2,094

$

1,745

Amount

$

433

$

444

Growth rate

20

%

1

%

Growth rate

(3)

%

19

%

Segment profit margin

2.30

%

2.18

%

Segment profit margin

3.80

%

4.05

%

¹       Revenue from Walgreens was $3.3 billion for the fiscal year ended June 30, 2014.  Excluding the impact of the Walgreens contract expiration,
         the fiscal 2015 Pharmaceutical segment revenue growth rate would have been 19 percent.

Refer to definitions for an explanation of calculations.

Total consolidated revenue for the fiscal year ended June 30, 2015 was $102,531 million, which included total segment revenue of $102,511 million and Corporate revenue of $20 million. Total consolidated revenue for the fiscal year ended June 30, 2014 was $91,084 million, which included total segment revenue of $91,072 million and Corporate revenue of $12 million.  Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments.

Total consolidated operating earnings for the fiscal year ended June 30, 2015 were $2,161 million, which included total segment profit of $2,527 million and Corporate costs of $(366) million. Total consolidated operating earnings for the fiscal year ended June 30, 2014 were $1,885 million, which included total segment profit of $2,189 million and Corporate costs of $(304) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.

Schedule 8

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation

Fourth Quarter 2015

Operating

Earnings Before

Provision

Earnings

Earnings from

Diluted EPS

Diluted EPS

Earnings

Income Taxes

for

from

Continuing

from

from Continuing

(in millions, except per common share amounts)

Operating

Growth

and Discontinued

Income

Continuing

Operations

Continuing

Operations

Earnings

Rate

Operations

Taxes

Operations

Growth Rate

Operations

Growth Rate

GAAP

$

558

44

%

$

523

$

230

$

293

25

%

$

0.88

29

%

Restructuring and employee severance

11

11

4

7

0.02

Amortization and other acquisition-related costs

91

91

31

60

0.18

Impairments and (gain)/loss on disposal of assets

—

—

—

—

—

Litigation (recoveries)/charges, net

(49)

(49)

(22)

(27)

(0.08)

Loss on extinguishment of debt

—

—

—

—

—

Non-GAAP

$

611

33

%

$

577

$

243

$

333

17

%

$

1.00

20

%

Fourth Quarter 2014

GAAP

$

387

N.M.

$

357

$

123

$

234

N.M.

$

0.68

N.M.

Restructuring and employee severance

6

6

2

4

0.01

Amortization and other acquisition-related costs

63

63

22

41

0.12

Impairments and loss on disposal of assets

4

4

1

3

0.01

Litigation (recoveries)/charges, net

1

1

—

1

—

Loss on extinguishment of debt

—

—

—

—

—

Non-GAAP

$

461

(2)

%

$

432

$

148

$

284

4

%

$

0.83

5

%

Operating

Earnings Before

Provision

Earnings

Earnings from

Diluted EPS

Diluted EPS

Earnings

Income Taxes

for

from

Continuing

from

from Continuing

(in millions, except per common share amounts)

Operating

Growth

and Discontinued

Income

Continuing

Operations

Continuing

Operations

Earnings

Rate

Operations

Taxes

Operations

Growth Rate

Operations

Growth Rate

GAAP

$

2,161

15

%

$

1,967

$

755

$

1,212

4

%

$