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Cardinal Health Reports Fourth Quarter And Full Year Results For Fiscal Year 2019

Cardinal Health (NYSE: CAH) today reported fourth quarter fiscal year 2019 revenues of $37.4 billion, an increase of 6 percent from the fourth quarter last year. GAAP operating earnings were $307 million and non-GAAP operating earnings were $507 million in the quarter. GAAP diluted earnings per share (EPS) for the fourth quarter were $0.65, while non-GAAP diluted EPS were $1.11.

Fiscal 2019 revenues were $145.5 billion, an increase of 6 percent from fiscal 2018. GAAP operating earnings were $2.1 billion and non-GAAP operating earnings were $2.4 billion for the year. GAAP diluted EPS for fiscal year 2019 were $4.53, while non-GAAP diluted EPS were $5.28.

“The fourth quarter capped off a year of progress for Cardinal Health,” said Mike Kaufmann, CEO of Cardinal Health. “During fiscal 2019, we delivered on our overall commitments and made significant strides on key initiatives that position us for growth in an evolving healthcare environment. While we still have work to do, we look forward to building on this foundation in the coming year and continuing to enhance the value we provide to our customers and their patients.”

Q4 and full year FY19 summary

Q4 FY19

Q4 FY18

Y/Y

FY19

FY18

Y/Y

Revenue

$37.4 billion

$35.3 billion

6%

$145.5 billion

$136.8 billion

6%

Operating 
earnings/(loss)

$307 million

$(1.1) billion

N.M.

$2.1 billion

$126 million

N.M.

Non-GAAP 
operating earnings

$507 million

$465 million

9%

$2.4 billion

$2.6 billion

(9)%

Net earnings/(loss) 
attributable to 
Cardinal Health, Inc.

$194 million

$(1.2) billion

N.M.

$1.4 billion

$256 million

N.M.

Non-GAAP net 
earnings 
attributable to 
Cardinal Health, Inc.

$334 million

$315 million

6%

$1.6 billion

$1.6 billion

1%

Diluted EPS 
attributable to 
Cardinal Health, Inc.

$0.65

$(3.76)

N.M.

$4.53

$0.81

N.M.

Non-GAAP diluted 
EPS attributable to 
Cardinal Health, Inc.

$1.11

$1.01

10%

$5.28

$5.00

6%

Fiscal year 2019 GAAP results included a pre-tax gain of $508 million from the divestiture of the company’s naviHealth business. Fiscal 2018 GAAP results included a $1.4 billion goodwill impairment taken in the fourth fiscal quarter related to the Medical segment and transitional tax benefits of $936 million due to the enactment of the U.S. Tax Cuts and Jobs Act (“U.S. tax reform”).

Tax rate

During the fourth quarter of 2019 and 2018, GAAP effective tax rates were 18.4 percent and 1.8 percent, respectively. In fiscal years 2019 and 2018, GAAP effective tax rates were 22.1 percent and 213.8 percent, respectively. The fiscal year 2018 GAAP fourth quarter and full year effective tax rates were adversely impacted by the non-deductible Medical segment goodwill impairment.  Additionally, the fiscal year 2018 GAAP effective tax rate benefitted from transitional tax benefits of $936 million due to the enactment of U.S. tax reform. The fiscal year 2019 GAAP fourth quarter effective tax rate was unfavorably impacted by net discrete items whereas the fiscal year 2018 GAAP fourth quarter effective tax rate was favorably impacted by net discrete items.

During the fourth quarter of 2019 and 2018, non-GAAP effective tax rates were 23.7 percent and 11.8 percent, respectively. In fiscal years 2019 and 2018, non-GAAP effective tax rates were 22.1 percent and 29.3 percent, respectively. Fiscal 2019 GAAP and non-GAAP effective tax rates were favorably impacted by the full benefit of the lower U.S. federal income tax rate due to U.S. tax reform. The fiscal year 2019 non-GAAP fourth quarter effective tax rate was unfavorably impacted by net discrete items whereas the fiscal year 2018 non-GAAP fourth quarter effective tax rate was favorably impacted by net discrete items.

Segment results

Pharmaceutical segment

Fourth quarter revenue for the Pharmaceutical segment increased 6 percent to $33.4 billion due to sales growth from Pharmaceutical Distribution and Specialty Solutions customers.

Pharmaceutical segment profit increased 7 percent to $447 million in the fourth quarter, which reflects the positive impact from Specialty Solutions and a higher contribution from brand sales and mix, partially offset by the company’s generics program performance.

Q4 FY19

Q4 FY18

Y/Y

FY19

FY18

Y/Y

Revenue

$33.4 billion

$31.5 billion

6%

$129.9 billion

$121.2 billion

7%

Segment profit

$447 million

$416 million

7%

$1.8 billion

$2.0 billion

(8)%

Medical segment

Fourth quarter revenue for the Medical segment increased 1 percent to $4.0 billion due to growth from existing customers, partially offset by the divestiture of the naviHealth business.

Medical segment profit decreased by 15 percent to $97 million in the fourth quarter, driven by the performance of Cardinal Health Brand products, partially offset by the benefits from cost savings initiatives.

Q4 FY19

Q4 FY18

Y/Y

FY19

FY18

Y/Y

Revenue

$4.0 billion

$3.9 billion

1%

$15.6 billion

$15.6 billion

0%

Segment profit

$97 million

$114 million

(15)%

$576 million

$662 million

(13)%

Outlook

The company does not provide a GAAP EPS outlook because it is unable to reliably forecast most of the items that are excluded from GAAP EPS to calculate non-GAAP EPS. These items could cause EPS to differ materially from non-GAAP EPS. See “Use of Non-GAAP Measures” following the attached schedules for additional explanation. 

The company’s fiscal year 2020 guidance range for non-GAAP diluted earnings per share attributable to Cardinal Health, Inc. is $4.85 to $5.10

The company’s guidance for fiscal 2020 includes an anticipated incremental $130 million in cost savings associated with actions intended to optimize and simplify the company’s operating model and cost structure. In connection with these cost savings initiatives, the company expects to record restructuring charges in the range of $120 millionto $145 million, the majority of which are expected to be expensed in fiscal year 2020. Cardinal Health has targeted achieving more than $500 million in savings within five years, relative to its fiscal 2018 baseline and may incur additional restructuring charges in furtherance of this goal. Restructuring charges are excluded from the company’s non-GAAP results.

Recent highlights

  • Cardinal Health announced that Dean Scarborough, former chairman and CEO of Avery Dennison, and John Weiland, former vice chairman, president and COO of C.R. Bard, Inc., will join the board of directors effective September 1.
  • Cardinal Health announced that Stephen Mason, president of the company’s Cardinal Health at-Home Solutions business, is being promoted to CEO of Cardinal Health’s Medical segment effective August 16.
  • Cardinal Health announced that David Evans joined Cardinal Health on July 29 and will become interim CFO, effective September 1, as the company conducts its external search for a permanent CFO. David most recently served as executive vice president and CFO of Battelle Memorial Institute, and previously served as executive vice president and CFO of Scotts Miracle-Gro.
  • Cardinal Health board of directors approved a quarterly dividend of $0.4811 per share. The dividend will be payable on October 15, 2019 to shareholders of record at the close of business on October 1, 2019.
  • As part of the company’s Opioid Action Program, the Cardinal Health Foundation awarded nearly $1 million in additional grants to state pharmacy associations and colleges of pharmacy to support best strategies for prescribing practices.

FY19 awards and recognition highlights

  • Named to the Human Rights Campaign (HRC) Best Places to Work for LGBT Equality for the eleventh consecutive year based on ratings in HRC’s 2019 Corporate Equality Index
  • Recognized by Becker’s Healthcare as one of the 150 Top Places to Work in Healthcare in 2019 for the fifth consecutive year
  • Earned distinction as a 2019 “Top 70 Companies for Executive Women” by the National Association for Female Executives for the eighth consecutive year

Webcast

Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss fourth quarter and year end results. To access the webcast and corresponding slide presentation, go to the Investor Relations page at ir.cardinalhealth.com. No access code is required.

Presentation slides and a webcast replay will be available on the Cardinal Health website at ir.cardinalhealth.comuntil August 7, 2020.

Upcoming webcasted investor events

  • Morgan Stanley 17th Annual Global Healthcare Conference on Wednesday, September 11 at 8:45 a.m. Eastern in New York City

PR Newswire

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