CARDINAL HEALTH INC
For the period ended Dec 31, 2024. Filed Jan 30, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Jan 30, 2025
CAH$271.72+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0000721371-24-000121
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsExplanation and Reconciliation of Non-GAAP Financial MeasuresCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-01-30.
0000721371-25-000013
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsExplanation and Reconciliation of Non-GAAP Financial MeasuresThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 149 previous paragraphs and 172 current paragraphs.
76 unchanged; 53 reworded; 35 added; 18 removed; 2 previous and 8 current paragraphs rearranged.
Tables are not compared: 38 previous and 38 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
GAAP operating earnings for the three months ended December 31, 2024 increased 9 percent to $549 million from the comparative prior-year quarter, primarily due to the beneficial impact of enterprise-wide cost savings measures and growth from BioPharma Solutions, including contributions from Specialty Networks, partially offset by transaction and integration costs associated with acquisitions. GAAP operating earnings for the six months ended December 31, 2024 increased to $1.1 billion from the comparative prior-year period, primarily due to the pre-tax non-cash goodwill impairment charges related to the GMPD segment of $585 million recognized during the six months ended December 31, 2023. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 5 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
Current report
Non-GAAP operating earnings increased 9 percent to $635 million for the three months ended December 31, 2024 from the comparative prior-year quarter, primarily due to the beneficial impact of enterprise-wide cost savings measures and growth from BioPharma Solutions, including contributions from Specialty Networks, partially offset by the expiration of the OptumRx contracts. Non-GAAP operating earnings increased 10 percent to $1.3 billion for the six months ended December 31, 2024 from the comparative prior-year period, primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products and the beneficial impact of enterprise-wide cost savings measures, partially offset by the expiration of the OptumRx contracts.
Current report
(2)For the six months ended December 31, 2023, impairments and (gain)/loss on disposal of assets, net included a pre-tax goodwill impairment charge of $585 million related to the GMPD segment. This had an adverse impact of $1.91 per share to GAAP diluted EPS for the six months ended December 31, 2023.
Current report
Non-GAAP diluted EPS for the three and six months ended December 31, 2024 increased 2 percent to $1.93 and 6 percent to $3.81, respectively, from the comparative prior-year periods, primarily due to the factors impacting non-GAAP operating earnings discussed in the preceding section, offset by increased interest expense.
Current report
In addition, on December 2, 2024, we completed the acquisition of ION for a purchase price of $1.1 billion of cash, subject to certain adjustments. During the six months ended December 31, 2024, we issued additional long-term debt and received net proceeds of $2.9 billion to fund a portion of the consideration to be paid in connection with our proposed acquisitions and for general purposes, and deployed cash of $400 million for debt repayment, $390 million for share repurchases, $250 million for cash dividends, and $189 million for capital expenditures.
Current report
See Note 2 and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information on these acquisitions and the debt issuance, respectively.
Current report
Integrated Oncology Network
Current report
GI Alliance ("GIA")
Current report
On January 30, 2025, we completed the acquisition of 73 percent ownership interest in GIA, a gastroenterology management services organization, for a purchase price of approximately $2.8 billion in cash, subject to certain adjustments. Beginning on the third anniversary of GIA's closing, we have the ability to exercise a call right to purchase up to 100 percent of the remaining outstanding equity. GIA's management services organization platform includes over 900 physicians across 345 practice locations in 20 states and has the ability to further expand both geographically and in other key therapeutic areas. We will consolidate the results of GIA in our condensed consolidated financial statements and report those consolidated results within our Pharma segment.
Current report
Advanced Diabetes Supply Group ("ADSG")
Current report
On November 11, 2024, we announced that we have entered into a definitive agreement to acquire the Advanced Diabetes Supply Group ("ADSG"), a diabetic medical supplies provider, for a purchase price of approximately $1.1 billion in cash, subject to certain adjustments. ADSG serves approximately 500,000 patients annually by providing the latest innovations in diabetes therapies from leading manufacturers. ADSG will become part of our at-Home Solutions operating segment and we will report ADSG results in Other. This transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.
Current report
We intend to finance the acquisitions of GIA and ADSG with a combination of cash on hand and cash proceeds from the new debt financing as described in Note 6 of the "Notes to Condensed Consolidated Financial Statements".
Current report
We expect the acquisition of ION and GIA and proposed acquisitions of ADSG to positively impact respective segment revenue and segment profit while increasing amortization and acquisition-related costs during the remainder of fiscal 2025, fiscal 2026, and beyond.
Current report
See Note 2 of the "Notes to Condensed Consolidated Financial Statements" for additional information on these acquisitions.
Current report
BioPharma Solutions
Current report
The performance of BioPharma Solutions positively impacted the year-over-year comparison of Pharma segment profit during the three and six months ended December 31, 2024. BioPharma Solutions consists of services to biopharmaceutical manufacturers and healthcare providers including, among other things, Specialty Networks, third-party logistics ("3PL"), group purchasing organizations ("GPOs"), patient access and support programs, regulatory and clinical consulting, and real world data and evidence.
Current report
Gross margin for the six months ended December 31, 2024 increased 7 percent to $3.8 billion from the comparative prior-year period, primarily due to the increased contribution from branded pharmaceutical and specialty pharmaceutical products and growth from BioPharma Solutions, including contributions from Specialty Networks, partially offset by the expiration of the OptumRx contracts.
Current report
SG&A expenses for the three months ended December 31, 2024 increased 3 percent to $1.3 billion from the comparative prior-year quarter, primarily due to the ION acquisition and higher costs to support sales growth for existing customers, partially offset by the beneficial impact of enterprise-wide cost savings measures.
Current report
Pharma segment profit for the three and six months ended December 31, 2024 increased 7 percent to $531 million and 12 percent to $1.1 billion, respectively, from the comparative prior-year periods, primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products and growth from BioPharma Solutions, including contributions from Specialty Networks, partially offset by the expiration of the OptumRx contracts.
Current report
GMPD segment profit for the three months ended December 31, 2024 increased to $18 million from the comparative prior-year quarter, primarily due to the beneficial impact of cost optimization initiatives, partially offset by the write-off of uncollectible receivables in the Wavemark business.
Current report
Other segment profit for the three months ended December 31, 2024 increased 11 percent to $118 million from the comparative prior-year quarter, primarily due to the performance of OptiFreight® Logistics and Nuclear and Precision Health Solutions.
Current report
Transaction and integration costs associated with acquisitions were $36 million and $42 million for the three and six months ended December 31, 2024, respectively.
Current report
Interest expense for the three and six months ended December 31, 2024 increased to $35 million and $67 million, respectively, from the comparative prior-year periods, primarily due to the new debt financing and decreased interest income from cash and equivalents. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the new debt financing.
Current report
Provision for Income Taxes
Current report
The effective tax rate was 21.4 percent and 27.9 percent for the three months ended December 31, 2024 and 2023, respectively, and 22.2 percent and 23.4 percent for the six months ended December 31, 2024 and 2023, respectively. The prior-year tax rates reflect the impact of the tax effects of goodwill impairment charges as well as certain other discrete items. See Note 8 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
Current report
In addition, on December 2, 2024, we completed the acquisition of ION for a purchase price of $1.1 billion of cash, subject to certain adjustments. During the six months ended December 31, 2024, we issued additional long-term debt and received net proceeds of $2.9 billion to fund a portion of the consideration payable in connection with the GIA and ADSG acquisitions and for general purposes, and deployed cash of $400 million for debt repayment,
Current report
$390 million for share repurchases, $250 million for cash dividends and $189 million for capital expenditures.
Current report
On December 5, 2024, we entered into a term loan credit agreement that, among other things, provides commitments for a term loan facility in an aggregate amount of $1.0 billion until the earliest of (a) the occurrence of both termination dates contemplated by (i) the agreement for the acquisition of a majority of the outstanding equity interest of GIA and (ii) the agreement for our proposed acquisition of ADSG, (b) the closing of both the GIA and ADSG transactions without the funding of the loans, or (c) November 10, 2025. See Note 2 of the "Notes to Condensed Consolidated Financial Statements" for more details on the proposed acquisitions. Once borrowed, loans under this term loan credit agreement will mature three years after the date of borrowing, which may be accelerated pursuant to certain conditions specified in the credit agreement. Interest rates on borrowings will be based on prevailing interest rates, benchmarked based on Term SOFR and subject to our credit ratings.
Current report
In November 2024, we issued additional debt with the aggregate principal amount of $2.9 billion to fund a portion of the consideration payable in connection with the GIA and ADSG acquisitions, and for general purposes. The notes issued are $500 million aggregate principal amount of 4.7% Notes that mature on November 15, 2026, $750 million aggregate principal amount of 5.0% Notes that mature on November 15, 2029, $1.0 billion aggregate principal amount of 5.35% Notes that mature on November 15, 2034, and$650 million aggregate principal amount of 5.75% Notes that mature on November 15, 2054. The proceeds of the notes issued, net of discounts, premiums, and debt issuance costs were $2.9 billion. We also obtained a commitment letter on November 11, 2024 from a financial institution for a $2.9 billion unsecured bridge term loan facility that could have been used to complete the acquisition of GIA. We incurred fees related to the facility, which are included in interest expense, net. The unsecured bridge term loan facility was never entered into and we terminated the commitment letter on November 22, 2024.
Current report
Opioid Litigation Settlement Agreement
Current report
Acquisitions
Current report
On January 30, 2025, we completed the acquisition of a 73 percent ownership interest in GIA, a gastroenterology management services organization supporting more than 900 physicians across 345 practice locations in 20 states, for a purchase price of approximately $2.8 billion in cash, subject to certain adjustments.
Current report
In November 2024, we issued additional debt with the aggregate principal amount of $2.9 billion to fund a portion of the consideration payable in connection with the GIA and ADSG acquisitions and for general purposes. See Note 2 and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
Current report
Our reporting units are: Pharmaceutical and Specialty Solutions (excluding Navista & ION), Navista & ION, GMPD, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight® Logistics.
Current report
GAAP to Non-GAAP Reconciliation
Removed paragraphs (18)
Previous report
We had GAAP operating earnings of $568 million during the three months ended September 30, 2024 and a GAAP operating loss of $32 million during the three months ended September 30, 2023, which included the impact of pre-tax goodwill impairment charges related to the GMPD segment of $585 million.
Previous report
Non-GAAP operating earnings increased 12 percent to $625 million from the prior-year quarter primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products, which includes the favorable impact from the earlier seasonal launch of the COVID-19 vaccine distribution, and the performance of our generics program.
Previous report
(2) The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."
Previous report
(3) For the three months ended September 30, 2023, GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 249 million common shares, which excludes potentially dilutive securities from the denominator due to their anti-dilutive effects resulting from our GAAP net loss for the period. For the three months ended September 30, 2023, non-GAAP diluted EPS is calculated using a weighted average of 250 million common shares, which includes potentially dilutive shares.
Previous report
During the three months ended September 30, 2024, GAAP diluted EPS increased from the prior-year quarter primarily due to the factors impacting GAAP operating earnings/(loss) discussed above. The goodwill impairment charge related to the GMPD segment had a $(1.76) per share after-tax impact on GAAP diluted EPS during the three months ended September 30, 2023.
Previous report
On March 18, 2024, we completed the acquisition of Specialty Networks for a purchase price of $1.2 billion in cash. The acquisition further expands our offerings in key therapeutic areas and accelerates our upstream data and research opportunities with biopharma manufacturers.
Previous report
Pharma segment profit increased 16 percent to $530 million from the prior-year quarter primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products, which includes the favorable impact from the earlier seasonal launch of the COVID-19 vaccine distribution, and the performance of our generics program. This was partially offset by the expiration of the OptumRx contracts.
Previous report
Interest expense, net, increased to $32 million from the prior-year quarter primarily due to decreased interest income from cash and equivalents and financial instruments.
Previous report
Provision for/(Benefit from) Income Taxes
Previous report
During the three months ended September 30, 2024 and 2023, the effective tax rate was 23.0 percent and 75.1 percent, respectively. The decrease in the effective tax rate for the three months ended September 30, 2024 compared to the prior-year quarter was primarily due to the tax effect of the prior-year goodwill impairment charge. See Note 8 of the “Notes to Condensed Consolidated Financial Statements” for additional information.
Previous report
Tax Effects of Pillar Two Initiatives
Previous report
In December 2021, the Organization for Economic Cooperation and Development ("OECD") published guidance on the establishment of the Pillar Two initiative for a global minimum tax rate of 15 percent. These rules are generally effective for fiscal 2025. We are closely monitoring developments, but we do not currently expect these rules to have a material impact on our effective tax rate.
Previous report
In October 2024, we entered into a new 364-Day Revolving Credit Facility, under which we have access to $1.0 billion of committed liquidity through October 2025. We also increased our commercial paper program from $2.0 billion to $3.0 billion.
Previous report
Long-Term Debt
Previous report
Opioid Litigation Settlements
Previous report
Integrated Oncology Network Acquisition
Previous report
GAAP to Non-GAAP Reconciliations
Previous report
2 For the three months ended September 30, 2023, GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 249 million common shares, which excludes potentially dilutive securities from the denominator due to their anti-dilutive effects resulting from our GAAP net loss for the period. For the three months ended September 30, 2023, non-GAAP diluted EPS is calculated using a weighted average of 250 million common shares, which includes potentially dilutive shares.
Reworded paragraphs (53)
Previous wording
The discussion and analysis presented below is concerned with material changes in financial condition and results of operations, including amounts and certainty of cash flows from operations and from outside sources, between the periods specified in our condensed consolidated balance sheets at September 30, 2024 and June 30, 2024, and in our condensed consolidated statements of earnings/(loss) and our condensed consolidated statements of cash flows for the three months ended September 30, 2024 and 2023. All comparisons presented are with respect to the prior-year period, unless stated otherwise. Our previously reported segment results have been recast to conform to our new reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. All of the revisions are reflected throughout this Form 10-Q. See Note 1 of the "Notes to Condensed Consolidated Financial Statements" for additional information. This discussion and analysis should be read in conjunction with the MD&A included in the 2024 Form 10-K.
Current wording
The discussion and analysis presented below is concerned with material changes in financial condition and results of operations, including amounts and certainty of cash flows from operations and from outside sources, between the periods specified in our condensed consolidated balance sheets at December 31, 2024 and June 30, 2024, and in our condensed consolidated statements of earnings and our condensed consolidated statements of cash flows for the three and six months ended December 31, 2024 and 2023. All comparisons presented are with respect to the prior-year period, unless stated otherwise. Our previously reported segment results have been recast to conform to our new reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. All of the revisions are reflected throughout this Form 10-Q. See Note 1 of the "Notes to Condensed Consolidated Financial Statements" for additional information. The discussion and analysis in this Form 10-Q should be read in conjunction with the MD&A included in our 2024 Form 10-K.
Previous wording
Revenue for the three months ended September 30, 2024 decreased 4 percent to $52.3 billion due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing customers.
Current wording
Revenue for the three and six months ended December 31, 2024 decreased 4 percent to $55.3 billion and $107.5 billion, respectively, from the comparative prior-year periods, primarily due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing and new customers.
Previous wording
GAAP and Non-GAAP Operating Earnings/(Loss)
Current wording
GAAP and Non-GAAP Operating Earnings
Previous wording
(1) Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").
Current wording
(1)Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").
Previous wording
Non-GAAP diluted EPS increased 9 percent to $1.88 from the prior-year quarter primarily due to the factors impacting non-GAAP operating earnings discussed above.
Current wording
GAAP diluted EPS for the three and six months ended December 31, 2024 increased to $1.65 and $3.35, respectively, from the comparative prior-year periods, primarily due to the factors impacting GAAP operating earnings discussed in the preceding section.
Previous wording
Our cash and equivalents balance was $2.9 billion at September 30, 2024 compared to $5.1 billion at June 30, 2024. During the three months ended September 30, 2024, net cash used in operating activities was $1.6 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities for the quarter also includes the impact of our annual payment of $366 million related to the National Opioid Settlement Agreement. In addition, we deployed cash of $375 million for share repurchases and $90 million for capital expenditures.
Current wording
Our cash and equivalents balance was $3.8 billion at December 31, 2024 compared to $5.1 billion at June 30, 2024. During the six months ended December 31, 2024, net cash used in operating activities was $2.0 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities also includes the impact of payments totaling $692 million related to the opioid litigation.
Previous wording
On September 20, 2024, we announced that we entered into a definitive agreement to acquire Integrated Oncology Network (“ION”), a physician-led independent community oncology network, for a purchase price of $1.1 billion in cash, subject to certain adjustments. ION includes more than 50 practice sites in 10 states representing more than 100 providers. ION supports a complete continuum of care across its member sites including medical oncology, radiation oncology, urology diagnostic testing, and other ancillary services. The acquisition will build on our Navista oncology practice alliance and is expected to expand our holistic suite of clinical and practice management solutions designed to support independent community oncology practices. This transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. We plan to fund the acquisition with available cash and existing borrowing arrangements.
Current wording
On December 2, 2024, we completed the acquisition of ION, a physician-led independent community oncology network, for a purchase price of $1.1 billion in cash, subject to certain adjustments. ION is a management services organization that supports more than 50 practice sites in 10 states representing more than 100 providers. ION supports a continuum of care across its member sites including medical oncology, radiation oncology, urology diagnostic testing, and other ancillary services. As part of the transaction, ION practices will be integrated into Navista, our managed services organization intended to enhance efficiency for providers and patients, enable additional capabilities, and increase practice profitability of independent community oncologists. We report ION results within our Pharma segment. We funded the acquisition with available cash on hand.
Previous wording
On April 22, 2024, we announced that our pharmaceutical distribution contracts with OptumRx would expire at the end of June 2024. Sales to OptumRx generated 17 percent of our consolidated revenue in fiscal 2024; however, due to the class of trade, sales to OptumRx generated a meaningfully lower operating margin than the overall Pharma segment. The expiration of the OptumRx contracts and unwinding of the negative net working capital associated with the contracts adversely impacted our results of operations, including segment profit, financial condition, and cash flows during the three months ended September 30, 2024. While we anticipate offsetting the impact through a combination of onboarding new customers, growth from existing customers, and cost savings, we expect some adverse impacts to continue throughout the remainder of fiscal 2025.
Current wording
On April 22, 2024, we announced that our pharmaceutical distribution contracts with OptumRx would expire at the end of June 2024. Sales to OptumRx generated 17 percent of our consolidated revenue in fiscal 2024; however, due to the class of trade, sales to OptumRx generated a meaningfully lower operating margin than the overall Pharma segment. The expiration of the OptumRx contracts and unwinding of the negative net working capital associated with the contracts adversely impacted our results of operations, including segment profit, financial condition, and cash flows during the six months ended December 31, 2024. While we anticipate offsetting the impact through a combination of onboarding new customers, growth from existing customers, and cost savings, we expect some adverse impacts to continue throughout the remainder of fiscal 2025.
Previous wording
During fiscal 2024, we saw increased demand for GLP-1 pharmaceuticals, and our sales increased significantly, despite periodic supply shortages. These increased sales positively impacted our Pharma segment and consolidated revenue for the fiscal 2024; however, GLP-1 sales did not meaningfully contribute to segment profit. Future demand for these medications is unpredictable and our ability to meet demand may be impacted by additional supply constraints.
Current wording
During fiscal 2024, we saw increased demand for GLP-1 pharmaceuticals and our sales increased significantly, despite periodic supply shortages. These increased sales positively impacted our Pharma segment and consolidated revenue for the fiscal 2024; however, GLP-1 sales did not meaningfully contribute to segment profit. Future demand and reimbursement for these medications is unpredictable and our ability to meet demand may be impacted by supply constraints.
Previous wording
During fiscal 2024, we began distributing commercially available COVID-19 vaccines following the U.S. Food and Drug Administration (“FDA”) approval. Distribution of these vaccines had a greater than anticipated benefit to our Pharma segment profit in fiscal year 2024, especially in the second quarter. We expect COVID-19 vaccine distribution to continue to favorably impact our Pharma segment profit in fiscal 2025, but to a lesser extent than in fiscal 2024. In August 2024, the FDA approved the 2024-2025 commercial COVID-19 vaccines, and our Pharma segment profit was positively impacted by distribution of these vaccines in the first quarter of fiscal 2025. Due to the earlier seasonal launch of the COVID-19 vaccine distribution, we expect a lower contribution from the vaccine distribution in the second quarter of fiscal 2025 compared to the prior-year quarter.
Current wording
segment profit was positively impacted by distribution of these vaccines in the first and second quarter of fiscal 2025, but to a lesser extent than in fiscal 2024. Due to the earlier seasonal launch of the COVID-19 vaccine distribution in fiscal 2025, there was a lower contribution from the vaccine distribution in the second quarter of fiscal 2025 compared to the prior-year quarter.
Previous wording
The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during the three months ended September 30, 2024. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.
Current wording
The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit, excluding the impact of the OptumRx contracts expiration, during the three and six months ended December 31, 2024. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.
Previous wording
We experienced Cardinal Health brand medical products sales growth during fiscal 2024 and expect further growth in fiscal 2025 and beyond. The timing, magnitude, and profit impact of this anticipated sales growth is subject to risks and uncertainties, which may impact GMPD segment profit.
Current wording
We experienced Cardinal Health brand medical products sales growth during fiscal 2024 and in the first half of fiscal 2025, and we expect further growth for the remainder of fiscal 2025 and beyond. The timing, magnitude, and profit impact of this anticipated sales growth is subject to risks and uncertainties, which may impact GMPD segment profit.
Previous wording
Pharma segment revenue decreased 5 percent to $48.0 billion from the prior-year quarter primarily due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing customers.
Current wording
Pharma segment revenue for the three and six months ended December 31, 2024 decreased 4 percent to $50.8 billion and 5 percent to $98.8 billion, respectively, from the comparative prior-year periods, primarily due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing and new customers.
Previous wording
GMPD segment revenue increased 3 percent to $3.1 billion from the prior-year quarter primarily due to higher volumes from existing customers.
Current wording
GMPD segment revenue for the three and six months ended December 31, 2024 increased 1 percent to $3.2 billion and 2 percent to $6.3 billion, respectively, from the comparative prior-year periods, primarily due to higher volumes from existing customers.
Previous wording
Other revenue increased 13 percent to $1.2 billion from the prior-year quarter due to growth across the at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight® Logistics operating segments.
Current wording
Other revenue for the three and six months ended December 31, 2024 increased 13 percent to $1.3 billion and $2.5 billion, respectively, from the comparative prior-year periods, due to growth across the three operating segments: at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight® Logistics.
Previous wording
Cost of products sold decreased 5 percent to $50.4 billion from the prior-year quarter due to the factors affecting the changes in revenue and gross margin.
Current wording
Cost of products sold for the three and six months ended December 31, 2024 decreased 4 percent to $53.3 billion and $103.7 billion, respectively, from the comparative prior-year periods, primarily due to the factors affecting the changes in revenue and gross margin.
Previous wording
Gross margin increased 9 percent to $1.9 billion from the prior-year quarter primarily due to the increased contribution from branded pharmaceutical and specialty pharmaceutical products and the positive performance of our generics program in the Pharma segment.
Current wording
Gross margin for the three months ended December 31, 2024 increased 5 percent to $1.9 billion from the comparative prior-year quarter, primarily due to growth from BioPharma Solutions, including contributions from Specialty Networks, increased contribution from branded pharmaceutical and specialty pharmaceutical products, and due to the ION acquisition, partially offset by the expiration of the OptumRx contracts.
Previous wording
Gross margin rate grew 45 basis points to 3.64 percent from the prior-year quarter primarily due to the increased contribution from branded pharmaceutical and specialty pharmaceutical products and favorable changes in the overall product mix for the Pharma segment, largely driven by the expiration of the OptumRx contracts.
Current wording
Gross margin rates for the three and six months ended December 31, 2024 grew 28 basis points to 3.51 percent and 36 basis points to 3.57 percent, respectively, from the comparative prior-year periods, primarily due to favorable changes in the overall product mix for the Pharma segment and the increased contribution from branded pharmaceutical and specialty pharmaceutical products, largely driven by the expiration of the OptumRx contracts.
Previous wording
SG&A expenses increased 8 percent to $1.3 billion from the prior-year quarter primarily due to higher health and welfare costs and costs to support sales growth for existing customers.
Current wording
SG&A expenses for the six months ended December 31, 2024 increased 5 percent to $2.6 billion from the comparative prior-year period, primarily due to higher health and welfare costs and higher costs to support sales growth for existing customers, partially offset by the beneficial impact of enterprise-wide cost savings measures.
Previous wording
GMPD segment profit decreased to $8 million from the prior-year quarter due to higher manufacturing and health and welfare costs, largely offset by an improvement in net inflationary impacts, which includes the effects of mitigation actions, and growth from existing customers.
Current wording
GMPD segment profit for the six months ended December 31, 2024 increased to $26 million from the comparative prior-year period, primarily due to growth from existing customers and the beneficial impact of cost optimization initiatives, partially offset by higher manufacturing and health and welfare costs.
Previous wording
Other profit increased 8 percent to $104 million from the prior-year quarter due to the performance of OptiFreight® Logistics.
Current wording
Other segment profit for the six months ended December 31, 2024 increased 10 percent to $222 million from the comparative prior-year period, primarily due to the performance of OptiFreight® Logistics.
Previous wording
The changes in Corporate during the three months ended September 30, 2024 are due to the factors discussed in the "Other Components of Consolidated Operating Earnings/(Loss)" section that follows.
Current wording
The changes in Corporate for the three and six months ended December 31, 2024 were due to the factors discussed in the "Other Components of Consolidated Operating Earnings" section that follows.
Previous wording
Other Components of Consolidated Operating Earnings/(Loss)
Current wording
Other Components of Consolidated Operating Earnings
Previous wording
In addition to revenue, gross margin, and SG&A expenses discussed previously, consolidated operating earnings/(loss) were impacted by the following:
Current wording
In addition to revenue, gross margin and SG&A expenses discussed previously, consolidated operating earnings were impacted by the following:
Previous wording
During the three months ended September 30, 2024, restructuring and employee severance costs were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations. During the three months ended September 30, 2023, restructuring and employee severance costs were primarily related to certain projects resulting from reviews of our strategy, portfolio, capital-allocation framework, and operations and the implementation of certain enterprise-wide cost-savings measures.
Current wording
Restructuring and employee severance costs during the three and six months ended December 31, 2024 were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations. During the three and six months ended December 31, 2023, costs were primarily related to certain projects resulting from reviews of our strategy, portfolio, capital-allocation framework, and operations and the implementation of certain enterprise-wide cost-savings measures.
Previous wording
Amortization of acquisition-related intangible assets was $68 million and $64 million for the three months ended September 30, 2024 and 2023, respectively.
Current wording
Amortization of acquisition-related intangible assets was $69 million and $63 million for the three months ended December 31, 2024 and 2023, respectively, and $137 million and $127 million for the six months ended December 31, 2024 and 2023, respectively.
Previous wording
During the three months ended September 30, 2023, we recognized a $585 million pre-tax non-cash goodwill impairment charge related to the GMPD segment and recognized a pre-tax gain of $53 million related to the divestiture of the Outcomes™ business.
Current wording
During the six months ended December 31, 2023, we recognized a $585 million pre-tax non-cash goodwill impairment charge related to the GMPD segment and recognized a pre-tax gain of $53 million related to the divestiture of the Outcomes™ business.
Previous wording
During the three months ended September 30, 2024 and 2023, we recognized income for net recoveries in class action antitrust lawsuits in which we were a class member or plaintiff of $43 million and $41 million, respectively.
Current wording
We recognized income for net recoveries in class action antitrust litigation in which we were a class member or plaintiff of $16 million and $59 million during the three and six months ended December 31, 2024, respectively, and $31 million and $71 million during the three and six months ended December 31, 2023, respectively. We recognized $15 million in opioid-related insurance recoveries during both the three and six months ended December 31, 2024. During the three and six months ended December 31, 2023, we recognized a $22 million charge related to an agreement in principle with the Alabama Attorney General.
Previous wording
In addition to the items discussed above, earnings before income taxes was impacted by the following:
Current wording
In addition to the items discussed above, earnings before income taxes were impacted by the following:
Previous wording
Tax Effects of Goodwill Impairment Charge
Current wording
Tax Effects of Goodwill Impairment Charges
Previous wording
During the three months ended September 30, 2023, we recognized a $585 million pre-tax charge for goodwill impairment related to the GMPD segment. The net tax benefit related to this charge is $45 million for fiscal 2024.
Current wording
During the six months ended December 31, 2023, we recognized a pre-tax goodwill impairment charge of $585 million related to the GMPD segment. The net tax benefit related to this charge was $45 million for fiscal 2024.
Previous wording
The tax effect of the goodwill impairment charge during the three months ended September 30, 2023 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairment in prior fiscal years. The impact of the non-deductible goodwill increased the estimated annual effective tax rate for fiscal 2024. Applying the higher tax rate to pre-tax loss for the three months ended September 30, 2023 resulted in recognizing an incremental interim tax benefit of approximately $102 million, which impacted the provision for/(benefit from) income taxes in the condensed consolidated statements of earnings/(loss) during the three months ended September 30, 2023 and prepaid expenses and other assets in the condensed consolidated balance sheets at September 30, 2023. This interim tax benefit reversed in the remaining quarters of fiscal 2024.
Current wording
The tax effect of the goodwill impairment charge recorded during the six months ended December 31, 2023 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairments in prior fiscal years. The impact of the non-deductible goodwill impairment increased the estimated annual effective tax rate for fiscal 2024. Applying the higher tax rate to the pre-tax income for the six months ended December 31, 2023 resulted in recognizing an incremental interim tax benefit of approximately $66 million, which impacted the provision for income taxes in the condensed consolidated statements of earnings during the six months ended December 31, 2023. The incremental interim tax benefit reversed in the remainder of fiscal 2024.
Previous wording
We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs as described below. If we decide to engage in one or more acquisitions, depending on the size and timing of such transactions, we may need to access capital markets for additional financing.
Current wording
We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs as described below. In addition to those disclosed, if we decide to engage in one or more acquisitions, depending on the size and timing of such transactions, we may need to access capital markets for additional financing.
Previous wording
Our cash and equivalents balance was $2.9 billion at September 30, 2024 compared to $5.1 billion at June 30, 2024. During the three months ended September 30, 2024, net cash used in operating activities was $1.6 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities for the quarter also includes the impact of our annual payment of $366 million related to the agreement to settle the vast majority of the opioid lawsuits filed by states and local governmental entities (the "National Opioid Settlement Agreement"). In addition, we deployed cash of $375 million for share repurchases and $90 million for capital expenditures.
Current wording
During the six months ended December 31, 2024, net cash used in operating activities was $2.0 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities also includes the impact of payments totaling $692 million related to the opioid litigation.
Previous wording
The cash and equivalents balance at September 30, 2024 included $471 million of cash held by subsidiaries outside of the United States.
Current wording
The cash and equivalents balance at December 31, 2024 includes $535 million of cash held by subsidiaries outside of the United States.
Previous wording
In addition to cash and equivalents and operating cash flow, other sources of liquidity at September 30, 2024 include a $2.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility, which expires in February 2028. We also have a $1.0 billion committed receivables sales facility through September 2025. At September 30, 2024, we had no amounts outstanding under our commercial paper program, revolving credit facility or our committed receivables sales facility.
Current wording
In addition to cash and equivalents and operating cash flow, other sources of liquidity at December 31, 2024 include a $3.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility and a $1.0 billion 364-Day revolving credit facility that expires in October 2025. We also have a $1.0 billion committed receivables sales facility through September 2025. At December 31, 2024, we had no amounts outstanding under our commercial paper program, revolving credit facilities, or our committed receivables sales facility.
Previous wording
Our revolving credit and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of September 30, 2024, we were in compliance with this financial covenant.
Current wording
Our term loan credit agreement, revolving credit, and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of December 31, 2024, we were in compliance with this financial covenant.
Previous wording
We had total long-term obligations, including the current portion and other short-term borrowings, of $5.2 billion and $5.1 billion at September 30, 2024 and June 30, 2024, respectively. We plan to repay our outstanding 3.5% Notes due 2024 at maturity in November 2024 with $400 million of proceeds from the debt issuance in fiscal 2024, $200 million of which were invested in short-term time deposits and classified as prepaid expenses and other in our condensed consolidated balance sheets.
Current wording
Long-Term Debt and Other Short-Term Borrowings
Previous wording
We had $5.0 billion accrued at September 30, 2024 related to certain opioid litigation, as further described within Note 7 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the remaining payment amounts to occur through 2038. During the three months ended September 30, 2024, we made our fourth annual payment of $366 million under the National Opioid Settlement Agreement. The amounts of future annual payments may differ from the payments that we have already made.
Current wording
We had $4.9 billion accrued at December 31, 2024 related to certain national opioid litigation settlements, as further described within Note 7 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the remaining payment amounts to occur through 2038. During the six months ended December 31, 2024, we made payments totaling $692 million, which included our fourth annual payment under the agreement to settle the vast majority of the opioid lawsuits filed by states and local governmental entities (the "National Opioid Settlement Agreement") and payments related to the settlement agreements with the City of Baltimore and acute care hospitals. The amounts of future annual payments under the National Opioid Settlement Agreement may differ from the payments that we have already made.
Previous wording
Capital expenditures during the three months ended September 30, 2024 and 2023 were $90 million and $92 million, respectively.
Current wording
Capital expenditures during the six months ended December 31, 2024 and 2023 were $189 million and $206 million, respectively.
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Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
During fiscal 2024, we began distributing commercially available COVID-19 vaccines following the U.S. Food and Drug Administration (“FDA”) approval. Distribution of these vaccines had a greater than anticipated benefit to our Pharma segment profit in fiscal 2024, especially in the second quarter. In August 2024, the FDA approved the 2024-2025 commercial COVID-19 vaccines, and our Pharma
Current report — wording carried from elsewhere
The frequency, timing, magnitude, and profit impact of customer demand, new product launches, and our ongoing investments are subject to risks and uncertainties. These risks and uncertainties may impact Pharma segment profit and consolidated operating earnings during the remainder of fiscal 2025 and beyond.
Current report — wording carried from elsewhere
Our cash and equivalents balance was $3.8 billion at December 31, 2024 compared to $5.1 billion at June 30, 2024.
Current report — wording carried from elsewhere
We had total long-term obligations, including the current portion and other short-term borrowings, of $7.6 billion and $5.1 billion at December 31, 2024 and June 30, 2024, respectively.
Current report — wording carried from elsewhere
During the three months ended December 31, 2024, we repaid the full principal of $400 million of the 3.5% Notes due 2024 at maturity with proceeds from the debt issuance in fiscal 2024, $200 million of which were invested in short-term time deposits and classified
Current report — wording carried from elsewhere
as prepaid expenses and other in our condensed consolidated balance sheets at June 30, 2024.
Current report — wording carried from elsewhere
As of December 31, 2024, we have $3.1 billion remaining under our existing share repurchase authorization.
Current report — wording carried from elsewhere
On December 2, 2024, we completed the acquisition of ION, a management services organization that supports more than 50 practice sites in 10 states representing more than 100 providers, for a purchase price of $1.1 billion in cash, subject to certain adjustments.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
Previous report — wording carried elsewhere
3 For the three months ended September 30, 2023, impairments and (gain)/loss on disposals of assets, net includes a pre-tax goodwill impairment charge of $585 million, related to the GMPD segment. For fiscal 2024, the net tax benefit related to this charge was $45 million and was included in the annual effective tax rate. As a result, the tax benefit for the three months ended September 30, 2023 increased approximately by an incremental $102 million, and increased the provision for income taxes during the remainder of fiscal 2024.