CARDINAL HEALTH INC
For the period ended Dec 31, 2023. Filed Feb 1, 2024.
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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, 2023 · Filed Feb 1, 2024
Extracted filing text, with the paragraph anchors used by the comparison.
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Financial Statemen
| Three Months Ended December 31, | Six Months Ended December 31, | |||
|---|---|---|---|---|
| (in millions, except per common share amounts) | 2023 | 2022 | 2023 | 2022 |
| Revenue | $57,445 | $51,469 | $112,208 | $101,072 |
| Cost of products sold | 55,599 | 49,806 | 108,594 | 97,795 |
| Gross margin | 1,846 | 1,663 | 3,614 | 3,277 |
| Operating expenses: | ||||
| Distribution, selling, general and administrative expenses | 1,283 | 1,191 | 2,480 | 2,388 |
| Restructuring and employee severance | 28 | 17 | 53 | 46 |
| Amortization and other acquisition-related costs | 63 | 71 | 127 | 142 |
| Impairments and (gain)/loss on disposal of assets, net | 1 | 710 | 538 | 863 |
| Litigation (recoveries)/charges, net | (11) | (207) | (52) | (180) |
| Operating earnings/(loss) | 482 | (119) | 468 | 18 |
| Other (income)/expense, net | (16) | (7) | (18) | (5) |
| Interest expense, net | 8 | 25 | 22 | 50 |
| Earnings/(loss) before income taxes | 490 | (137) | 464 | (27) |
| Provision for/(benefit from) income taxes | 136 | (7) | 104 | (8) |
| Net earnings/(loss) | 354 | (130) | 360 | (19) |
| Less: Net earnings attributable to noncontrolling interests | (1) | — | (2) | (1) |
| Net earnings/(loss) attributable to Cardinal Health, Inc. | $353 | $(130) | $358 | $(20) |
| Earnings/(Loss) per common share attributable to Cardinal Health, Inc.: | ||||
| Basic | $1.44 | $(0.50) | $1.45 | $(0.08) |
| Diluted | 1.43 | (0.50) | 1.44 | (0.08) |
| Weighted-average number of common shares outstanding: | ||||
| Basic | 245 | 261 | 247 | 266 |
| Diluted | 246 | 261 | 248 | 266 |
| Cash dividends declared per common share | $0.5006 | $0.4957 | $1.0012 | $0.9914 |
| 23 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Financial Statements
Condensed Consolidated Statements of Comprehensive Income/(Loss)
| Three Months Ended December 31, | Six Months Ended December 31, | |||
|---|---|---|---|---|
| (in millions) | 2023 | 2022 | 2023 | 2022 |
| Net earnings/(loss) | $354 | $(130) | $360 | $(19) |
| Other comprehensive income/(loss): | ||||
| Foreign currency translation adjustments and other | 6 | 20 | (5) | (38) |
| Net unrealized gain on derivative instruments, net of tax | 4 | 10 | 1 | 6 |
| Total other comprehensive income/(loss), net of tax | 10 | 30 | (4) | (32) |
| Total comprehensive income/(loss) | 364 | (100) | 356 | (51) |
| Less: comprehensive income attributable to noncontrolling interests | (1) | — | (2) | (1) |
| Total comprehensive income/(loss) attributable to Cardinal Health, Inc. | $363 | $(100) | $354 | $(52) |
| 24 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Financial Statements
Condensed Consolidated Balance Sheets
| (in millions) | December 31, 2023 | June 30, 2023 |
|---|---|---|
| (Unaudited) | ||
| Assets | ||
| Current assets: | ||
| Cash and equivalents | $4,591 | $4,043 |
| Trade receivables, net | 11,788 | 11,344 |
| Inventories, net | 18,451 | 15,940 |
| Prepaid expenses and other | 2,816 | 2,362 |
| Assets held for sale | 12 | 144 |
| Total current assets | 37,658 | 33,833 |
| Property and equipment, net | 2,446 | 2,462 |
| Goodwill and other intangibles, net | 5,371 | 6,081 |
| Other assets | 1,098 | 1,041 |
| Total assets | $46,573 | $43,417 |
| Liabilities and Shareholders’ Deficit | ||
| Current liabilities: | ||
| Accounts payable | $34,259 | $29,813 |
| Current portion of long-term obligations and other short-term borrowings | 1,188 | 792 |
| Other accrued liabilities | 2,839 | 3,059 |
| Liabilities related to assets held for sale | — | 42 |
| Total current liabilities | 38,286 | 33,706 |
| Long-term obligations, less current portion | 3,535 | 3,909 |
| Deferred income taxes and other liabilities | 8,199 | 8,653 |
| Shareholders’ deficit: | ||
| Preferred shares, without par value: | ||
| Authorized—500 thousand shares, Issued—none | — | — |
| Common shares, without par value: | ||
| Authorized—755 million shares, Issued—327 million shares at December 31, 2023 and June 30, 2023 | 2,855 | 2,747 |
| Accumulated deficit | (425) | (534) |
| Common shares in treasury, at cost: 83 million shares and 76 million shares at December 31, 2023 and June 30, 2023, respectively | (5,724) | (4,914) |
| Accumulated other comprehensive loss | (155) | (151) |
| Total Cardinal Health, Inc. shareholders' deficit | (3,449) | (2,852) |
| Noncontrolling interests | 2 | 1 |
| Total shareholders’ deficit | (3,447) | (2,851) |
| Total liabilities and shareholders’ deficit | $46,573 | $43,417 |
| 25 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Financial Statements
Condensed Consolidated Statements of Shareholders' Deficit
| Common Shares · Accumulated Deficit · Treasury Shares · Accumulated OtherComprehensiveLoss · Noncontrolling Interests · TotalShareholders’ Deficit | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (in millions) · Shares Issued · Amount · Shares · Amount | |||||||||||||||||
| Three Months Ended December 31, 2023 | |||||||||||||||||
| Balance at September 30, 2023 | 327 | $2,728 | $(654) | (80) | $(5,400) | $(165) | $1 | $(3,490) | |||||||||
| Net earnings | 353 | 1 | 354 | ||||||||||||||
| Other comprehensive income, net of tax | 10 | 10 | |||||||||||||||
| Employee stock plans activity, net of shares withheld for employee taxes | — | 27 | — | 30 | 57 | ||||||||||||
| Share repurchase program activity | 100 | (4) | (354) | (254) | |||||||||||||
| Dividends declared | (123) | (123) | |||||||||||||||
| Other | (1) | 1 | — | (1) | |||||||||||||
| Balance at December 31, 2023 | 327 | $2,855 | $(425) | (83) | $(5,724) | $(155) | $2 | $(3,447) | |||||||||
| Three Months Ended December 31, 2022 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at September 30, 2022 | 327 | $2,576 | $(301) | (65) | $(3,880) | $(176) | $1 | $(1,780) | ||||||||
| Net loss | (130) | — | (130) | |||||||||||||
| Other comprehensive income, net of tax | 30 | 30 | ||||||||||||||
| Employee stock plans activity, net of shares withheld for employee taxes | — | 21 | 1 | 26 | 47 | |||||||||||
| Share repurchase program activity | 150 | (4) | (400) | (250) | ||||||||||||
| Dividends declared | (129) | (129) | ||||||||||||||
| Balance at December 31, 2022 | 327 | $2,747 | $(560) | (68) | $(4,254) | $(146) | $1 | $(2,212) | ||||||||
| Six Months Ended December 31, 2023 | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at June 30, 2023 | 327 | $2,747 | $(534) | (76) | $(4,914) | $(151) | $1 | $(2,851) | |||||||
| Net earnings | 358 | 2 | 360 | ||||||||||||
| Other comprehensive loss, net of tax | (4) | (4) | |||||||||||||
| Employee stock plans activity, net of shares withheld for employee taxes | 8 | 1 | 49 | 57 | |||||||||||
| Share repurchase program activity | 100 | (9) | (859) | (759) | |||||||||||
| Dividends declared | (249) | (249) | |||||||||||||
| Other | — | 1 | (1) | (1) | |||||||||||
| Balance at December 31, 2023 | 327 | $2,855 | $(425) | (83) | $(5,724) | $(155) | $2 | $(3,447) | |||||||
| Six Months Ended December 31, 2022 | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at June 30, 2022 | 327 | $2,813 | $(280) | (54) | $(3,128) | $(114) | $3 | $(706) | |||||||||
| Net earnings/(loss) | (20) | 1 | (19) | ||||||||||||||
| Other comprehensive loss, net of tax | (32) | (32) | |||||||||||||||
| Purchase of noncontrolling interests | (2) | (2) | |||||||||||||||
| Employee stock plans activity, net of shares withheld for employee taxes | — | (16) | 2 | 74 | 58 | ||||||||||||
| Share repurchase program activity | (50) | (16) | (1,200) | (1,250) | |||||||||||||
| Dividends declared | (260) | (260) | |||||||||||||||
| Other | (1) | (1) | |||||||||||||||
| Balance at December 31, 2022 | 327 | $2,747 | $(560) | (68) | $(4,254) | $(146) | $1 | $(2,212) | |||||||||
| 26 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Financial Statements
Condensed Consolidated Statements of Cash Flows
| Six Months Ended December 31, | ||
|---|---|---|
| (in millions) | 2023 | 2022 |
| Cash flows from operating activities: | ||
| Net earnings/(loss) | $360 | $(19) |
| Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities: | ||
| Depreciation and amortization | 347 | 341 |
| Impairments and (gain)/loss on disposal of assets, net | 538 | 863 |
| Share-based compensation | 57 | 48 |
| Provision for bad debts | 43 | 59 |
| Change in operating assets and liabilities, net of effects from acquisitions and divestitures: | ||
| Increase in trade receivables | (487) | (919) |
| Increase in inventories | (2,536) | (1,643) |
| Increase in accounts payable | 4,446 | 2,954 |
| Other accrued liabilities and operating items, net | (1,034) | (1,064) |
| Net cash provided by operating activities | 1,734 | 620 |
| Cash flows from investing activities: | ||
| Proceeds from divestitures, net of cash sold | 9 | — |
| Additions to property and equipment | (206) | (155) |
| Proceeds from disposal of property and equipment | 2 | 2 |
| Purchases of investments | (2) | (5) |
| Proceeds from investments | 1 | 1 |
| Proceeds from net investment hedge terminations | 28 | — |
| Net cash used in investing activities | (168) | (157) |
| Cash flows from financing activities: | ||
| Reduction of long-term obligations | (15) | (13) |
| Net tax proceeds from share-based compensation | 1 | 9 |
| Dividends on common shares | (255) | (271) |
| Purchase of treasury shares | (750) | (1,250) |
| Net cash used in financing activities | (1,019) | (1,525) |
| Effect of exchange rate changes on cash and equivalents | 1 | (1) |
| Net increase/(decrease) in cash and equivalents | 548 | (1,063) |
| Cash and equivalents at beginning of period | 4,043 | 4,717 |
| Cash and equivalents at end of period | $4,591 | $3,654 |
| 27 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Notes to Financial Statements
Notes to Condensed Consolidated Financial Statements
- Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our condensed consolidated financial statements include the accounts of all majority-owned or consolidated subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively.
References to "we," "our," and similar pronouns in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2023 (this "Form 10-Q") are to Cardinal Health, Inc. and its majority-owned or consolidated subsidiaries unless the context requires otherwise.
Our fiscal year ends on June 30. References to fiscal 2024 and 2023 in these condensed consolidated financial statements are to the fiscal years ending or ended June 30, 2024 and June 30, 2023, respectively.
Our condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission ("SEC") instructions to Quarterly Reports on Form 10-Q and include the information and disclosures required by accounting principles generally accepted in the United States ("GAAP") for interim financial reporting. The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts.
In our opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal 2024 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2024. These condensed consolidated financial statements are unaudited and, accordingly, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (our "2023 Form 10-K").
Recently Issued Financial Accounting Standards
Not Yet Adopted
We assess the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board ("FASB") on our condensed consolidated financial statements as well as material updates to previous assessments, if any, from our fiscal 2023 Form 10-K.
Segment Reporting
In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, primarily through disclosures of significant segment expenses. This guidance will be effective for us in our fiscal 2025 Form 10-K and the guidance must be applied retrospectively to all prior periods presented. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Income Tax Disclosure
In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for us in our fiscal 2026 Form 10-K and should be applied on a prospective basis, with retrospective application permitted. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Recently Adopted Financial Accounting Standards
There were no new material accounting standards adopted in the six months ended December 31, 2023.
| 28 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
Notes to Financial Statements
- Divestitures
On June 5, 2023, we signed a definitive agreement to contribute the Outcomes TM business to Transaction Data Systems ("TDS"), a portfolio company of BlackRock Long Term Private Capital and GTCR, in exchange for a 16 percent equity interest in the combined entity. The transaction closed on July 10, 2023 and we recognized a pre-tax gain of $53 million during the six months ended December 31, 2023, which was included inimpairments and (gain)/loss on disposal of assets, net in our condensed consolidated statements of earnings/(loss). This gain includes our initial recognition of an equity method investment in the combined entity for $147 million.
We determined that the divestiture of the Outcomes TMbusiness does not meet the criteria to be classified as discontinued operations. The Outcomes TMbusiness operated within our Pharmaceutical segment.
- Restructuring and Employee Severance
The following tables summarize restructuring and employee severance costs:
| Three Months Ended December 31, | ||
|---|---|---|
| (in millions) | 2023 | 2022 |
| Employee-related | $8 | $10 |
| Facility exit and other | 20 | 7 |
| Total restructuring and employee severance | $28 | $17 |
| Six Months Ended December 31, | ||
|---|---|---|
| (in millions) | 2023 | 2022 |
| Employee-related | $15 | $29 |
| Facility exit and other | 38 | 17 |
| Total restructuring and employee severance | $53 | $46 |
Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated, duplicate payroll costs and retention bonuses incurred during transition periods. Facility exit and other costs primarily consist of project consulting fees, accelerated depreciation, professional, project management and other service fees to support divestitures, costs associated with vacant facilities, and certain other divestiture-related costs.
Restructuring and employee severance costs during the three and six months ended December 31, 2023 were primarily related to certain projects resulting from review of our strategy portfolio, capital-allocation framework and operation and the implementation of certain enterprise-wide cost-savings measures. During the three and six months ended December 31, 2022, restructuring and employee severance costs were primarily related to implementation of certain enterprise-wide cost-saving measures.
The following table summarizes activity related to liabilities associated with restructuring and employee severance:
| (in millions) | Employee-Related Costs | Facility Exitand Other Costs | Total |
|---|---|---|---|
| Balance at June 30, 2023 | $44 | $2 | $46 |
| Additions | 8 | 4 | 12 |
| Payments and other adjustments | (18) | (1) | (19) |
| Balance at December 31, 2023 | $34 | $5 | $39 |
| 29 | Cardinal Health | Q2 Fiscal 2024 Form 10-Q |
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.