On May 3, 2018 Cardinal Health (NYSE: CAH) reported third-quarter fiscal year 2018 revenue of $33.6 billion, an increase of 6 percent (Press release, Cardinal Health, MAY 3, 2018, View Source [SID1234526051]). The company also reported a decline in GAAP operating earnings of 10 percent to $546 million and a decrease in GAAP diluted earnings per share (EPS) of 33 percent to $0.81. Non-GAAP operating earnings increased 3 percent to $781 million, while non-GAAP diluted EPS decreased 9 percent to $1.39.

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"Our non-GAAP operating earnings came in largely as expected this quarter. However, our non-GAAP EPS was adversely affected by a significant negative change in our effective tax rate primarily associated with our Cordis business," said Mike Kaufmann, Chief Executive Officer of Cardinal Health. "Our team is moving aggressively to address our operational and supply chain issues at Cordis. Under the leadership of our new Medical Segment CEO, Jon Giacomin, we are implementing a series of initiatives to improve those operations and drive greater efficiencies. While these initiatives will take some time, we remain confident in the potential of this business and the value it provides to cardiovascular patients."

Mr. Kaufmann continued, "We have an exceptional portfolio of assets, a tremendously talented and dedicated organization, and a critical position in the delivery of global healthcare. We look forward to building on this incredibly strong foundation to drive future performance and increase value for our shareholders."

Tax rate
During the three months ended March 31, 2018 and 2017, GAAP effective tax rates were 45.1 percent and 32.3 percent, respectively, and non-GAAP effective tax rates were 37.5 percent and 32.3 percent, respectively.

This quarter’s higher effective tax rates are attributable to unfavorable discrete items and a significant negative impact from the reduction in Cordis income. Both unfavorable items were partially offset by the lower U.S. federal income tax rate due to the U.S. Tax Cuts and Jobs Act.

Additionally, the effective tax rates in the third quarter of fiscal year 2017 were positively affected by discrete items.

Cardinal Health

Outlook
The company does not provide 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 revised its outlook for fiscal 2018 non-GAAP EPS to $4.85-$4.95 from $5.25-$5.50. This new guidance reflects the company’s updated view on the performance of Cordis and its negative effect on the tax rate. The company will offer commentary for fiscal year 2019 during its earnings call today and expects to provide specific guidance when it reports year-end results in August.

Segment results
Pharmaceutical segment
Third-quarter revenue for the Pharmaceutical segment increased 5 percent to $29.7 billion due to sales growth from pharmaceutical and specialty distribution customers. This was partially offset by the previously announced expiration of a large, mail-order customer contract and the divestiture of the company’s China distribution business.

Segment profit decreased by 3 percent to $596 million which reflects a modest, negative impact from the company’s generic program performance.

Additional third-quarter and recent highlights

The company announced that it has extended and expanded its relationship with Optum through a contract that now extends through the end of the company’s fiscal year 2024.

As part of its Opioid Action Program, Cardinal Health donated more than 16,000 prepaid prescription medication disposal envelopes to the National Community Pharmacists Association Foundation for distribution to NCPA member pharmacies free of charge.

The company began donations of more than 80,000 doses of Narcan, (naloxone HCI) Nasal Spray 4mg, to community organizations who will distribute the life-saving overdose-reversal medication to first responders and law enforcement across Ohio, Kentucky, Tennessee and West Virginia.

Cardinal Health was recognized as being among the nation’s best workplaces for female advancement as a Top Company for Executive Women by the National Association for Female Executives.

Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss third-quarter 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.com until May 2, 2019.