On August 5, 2021 Cardinal Health (NYSE: CAH) reported that fourth-quarter fiscal 2021 revenue increased 16% to $42.6 billion (Press release, Cardinal Health, AUG 5, 2021, View Source [SID1234585900]). This increase includes the favorable prior year comparison from reduced pharmaceutical demand related to COVID-19. Fiscal year 2021 revenues were $162.5 billion, a 6% increase from fiscal year 2020.

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Cardinal Health, Inc. is a global, integrated healthcare services and products company, providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices worldwide. (PRNewsfoto/Cardinal Health)

Both GAAP and Non-GAAP operating earnings during the fourth quarter and fiscal year 2021 were adversely impacted by a $197 million COVID-19-related inventory reserve related to certain Personal Protective Equipment (PPE) in the Medical segment. Fourth-quarter and full year GAAP diluted earnings per share (EPS) were also negatively impacted by $149 million and $1.17 billion pre-tax charges, respectively, related to opioid lawsuits brought by states and local governmental entities.

Fourth-quarter GAAP operating earnings decreased 40% to $162 million and GAAP diluted EPS decreased to $0.40. Non-GAAP operating earnings decreased 28% to $320 million and Non-GAAP diluted EPS decreased 26% to $0.77 in the quarter.

Fiscal year 2021 GAAP operating earnings were $472 million and non-GAAP operating earnings decreased 5% to $2.3 billion. GAAP diluted EPS for fiscal year 2021 were $2.08, while non-GAAP diluted EPS were $5.57.

"We’re disappointed with our fourth quarter results. Throughout the past year we have been taking action to drive performance, and we will continue to move forward with urgency," said Mike Kaufmann, CEO of Cardinal Health. "For example, we divested the Cordis business, extended our Red Oak Sourcing agreement with CVS Health, identified $250 million of additional cost savings opportunities and made important leadership changes. With the actions we’ve taken to date and our plans for fiscal year 2022, we feel confident in our strategy, and are encouraged by the tailwinds behind our growth areas and strong cash flow generation."

COVID-19
The COVID-19 pandemic adversely affected fiscal year 2021 results. The company estimates that COVID-19 had a total net negative impact to both GAAP and non-GAAP operating earnings of approximately $300 million in fiscal year 2021, or approximately $200 million on a year-over-year basis.

Fourth-quarter revenue for the Pharmaceutical segment increased 15% to $38.3 billion driven primarily by sales growth from large Pharmaceutical Distribution and Specialty Solutions customers. This increase also includes the favorable prior year comparison from reduced pharmaceutical demand related to COVID-19.

Pharmaceutical segment profit was flat at $358 million in the fourth quarter. This reflects COVID-19-related volume recovery in the Nuclear and Precision Health Solutions business, offset by the adverse impact of Pharmaceutical Distribution customer contract renewals.

Fourth-quarter revenue for the Medical segment increased 23% to $4.2 billion, driven by a net positive impact from COVID-19 on products and distribution. This increase was primarily due to a recovery in elective procedure volumes and the positive pricing impact of PPE.

Medical segment loss of $63 million in the fourth quarter was due to an adverse impact from COVID-19. This was primarily due to an inventory reserve on certain PPE products, partially offset by a recovery in elective procedure volumes. Additionally, benefits from cost savings initiatives were offset by elevated supply chain costs.

Tax rate
The GAAP effective tax rates for the fourth quarter of fiscal year 2021, fiscal year 2021 and fiscal year 2020 included net tax benefits related to the treatment of the tax impacts of the opioid litigation charges. Included in the GAAP effective tax rate for fiscal 2021 was a benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss.

Fiscal year 2022 non-GAAP EPS guidance reflects a net tailwind related to COVID-19 of approximately $200 million compared to the prior year. Additionally, the company expects incremental investments of approximately $120 million in technology enhancements to drive growth and efficiencies, as well as an approximate $80 million negative impact to operating earnings due to the Cordis divestiture. Fiscal year 2022 non-GAAP EPS guidance reflects share repurchases in the range of $500 million to $1.0 billion.

The company does not provide forward-looking guidance on a GAAP basis as certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated. See "Use of Non-GAAP Measures" following the attached schedules for additional explanation.

Recent highlights

Cardinal Health amended its Red Oak Sourcing agreement with CVS Health to extend the term of the generic pharmaceutical sourcing venture through June 2029.
Cardinal Health announced the completion of the previously announced sale of Cardinal Health’s Cordis business to Hellman & Friedman for a sale price of approximately $1 billion.
Cardinal Health, along with pharmaceutical distribution peers, announced that they have negotiated a comprehensive proposed settlement agreement which, if all conditions are satisfied, would result in the settlement of a substantial majority of opioid lawsuits filed by state and local governmental entities.
Cardinal Health Board of Directors approved a quarterly dividend of $0.4908 per share. The dividend will be payable on October 15, 2021 to shareholders of record at the close of business on October 1, 2021.
Cardinal Health has been named one of the 2021 Best Companies for Multicultural Women by Seramount (formerly Working Mother Media), an honor recognizing companies that create and use best practices in hiring, retaining and promoting multicultural women in the United States.
Upcoming webcasted investor events

Morgan Stanley 19th Annual Global Healthcare Conference at 8:00 a.m. Eastern, September 14, 2021
Webcast
Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss fourth-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 until August 5, 2022.