On November 7, 2019 Cardinal Health (NYSE: CAH) reported first quarter fiscal year 2020 revenue of $37.3 billion, an increase of 6 percent from the first quarter last year (Press release, Cardinal Health, NOV 7, 2019, View Source [SID1234550701]).
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First quarter GAAP operating loss was $5.3 billion and included a $5.6 billion accrual related to opioid litigation. Non-GAAP operating earnings increased 6 percent to $577 million. GAAP diluted loss per share was $16.65, while non-GAAP diluted earnings per share (EPS) decreased 2 percent to $1.27.
"We are off to a solid start to fiscal year 2020, giving us confidence in our operating rigor and path forward," said Mike Kaufmann, CEO of Cardinal Health. "Our disciplined cost management is enabling strategic investment across the enterprise. We recognize that as our industry and the healthcare sector continue to evolve, there is more work to be done. Our core capabilities, deep industry knowledge and scale position us to adapt and deliver long-term shareholder value."
Q1 FY20 summary
Q1 FY20
Q1 FY19
Y/Y
Revenue
$37.3 billion
$35.2 billion
6%
Operating earnings/(loss)
$(5.3) billion
$816 million
N.M.
Non-GAAP operating earnings
$577 million
$542 million
6%
Net earnings/(loss) attributable
to Cardinal Health, Inc.
$(4.9) billion
$593 million
N.M.
Non-GAAP net earnings attributable
to Cardinal Health, Inc.
$378 million
$396 million
(4)%
Diluted EPS/(loss per share)
attributable to Cardinal Health, Inc.2
$(16.65)
$1.94
N.M.
Non-GAAP diluted EPS attributable
to Cardinal Health, Inc.
$1.27
$1.29
(2)%
Segment results
Pharmaceutical segment
Q1 FY20
Q1 FY19
Y/Y
Revenue
$33.4 billion
$31.4 billion
6%
Segment profit
$398 million
$409 million
(3)%
First 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 decreased 3 percent to $398 million in the first quarter, which reflects the adverse impact of Pharmaceutical Distribution customer contract renewals, partially offset by benefits from cost savings initiatives and the performance of Specialty Solutions.
Medical segment
Q1 FY20
Q1 FY19
Y/Y
Revenue
$3.9 billion
$3.8 billion
3%
Segment profit
$170 million
$135 million
26%
First quarter revenue for the Medical segment increased 3 percent to $3.9 billion due to organic growth across the segment, led by products and distribution, and Cardinal Health at Home. This was partially offset by the divestiture of the naviHealth business.
Medical segment profit increased 26 percent to $170 million in the first quarter, which reflects the benefits from cost savings initiatives, as well as growth in products and distribution, services, and Cardinal Health at Home. This was partially offset by the divestiture of the naviHealth business.
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 reaffirms its fiscal year 2020 guidance range for non-GAAP diluted earnings per share attributable to Cardinal Health, Inc. of $4.85 to $5.10.
Opioid lawsuits developments
In October 2019, the company agreed in principle to a global settlement framework with a leadership group of four state attorneys general that is designed to resolve all pending and potential opioid lawsuits by states and political subdivisions. The global settlement framework includes, among other significant components, an agreement in principle by the company to pay up to $5.56 billion over 18 years. There is no assurance that a definitive settlement agreement will be finalized by the necessary parties or that the contingencies to any agreement will be satisfied. The company also agreed to a $66 million settlement with two Ohio counties. In connection with these matters, the company accrued $5.63 billion ($5.14 billion after tax) which is excluded from its non-GAAP earnings.
Quarterly dividend
Cardinal Health board of directors approved a quarterly dividend of $0.4811 per share. The dividend will be payable on January 15, 2020 to shareholders of record at the close of business on January 2, 2020.
Tax rate
During the first quarters of fiscal 2020 and 2019, GAAP effective tax rates were 7.9 percent and 19.4 percent, respectively. Non-GAAP effective tax rates were 23.7 percent and 14.0 percent, respectively.
The GAAP effective tax rate for the first quarter of fiscal 2020 was impacted by the assessment of the future deductibility of the $5.6 billion opioid litigation accrual.
The effective tax rates in the first quarter of fiscal 2019 were affected by an approximately $0.18 per share positive impact of discrete tax benefits primarily related to international legal entity changes.
Webcast
Cardinal Health will host a webcast today at 8 a.m. Eastern to discuss first 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 November 6, 2020.
Upcoming webcasted investor events
Credit Suisse 28th Annual Healthcare Conference on November 12 at 2:25 p.m. Mountain in Scottsdale, Ariz.
38th Annual J.P. Morgan Healthcare Conference on January 13-16, 2020 in San Francisco, Calif.