On August 6, 2018 Cardinal Health (NYSE: CAH) reported fourth-quarter fiscal year 2018 revenues of $35 billion, an increase of 7 percent from the fourth quarter last year, and fiscal year 2018 revenues of $137 billion, an increase of 5 percent from fiscal 2017 (Press release, Cardinal Health, AUG 6, 2018, View Source [SID1234528478]).

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Fourth-quarter GAAP operating earnings were a loss of $1.1 billion due to a Medical segment non-cash, goodwill impairment of $1.4 billion, which was primarily due to the performance of the Cordis business. Non-GAAP operating earnings were $465 million for the quarter. The company reported GAAP operating earnings of $126 million for fiscal year 2018 and non-GAAP operating earnings of $2.6 billion.

For the quarter, GAAP diluted earnings per share (EPS) were a loss of $3.76, while non-GAAP diluted EPS were $1.01. GAAP diluted EPS for fiscal year 2018 were $0.81, and non-GAAP diluted EPS were $5.00.

"Fiscal ’18 was a challenging year, but we are making significant progress by taking decisive actions to drive growth, reduce costs and enhance profitability," said Mike Kaufmann, CEO of Cardinal Health. "We are on track, and Cardinal Health’s best-in-class products and services continue to distinguish us with our customers and their patients."

Tax rates
During the fourth quarter of 2018 and 2017, GAAP effective tax rates were 1.8 percent and 25.8 percent, respectively. During fiscal years 2018 and 2017, GAAP effective tax rates were 213.8 percent and 32.7 percent, respectively. The fiscal year 2018 effective tax rates were adversely affected by the non-deductible Medical segment goodwill impairment. This unfavorable impact was partially offset in both the fourth quarter and fiscal year 2018 by net discrete tax benefits. Also, as previously disclosed, the fiscal year 2018 GAAP effective tax rate benefitted from transitional tax benefits of $2.97 per share due to the enactment of the U.S. Tax Cuts and Jobs Act ("U.S. tax reform") and a lower U.S. federal income tax rate.

During the fourth quarter of 2018 and 2017, the non-GAAP effective tax rates were 11.8 percent and 27.0 percent respectively. During fiscal years 2018 and 2017, the non-GAAP effective tax rates were 29.3 percent and 32.6 percent. The non-GAAP effective tax rates for the fourth quarter and fiscal year 2018 benefitted from net favorable discrete items and the lower U.S. federal income tax rate due to U.S. tax reform.

Segment results
Pharmaceutical segment
Fourth-quarter revenue for the Pharmaceutical segment increased 6 percent to $31 billion due to sales growth from Pharmaceutical and Specialty Distribution customers. This was partially offset by the divestiture of the company’s China distribution business and expiration of a large, mail-order customer contract, both of which were previously announced.

Segment profit for the quarter decreased 18 percent to $416 million primarily due to the negative impact from the company’s generic program performance.

Medical segment
Fourth-quarter revenue for the Medical segment increased 14 percent to $4 billion, which was driven primarily by the acquisition of the Patient Recovery business.

Medical segment profit decreased by 17 percent, or $24 million, to $114 million in the fourth quarter driven by the performance of Cardinal Health Branded products, primarily Cordis, and compensation-related items. This was mostly offset by contributions from acquisitions.

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’s fiscal year 2019 guidance range for non-GAAP diluted EPS from continuing operations is $4.90 to $5.15.

Recent highlights

Closed on partnership with Clayton, Dubilier & Rice to accelerate the growth of naviHealth, a market leader in post-acute care management. Cardinal Health retains approximately a 45 percent interest in naviHealth and, at closing, received net cash proceeds of $736 million and expects to record a pre-tax gain of more than $500 million in the first quarter of FY19.

The company exited its transition services agreements (TSA) with Medtronic for North America, Latin America and the Global Supply Chain during the last week of July and is on track for TSA exits in other regions in late calendar year 2018 and early 2019.

Awarded more than $3 million in grants to more than 70 nonprofit organizations to support local efforts to combat the opioid epidemic across Ohio, West Virginia, Kentucky and Tennessee. The grants were made through the Cardinal Health Foundation’s Generation Rx program and are funded by Cardinal Health’s Opioid Action Program.

FY18 awards and recognition highlights

Named as one of 2018 World’s Most Admired Companies by Fortune for the fourth consecutive year

Earned distinction as a 2018 "Top 70 Companies for Executive Women" by the National Association for Female Executives for the seventh consecutive year

Recognized by Becker’s Healthcare as one of the 150 Top Places to Work in Healthcare in 2018 for the fifth consecutive year

Named to the Human Rights Campaign (HRC) Best Places to Work for LGBT Equality for the tenth consecutive year based on ratings in HRC’s 2018 Corporate Equality Index

Webcast

Cardinal Health will host a webcast today at 8:30 a.m. Eastern to discuss fourth-quarter and year-end 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 August 5, 2019.

Upcoming webcasted investor events

Morgan Stanley 16th Annual Global Healthcare Conference on Friday, Sept. 14 at 8:45 a.m. Eastern in New York City