Cardinal Health Inc 10-Q for FY2024 Q1

Cardinal Health Inc (CAH)

10-Q 2023-11-03 For: 2023-09-30

Added on April 10, 2026

About this 10-Q

Cardinal Health Inc filed this 10-Q on November 3, 2023, covering the quarter ended September 30, 2023 (FY2024 Q1).

Headline figures

Quarter ended September 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $54.76B; up 10.4% from $49.6B a year earlier
Net income: $5M; down 95.5% from net income of $110M a year earlier
Diluted EPS: $0.02; down 95.0% from $0.40 a year earlier

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Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common shares (without par value)	CAH	New York Stock Exchange


						Page
			Management's Discussion and Analysis of Financial Condition and Results of Operations			2
			Explanation and Reconciliation of Non-GAAP Financial Measures			16
			Quantitative and Qualitative Disclosures about Market Risk			19
			Controls and Procedures			19
			Legal Proceedings			20
			Risk Factors			20
			Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities			20
			Financial Statements			21
			Exhibits			38
			Form 10-Q Cross Reference Index			39
			Signatures			40


	Three Months Ended September 30,
(in millions)	2023		2022		Change
GAAP operating earnings/(loss)	$	(14)	$	137	N.M.


Shareholder cooperation agreement costs	—		6
Restructuring and employee severance	25		29
Amortization and other acquisition-related costs	64		71
Impairments and (gain)/loss on disposal of assets, net	537		153
Litigation (recoveries)/charges, net	(41)		27
Non-GAAP operating earnings	$	571	$	423	35	%


	Three Months Ended September 30,
($ per share)	2023 (2)		2022 (2)		Change
GAAP diluted EPS (1)	$	0.02	$	0.40	N.M.


Shareholder cooperation agreement costs	—		0.01
Restructuring and employee severance	0.07		0.08
Amortization and other acquisition-related costs	0.19		0.20
Impairments and (gain)/loss on disposal of assets, net (3)	1.57		0.44
Litigation (recoveries)/charges, net	(0.12)		0.07


Non-GAAP diluted EPS (1)	$	1.73	$	1.20	44	%


	Three Months Ended September 30,
(in millions)	2023		2022		Change
Pharmaceutical	$	51,006	$	45,828	11	%
Medical	3,760		3,778		—	%
Total segment revenue	54,766		49,606		10	%
Corporate	(3)		(3)		N.M.
Total revenue	$	54,763	$	49,603	10	%


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934






	Operating Earnings/ (Loss)		Operating Earnings Growth Rate		Earnings/ (Loss) Before Income Taxes		Provision for/(Benefit from) Income Taxes		Net Earnings1		Net Earnings1 Growth Rate		Diluted EPS1		Diluted EPS1 Growth Rate
(in millions, except per common share amounts)	Three Months Ended September 30, 2023
GAAP	$	(14)	N.M.		$	(26)	$	(32)	$	5	N.M.		$	0.02	N.M.




Restructuring and employee severance	25				25		7		18				0.07
Amortization and other acquisition-related costs	64				64		17		47				0.19
Impairments and (gain)/loss on disposal of assets, net2	537				537		146		391				1.57
Litigation (recoveries)/charges, net	(41)				(41)		(12)		(29)				(0.12)


Non-GAAP	$	571	35	%	$	560	$	126	$	433	32	%	$	1.73	44	%

	Three Months Ended September 30, 2022
GAAP	$	137	(67)	%	$	110	$	(1)	$	110	(59)	%	$	0.40	(57)	%
Shareholder cooperation agreement costs	6				6		2		4				0.01
Restructuring and employee severance	29				29		7		22				0.08
Amortization and other acquisition-related costs	71				71		18		53				0.20
Impairments and (gain)/loss on disposal of assets, net2	153				153		34		119				0.44
Litigation (recoveries)/charges, net	27				27		7		20				0.07


Non-GAAP	$	423	(20)	%	$	396	$	67	$	328	(12)	%	$	1.20	(7)	%




Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2,3)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2,3,4)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (4) (in millions)
July 2023	123	$	93.72	—	$	4,343
Aug 2023	5,314,608	94.10		5,313,596	3,843
Sept 2023	135	87.67		—	3,843
Total	5,314,866	$	94.10	5,313,596	$	3,843


(in millions)	September 30, 2023		June 30, 2023
Assets	(Unaudited)
Current assets:
Cash and equivalents	$	3,854	$	4,043
Trade receivables, net	11,265		11,344
Inventories, net	16,987		15,940
Prepaid expenses and other	2,582		2,362
Assets held for sale	—		144
Total current assets	34,688		33,833

Property and equipment, net	2,441		2,462
Goodwill and other intangibles, net	5,432		6,081

Other assets	1,149		1,041
Total assets	$	43,710	$	43,417

Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts payable	$	31,540	$	29,813
Current portion of long-term obligations and other short-term borrowings	788		792
Other accrued liabilities	2,737		3,059
Liabilities related to assets held for sale	—		42
Total current liabilities	35,065		33,706

Long-term obligations, less current portion	3,890		3,909
Deferred income taxes and other liabilities	8,245		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 September 30, 2023 and June 30,2023	2,728		2,747
Accumulated deficit	(654)		(534)
Common shares in treasury, at cost: 80 million shares and 76 million shares at September 30, 2023 and June 30, 2023, respectively	(5,400)		(4,914)
Accumulated other comprehensive loss	(165)		(151)
Total Cardinal Health, Inc. shareholders' deficit	(3,491)		(2,852)
Noncontrolling interests	1		1
Total shareholders’ deficit	(3,490)		(2,851)
Total liabilities and shareholders’ deficit	$	43,710	$	43,417


	Common Shares					Treasury Shares			Accumulated Other Comprehensive Loss		Noncontrolling Interests		Total Shareholders’ Deficit
(in millions)	Shares Issued	Amount		Accumulated Deficit		Shares	Amount
	Three Months Ended September 30, 2023
Balance at June 30, 2023	327	$	2,747	$	(534)	(76)	$	(4,914)	$	(151)	$	1	$	(2,851)
Net earnings				5							1		6
Other comprehensive loss, net of tax									(14)				(14)

Employee stock plans activity, net of shares withheld for employee taxes	—	(19)				1	19						—
Share repurchase program activity						(5)	(505)						(505)
Dividends declared				(125)									(125)
Other											(1)		(1)

Balance at September 30, 2023	327	$	2,728	$	(654)	(80)	$	(5,400)	$	(165)	$	1	$	(3,490)


	Three Months Ended September 30, 2022
Balance at June 30, 2022	327	$	2,813	$	(280)	(54)	$	(3,128)	$	(114)	$	3	$	(706)
Net earnings				110							1		111
Other comprehensive loss, net of tax									(62)				(62)
Purchase of noncontrolling interests											(2)		(2)
Employee stock plans activity, net of shares withheld for employee taxes	—	(37)				1	48						11
Share repurchase program activity		(200)				(12)	(800)						(1,000)
Dividends declared				(131)									(131)
Other											(1)		(1)

Balance at September 30, 2022	327	$	2,576	$	(301)	(65)	$	(3,880)	$	(176)	$	1	$	(1,780)


(in millions)	Employee- Related Costs		Facility Exit and Other Costs		Total
Balance at June 30, 2023	$	44	$	2	$	46
Additions	6		4		10
Payments and other adjustments	(15)		(2)		(17)
Balance at September 30, 2023	$	35	$	4	$	39


(in millions)	Pharmaceutical		Medical (1)		Total
Balance at June 30, 2023	$	2,649	$	1,960	$	4,609

Foreign currency translation adjustments and other	—		(3)		(3)
Goodwill impairment	—		(581)		(581)

Balance at September 30, 2023	$	2,649	$	1,376	$	4,025


	September 30, 2023
(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible		Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles:
Trademarks and patents	$	12	$	—	$	12	N/A
Total indefinite-life intangibles	12		—		12		N/A

Definite-life intangibles:
Customer relationships	3,164		2,307		857		9
Trademarks, trade names and patents	546		387		159		8
Developed technology and other	1,021		642		379		8
Total definite-life intangibles	4,731		3,336		1,395		9
Total other intangible assets	$	4,743	$	3,336	$	1,407	N/A


MD&A			Overview


MD&A			Overview


MD&A			Overview


MD&A			Overview


	September 30, 2023
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents	$	1,378	$	—	$	—	$	1,378
Other investments (1)	93		—		—		93


Liabilities:
Forward contracts (2)	—		(104)		—		(104)


(in millions)	Foreign Currency Translation Adjustments		Unrealized Gain/(Loss) on Derivatives, net of tax		Accumulated Other Comprehensive Loss
Balance at June 30, 2023	$	(137)	$	(14)	$	(151)
Other comprehensive loss, before reclassifications	(11)		(1)		(12)
Amounts reclassified to earnings	—		(2)		(2)
Total other comprehensive loss attributable to Cardinal Health, Inc., net of tax expense of $3 million	(11)		(3)		(14)
Balance at September 30, 2023	$	(148)	$	(17)	$	(165)


(in millions, except per share amounts)	Restricted Share Units	Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2023	2.2	$	57.37
Granted	0.8	90.40
Vested	(1.0)	60.09
Canceled and forfeited	—	—
Nonvested at September 30, 2023	2.0	$	74.06


(in millions, except per share amounts)	Performance Share Units	Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2023	1.2	$	82.17
Granted	0.5	94.66
Vested	(0.4)	62.26
Canceled and forfeited	—	—
Nonvested at September 30, 2023	1.3	$	96.38


Exhibit Number			Exhibit Description
3.1			Amended and Restated Articles of Incorporation of Cardinal Health, Inc., as amended (incorporated by reference to Exhibit 3.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)
3.2			Cardinal Health, Inc. Restated Code of Regulations (incorporated by reference to Exhibit 3.1 to Cardinal Health's Current Report on Form 8 -K filed on May 11, 2023 , File No. 1-11373
10.1			Third Amendment to the Cardinal Health, Inc. Senior Executive Severance Plan
10.2			Fifth Amended and Restated Receivables Purchase Agreement, dated September 1 , 202 3 *
10.3			Performance Guaranty , dated September 1 , 202 3 (incorporated by reference to Exhibit 10.2 to Cardinal Health's Current Report on Form 8-K filed on September 6 , 202 3 , File No. 1-11373)
31.1			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1			Statement Regarding Forward-Looking Information
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF			Inline XBRL Taxonomy Definition Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104			Cover Page Interactive Data File - formatted in Inline XBRL (included as Exhibit 101)
* Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S0-K under the Exchange Act. The company undertakes to furnish supplemental copies of any of the omitted schedules to the SEC upon request.


Item Number		Page

	Part I. Financial Information
Item 1	Financial Statements	21
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	2
Item 3	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4	Controls and Procedures	19

	Part II. Other Information
Item 1	Legal Proceedings	20
Item 1A	Risk Factors	20
Item 2	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	20
Item 3	Defaults Upon Senior Securities	N/A
Item 4	Mine Safety Disclosures	N/A
Item 5	Other Information	20
Item 6	Exhibits	38
	Signatures	40


		Cardinal Health, Inc.

Date:	November 3, 2023	/s/ JASON M. HOLLAR
		Jason M. Hollar
		Chief Executive Officer

		/s/ AARON E. ALT
		Aaron E. Alt
		Chief Financial Officer


Article I PURCHASE ARRANGEMENTS			2
Section 1.1 Purchase Facility			2
Section 1.2 Increases			3
Section 1.3 Decreases			3
Section 1.4 Payment Requirements			3
Section 1.5 Letters of Credit			4
Section 1.6 Issuance of Letters of Credit; Participants			4
Section 1.7 Requirements For Issuance of Letters of Credit			5
Section 1.8 Disbursements, Reimbursement			5
Section 1.9 Repayment of LC Participation Advance			6
Section 1.10 Documentation			6
Section 1.11 Determination to Honor Drawing Request			6
Section 1.12 Nature of LC Participations and LC Reimbursement Obligations			7
Section 1.13 Liability for Acts and Omissions			8
Section 1.14 Defaulting Financial Institutions			9
Article II PAYMENTS AND COLLECTIONS			9
Section 2.1 Payments			9
Section 2.2 Collections Prior to Amortization			10
Section 2.3 Collections Following Amortization			10
Section 2.4 Application of Collections			11
Section 2.5 Payment Rescission			11
Section 2.6 Maximum Purchaser Interests			11
Section 2.7 Clean Up Call			11
Section 2.8 Demand for Payment of Demand Loans			12
Section 2.9 Allocation between Sellers			12
Article III CONDUIT FUNDING			12
Section 3.1 CP Costs			12
Section 3.2 CP Costs Payments			12
Section 3.3 Calculation of CP Costs			12
Article IV FINANCIAL INSTITUTION FUNDING			12
Section 4.1 Financial Institution Funding			12
Section 4.2 Calculation of Yield; Yield Payments			12
Section 4.3 [Reserved]			13
Section 4.4 Financial Institution Discount Rates			13
Section 4.5 [Reserved]			13
Section 4.6 Extension of Scheduled Facility Termination Date			13
Section 4.7 Inability to Determine Rates; Change in Legality			14
Section 4.8 Benchmark Replacement Setting			15


Article V REPRESENTATIONS AND WARRANTIES			18
Section 5.1 Representations and Warranties of the Seller Parties			18
Section 5.2 Additional Representations and Warranties of Sellers			20
Section 5.3 Financial Institution Representation and Warranties			22
Article VI CONDITIONS OF PURCHASES			22
Section 6.1 Conditions Precedent to Initial Incremental Purchase			22
Section 6.2 Conditions Precedent to All Incremental Purchases and Reinvestments			22
Article VII COVENANTS			23
Section 7.1 Affirmative Covenants of the Seller Parties			23
Section 7.2 Negative Covenants of the Seller Parties			28
Article VIII ADMINISTRATION AND COLLECTION			30
Section 8.1 Designation of Servicer			30
Section 8.2 Duties of Servicer			30
Section 8.3 Collection Notices; Power-of-Attorney			31
Section 8.4 Responsibilities of Sellers			32
Section 8.5 Reports			32
Section 8.6 Servicing Fees			32
Article IX AMORTIZATION EVENTS			32
Section 9.1 Amortization Events			32
Section 9.2 Remedies			34
Article X INDEMNIFICATION			35
Section 10.1 Indemnities by the Seller Parties			35
Section 10.2 Increased Cost and Reduced Return; Accounting Based Consolidation Events			37
Section 10.3 Other Costs and Expenses			38
Section 10.4 Taxes			38
Article XI THE AGENT			40
Section 11.1 Authorization and Action			40
Section 11.2 Delegation of Duties			41
Section 11.3 Exculpatory Provisions			41
Section 11.4 Reliance by Agent			41
Section 11.5 Non-Reliance on Agent and Other Purchasers			41
Section 11.6 Reimbursement and Indemnification			41
Section 11.7 Agent in its Individual Capacity			42
Section 11.8 Successor Agent			42
Section 11.9 Erroneous Payments			42
Article XII ASSIGNMENTS; PARTICIPATIONS			44
Section 12.1 Assignments			44
Section 12.2 Participations			45
Article XIII MANAGING AGENTS			45
Section 13.1 Managing Agents			45


Article XIV MISCELLANEOUS			45
Section 14.1 Waivers and Amendments			45
Section 14.2 Notices			46
Section 14.3 Sellers Jointly and Severally Liable			47
Section 14.4 Ratable Payments			49
Section 14.5 Protection of Ownership Interests of the Purchasers			49
Section 14.6 Confidentiality			50
Section 14.7 Bankruptcy Petition			50
Section 14.8 Limitation of Liability			51
Section 14.9 CHOICE OF LAW			51
Section 14.10 CONSENT TO JURISDICTION			51
Section 14.11 WAIVER OF JURY TRIAL			51
Section 14.12 Integration; Binding Effect; Survival of Terms			51
Section 14.13 Counterparts; Severability; Section References			52
Section 14.14 Roles			52
Section 14.15 Characterization			52
Section 14.16 Confirmation and Ratification of Terms			52
Section 14.17 Excess Funds			53
Section 14.18 Patriot Act			53
Section 14.19 Acknowledgement and Consent of Bail-In of EEA Financial Institutions			53


Exhibit I			Definitions
Exhibit II			Form of Purchase Notice
Exhibit III			Legal Names; Jurisdictions of Organization; Locations of Records; Federal Employer Identification Numbers; State Organizational Identification Numbers
Exhibit IV			[Reserved]
Exhibit V			Form of Compliance Certificate
Exhibit VI			Form of Assignment Agreement
Exhibit VII			Credit and Collection Policy
Exhibit VIII			[Reserved]
Exhibit IX			Form of Reduction Notice
Exhibit X			[Reserved]
Exhibit XI			Form of Reduction Notice
Exhibit XII			Form of Letter of Credit Application
Schedule A			Commitments, Wiring Instructions, Related Financial Institutions, LC Banks, Conduits and Managing Agents
Schedule B			Documents to be Delivered to the Agent
Schedule C			Notice Addresses
Schedule D			Concentration Limit
Schedule E			Subject Conversion Condition Documents


Ratings Level			Dilution Stress Factor
Ratings Level 1			2
Ratings Level 2			2
Ratings Level 3			2.25
Ratings Level 4			2.25


Ratings Level			Loss Stress Factor
Ratings Level 1			2
Ratings Level 2			2
Ratings Level 3			2.25
Ratings Level 4			2.25


E	=	the amount of such selected Capital and/or such selected portion of the LC Adjusted Exposure, as the case may be.
NRB	=	the Net Receivables Balance.
AR	=	the Aggregate Reserves.


Qualification Requirements			Ratings Level
The senior unsecured long-term debt ratings of Cardinal are (i) at BBB- or higher (as determined by S&P) and (ii) at Baa3 or higher (as determined by Moody’s)			Ratings Level 1
Cardinal does not qualify for Ratings Level 1 and the senior unsecured long-term debt ratings of Cardinal are (i) at BB+ or higher (as determined by S&P) and (ii) at Ba1 or higher (as determined by Moody’s)			Ratings Level 2
Cardinal does not qualify for Ratings Level 1 or Ratings Level 2 and the senior unsecured long-term debt ratings of Cardinal are (i) at BB or higher (as determined by S&P) and (ii) at Ba2 or higher (as determined by Moody’s)			Ratings Level 3
Cardinal does not qualify for Ratings Level 1, Ratings Level 2 or Ratings Level 3 for any reason			Ratings Level 4


Aggregate Reduction			Required Notice Period

≤ $250,000,000			one Business Day
> $250,000,000			two Business Days


Purchase Price:			$
Portion of the Purchase Price Payable by the BNS Conduit’s Purchaser Group:[1]			$
Portion of Purchase Price Payable by the MUFG Conduit’s Purchaser Group:[2]			$
Portion of Purchase Price Payable by PNC:[3]			$
Portion of Purchase Price Payable by WF:[4]			$


Portion of Purchase Price Payable by BofA: [5			$
Date of Purchase:
Requested Discount Rate: [6			Daily One Month Term SOFR
Requested Tranche Period: [7			[______________________________]


Seller

Legal Name:			Cardinal Health Funding, LLC
Jurisdiction of Organization			Nevada
Locations of Records:			7000 Cardinal Place Dublin, Ohio 43017
Federal Employer’s Identification Number:			##-#######
State Organizational Identification Number:			#######-####
Additional Seller Legal Name: Jurisdiction of Organization: Location of Records: Federal Employer’s Identification Number: State Organizational Identification Number:			Cardinal Health 23 Funding, LLC Nevada 7000 Cardinal Place Dublin, Ohio 43017 ##-####### ############-#

Servicer

Legal Name:			Griffin Capital, LLC
Jurisdiction of Organization			Nevada
Locations of Records:			7000 Cardinal Place Dublin, Ohio 43017
Federal Employer’s Identification Number:			##-#######
State Organizational Identification Number:			#######-####


Additional Servicer Legal Name: Jurisdiction of Organization: Location of Records: Federal Employer’s Identification Number: State Organizational Identification Number:			Cardinal Health 23, LLC Nevada 7000 Cardinal Place Dublin, Ohio 43017 ##-####### ############-#