Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Q3 FY2017 Earnings Presentation
29 slides from Cardinal Health's earnings presentation, May 1, 2017
Slide 1: Q3 FY2017 Earnings Investor/Analyst call
Q3 FY2017 Cardinal Health, Inc. Earnings Investor/Analyst call May 1, 2017 © Copyright 2017, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 2: Forward-looking statements and GAAP reconciliation
Forward-looking statements and GAAP reconciliation Cautions Concerning Forward-Looking Statements This presentation contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be ident
Slide 3: Q3 FY2017 results
Q3 FY2017 results © Copyright 2017, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 4: Q3 FY17 financial summary
Q3 FY17 financial summary GAAP Basis ($M) Non-GAAP Basis ($M) Q3 FY17 Q3 FY16 Q3 FY17 Q3 FY16 Revenue $31,821 $30,662 N/A N/A % change 4% increase YoY 21% increase YoY Gross Margin $1,728 $1,689 $1,719 $1,702 % change 2% increase YoY 16% increase YoY 1% increase YoY 17% increase YoY Ratio to revenue
Slide 5: Q3 FY17 Pharmaceutical segment business analysis
Q3 FY17 Pharmaceutical segment business analysis Q3 FY17 ($M) Q3 FY16 ($M) YoY Change Revenue $28,406 $27,527 3% Segment Profit $611 $660 (7)% Segment 2.15% 2.40% -25 bps Profit Margin Highlights: • Revenue for the Pharmaceutical segment increased 3 percent to $28.4 billion due to performance from t
Slide 6: Q3 FY17 Medical segment business analysis
Q3 FY17 Medical segment business analysis Q3 FY17 ($M) Q3 FY16 ($M) YoY Change Revenue $3,418 $3,138 9% Segment Profit $148 $128 16% Segment 4.34% 4.08% +26 bps Profit Margin Highlights: • Revenue for the Medical segment increased 9 percent to $3.4 billion driven by contributions from new and existi
Slide 7: Q3 FY17 GAAP to non-GAAP adjustments
Q3 FY17 GAAP to non-GAAP adjustments1 Q3 FY 2017 Q3 FY 2016 Gross Operating Net Earnings 2 2 Gross Operating Net Earnings 2 Diluted EPS Diluted EPS 2 Margin ($M) Earnings ($M) ($M) Margin ($M) Earnings ($M) ($M) GAAP $1,728 $605 $381 $1.20 $1,689 $656 $386 $1.17 LIFO charges/(credits) (9) (9) (5) (0
Slide 8: FY2017 Outlook
FY2017 Outlook The company presents its outlook for fiscal 2017 non-GAAP EPS and non-GAAP effective tax rate on the following pages. As previously disclosed, the company does not provide a GAAP EPS or GAAP effective tax rate outlook because it is unable to reliably forecast many of the items that th
Slide 9: FY17 financial expectations
FY17 financial expectations FY2017 Outlook FY2016 Actual Mid-to-high single digit Revenue percentage growth vs. PY $121.5B Non-GAAP $5.35 to $5.50 $5.24 Diluted EPS Red font indicates a change since previous guidance. 9 © Copyright 2017, Cardinal Health, Inc. or one of its subsidiaries. All rights r
Slide 10: FY17 corporate assumptions
FY17 corporate assumptions FY2017 Outlook FY2016 Actual Non-GAAP effective tax rate 35% - 37%1 36.0%3 Diluted weighted average Shares outstanding 320M - 321M 330M Interest and other, net $190M - $205M $183M Capital expenditures $400M - $450M $465M Acquisition-related intangible amortization ~$389M o
Slide 11: Pharmaceutical segment FY17(E)
Pharmaceutical segment FY17(E) • Mid-to-high single digit percentage increase in revenue versus prior year • Full-year segment profit down low-double digits versus prior year Key assumptions • Loss of the Safeway contract, which expired on March 31, 2016 • Generic drug price assumption of low-double
Slide 12: Medical segment FY17(E)
Medical segment FY17(E) • High-single digit percentage increase in revenue vs. prior year • Double-digit segment profit growth vs. prior year Key assumptions • Cordis accretive by >$0.15 vs. prior year; net of transaction-related interest expense of $0.07-$0.08; increasingly accretive thereafter • A
Slide 13: A balanced approach with capital
A balanced approach with capital Capital Deployment Capital Expenditures Acquisitions1 Dividends Share Repurchases FY12 - FY16 $1.5B $7.0B $2.0B $3.3B YTD FY17 $293M $113M $435M $600M Invested Returned $406M $1.0B for sustainable growth2 to our shareholders2 1Acquisitions are net of divestitures. 2N
Slide 14: Appendix: Q3 FY2017 trailing five quarters, GAAP to Non-GAAP reconciliation
Appendix Q3 FY2017 trailing five quarters, GAAP to Non-GAAP reconciliation statements and supplemental financial information © Copyright 2017, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved
Slide 15: Q3 FY2017 segment analysis
Q3 FY2017 segment analysis Pharmaceutical segment Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Revenue 27,527 28,177 28,762 29,743 28,406 ($M) Segment Profit 660 542 534 537 611 ($M) Medical segment Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Revenue 3,138 3,210 3,279 3,410 3,418 ($M) Segment Profit 128 122
Slide 16: Year-to-date financial summary
Year-to-date financial summary1 GAAP Basis ($M) Non-GAAP Basis ($M) YTD FY17 YTD FY16 YTD FY17 YTD FY16 Revenue $97,010 $90,162 N/A N/A % change 8% increase YoY 20% increase YoY Gross Margin $4,921 $4,877 $4,921 $4,929 % change 1% increase YoY 15% increase YoY 0% decrease YoY 16% increase YoY Ratio
Slide 17: GAAP / Non-GAAP Reconciliation: Third Quarter
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation 1 Gross Margin Operating Provision for Net Diluted Gross Grow th Operating Earnings Earnings Before Incom e Net Earnings 2 Diluted EPS2 Margin Rate Earnings Grow th Rate Incom e Taxes Taxes Earnings 2 Grow th Rate EPS2,3,4 Grow th
Slide 18: GAAP / Non-GAAP Reconciliation: Year-to-Date
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation 1 Gross Margin Operating Provision for Net Diluted Gross Grow th Operating Earnings Earnings Before Incom e Net Earnings 2 Diluted EPS2 Margin Rate Earnings Grow th Rate Incom e Taxes Taxes Earnings 2 Grow th Rate EPS2 Grow th Rat
Slide 19: GAAP / Non-GAAP Reconciliation: Fiscal Year 2016
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Net Earnings Net Earnings from Operating Provision for from Continuing Diluted Operating Earnings Earnings 1 Before Incom e Continuing Operations 2 Diluted EPS1,2 2 1,2 Earnings Grow th Rate Incom e Taxes Taxes Operations Grow th
Slide 20: Total Company Business Analysis
Cardinal Health, Inc. and Subsidiaries Total Com pany Business Analysis Non-GAAP Third Quarter Third Quarter (in millions) 2017 2016 2017 2016 Revenue Amount $ 31,821 $ 30,662 Grow th rate 4% 21 % Gross m argin Amount $ 1,728 $ 1,689 $ 1,719 $ 1,702 Grow th rate 2% 16 % 1% 17 % Operating earnings Am
Slide 21: Segment Business Analysis Third Quarter
Cardinal Health, Inc. and Subsidiaries Segm ent Business Analysis Third Quarter Third Quarter (in millions) 2017 2016 (in millions) 2017 2016 Pharm aceutical Medical Revenue Revenue Amount $ 28,406 $ 27,527 Amount $ 3,418 $ 3,138 Grow th rate 3% 22 % Grow th rate 9% 13 % Segm ent profit Segm ent pro
Slide 22: Segment Business Analysis Year-to-Date
Cardinal Health, Inc. and Subsidiaries Segm ent Business Analysis Year-to-Date Year-to-Date (in millions) 2017 2016 (in millions) 2017 2016 Pharm aceutical Medical Revenue Revenue Amount $ 86,911 $ 80,954 Amount $ 10,107 $ 9,220 Grow th rate 7% 22 % Grow th rate 10 % 8% Segm ent profit Segm ent prof
Slide 23: GAAP / Non-GAAP Reconciliation Third Quarter
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Third Quarter (in millions) 2017 2016 GAAP return on equity 23.6 % 23.0 % Non-GAAP return on equity Net earnings attributable to Cardinal Health, Inc. $ 381 $ 386 LIFO charges/(credits), net of tax (5) 8 Restructuring and employee
Slide 24: GAAP / Non-GAAP Reconciliation Year-to-Date
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Year-to-Date (in millions) 2017 2016 GAAP return on equity 20.8 % 22.3 % Non-GAAP return on equity Net earnings from continuing operations attributable to Cardinal Health, Inc. $ 1,014 $ 1,095 LIFO charges/(credits), net of tax -
Slide 25: GAAP / Non-GAAP Reconciliation: Effective Tax Rate
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Third Quarter Year-to-Date (in millions) 2017 2016 2017 2016 GAAP effective tax rate 32.3 % 36.9 % 34.4 % 35.5 % Non-GAAP effective tax rate Earnings before income taxes $ 564 $ 612 $ 1,549 $ 1,700 LIFO charges/(credits) (9) 12 -
Slide 26: GAAP / Non-GAAP Reconciliation Fiscal Year
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fiscal Year (in millions) 2016 GAAP effective tax rate 37.1 % Non-GAAP effective tax rate Earnings before income taxes $ 2,276 Restructuring and employee severance 25 Amortization and other acquisition-related costs 459 Impairment
Slide 27: Forward Looking non-GAAP Measures
Cardinal Health, Inc. and Subsidiaries Forward Looking non-GAAP Measures In this presentation, the Company presents its outlook for fiscal 2017 non-GAAP EPS and non-GAAP Effective Tax Rate (ETR). The Company does not provide EPS or ETR outlook, which are the most directly comparable GAAP measures to
Slide 28: Definitions
Cardinal Health, Inc. and Subsidiaries Definitions Debt: long-term obligations plus short-term borrowings. Debt to Total Capital: debt divided by (debt plus total Cardinal Health, Inc. shareholders’ equity). Interest and Other, net: other (income)/expense, net plus interest expense, net. Net Debt: a
Slide 29: Definitions
Cardinal Health, Inc. and Subsidiaries Definitions Non-GAAP Net Earnings attributable to Cardinal Health, Inc. or "Non-GAAP Net Earnings": net earnings attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) restructuring and employee severance, (3) amortization and other acq