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Press Release: Cardinal Health Reports -4-

· 02/05/2021 06:55
federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss is being carried back and applied to adjust our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The total net benefit was $420 million; however, for purposes of reconciling Non-GAAP financial measures, we allocated $394 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $26 million is included in non-GAAP measures. As the fiscal year 2020 federal return is finalized, both the tax benefit and the relative allocation may be adjusted. The sum of the components and certain computations may reflect rounding adjustments. We generally apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. Schedule 5 ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation(1) Operating Earnings/ Net Gross Earnings/ (Loss) Provision for/ Earnings/ Diluted Margin SG&A(2) Operating (Loss) Before (Benefit from) Net (Loss)(3) Effective EPS(3) Gross Growth Growth Earnings/ Growth Income Income Earnings/ Growth Tax Diluted Growth (in millions, except per common share amounts) Margin Rate SG&A(2) Rate (Loss) Rate Taxes Taxes (Loss)(3) Rate Rate EPS(3,4) Rate ---------------------- Year-to-Date 2021 ---------------------- GAAP $3,491 3 % $ 2,284 1 % $ (163) N.M. $ (236) $ (613) $ 376 N.M. 259.7 % $1.27 N.M. Surgical gown recall costs 1 3 (2) (2) (1) (1) -- State opioid assessment related to prior fiscal years -- (41) 41 41 10 31 0.10 Restructuring and employee severance -- -- 57 57 14 43 0.15 Amortization and other acquisition-related costs -- -- 234 234 58 176 0.60 Impairments and (gain)/loss on disposal of assets, net -- -- 9 9 16 (7) (0.02) Litigation (recoveries)/charges, net(5) -- -- 1,070 1,070 728 342 1.16 Loss on extinguishment of debt -- -- -- 1 -- 1 -- Non-GAAP $3,492 1 % $ 2,246 1 % $ 1,246 2 % $ 1,174 $ 212 $ 960 16 % 18.1 % $3.26 16 % Year-to-Date 2020 GAAP $3,393 -- % $ 2,270 2 % $ (4,930) N.M. $ (5,065) $ (364) $ (4,702) N.M. 7.2 % $(15.99) N.M. Surgical gown recall costs 56 (40) 96 96 25 71 0.24 State opioid assessment related to prior fiscal years -- (4) 4 4 1 3 0.01 Restructuring and employee severance -- -- 86 86 21 65 0.22 Amortization and other acquisition-related costs -- -- 265 265 67 198 0.67 Impairments and (gain)/loss on disposal of assets, net -- -- 8 8 2 6 0.02 Litigation (recoveries)/charges, net(5) -- -- 5,694 5,694 501 5,193 17.66 Loss on extinguishment of debt -- -- -- 4 1 3 0.01 Transitional tax benefit, net -- -- -- -- 11 (11) (0.04) Non-GAAP $3,449 2 % $ 2,226 -- % $ 1,223 4 % $ 1,092 $ 265 $ 826 6 % 24.3 % $2.80 9 % (1) For more information on these measures, refer to the Use of Non-GAAP Measures and Definitions schedules. (2) Distribution, selling, general and administrative expenses. (3) Attributable to Cardinal Health, Inc. (4) For the six months ended December 31, 2019, GAAP diluted loss per share attributable to Cardinal Health, Inc. ("GAAP diluted EPS") and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 294 million common shares, which excludes potentially dilutive securities from the denominator due to their anti-dilutive effects resulting from our GAAP net loss for the period. For the six months ended December 31, 2019, non-GAAP diluted EPS is calculated using a weighted average of 295 million common shares, which includes potentially dilutive shares. (5) Litigation (recoveries)/charges, net includes pre-tax charges of $1.02 billion and $5.63 billion recorded in the first quarter of fiscal 2021 and 2020, respectively, related to the opioid litigation. For fiscal 2021, the amount of tax expense increased by approximately $150 million during the three months ended December 31, 2020 while the amount of tax benefit increased by approximately $300 million during the six months ended December 31, 2020 compared to the tax impacts that would have been recognized without the opioid litigation charge. The treatment of the tax impacts of opioid litigation charges is expected to significantly increase the provision for income taxes during the remainder of the fiscal year. The net tax benefits associated with the opioid litigation charges are $35 million and $488 million for fiscal 2021 and 2020, respectively. Litigation(recoveries)/charges, net also includes a tax benefit recorded during the three months ended December 31, 2020 related to a net operating loss carryback. Our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to the opioid litigation charges previously accrued in our consolidated financial statements. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, is currently deductible on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss is being carried back and applied to adjust our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security ("CARES") Act. The total net benefit was $420 million; however, for purposes of reconciling Non-GAAP financial measures, we allocated $394 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $26 million is included in non-GAAP measures. As the fiscal year 2020 federal return is finalized, both the tax benefit and the relative allocation may be adjusted. The sum of the components and certain computations may reflect rounding adjustments. We generally apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

Cardinal Health, Inc. and Subsidiaries

Use of Non-GAAP Measures

This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP").

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February 05, 2021 06:55 ET (11:55 GMT)