cah-20240930


Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


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

For the quarterly period ended September 30, 2024


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

For the transition period from ________ to ________

Commission File Number: 1-11373

Cardinal Health, Inc.

(Exact name of registrant as specified in its charter)

Ohio

31-0958666

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification No.)

7000 Cardinal Place

Dublin

Ohio

43017

(Address of principal executive offices)

(Zip Code)

(614) 757-5000

(Registrant’s telephone number, including area code)


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

The number of the registrant’s common shares, without par value, outstanding as of October 25, 2024, was the following: 242,010,503.


Cardinal Health Q1 Fiscal 2025 Form 10-Q

Table of Contents


						Page
			Management's Discussion and Analysis of Financial Condition and Results of Operations			2
			Explanation and Reconciliation of Non-GAAP Financial Measures			15
			Quantitative and Qualitative Disclosures about Market Risk			18
			Controls and Procedures			18
			Legal Proceedings			19
			Risk Factors			19
			Unregistered Sales of Equity Securities and Use of Proceeds			19
			Financial Statements			21
			Exhibits			38
			Form 10-Q Cross Reference Index			39
			Signatures			40

About Cardinal Health

Cardinal Health, Inc., an Ohio corporation formed in 1979, is a global healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. We connect patients, providers, payers, pharmacists, and manufacturers for integrated care coordination.

We report our financial results in two reportable segments: Pharmaceutical and Specialty Solutions ("Pharma") segment and Global Medical Products and Distribution ("GMPD") segment. All remaining operating segments that are not significant enough to require separate reportable segment disclosures are included in Other, which is comprised of Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight® Logistics. As used in this report, “we,” “our,” “us,” and similar pronouns refer to Cardinal Health, Inc. and its majority-owned and consolidated subsidiaries, unless the context requires otherwise. Our fiscal year ends on June 30. References to fiscal 2025 and fiscal 2024 and to FY25 and FY24 are to the fiscal years ending or ended June 30, 2025 and June 30, 2024, respectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (this "Form 10-Q") (including information incorporated by reference) includes "forward-looking statements" addressing expectations, prospects, estimates, and other matters that are dependent upon future events or developments. Many forward-looking statements appear in Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), but there are others in this Form 10-Q, which may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook, and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those made, projected, or implied. The most significant of these risks and uncertainties are described in this Form 10-Q, including Exhibit 99.1, and in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (“2024 Form 10-K”). Forward-looking statements in this Form 10-Q speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.

Non-GAAP Financial Measures

In the "Overview of Consolidated Results" section of MD&A, we use financial measures that are derived from our consolidated financial data but are not presented in our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These measures are considered "non-GAAP financial measures" under the Securities and Exchange Commission ("SEC") rules. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in the “Explanation and Reconciliation of Non-GAAP Financial Measures” section following MD&A in this Form 10-Q.



1			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Overview

Management's Discussion and Analysis of Financial Condition and Results of Operations

The discussion and analysis presented below is concerned with material changes in financial condition and results of operations, including amounts and certainty of cash flows from operations and from outside sources, between the periods specified in our condensed consolidated balance sheets at September 30, 2024 and June 30, 2024, and in our condensed consolidated statements of earnings/(loss) and our condensed consolidated statements of cash flows for the three months ended September 30, 2024 and 2023. All comparisons presented are with respect to the prior-year period, unless stated otherwise. Our previously reported segment results have been recast to conform to our new reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. All of the revisions are reflected throughout this Form 10-Q. See Note 1 of the "Notes to Condensed Consolidated Financial Statements" for additional information. This discussion and analysis should be read in conjunction with the MD&A included in the 2024 Form 10-K.



2			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Overview

Overview of Consolidated Results

Revenue

Revenue for the three months ended September 30, 2024 decreased 4 percent to $52.3 billion due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing customers.

GAAP and Non-GAAP Operating Earnings/(Loss)


	Three Months Ended September 30,
(in millions)	2024		2023		Change
GAAP operating earnings/(loss)	$	568	$	(32)	N.M.




Restructuring and employee severance	24		25
Amortization and other acquisition-related costs	74		64
Impairments and (gain)/loss on disposal of assets, net	(1)		541
Litigation (recoveries)/charges, net	(40)		(41)
Non-GAAP operating earnings	$	625	$	557	12	%

The sum of the components and certain computations may reflect rounding adjustments.

We had GAAP operating earnings of $568 million during the three months ended September 30, 2024 and a GAAP operating loss of $32 million during the three months ended September 30, 2023, which included the impact of pre-tax goodwill impairment charges related to the GMPD segment of $585 million.

Non-GAAP operating earnings increased 12 percent to $625 million from the prior-year quarter primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products, which includes the favorable impact from the earlier seasonal launch of the COVID-19 vaccine distribution, and the performance of our generics program.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			3


MD&A			Overview

GAAP and Non-GAAP Diluted EPS


	Three Months Ended September 30,
($ per share)	2024 (2)		2023 (2),(3)		Change
GAAP diluted EPS (1)	$	1.70	$	(0.05)	N.M.




Restructuring and employee severance	0.07		0.07
Amortization and other acquisition-related costs	0.22		0.19
Impairments and (gain)/loss on disposal of assets, net (4)	—		1.63
Litigation (recoveries)/charges, net	(0.11)		(0.12)



Non-GAAP diluted EPS (1)	$	1.88	$	1.72	9	%

The sum of the components and certain computations may reflect rounding adjustments.

(1) Diluted earnings per share attributable to Cardinal Health, Inc. ("diluted EPS").

(2) The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."

(3) For the three months ended September 30, 2023, GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 249 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 three months ended September 30, 2023, non-GAAP diluted EPS is calculated using a weighted average of 250 million common shares, which includes potentially dilutive shares.

(4) For the three months ended September 30, 2023, impairments and (gain)/loss on disposals of assets, net includes a pre-tax goodwill impairment charge of $585 million, related to the GMPD segment. For fiscal 2024, the net tax benefit related to this charge was $45 million and was included in the annual effective tax rate. As a result, the tax benefit for the three months ended September 30, 2023 increased approximately by an incremental $102 million, and increased the provision for income taxes during the remainder of fiscal 2024.

During the three months ended September 30, 2024, GAAP diluted EPS increased from the prior-year quarter primarily due to the factors impacting GAAP operating earnings/(loss) discussed above. The goodwill impairment charge related to the GMPD segment had a $(1.76) per share after-tax impact on GAAP diluted EPS during the three months ended September 30, 2023.

Non-GAAP diluted EPS increased 9 percent to $1.88 from the prior-year quarter primarily due to the factors impacting non-GAAP operating earnings discussed above.

Cash and Equivalents

Our cash and equivalents balance was $2.9 billion at September 30, 2024 compared to $5.1 billion at June 30, 2024. During the three months ended September 30, 2024, net cash used in operating activities was $1.6 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities for the quarter also includes the impact of our annual payment of $366 million related to the agreement to settle the vast majority of the opioid lawsuits filed by states and local governmental entities (the "National Opioid Settlement Agreement"). In addition, we deployed cash of $375 million for share repurchases and $90 million for capital expenditures.



4			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Overview

Significant Developments in Fiscal 2025 and Trends

Pharmaceutical and Specialty Solutions Segment

OptumRx Contracts

On April 22, 2024, we announced that our pharmaceutical distribution contracts with OptumRx would expire at the end of June 2024. Sales to OptumRx generated 17 percent of our consolidated revenue in fiscal 2024; however, due to the class of trade, sales to OptumRx generated a meaningfully lower operating margin than the overall Pharma segment. The expiration of the OptumRx contracts and unwinding of the negative net working capital associated with the contracts adversely impacted our results of operations, including segment profit, financial condition, and cash flows during the three months ended September 30, 2024. While we anticipate offsetting the impact through a combination of onboarding new customers, growth from existing customers, and cost savings, we expect some adverse impacts to continue throughout the remainder of fiscal 2025.

Acquisitions

On September 20, 2024, we announced that we entered into a definitive agreement to acquire Integrated Oncology Network (“ION”), a physician-led independent community oncology network, for a purchase price of $1.1 billion in cash, subject to certain adjustments. ION includes more than 50 practice sites in 10 states representing more than 100 providers. ION supports a complete continuum of care across its member sites including medical oncology, radiation oncology, urology diagnostic testing, and other ancillary services. The acquisition will build on our Navista oncology practice alliance and is expected to expand our holistic suite of clinical and practice management solutions designed to support independent community oncology practices. This transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals. We plan to fund the acquisition with available cash and existing borrowing arrangements.

On March 18, 2024, we completed the acquisition of Specialty Networks for a purchase price of $1.2 billion in cash. The acquisition further expands our offerings in key therapeutic areas and accelerates our upstream data and research opportunities with biopharma manufacturers.

Branded Pharmaceuticals

During fiscal 2024, we saw increased demand for GLP-1 pharmaceuticals, and our sales increased significantly, despite periodic supply shortages. These increased sales positively impacted our Pharma segment and consolidated revenue for the fiscal 2024; however, GLP-1 sales did not meaningfully contribute to segment profit. Future demand for these medications is unpredictable and our ability to meet demand may be impacted by additional supply constraints.

During fiscal 2024, we began distributing commercially available COVID-19 vaccines following the U.S. Food and Drug Administration (“FDA”) approval. Distribution of these vaccines had a greater than anticipated benefit to our Pharma segment profit in fiscal year 2024, especially in the second quarter. We expect COVID-19 vaccine distribution to continue to favorably impact our Pharma segment profit in fiscal 2025, but to a lesser extent than in fiscal 2024. In August 2024, the FDA approved the 2024-2025 commercial COVID-19 vaccines, and our Pharma segment profit was positively impacted by distribution of these vaccines in the first quarter of fiscal 2025. Due to the earlier seasonal launch of the COVID-19 vaccine distribution, we expect a lower contribution from the vaccine distribution in the second quarter of fiscal 2025 compared to the prior-year quarter.

Generics Program

The performance of our Pharma segment generics program positively impacted the year-over-year comparison of Pharma segment profit during the three months ended September 30, 2024. The Pharma segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes, the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"), and generic pharmaceutical contract manufacturing and sourcing costs.

The frequency, timing, magnitude, and profit impact of generic pharmaceutical customer volumes, pricing changes, customer contract renewals, generic pharmaceutical manufacturer pricing changes, and generic pharmaceutical contract manufacturing and sourcing costs all impact Pharma segment profit and are subject to risks and uncertainties. These risks and uncertainties may impact Pharma segment profit and consolidated operating earnings during the remainder of fiscal 2025 and beyond.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			5


MD&A			Overview

Global Medical Products and Distribution Segment

Volumes

We experienced Cardinal Health brand medical products sales growth during fiscal 2024 and expect further growth in fiscal 2025 and beyond. The timing, magnitude, and profit impact of this anticipated sales growth is subject to risks and uncertainties, which may impact GMPD segment profit.



6			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Results of Operations

Results of Operations

Revenue


	Three Months Ended September 30,
(in millions)	2024		2023		Change
Pharmaceutical and Specialty Solutions	$	47,990	$	50,588	(5)	%
Global Medical Products and Distribution	3,123		3,032		3	%
Other	1,186		1,051		13	%
Total segment revenue	52,299		54,671		(4)	%
Corporate	(22)		(21)		N.M.
Total revenue	$	52,277	$	54,650	(4)	%

Pharmaceutical and Specialty Solutions

Pharma segment revenue decreased 5 percent to $48.0 billion from the prior-year quarter primarily due to the expiration of the OptumRx contracts, partially offset by branded and specialty pharmaceutical sales growth from existing customers.

Global Medical Products and Distribution

GMPD segment revenue increased 3 percent to $3.1 billion from the prior-year quarter primarily due to higher volumes from existing customers.

Other

Other revenue increased 13 percent to $1.2 billion from the prior-year quarter due to growth across the at-Home Solutions, Nuclear and Precision Health Solutions, and OptiFreight® Logistics operating segments.

Cost of Products Sold

Cost of products sold decreased 5 percent to $50.4 billion from the prior-year quarter due to the factors affecting the changes in revenue and gross margin.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			7


MD&A			Results of Operations

Gross Margin


	Three Months Ended September 30,
(in millions)	2024		2023		Change
Gross margin	$	1,902	$	1,743	9	%

Gross margin increased 9 percent to $1.9 billion from the prior-year quarter primarily due to the increased contribution from branded pharmaceutical and specialty pharmaceutical products and the positive performance of our generics program in the Pharma segment.

Gross margin rate grew 45 basis points to 3.64 percent from the prior-year quarter primarily due to the increased contribution from branded pharmaceutical and specialty pharmaceutical products and favorable changes in the overall product mix for the Pharma segment, largely driven by the expiration of the OptumRx contracts.

Distribution, Selling, General, and Administrative ("SG&A") Expenses


	Three Months Ended September 30,
(in millions)	2024		2023		Change
SG&A expenses	$	1,277	$	1,186	8	%

SG&A expenses increased 8 percent to $1.3 billion from the prior-year quarter primarily due to higher health and welfare costs and costs to support sales growth for existing customers.



8			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Results of Operations

Segment Profit

We evaluate segment performance based on segment profit, among other measures. See Note 13 of the "Notes to Condensed Consolidated Financial Statements" for additional information on segment profit.


	Three Months Ended September 30,
(in millions)	2024		2023		Change
Pharmaceutical and Specialty Solutions	$	530	$	456	16	%
Global Medical Products and Distribution	8		12		N.M.
Other	104		96		8	%
Total segment profit	642		564		14	%
Corporate	(74)		(596)		N.M.
Total consolidated operating earnings/(loss)	$	568	$	(32)	N.M.

Pharmaceutical and Specialty Solutions

Pharma segment profit increased 16 percent to $530 million from the prior-year quarter primarily due to increased contribution from branded pharmaceutical and specialty pharmaceutical products, which includes the favorable impact from the earlier seasonal launch of the COVID-19 vaccine distribution, and the performance of our generics program. This was partially offset by the expiration of the OptumRx contracts.

Global Medical Products and Distribution

GMPD segment profit decreased to $8 million from the prior-year quarter due to higher manufacturing and health and welfare costs, largely offset by an improvement in net inflationary impacts, which includes the effects of mitigation actions, and growth from existing customers.

Other

Other profit increased 8 percent to $104 million from the prior-year quarter due to the performance of OptiFreight® Logistics.

Corporate

The changes in Corporate during the three months ended September 30, 2024 are due to the factors discussed in the "Other Components of Consolidated Operating Earnings/(Loss)" section that follows.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			9


MD&A			Results of Operations

Other Components of Consolidated Operating Earnings/(Loss)

In addition to revenue, gross margin, and SG&A expenses discussed previously, consolidated operating earnings/(loss) were impacted by the following:


	Three Months Ended September 30,
(in millions)	2024		2023
Restructuring and employee severance	$	24	$	25
Amortization and other acquisition-related costs	74		64
Impairments and (gain)/loss on disposal of assets, net	(1)		541
Litigation (recoveries)/charges, net	(40)		(41)

Restructuring and Employee Severance

During the three months ended September 30, 2024, restructuring and employee severance costs were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations. During the three months ended September 30, 2023, restructuring and employee severance costs were primarily related to certain projects resulting from reviews of our strategy, portfolio, capital-allocation framework, and operations and the implementation of certain enterprise-wide cost-savings measures.

Amortization and Other Acquisition-Related Costs

Amortization of acquisition-related intangible assets was $68 million and $64 million for the three months ended September 30, 2024 and 2023, respectively.

Impairments and (Gain)/Loss on Disposal of Assets, Net

During the three months ended September 30, 2023, we recognized a $585 million pre-tax non-cash goodwill impairment charge related to the GMPD segment and recognized a pre-tax gain of $53 million related to the divestiture of the Outcomes™ business.

Litigation (Recoveries)/Charges, Net

During the three months ended September 30, 2024 and 2023, we recognized income for net recoveries in class action antitrust lawsuits in which we were a class member or plaintiff of $43 million and $41 million, respectively.

Earnings Before Income Taxes

In addition to the items discussed above, earnings before income taxes was impacted by the following:


	Three Months Ended September 30,
(in millions)	2024		2023		Change
Other (income)/expense, net	$	(5)	$	1	N.M.
Interest expense, net	32		11		N.M.

Interest Expense, Net

Interest expense, net, increased to $32 million from the prior-year quarter primarily due to decreased interest income from cash and equivalents and financial instruments.



10			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Results of Operations

Provision for/(Benefit from) Income Taxes

During the three months ended September 30, 2024 and 2023, the effective tax rate was 23.0 percent and 75.1 percent, respectively. The decrease in the effective tax rate for the three months ended September 30, 2024 compared to the prior-year quarter was primarily due to the tax effect of the prior-year goodwill impairment charge. See Note 8 of the “Notes to Condensed Consolidated Financial Statements” for additional information.

Tax Effects of Goodwill Impairment Charge

During the three months ended September 30, 2023, we recognized a $585 million pre-tax charge for goodwill impairment related to the GMPD segment. The net tax benefit related to this charge is $45 million for fiscal 2024.

Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings before income taxes for the year-to-date period to compute our impact from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur.

The tax effect of the goodwill impairment charge during the three months ended September 30, 2023 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairment in prior fiscal years. The impact of the non-deductible goodwill increased the estimated annual effective tax rate for fiscal 2024. Applying the higher tax rate to pre-tax loss for the three months ended September 30, 2023 resulted in recognizing an incremental interim tax benefit of approximately $102 million, which impacted the provision for/(benefit from) income taxes in the condensed consolidated statements of earnings/(loss) during the three months ended September 30, 2023 and prepaid expenses and other assets in the condensed consolidated balance sheets at September 30, 2023. This interim tax benefit reversed in the remaining quarters of fiscal 2024.

Tax Effects of Pillar Two Initiatives

In December 2021, the Organization for Economic Cooperation and Development ("OECD") published guidance on the establishment of the Pillar Two initiative for a global minimum tax rate of 15 percent. These rules are generally effective for fiscal 2025. We are closely monitoring developments, but we do not currently expect these rules to have a material impact on our effective tax rate.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			11


MD&A			Liquidity and Capital Resources

Liquidity and Capital Resources

We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs as described below. If we decide to engage in one or more acquisitions, depending on the size and timing of such transactions, we may need to access capital markets for additional financing.

Cash and Equivalents

Our cash and equivalents balance was $2.9 billion at September 30, 2024 compared to $5.1 billion at June 30, 2024. During the three months ended September 30, 2024, net cash used in operating activities was $1.6 billion, which was primarily impacted by the unwinding of the negative net working capital associated with the OptumRx contracts and the normal timing of payments to vendors. Cash used in operating activities for the quarter also includes the impact of our annual payment of $366 million related to the National Opioid Settlement Agreement. In addition, we deployed cash of $375 million for share repurchases and $90 million for capital expenditures.

At September 30, 2024, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.

Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, payments to vendors, and tax payments in the regular course of business, as well as fluctuating working capital needs driven by customer and product mix.

The cash and equivalents balance at September 30, 2024 included $471 million of cash held by subsidiaries outside of the United States.

Other Financing Arrangements and Financial Instruments

Credit Facilities and Commercial Paper

In addition to cash and equivalents and operating cash flow, other sources of liquidity at September 30, 2024 include a $2.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility, which expires in February 2028. We also have a $1.0 billion committed receivables sales facility through September 2025. At September 30, 2024, we had no amounts outstanding under our commercial paper program, revolving credit facility or our committed receivables sales facility.

In October 2024, we entered into a new 364-Day Revolving Credit Facility, under which we have access to $1.0 billion of committed liquidity through October 2025. We also increased our commercial paper program from $2.0 billion to $3.0 billion.

Our revolving credit and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of September 30, 2024, we were in compliance with this financial covenant.

Long-Term Debt

We had total long-term obligations, including the current portion and other short-term borrowings, of $5.2 billion and $5.1 billion at September 30, 2024 and June 30, 2024, respectively. We plan to repay our outstanding 3.5% Notes due 2024 at maturity in November 2024 with $400 million of proceeds from the debt issuance in fiscal 2024, $200 million of which were invested in short-term time deposits and classified as prepaid expenses and other in our condensed consolidated balance sheets.



12			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


MD&A			Liquidity and Capital Resources

Capital Deployment

Opioid Litigation Settlements

We had $5.0 billion accrued at September 30, 2024 related to certain opioid litigation, as further described within Note 7 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the remaining payment amounts to occur through 2038. During the three months ended September 30, 2024, we made our fourth annual payment of $366 million under the National Opioid Settlement Agreement. The amounts of future annual payments may differ from the payments that we have already made.

Capital Expenditures

Capital expenditures during the three months ended September 30, 2024 and 2023 were $90 million and $92 million, respectively.

Dividends

On each of May 7, 2024 and August 15, 2024, our Board of Directors approved a quarterly dividend of $0.5056 per share, or $2.02 per share on an annualized basis, which were paid on July 15, 2024 and October 15, 2024 to shareholders of record on July 1, 2024 and October 1, 2024, respectively.

Share Repurchases

During the three months ended September 30, 2024, we deployed $375 million for repurchases of our common shares under an accelerated share repurchase ("ASR") program. We funded the repurchases with available cash. This program concluded in the second quarter of fiscal 2025, which reduced the amount remaining under our existing share repurchase authorization to approximately $3.1 billion. See Note 11 of the "Notes to Condensed Consolidated Financial Statements" for additional information.

Integrated Oncology Network Acquisition

On September 20, 2024, we announced that we have entered into a definitive agreement to acquire Integrated Oncology Network, a physician-led independent community oncology network, for a purchase price of $1.1 billion in cash, subject to certain adjustments. The acquisition is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			13


MD&A			Other Items

Other Items

The MD&A in the 2024 Form 10-K addresses our contractual obligations and cash requirements, as of and for the fiscal year ended June 30, 2024. Other than the considerations noted above in connection with our proposed acquisition of Integrated Oncology Network, there have been no subsequent material changes outside the ordinary course of business to those items.

Critical Accounting Policies and Sensitive Accounting Estimates

The discussion and analysis presented below are supplemental disclosures to the critical accounting policies and sensitive accounting estimates specified in our consolidated balance sheet at June 30, 2024. This discussion and analysis should be read in conjunction with the Critical Accounting Policies and Sensitive Accounting Estimates included in the 2024 Form 10-K.

Critical accounting policies are those accounting policies that (i) can have a significant impact on our financial condition and results of operations and (ii) require the use of complex and subjective estimates based upon past experience and management’s judgment. Other people applying reasonable judgment to the same facts and circumstances could develop different estimates. Because estimates are inherently uncertain, actual results may differ, including due to the risks discussed in "Risk Factors" and other risks discussed in the 2024 Form 10-K and our other filings with the SEC since June 30, 2024.

Goodwill

Purchased goodwill is tested for impairment annually or when indicators of impairment exist. Goodwill impairment testing involves a comparison of the estimated fair value of reporting units to the respective carrying amount, which may be performed utilizing either a qualitative or quantitative assessment. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment (also known as a component).

Goodwill impairment testing involves judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit. Our qualitative evaluation considers the weight of evidence and significance of all identified

events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

At-Home Solutions Goodwill

During our fiscal 2024 annual impairment test, the fair value of our at-Home Solutions reporting unit exceeded its carrying amount by less than 1 percent. A decrease in future cash flows, an increase in the discount rate or a decrease in the terminal growth rate, among other things, could result in a goodwill impairment for at-Home Solutions. During the three months ended September 30, 2024, there were no indicators of goodwill impairment for the at-Home Solutions reporting unit.

Global Medical Products and Distribution Goodwill

During fiscal 2024, we recorded $675 million of goodwill impairment charges related to our GMPD reporting unit. GMPD goodwill was fully impaired during the third quarter of fiscal 2024.



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			14


Explanation and Reconciliation of Non-GAAP Financial Measures

Explanation and Reconciliation of Non-GAAP Financial Measures

The "Overview of Consolidated Results" section within MD&A in this Form 10-Q contains financial measures that are not calculated in accordance with GAAP.

In addition to analyzing our business based on financial information prepared in accordance with GAAP, we use these non-GAAP financial measures internally to evaluate our performance, engage in financial and operational planning, and determine incentive compensation because we believe that these measures provide additional perspective on and, in some circumstances are more closely correlated to, the performance of our underlying, ongoing business. We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance to that of our competitors. However, the non-GAAP financial measures that we use may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by us should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.

Exclusions from Non-GAAP Financial Measures

Management believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and for investors’ assessment of the business for the reasons identified below:

•LIFO charges and credits are excluded because the factors that drive last-in first-out ("LIFO") inventory charges or credits, such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end), are largely out of our control and cannot be accurately predicted. The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies’ financial results. We did not recognize any LIFO charges or credits during the periods presented.

•State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that were sold or distributed in periods prior to the period in which the expense is incurred. This portion is excluded from non-GAAP financial measures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying, ongoing business. Additionally, while states' laws may require us to make payments on an ongoing basis, the portion of the assessment related to sales in prior periods are contemplated to be one-time, nonrecurring items. Income from state opioid assessments related to prior fiscal years represents reversals of accruals due to changes in estimates or when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.

•Shareholder cooperation agreement costs includes costs such as legal, consulting, and other expenses incurred in relation to the agreement (the "Cooperation Agreement") entered into among Elliott Associates, L.P., Elliott International, L.P. (together, "Elliott") and Cardinal Health. These include costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the Business Review Committee of the Board of Directors formed under this Cooperation Agreement, tasked with undertaking a comprehensive review of our strategy, portfolio, capital-allocation framework, and operations. We have excluded these costs from our non-GAAP metrics because they do not occur in or reflect the ordinary course of our ongoing business operations and may obscure analysis of trends and financial performance.

•Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business and include, but are not limited to, costs related to divestitures, closing and consolidating facilities, changing the way we manufacture or distribute our products, moving manufacturing of a product to another location, changes in production or business process outsourcing or insourcing, employee severance, and realigning operations.

•Amortization and other acquisition-related costs, which include transaction costs, integration costs, and changes in the fair value of contingent consideration obligations, are excluded because they are not part of the ongoing operations of our underlying business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies' financial results. Additionally, costs for amortization of acquisition-related intangible assets are non-cash amounts, which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion facilitates comparison of historical, current and forecasted financial results. We also exclude other acquisition-related costs, which are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity’s initial



			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q			15


Explanation and Reconciliation of Non-GAAP Financial Measures

balance sheet as part of the purchase price allocation. These costs are also significantly impacted by the timing, complexity and size of acquisitions.

•Impairments and gain or loss on disposal of assets, net are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and are inherently unpredictable in timing and amount, and in the case of impairments, are non-cash amounts, so their exclusion facilitates comparison of historical, current, and forecasted financial results.

•Litigation recoveries or charges, net are excluded because they often relate to events that may have occurred in prior or multiple periods, do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount.

•Loss on early extinguishment of debt is excluded because it does not typically occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions.

The tax effect for each of the items listed above is determined using the tax rate and other tax attributes applicable to the item and the jurisdiction(s) in which the item is recorded. The gross, tax and net impact of each item are presented with our GAAP to non-GAAP reconciliations.

Definitions

Growth rate calculation: growth rates in this report are determined by dividing the difference between current-period results and prior-period results by prior-period results.

Non-GAAP operating earnings: operating earnings/(loss) excluding (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, and (7) litigation (recoveries)/charges, net.

Non-GAAP earnings before income taxes: earnings/(loss) before income taxes excluding (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, (7) litigation (recoveries)/charges, net and (8) loss on early extinguishment of debt.

Non-GAAP net earnings attributable to Cardinal Health, Inc.: net earnings/(loss) attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, (7) litigation (recoveries)/charges, net and (8) loss on early extinguishment of debt.

Non-GAAP effective tax rate: provision for/(benefit from) income taxes adjusted for the tax impacts of (1) LIFO charges/(credits), (2) state opioid assessment related to prior fiscal years, (3) shareholder cooperation agreement costs, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, net, (7) litigation (recoveries)/charges, net and (8) loss on early extinguishment of debt divided by (earnings before income taxes adjusted for the eight items above).

Non-GAAP diluted earnings per share attributable to Cardinal Health, Inc.: non-GAAP net earnings attributable to Cardinal Health, Inc. divided by diluted weighted-average shares outstanding.



16			Cardinal Health \| Q1 Fiscal 2025 Form 10-Q


Explanation and Reconciliation of Non-GAAP Financial Measures

GAAP to Non-GAAP Reconciliations






	Operating Earnings/ (Loss)		Operating Earnings Growth Rate	Earnings/ (Loss) Before Income Taxes		Provision for/(Benefit from) Income Taxes		Net Earnings/(Loss)1		Net Earnings1 Growth Rate	Diluted EPS1,2		Diluted EPS1 Growth Rate
(in millions, except per common share amounts)	Three Months Ended September 30, 2024
GAAP	$	568	N.M.	$	541	$	124	$	416	N.M.	$	1.70	N.M.




Restructuring and employee severance	24			24		6		18			0.07
Amortization and other acquisition-related costs	74			74		20		54			0.22
Impairments and (gain)/loss on disposal of assets, net	(1)			(1)		—		(1)			—
Litigation (recoveries)/charges, net	(40)			(40)		(12)		(28)			(0.11)


Non-GAAP	$	625

SEC Form 10-Q filed by Cardinal Health Inc.