Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Q4 2014 Earnings Presentation
29 slides from Cardinal Health's earnings presentation, Aug 4, 2014
Slide 1: Q4 FY2014 earnings investor/analyst call
Q4 FY2014 earnings investor/analyst call August 4, 2014 © Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
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: FY2014 financial accomplishments
FY2014 financial accomplishments • Revenue increased 8% excluding the impact of the Walgreens contract expiration • Expanded gross and non-GAAP operating margin rates 80 bps and 32 bps, respectively • Increased gross margin dollars by 5% • Grew non-GAAP operating earnings by 4% to $2.1B and non-GAAP
Slide 4: Q4 and FY2014 results
Q4 and FY2014 results © Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Slide 5: Q4 FY2014 Financial summary
Q4 FY2014 Financial summary GAAP Basis ($M) Non-GAAP Basis ($M) Q4 FY14 Q4 FY13 Q4 FY14 Q4 FY13 Revenue $22,894 $25,420 % change (10)% (5)% Operating earnings/(loss) $387 ($442) $461 $472 % change N.M. N.M. (2)% 11% Ratio to revenue 1.69% (1.74)% 2.01% 1.86% Earnings/(loss) from continuing ops $234
Slide 6: Pharmaceutical segment business analysis
Q4 FY2014 Pharmaceutical segment business analysis Q4 FY14 Q4 FY13 % Change ($M) ($M) Revenue $20,092 $22,783 (12)% Segment profit $377 $395 (5)% Segment profit margin 1.88% 1.73% Highlights: • Excluding the impact of the Walgreen’s contract expiration, revenue grew 13%, driven by organic sales grow
Slide 7: Medical segment business analysis
Q4 FY2014 Medical segment business analysis Q4 FY14 Q4 FY13 % Change ($M) ($M) Revenue $2,794 $2,697 4% Segment profit $96 $104 (8)% Segment profit margin 3.43% 3.86% Highlights: • Revenue increased 4%, primarily due to growth in existing customers, including growth in strategic hospital network acc
Slide 8: GAAP to non-GAAP reconciliation
Q4 FY2014 GAAP to non-GAAP reconciliation Q4 FY 2014 Q4 FY 2013 Earnings from Diluted EPS Operating Earnings / (Loss) Diluted EPS Operating Continuing from Continuing Earnings / from Continuing from Continuing Earnings ($M) Operations ($M) Operations (Loss) ($M) Operations ($M) Operations GAAP $387
Slide 9: FY2014 financial summary
Q4 FY2014 FY2014 financial summary GAAP Basis ($M) Non-GAAP Basis ($M) FY14 FY13 FY14 FY13 Revenue $91,084 $101,093 % change (10)% (6)% Operating earnings $1,885 $996 $2,133 $2,046 % change 89% (44)% 4% 10% Ratio to revenue 2.07% 0.99% 2.34% 2.02% Earnings from continuing ops $1,163 $335 $1,324 $1,2
Slide 10: FY2014 GAAP to non-GAAP reconciliation
Q4 FY2014 FY2014 GAAP to non-GAAP reconciliation FY2014 FY2013 Earnings from Diluted EPS Earnings from Diluted EPS Operating Operating Continuing from Continuing Continuing from Continuing Earnings ($M) Earnings ($M) Operations ($M) Operations Operations ($M) Operations GAAP $1,885 $1,163 $3.37 $996
Slide 11: FY2015 outlook
FY2015 outlook © Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Slide 12: CAH FY2015 financial expectations
August 4, 2014 CAH FY2015 financial expectations FY2015 outlook FY2014 actual Revenue Up modestly vs. PY $91.1B Non-GAAP EPS $4.10 to $4.30 $3.84 © Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and 12 ESSENTIAL TO CARE are trademarks or registered tr
Slide 13: FY15 corporate assumptions
August 4, 2014 FY15 corporate assumptions FY15 outlook FY14 actual Non-GAAP effective tax rate 36.0% - 37.0%1 35.3% Diluted weighted average 337M - 338M 345.2M shares outstanding Interest and other, net $140M - $150M $86.8M Capital expenditures ~$350M ~$249M Acquisition-related intangible ~$177M or
Slide 14: Pharmaceutical Segment FY15 assumptions
August 4, 2014 Pharmaceutical Segment FY15 assumptions • Modest increase in revenue vs. prior year, despite Q1 impact of Walgreens comparison • Brand inflation similar to FY2014 • Positive Y-on-Y contribution from generics programs – Positive earnings contribution from Red Oak Sourcing, LLC joint ve
Slide 15: Medical Segment FY15 assumptions
August 4, 2014 Medical Segment FY15 assumptions • Low- to mid-single digit revenue growth vs. prior year • Solid segment profit growth and profit margin expansion, driven by growth in: – Preferred products – Strategic national accounts and services – Home health • Net neutral impact from commodities
Slide 16: © Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO
© Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Slide 17: Q4 FY2014 trailing five quarters and GAAP to Non-GAAP reconciliation statements
Q4 FY2014 trailing five quarters and GAAP to Non-GAAP reconciliation statements © Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.
Slide 18: Segment analysis
Q4 FY2014 Segment analysis Pharmaceutical segment Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Revenue 22,783 21,813 19,443 18,762 20,092 ($M) Segment Profit 395 433 482 452 377 ($M) Medical segment Q4 FY13 Q1 FY14 Q2 FY14 Q3 FY14 Q4 FY14 Revenue 2,697 2,711 2,799 2,657 2,794 ($M) Segment Profit 104 106
Slide 19: GAAP / Non-GAAP Reconciliation Fourth Quarter 2014
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter 2014 Operating Earnings / (Loss) Provision Earnings Earnings from Diluted EPS Diluted EPS Operating Earnings Before Income for / (Loss) from Continuing from from Continuing Earnings Growth Taxes and Discontinued Inc
Slide 20: Total Company Business Analysis Non-GAAP
Cardinal Health, Inc. and Subsidiaries Total Company Business Analysis Non-GAAP Fourth Quarter Fourth Quarter (in millions) 2014 2013 2014 2013 Revenue Amount $ 22,894 $ 25,420 Growth rate1 (10)% (5)% Operating earnings/(loss) Amount $ 387 $ (442) $ 461 $ 472 Growth rate N.M. N.M. (2)% 11 % Earnings
Slide 21: Segment Business Analysis Fourth Quarter
Cardinal Health, Inc. and Subsidiaries Segment Business Analysis Fourth Quarter Fourth Quarter (in millions) 2014 2013 (in millions) 2014 2013 Pharmaceutical Medical Revenue Revenue Amount $ 20,092 $ 22,783 Amount $ 2,794 $ 2,697 Growth rate1 (12)% (6)% Growth rate 4% 11 % Segment profit Segment pro
Slide 22: Segment Business Analysis Fiscal Year
Cardinal Health, Inc. and Subsidiaries Segment Business Analysis Fiscal Year Fiscal Year (in millions) 2014 2013 (in millions) 2014 2013 Pharmaceutical Medical Revenue Revenue Amount $ 80,110 $ 91,097 Amount $ 10,962 $ 10,060 Growth rate1 (12)% (7)% Growth rate 9% 4% Segment profit Segment profit Am
Slide 23: GAAP / Non-GAAP Reconciliation Fourth Quarter
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter (in millions) 2014 2013 GAAP return on equity 14.5 % (36.6)% Non-GAAP return on equity Net earnings/(loss) $ 234 $ (586) Restructuring and employee severance, net of tax, in continuing operations 4 20 Amortization a
Slide 24: GAAP / Non-GAAP Reconciliation Fiscal Year
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fiscal Year (in millions) 2014 2013 GAAP return on equity 18.3 % 5.2 % Non-GAAP return on equity Net earnings $ 1,166 $ 334 Restructuring and employee severance, net of tax, in continuing operations 20 44 Amortization and other ac
Slide 25: GAAP / Non-GAAP Reconciliation
Schedule 10 Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter Fiscal Year (in millions) 2014 2013 2014 2013 GAAP effective tax rate from continuing operations 34.4 % (21.9)% 35.3 % 62.3 % Non-GAAP effective tax rate from continuing operations Earnings/(loss) before
Slide 26: GAAP / Non-GAAP Reconciliation
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter Fiscal Year (in millions) 2014 2013 2014 2013 Distribution, selling, general and administrative expenses $ 795 $ 775 $ 3,028 $ 2,875 Restructuring and employee severance 6 32 31 71 Amortization and other acquisition
Slide 27: GAAP / Non-GAAP Reconciliation
Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter Fiscal Year (in millions) 2014 2013 2014 2013 Revenue $ 22,894 $ 25,420 $ 91,084 $ 101,093 GAAP operating earnings/(loss) $ 387 $ (442) $ 1,885 $ 996 Restructuring and employee severance 6 32 31 71 Amortization and
Slide 28: Days sales outstanding, inventory and payable calculations
Cardinal Health, Inc. and Subsidiaries Fourth Quarter (in millions) 2014 2013 Days sales outstanding 21.1 22.3 Days inventory on hand Inventories, net $ 8,266 $ 8,373 Cost of products sold $ 21,638 $ 24,173 Chargeback billings 5,189 4,263 Adjusted cost of products sold $ 26,827 $ 28,436 Adjusted cos
Slide 29: Use of Non-GAAP Measures
Cardinal Health, Inc. and Subsidiaries Use of Non-GAAP Measures Beginning in fiscal 2015, the Company will exclude last-in, first-out ("LIFO") inventory charges/(credits)5 from its non-GAAP earnings, for consistency with the presentation by some of its peers. The Company did not record any LIFO char