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1、Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-KANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended June 30,2023orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1
2、934For the transition period from _ to _Commission File Number:1-11373Cardinal Health,Inc.(Exact name of registrant as specified in its charter)Ohio31-0958666(State or other jurisdiction ofincorporation or organization)(IRS EmployerIdentification No.)7000 Cardinal PlaceDublin,Ohio43017(Address of pr
3、incipal executive offices)(Zip Code)(614)757-5000(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon shares(without par value)CAHNew York Stock ExchangeSecuriti
4、es registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the A
5、ct.Yes o No 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 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject t
6、o such filing requirements forthe past 90 days.Yes No oIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter peri
7、od that the registrant was required to submit suchfiles).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,smaller reporting company,or an emerginggrowth company.See the definitions of“large accelerated filer,”“accelerated
8、filer,”“smaller reporting company,”and emerging growth company in Rule 12b-2of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use
9、the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.oIndicate by check mark whether the registrant has filed a report on and attestation to its managements assessment of the effectiveness of its inte
10、rnalcontrol over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that preparedor issued its audit report.If securities are registered pursuant to Section 12(b)of the Act,indicate by check mark whether the financial statements
11、 of the registrant included in thefiling reflect the correction of an error to previously issued financial statements.oIndicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensationreceived by any of the registrants ex
12、ecutive officers during the relevant recovery period pursuant to 240.10D-1(b).oIndicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The aggregate market value of voting stock held by non-affiliates on December 31,2022,was the following
13、:$19,775,475,828.The number of the registrants common shares,without par value,outstanding as of July 31,2023,was the following:250,681,620.Documents Incorporated by Reference:Portions of the registrants Definitive Proxy Statement to be filed for its 2023 Annual Meeting of Shareholders are incorpora
14、ted by reference into the sections ofthis Form 10-K addressing the requirements of Part III of Form 10-K.Cardinal HealthFiscal 2023 Form 10-KTable of ContentsPageIntroduction2Managements Discussion and Analysis of Financial Condition and Results of Operations3Explanation and Reconciliation of Non-GA
15、AP Financial Measures21Quantitative and Qualitative Disclosures about Market Risk26Business28Risk Factors36Properties43Legal Proceedings44Market for Registrants Common Equity45Reports47Financial Statements and Supplementary Data51Directors,Executive Officers and Corporate Governance82Exhibits84Form
16、10-K Cross Reference Index89Signatures90 1Cardinal Health|Fiscal 2023 Form 10-KIntroductionIntroductionReferences to Cardinal Health and Fiscal YearsAs used in this report,we,our,us,Cardinal Health and similar pronouns refer to Cardinal Health,Inc.and its majority-owned andconsolidated subsidiaries,
17、unless the context requires otherwise.Our fiscal year ends on June 30.References to fiscal 2024,2023,2022,2021,2020 and 2019 are to the fiscal years ended June 30,2024,2023,2022,2021,2020 and 2019,respectively.Except as otherwise specified,information in this report is provided as of June 30,2023.No
18、n-GAAP Financial MeasuresIn this report,we use financial measures that are derived from consolidated financial data but are not presented in our financial statements thatare prepared in accordance with U.S.generally accepted accounting principles(“GAAP”).These measures are considered“non-GAAP financ
19、ialmeasures”under the Securities and Exchange Commission(“SEC”)rules.The reasons we use these non-GAAP financial measures and thereconciliations to their most directly comparable GAAP financial measures are included in the“Explanation and Reconciliation of Non-GAAPFinancial Measures”section followin
20、g MD&A in this report.Managements Discussion and Analysis of Financial Condition and Results of OperationsOur MD&A within this Form 10-K generally discusses fiscal 2023 and fiscal 2022 items and year-over-year comparisons between fiscal 2023 andfiscal 2022.Fiscal 2021 items and discussions of year-o
21、ver-year comparisons between fiscal 2022 and fiscal 2021 that are not included in thisForm 10-K can be found in Managements Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report onForm 10-K for the fiscal year ended June 30,2022(the Fiscal 2022 Form 10-K).Impo
22、rtant Information Regarding Forward-Looking StatementsThis report(including information incorporated by reference)includes forward-looking statements addressing expectations,prospects,estimatesand other matters that are dependent upon future events or developments.Many forward-looking statements app
23、ear in MD&A and Risk Factors,but there are others throughout this report,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 g
24、uidance,statements of outlook and expense accruals.These matters are subject to risks and uncertainties that could cause actual results to differmaterially from those projected,anticipated or implied.The most significant of these risks and uncertainties are described in“Risk Factors”in thisreport an
25、d in Exhibit 99.1 to the Form 10-K included in this report.Forward-looking statements in this report speak only as of the date of thisdocument.Except to the extent required by applicable law,we undertake no obligation to update or revise any forward-looking statement.Available InformationOur Annual
26、Report on Form 10-K,Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and amendments to those reports areavailable free of charge on our website(),under the“Investor Relations Financial Reporting SEC Filings”caption,as soon as reasonably practicable after we electronically file them with,or
27、 furnish them to,the SEC.The SEC also maintains a website(www.sec.gov)where you can search for annual,quarterly and current reports,proxy and information statements and other informationregarding us and other public companies.Cardinal Health|Fiscal 2023 Form 10-K2MD&AAbout Cardinal HealthManagements
28、 Discussion and Analysis of Financial Condition andResults of OperationsAbout Cardinal HealthCardinal Health,Inc.,an Ohio corporation formed in 1979,is a global healthcare services and products company providing customized solutionsfor hospitals,healthcare systems,pharmacies,ambulatory surgery cente
29、rs,clinical laboratories,physician offices and patients in the home.Weprovide 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 and better patient
30、management.We manage our business and reportour financial results in two segments:Pharmaceutical and Medical.Pharmaceutical SegmentOur Pharmaceutical segment distributes branded and genericpharmaceutical,specialty pharmaceutical and over-the-counterhealthcare and consumer products in the United Stat
31、es.Thissegment also provides services to pharmaceutical manufacturers andhealthcare providers for specialty pharmaceutical products;providespharmacy management services to hospitals and operates a limitednumber of pharmacies,including pharmacies in community healthcenters;operates nuclear pharmacies
32、 and radiopharmaceuticalmanufacturing facilities;and repackages generic pharmaceuticalsand over-the-counter healthcare products.Medical SegmentOur Medical segment manufactures,sources and distributes CardinalHealth branded medical,surgical and laboratory products,which aresold in the United States,C
33、anada,Europe,Asia and other markets.This segment also distributes a broad range of medical,surgical andlaboratory products known as national brand products and providessupply chain services and solutions to hospitals,ambulatory surgerycenters,clinical laboratories and other healthcare providers in t
34、heUnited States and Canada.This segment also distributes medicalproducts to patients homes in the United States through our CardinalHealth at-Home Solutions division.Cardinal Health|Fiscal 2023 Form 10-K3MD&AOverviewConsolidated ResultsFiscal 2023 OverviewRevenueRevenue for fiscal 2023 was$205.0 bil
35、lion,a 13 percent increase from the prior year,primarily driven by Pharmaceutical segment sales growth.GAAP and Non-GAAP Operating Earnings/(Loss)(in millions)20232022ChangeGAAP operating earnings/(loss)$727$(596)N.M.Surgical gown recall costs/(income)1 State opioid assessment related to prior fisca
36、l years(6)Shareholder cooperation agreement costs8 Restructuring and employee severance95 101 Amortization and other acquisition-related costs285 324 Impairments and(gain)/loss on disposal of assets,net1,250 2,050 Litigation(recoveries)/charges,net(302)109 Non-GAAP operating earnings$2,057$1,990 3%T
37、he sum of the components and certain computations may reflect rounding adjustments.We had GAAP operating earnings of$727 million and a GAAP operating loss of$596 million during fiscal 2023 and 2022,respectively,whichincluded$1.2 billion and$2.1 billion pre-tax non-cash goodwill impairment charges re
38、lated to the Medical segment,respectively.See CriticalAccounting Policies and Sensitive Accounting Estimates section of this MD&A and Note 4 of the Notes to Consolidated Financial Statementsfor additional detail.GAAP operating earnings during fiscal 2023 were favorably impacted by litigation recover
39、ies as described further in Note 7of the Notes to Consolidated Financial Statements.Non-GAAP operating earnings during fiscal 2023 increased 3 percent to$2.1 billion,primarily driven by an increase in Pharmaceutical segmentprofit,partially offset by a decrease in Medical segment profit.GAAP and Non-
40、GAAP Diluted EPS($per share)2023 2022 ChangeGAAP diluted EPS$1.00$(3.35)N.M.State opioid assessment related to prior fiscal years(0.02)Shareholder cooperation agreement costs0.02 Restructuring and employee severance0.28 0.27 Amortization and other acquisition-related costs0.80 0.87 Impairments and(g
41、ain)/loss on disposal of assets,net 4.44 6.93 Litigation(recoveries)/charges,net(0.73)0.31 Loss on early extinguishment of debt 0.03 Non-GAAP diluted EPS$5.79$5.06 14%The sum of the components and certain computations may reflect rounding adjustments.(1)Diluted earnings/(loss)per share attributable
42、to Cardinal Health,Inc.(diluted EPS or diluted loss per share).(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 sectiontitled Explanation and Reconciliation of Non-GAAP Financi
43、al Measures.(3)For fiscal 2022,GAAP diluted loss per share attributable to Cardinal Health,Inc.and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculatedusing a weighted average of 279 million common shares,which excludes potentially dilutive securities from the denomina
44、tor due to their anti-dilutive effects resulting from ourGAAP net loss for the period.Fiscal 2022 non-GAAP diluted EPS is calculated using a weighted average of 280 million common shares,which includes potentially dilutiveshares.(4)Impairments and(gain)/loss on disposals of assets,net includes pre-t
45、ax goodwill impairment charges of$1.2 billion and$2.1 billion,respectively,related to the Medicalsegment recorded during fiscal 2023 and 2022.The net tax benefits related to these charges were$82 million and$150 million,respectively.During fiscal 2023 and 2022,GAAP diluted EPS was adversely impacted
46、 by the goodwill impairment charges related to the Medical segment,which had a$(4.38)and$(6.94)per share after-tax impact,respectively.See Critical Accounting Policies and Sensitive(2)(2)(3)(1)(4)(1)4Cardinal Health|Fiscal 2023 Form 10-KMD&AOverviewAccounting Estimates section of this MD&A,and Note
47、4 and Note 8 of the Notes to Consolidated Financial Statements for additional detail.During fiscal 2023,GAAP diluted EPS was favorably impacted by litigation recoveries.See Note 7 of the Notes to Consolidated FinancialStatements.During fiscal 2023,non-GAAP diluted EPS increased 14 percent to$5.79 du
48、e to a lower share count,the factors impacting non-GAAP operatingearnings described above and lower interest expense,net.Cash and EquivalentsOur cash and equivalents balance was$4.0 billion at June 30,2023 compared to$4.7 billion at June 30,2022.During fiscal 2023,net cashprovided by operating activ
49、ities was$2.8 billion,which was offset by$2.0 billion in share repurchases,$579 million in debt repayments,$525million of dividends and$481 million of capital expenditures.Cardinal Health|Fiscal 2023 Form 10-K5MD&AOverviewSignificant Developments in Fiscal 2023 and TrendsPharmaceutical SegmentGeneri
50、cs ProgramThe performance of our Pharmaceutical segment generics program positively impacted the year-over-year comparison of Pharmaceuticalsegment profit in fiscal 2023.The Pharmaceutical segment generics program includes,among other things,the impact of genericpharmaceutical product launches,custo
51、mer volumes,pricing changes,the Red Oak Sourcing,LLC venture(Red Oak Sourcing)with CVSHealth 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,custome
52、r contract renewals,generic pharmaceutical manufacturer pricing changes and generic pharmaceutical contract manufacturing and sourcing costs all impactPharmaceutical segment profit and are subject to risks and uncertainties.These risks and uncertainties may impact Pharmaceutical segmentprofit and co
53、nsolidated operating earnings in fiscal 2024.Medical SegmentInflationary ImpactsBeginning in fiscal 2022,Medical segment profit was negatively affected by inflationary impacts,primarily related to transportation(includingocean and domestic freight),commodities,labor and global supply chain constrain
54、ts.Since that time,we have taken actions to partially mitigatethese impacts,including implementing certain price increases and evolving our pricing and commercial contracting processes to provide us withgreater pricing flexibility.In addition,decreases in some product-related costs have been recogni
55、zed as the higher-cost inventory moved throughour supply chain and was replaced by lower cost inventory.These net inflationary impacts negatively affected Medical segment profit duringfiscal 2023.We expect these net inflationary impacts to continue to affect Medical segment profit in fiscal 2024 and
56、 beyond,but to a significantly lesserextent than in fiscal 2023 and prior periods,due to our mitigation actions,together with continued decreases in certain product-related costs.However,these inflationary costs are difficult to predict and may be greater than we expect or continue longer than our c
57、urrent expectations.Ouractions to increase prices and evolve our contracting strategies are subject to contingencies and uncertainties and it is possible that our resultsof operations will be adversely impacted to a greater extent than we currently anticipate or that we may not be able to mitigate t
58、he negativeimpact to the extent or on the timeline we anticipate.Volumes within Products and DistributionMedical segment profit was adversely impacted during fiscal 2023 on a year-over-year basis in part due to lower volumes within products anddistribution,which includes our Cardinal Health branded
59、medical products.We expect Cardinal Health branded medical products sales growth infiscal 2024 and beyond.The timing,magnitude and profit impact of this anticipated sales growth is subject to risks and uncertainties,which mayimpact Medical segment profit.Medical Unit GoodwillDue to previously commun
60、icated changes in our long-term financial plan assumptions,including those related to Cardinal Health brandedmedical products sales growth,and increases in the risk-free interest rate,we performed goodwill impairment testing for the Medical operatingsegment(excluding our Cardinal Health at-Home Solu
61、tions division)(“Medical Unit”)during fiscal 2023.This testing resulted in cumulative pre-tax charges of$1.2 billion which were included in impairments and(gain)/loss on disposal of assets,net in our consolidated statements ofearnings/(loss).See Critical Accounting Policies and Sensitive Accounting
62、Estimates section of this MD&A and Note 4 of the Notes toConsolidated Financial Statements for additional detail.Adverse changes in key assumptions or a significant change in industry or economictrends during fiscal 2024 could result in additional goodwill impairment.Shareholder Cooperation Agreemen
63、tIn September 2022,we entered into a Cooperation Agreement(the Cooperation Agreement)with Elliott Associates,L.P.and ElliottInternational,L.P.(together,Elliott)under which our Board of Directors(the Board),among other things,(1)appointed four new independentdirectors,including a representative from
64、Elliott,and(2)formed an advisory Business Review Committee of the Board,which is tasked withundertaking a comprehensive review of our strategy,portfolio,capital-allocation framework and operations.In May 2023,we extended the termof the Cooperation Agreement until the later of July 15,2024 or until E
65、lliotts representative ceases to serve on,or 6Cardinal Health|Fiscal 2023 Form 10-KMD&AOverviewresigns from,the Board.In connection with this extension,the Board has extended the term of the Business Review Committee until July 15,2024.The evaluation and implementation of any actions recommended by
66、the Business Review Committee and the Board have impacted and maycontinue to impact our business,financial position and results of operations during fiscal 2024 and beyond.During fiscal 2023,we incurred$8million of expenses related to the negotiation and finalization of the Cooperation Agreement and
67、 other consulting expenses.We have incurred,and expect to continue to incur additional legal,consulting and other expenses related to the Cooperation Agreement and the activities of theBusiness Review Committee.See Risk Factors section for additional detail related to risks associated with the Coope
68、ration Agreement.Cardinal Health|Fiscal 2023 Form 10-K7MD&AResults of OperationsResults of OperationsRevenueRevenue(in millions)20232022ChangePharmaceutical$190,009$165,491 15%Medical15,014 15,887(5)%Total segment revenue205,023 181,378 13%Corporate(11)(14)N.M.Total revenue$205,012$181,364 13%(1)Cor
69、porate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.Pharmaceutical SegmentFiscal 2023 Pharmaceutical segment revenue grew by 15 percent primarily due to branded and specialty pharmaceutical sales growth largelyfrom existing and net new
70、customers,which increased revenue by$24.2 billion.Medical SegmentFiscal 2023 Medical segment revenue decrease was driven by products and distribution,which decreased revenue by$1.1 billion,primarilyrelated to lower sales,largely due to an adverse impact from personal protective equipment(PPE)pricing
71、 and volumes.This decrease waspartially offset by sales growth in at-Home Solutions,which increased revenue by$215 million.Cost of Products SoldCost of products sold for fiscal 2023 increased$23.3 billion(13 percent)due to the factors affecting the changes in revenue and gross margin.(1)8Cardinal He
72、alth|Fiscal 2023 Form 10-KMD&AResults of OperationsGross Margin Consolidated GrossMargin(in millions)20232022ChangeGross margin$6,889$6,545 5%Fiscal 2023 consolidated gross margin increased primarily due to the Pharmaceutical segment,which reflected the positive performance of ourgenerics program an
73、d a higher contribution from branded and specialty pharmaceutical products.This increase was partially offset by theperformance of products and distribution within the Medical segment,primarily driven by lower volumes and unfavorable product sales mix,partially offset by a net positive contribution
74、from PPE.Gross margin rate declined 25 basis points during fiscal 2023 mainly due to changes in overall product mix,primarily driven by increasedpharmaceutical distribution branded sales,which have a dilutive impact on our overall gross margin rate.This decline in gross margin rate waspartially offs
75、et by a net positive contribution from PPE.Distribution,Selling,General and Administrative(SG&A)ExpensesSG&A Expenses(in millions)20232022ChangeSG&A expenses$4,834$4,557 6%Fiscal 2023 SG&A expenses increased primarily due to inflationary impacts,primarily related to increased transportation and labo
76、r costs,higheroperating expenses,including higher costs to support sales growth,and enterprise-wide incentive compensation.These increases were partiallyoffset by the beneficial impact of enterprise-wide cost-savings measures.Cardinal Health|Fiscal 2023 Form 10-K9MD&AResults of OperationsSegment Pro
77、fitWe evaluate segment performance based on segment profit,among other measures.See Note 13 of the Notes to Consolidated FinancialStatements for additional information on segment profit.Segment Profit andOperating Earnings(in millions)20232022ChangePharmaceutical$1,999$1,770 13%Medical111 216(49)%To
78、tal segment profit2,110 1,986 6%Corporate(1,383)(2,582)N.M.Total consolidated operating earnings/(loss)$727$(596)N.M.Pharmaceutical Segment ProfitFiscal 2023 Pharmaceutical segment profit increased primarily due to the positive performance of our generics program and an increasedcontribution from br
79、anded and specialty pharmaceutical products,partially offset by inflationary impacts,primarily related to increasedtransportation and labor costs.Medical Segment ProfitFiscal 2023 Medical segment profit decreased primarily due to the performance of products and distribution,largely driven by net inf
80、lationaryimpacts,lower volumes and unfavorable product sales mix,partially offset by a net positive contribution from PPE.CorporateThe changes in Corporate during fiscal 2023 are due to the factors discussed in the Other Components of Consolidated OperatingEarnings/(Loss)section that follows.10Cardi
81、nal Health|Fiscal 2023 Form 10-KMD&AResults of OperationsOther 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 thefollowing:(in millions)20232022Restructuring and emp
82、loyee severance$95$101 Amortization and other acquisition-related costs285 324 Impairments and(gain)/loss on disposal of assets,net1,250 2,050 Litigation(recoveries)/charges,net(302)109 Restructuring and Employee SeveranceRestructuring and employee severance costs during fiscal 2023 and 2022 were pr
83、imarily related to the implementation of certain enterprise-widecost-savings measures and the divestiture of the Cordis business.During fiscal 2023,we also incurred restructuring costs related to certainprojects resulting from reviews of our strategy,portfolio,capital-allocation framework and operat
84、ions.During fiscal 2022,restructuring costs alsoincluded facility exit costs related to decreasing our overall office space.Amortization and Other Acquisition-Related CostsAmortization of acquisition-related intangible assets was$281 million and$311 million for fiscal 2023 and 2022,respectively.Impa
85、irments and(Gain)/Loss on Disposal of Assets,NetDuring fiscal 2023 and 2022,we recognized$1.2 billion and$2.1 billion of pre-tax non-cash goodwill impairment charges,respectively,related toour Medical segment,as discussed further in the Critical Accounting Policies and Sensitive Accounting Estimates
86、 section of this MD&A andNote 4 of the Notes to Consolidated Financial Statements.Litigation(Recoveries)/Charges,NetDuring fiscal 2023,we recognized income of$103 million,primarily related to a reduction of the reserve for the estimated settlement anddefense costs for the Cordis OptEase and TrapEase
87、 inferior vena cava(IVC)product liability due to the execution of certain settlementagreements.During fiscal 2022,we recognized estimated losses and legal defense costs associated with the IVC filter product liability claims of$87 million.See Note 7 of the Notes to Consolidated Financial Statements
88、for additional information.During fiscal 2023,we recognized income of$93 million due to net proceeds from the settlement of a shareholder derivative litigation matter asdescribed further in the Legal Proceedings section.During fiscal 2023 and 2022,we recognized income of$130 million and$18 million,r
89、espectively,for net recoveries in class action antitrustlawsuits in which we were a class member or plaintiff.Other Components of Earnings/(Loss)Before Income TaxesIn addition to the items discussed above,earnings/(loss)before income taxes was impacted by the following:(in millions)20232022ChangeOth
90、er(income)/expense,net$(4)$16 N.M.Interest expense,net93 149(38)%Loss on early extinguishment of debt 10 N.M.(Gain)/Loss on sale of equity interest in naviHealth(2)N.M.Interest Expense,NetFiscal 2023 interest expense decreased from fiscal 2022 primarily due to increased interest income from cash and
91、 equivalents.Loss On Early Extinguishment of DebtDuring fiscal 2022,we recognized a loss of$10 million connection with the debt redemption as described further in Note 6 of the Notes toConsolidated Financial Statements.Cardinal Health|Fiscal 2023 Form 10-K11MD&AResults of OperationsProvision for Inc
92、ome TaxesFluctuations in the effective tax rates are primarily due to the impact of the goodwill impairment charges recognized in fiscal 2023 and 2022related to the Medical segment.A reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate from
93、continuing operations is asfollows(see Note 8 of the Notes to Consolidated Financial Statements for additional information):2023 2022 Provision at Federal statutory rate21.0%21.0%State and local income taxes,net of federal benefit6.6 2.2 Tax effect of foreign operations(4.2)3.5 Nondeductible/nontaxa
94、ble items(1.1)1.2 Impact of Divestitures(4.9)Withholding Taxes1.0(1.1)Change in Valuation Allowances(5.3)3.5 US Taxes on International Income(0.7)3.2 Impact of Resolutions with IRS and other related matters5.8(0.6)Opioid litigation0.1(0.5)Goodwill Impairment36.9(49.5)Other(1.2)0.8 Effective income t
95、ax rate58.9%(21.2)%(1)This table reflects fiscal 2023 pretax income with tax expense and fiscal 2022 pretax loss with tax expense.(2)Includes the tax impact of Global Intangible Low-Taxed Income(GILTI)tax,the Foreign-Derived Intangible Income deduction and other foreign income that is taxable undert
96、he U.S.tax code.During fiscal 2023 and 2022,the effective tax rate was 58.9 percent and(21.2)percent,respectively.Included in the effective tax rate for fiscal2023 and 2022 was$82 million and$150 million,respectively,of benefit related to the goodwill impairment charges related to the Medical Unit.O
97、ngoing AuditsWe file income tax returns in the U.S.federal jurisdiction,various U.S.state jurisdictions and various foreign jurisdictions.With few exceptions,we are subject to audit by taxing authorities for fiscal 2015 through the current fiscal year.Tax laws are complex and subject to varyinginter
98、pretations.New challenges related to future audits may adversely affect our effective tax rate or tax payments.(1)(1)(2)12Cardinal Health|Fiscal 2023 Form 10-KMD&ALiquidity and Capital ResourcesLiquidity and Capital ResourcesWe currently believe that,based on available capital resources and projecte
99、d operating cash flow,we have adequate capital resources to fundour operations and expected future cash needs as described below.If we decide to engage in one or more acquisitions,depending on the sizeand timing of such transactions,we may need to access capital markets for additional financing.Cash
100、 and EquivalentsOur cash and equivalents balance was$4.0 billion at June 30,2023compared to$4.7 billion at June 30,2022.Net cash provided byoperating activities was$2.8 billion,which includes the impact of oursecond annual payment of$372 million related to the April 2022agreement to settle the vast
101、majority of the opioid lawsuits filed bystates and local governmental entities(the National OpioidSettlement Agreement).In addition,we deployed$2.0 billion forshare repurchases,$579 million for debt repayments,$525 million fordividends and$481 million for capital expenditures.At June 30,2023,our cas
102、h and equivalents were held in cash depository accounts withmajor banks or invested in high quality,short-term liquid investments.At June 30,2022,our cash and equivalents were$4.7 billion.Duringfiscal 2022,net cash provided by operating activities of$3.1 billionincluded a refund of$966 million for t
103、he tax benefit from the netoperating loss carryback related to a self-insurance pre-tax loss.Wealso received proceeds of$923 million,net of cash transferred,fromthe divestiture of the Cordis business and we deployed$1.0 billion forshare repurchases,$885 million for debt repayments,$559 million fordi
104、vidends and$387 million for capital expenditures.Changes in working capital,which impact operating cash flow,canvary significantly depending on factors such as the timing of customerpayments,inventory purchases,payments to vendors and taxpayments in the regular course of business,as well as fluctuat
105、ingworking capital needs driven by customer and product mix.The cash and equivalents balance at June 30,2023 included$533million of cash and equivalents held by subsidiaries outside of theUnited States.In fiscal 2023,we returned$189 million of cash held by foreignsubsidiaries to the U.S.At June 30,2
106、023,foreign earnings of approximately$976 million areconsidered indefinitely reinvested for working capital and otheroffshore investment needs.The computation of tax required if thoseearnings are repatriated is not practicable.For amounts notconsidered indefinitely reinvested,we have recorded an imm
107、aterialamount of income tax expense in our consolidated financialstatements in fiscal 2023.Other Financing Arrangements and Financial InstrumentsCredit Facilities and Commercial PaperIn addition to cash and equivalents and operating cash flow,othersources of liquidity at June 30,2023 include a$2.0 b
108、illion commercialpaper program,backed by a$2.0 billion revolving credit facility.Wealso have a$1.0 billion committed receivables sales facility.AtJune 30,2023,we had no amounts outstanding under ourcommercial paper program,revolving credit facility or our committedreceivables sales facility.During f
109、iscal 2023,under our commercialpaper program and our committed receivables program,we hadmaximum combined total daily amounts outstanding of$445 million.In February 2023,we extended our revolving credit facility throughFebruary 25,2028.In September 2022,we renewed our committedreceivables sales faci
110、lity program through Cardinal Health Funding,LLC(CHF)through September 30,2025.Our revolving credit and committed receivables sales facilities requireus to maintain a consolidated net leverage ratio of no more than 3.75-to-1.As of June 30,2023,we were in compliance with this financialcovenant.Long-T
111、erm ObligationsAt June 30,2023,we had total long-term obligations,including thecurrent portion and other short-term borrowings of$4.7 billion.During fiscal 2023,we repaid the full principal of$550 million of the3.2%Notes due 2023.During fiscal 2022,we redeemed all outstanding$572 millionprincipal am
112、ount of 2.616%Notes due 2022 and recorded a$10 million loss on early extinguishment of debt.We also repaid thefull principal of the$282 million Floating Rate Notes due 2022 as theybecame due.The early redemption and repayments were funded with availablecash.Cardinal Health|Fiscal 2023 Form 10-K13MD&
113、ALiquidity and Capital ResourcesCapital DeploymentOpioid Litigation Settlement AgreementWe had$5.87 billion accrued at June 30,2023 related to certainopioid litigation,as further described within Note 7 of the Notes toConsolidated Financial Statements.We expect the majority ofpayments to occur throu
114、gh 2038.During fiscal 2023,we paid oursecond annual payment of$372 million under the National OpioidSettlement Agreement.In July 2023,we made our third annualpayment of$378 million under the National Opioid SettlementAgreement.The amounts of these future payments may differ fromthe payments that we
115、have already made.Capital ExpendituresCapital expenditures during fiscal 2023 and 2022 were$481 millionand$387 million,respectively.We expect capital expenditures in fiscal 2024 to be approximately$500 million and primarily related to manufacturing and distributioninfrastructure projects and technol
116、ogy investments.DividendsDuring fiscal 2023,we paid quarterly dividends totaling$1.98 pershare,an increase of 1 percent from fiscal 2022.On May 11,2023,our Board of Directors approved a quarterlydividend of$0.5006 per share,or$2.00 per share on an annualizedbasis,which was paid on July 15,2023,to sh
117、areholders of record onJuly 3,2023.On August 9,2023,our Board of Directors approved a quarterlydividend of$0.5006 per share,or$2.00 per share on an annualizedbasis,which will be paid on October 15,2023,to shareholders ofrecord on October 3,2023.Share RepurchasesDuring fiscal 2023 and 2022,we deploye
118、d$2.0 billion and$1.0billion,respectively,for repurchases of our common shares.Wefunded the repurchases with available cash.See Note 11 of theNotes to Consolidated Financial Statements for additionalinformation.On November 4,2021,our Board of Directors approved a$3.0 billionshare repurchase program,
119、which will expire on December 31,2024.On June 7,2023,our Board of Directors approved a$3.5 billion sharerepurchase program,which will expire on December 31,2027.AtJune 30,2023,we had$4.3 billion remaining authorized for sharerepurchases under these programs.14Cardinal Health|Fiscal 2023 Form 10-KMD&
120、AOtherContractual Obligations and Cash RequirementsAt June 30,2023,our contractual obligations and future cashrequirements,including estimated payments due by period,were asfollows:(in millions)20242025 to20262027 to2028There-afterTotalLong-term debt and short-term borrowings(1)$764$917$1,308$1,626$
121、4,615 Interest on long-term debt218 326 215 1,336 2,095 Finance lease obligations(2)28 41 16 7 92 Operating leaseobligations(3)113 189 123 97 522 Purchase obligations andother payments(4)645 311 188 105 1,249 Opioid litigationsettlement agreements(5)426 837 832 3,715 5,810 Total contractualobligatio
122、ns and cashrequirements(6)$2,194$2,621$2,682$6,886$14,383(1)Represents maturities of our long-term debt obligations and other short-termborrowings excluding finance lease obligations described below.See Note 6 ofthe“Notes to Consolidated Financial Statements”for further information.(2)Represents min
123、imum finance lease obligations included within current portion oflong-term obligations and other short-term borrowings and long-term obligations,less current portion in our consolidated balance sheets and further described inNote 5 of the“Notes to Consolidated Financial Statements.”(3)Represents min
124、imum operating lease obligations included within other accruedliabilities and deferred income taxes and other liabilities in ourconsolidated balance sheets and further described in Note 5 of the“Notes toConsolidated Financial Statements.”(4)A purchase obligation is defined as an agreement to purchas
125、e goods or servicesthat is legally enforceable and specifies all significant terms,including fixed orminimum quantities to be purchased;fixed,minimum or variable price provisions;and approximate timing of the transaction.The purchase obligation amountsdisclosed above represent estimates of the minim
126、um for which we are obligatedand the time period in which cash outflows will occur.Purchase orders andauthorizations to purchase that involve no firm commitment from either party areexcluded from the above table.In addition,contracts that can be unilaterallycanceled with no termination fee or with p
127、roper notice are excluded from our totalpurchase obligations except for the amount of the termination fee or the minimumamount of goods that must be purchased during the requisite notice period.Purchase obligations and other payments also includes quarterly payments toCVS Health in connection with R
128、ed Oak Sourcing.See Note 7 of the“Notes toConsolidated Financial Statements”for additional information.(5)Represents future cash obligations under the National Opioid SettlementAgreement as well as future cash obligations under separate settlementagreements with the States of Oklahoma,Washington and
129、 West Virginia and theCherokee Nation.We have$5.87 billion accrued at June 30,2023,of which$426 million is included in other accrued liabilities,and the remainder is includedin deferred income taxes and other liabilities in our consolidated balance sheets.See Note 7 of the“Notes to Consolidated Fina
130、ncial Statements”for additionalinformation.(6)Long-term liabilities,such as unrecognized tax benefits,deferred taxes and othertax liabilities,have been excluded from the above table due to the inherentuncertainty of the underlying tax positions or because of the inability to reasonablyestimate the t
131、iming of any cash outflows.See Note 8 of the Notes toConsolidated Financial Statements for further discussion of income taxes.Recent Financial Accounting StandardsSee Note 1 of the“Notes to Consolidated Financial Statements”for further information.Cardinal Health|Fiscal 2023 Form 10-K15MD&ACritical
132、Accounting Policies and Sensitive Accounting EstimatesCritical Accounting Policies and Sensitive Accounting EstimatesCritical accounting policies are those accounting policies that(i)can have a significant impact on our financial condition and results of operationsand(ii)require the use of complex a
133、nd subjective estimates based upon past experience and managements judgment.Other people applyingreasonable judgment to the same facts and circumstances could develop different estimates.Because estimates are inherently uncertain,actualresults may differ.In this section,we describe the significant p
134、olicies applied in preparing our consolidated financial statements that managementbelieves are the most dependent on estimates and assumptions.See Note 1 of the“Notes to Consolidated Financial Statements”for furtherdiscussion.Allowance for Doubtful AccountsThe allowance for doubtful accounts include
135、s general and specificreserves.We determine our allowance for doubtful accounts byreviewing accounts receivable aging,historical write-off trends,payment history,pricing discrepancies,industry trends,customerfinancial strength,customer credit ratings or bankruptcies.Weregularly evaluate how changes
136、in economic conditions may affectcredit risks.A hypothetical 0.1 percent increase or decrease in the reserve as apercentage of trade receivables at June 30,2023,would result in anincrease or decrease in bad debt expense of$11 million.We believethe reserve maintained and expenses recorded in fiscal 2
137、023 areappropriate.At this time,we are not aware of any analytical findings or customerissues that are likely to lead to a significant futureincrease in the allowance for doubtful accounts as a percentage ofrevenue.The following table presents information regarding ourallowance for doubtful accounts
138、 over the past three fiscal years:(in millions,except percentages)202320222021Allowance for doubtful accounts at beginning ofperiod$273$243$207 Charged to costs and expenses197 155 130 Reduction to allowance for customerdeductions and write-offs(171)(125)(94)Allowance for doubtful accounts at end of
139、 period$299$273$243 Allowance as a percentage of customerreceivables2.6%2.6%2.7%Allowance as a percentage of revenue0.15%0.15%0.15%InventoriesLIFO InventoryA portion of our inventories(55 percent and 52 percent at June 30,2023 and 2022,respectively)are valued at the lower of cost,usingthe last-in,fi
140、rst-out(LIFO)method,or market.These are primarilymerchandise inventories at the core pharmaceutical distributionfacilities within our Pharmaceutical segment(“distribution facilities”).The LIFO impact on the consolidated statements of earnings/(loss)depends on pharmaceutical manufacturer price apprec
141、iation ordeflation and our fiscal year-end inventory levels,which can bemeaningfully influenced by customer buying behavior immediatelypreceding our fiscal year-end.Historically,prices for brandedpharmaceuticals have generally tended to rise,resulting in anincrease in cost of products sold,whereas p
142、rices for genericpharmaceuticals generally tend to decline,resulting in a decrease incost of products sold.Using LIFO,if there is a decrease in inventory levels that haveexperienced pharmaceutical price appreciation,the result generallywill be a decrease in future cost of products sold as our olderi
143、nventory is held at a lower cost.Conversely,if there is a decrease ininventory levels that have experienced a pharmaceutical pricedecline,the result generally will be an increase in future cost ofproducts sold as our older inventory is held at a higher cost.We believe that the average cost method of
144、 inventory valuationprovides a reasonable approximation of the current cost of replacinginventory within these distribution facilities.As such,theLIFO reserve is the difference between(a)inventory at the lower ofLIFO cost or market and(b)inventory at replacement costdetermined using the average cost
145、 method of inventory valuation.AtJune 30,2023 and 2022,respectively,inventories valued at LIFOcost were$476 million and$416 million higher than the average costvalue.We do not record inventories in excess of replacement cost.Assuch,we did not write-up the value of our inventory from average costto L
146、IFO cost at June 30,2023 or 2022.FIFO InventoryOur remaining inventory,including inventory in our Medical segmentand certain inventory in our Pharmaceutical segment,that is notvalued at the lower of LIFO cost or market is stated at the lower ofcost,using the first-in,first-out(FIFO)method,or net rea
147、lizablevalue.We reserve for the lower of cost or net realizable value usingthe estimated selling prices and estimated sales demand in theordinary course of business,less reasonably predictable costs ofcompletion,disposal and transportation.In fiscal 2021,we recorded areserve of$197 million,primarily
148、 related to certain categories ofgloves,to reduce the carrying value of certain PPE to its netrealizable value.Our estimates for selling prices and demand areinherently uncertain and if our assumptions decline in the future,additional inventory reserves may be required.16Cardinal Health|Fiscal 2023
149、Form 10-KMD&ACritical Accounting Policies and Sensitive Accounting EstimatesExcess and Obsolete InventoryWe reserve for inventory obsolescence using estimates based onhistorical experience,historical and projected sales trends,specific categories of inventory,age and expiration dates of on-handinven
150、tory and manufacturer return policies.Inventories presented inthe consolidated balance sheets are net of reservesfor excess and obsolete inventory which were$139 million and$147million at June 30,2023 and 2022,respectively.If actual conditionsare less favorable than our assumptions,additional invent
151、oryreserves may be required.Goodwill and Other Indefinite-Lived Intangible AssetsPurchased goodwill and intangible assets with indefinite lives aretested for impairment annually or when indicators of impairment exist.Goodwill impairment testing involves a comparison of the estimatedfair value of rep
152、orting units to the respective carrying amount,whichmay be performed utilizing either a qualitative or quantitativeassessment.Qualitative factors are first assessed to determine if it ismore likely than not that the fair value of a reporting unit is less thanits carrying amount.There is an option to
153、 bypass the qualitativeassessment for any reporting unit in any period and proceed directlyto performing the quantitative goodwill impairment test.We haveelected to bypass the qualitative assessment for the annual goodwillimpairment test in the current year.The quantitative goodwillimpairment test i
154、nvolves a comparison of the estimated fair value ofthe reporting unit to the respective carrying amount.A reporting unit isdefined as an operating segment or one level below an operatingsegment(also known as a component).We have two operating segments,which are the same as ourreportable segments:Pha
155、rmaceutical and Medical.These operatingsegments are comprised of divisions(which are components),forwhich discrete financial information is available.Components areaggregated into reporting units for purposes of goodwill impairmenttesting to the extent that they share similar economic characteristic
156、s.Our reporting units are:Pharmaceutical operating segment(excludingour Nuclear and Precision Health Solutions division);Nuclear andPrecision Health Solutions division;Medical operating segment(excluding our Cardinal Health at-Home Solutions division)(“MedicalUnit”);and Cardinal Health at-Home Solut
157、ions division.Goodwill impairment testing involves judgment,including theidentification of reporting units,qualitative evaluation of events andcircumstances to determine if it is more likely than not that animpairment exists and,if necessary,the estimation of the fair value ofthe applicable reportin
158、g unit.Our determination of estimated fair value of our reporting units infiscal 2023 was based on a combination of the income-based andmarket-based approaches(using discount rates ranging from 9.5 to11 percent).We use discount rates that are commensurate with therisks and uncertainty inherent in th
159、e respective reporting units and inour internally-developed forecasts.Under the market-based guidelinepublic company method,we determine fair value by comparing ourreporting units to similar businesses or guideline companies whosesecurities are actively traded in public markets.We also use themarket
160、-based guideline transaction method todetermine fair value based on pricing multiples derived from the saleof companies that are similar to our reporting units.Estimating the fair value of reporting units requires the use ofestimates and significant judgments that are based on a number offactors inc
161、luding actual operating results.The use of alternateestimates and assumptions,changes in the industry or peer groups,or changes in weightings assigned to the discounted cash flowmethod,guideline public company method or guideline transactionmethod could materially affect the determination of fair va
162、lue for eachreporting unit and potentially result in goodwill impairment.If areporting unit fails to achieve expected earnings or operating cashflow,or otherwise fails to meet current financial plans,or if there werechanges to any other key assumptions used in the tests,the reportingunit could incur
163、 a goodwill impairment in a future period.We performed annual impairment testing in fiscal 2023,2022 and2021 and concluded that there were no impairments of goodwill forPharmaceutical operating segment(excluding our Nuclear andPrecision Health Solutions division);Nuclear and Precision HealthSolution
164、s division;and Cardinal Health at-Home Solutions division asthe estimated fair value of each reporting unit exceeded its carryingvalue.See additional detail on Medical Unit goodwill below.Medical Unit GoodwillDue to previously communicated changes in our long-term financialplan assumptions made duri
165、ng fiscal 2023,including those related toCardinal Health branded medical products sales growth and netinflationary impacts,we elected to bypass the qualitative assessmentand perform quantitative goodwill impairment testing for the MedicalUnit at June 30,2023.This quantitative testing resulted in the
166、carrying amount of the Medical Unit exceeding the fair value,resulting in a pre-tax impairment charge of$368 million in the fourthquarter and cumulative pre-tax impairment charges of$1.2 billion dueto the impairment charges recognized during the second and firstquarters of fiscal 2023 as described f
167、urther below.The fourth quarterimpairment charge was primarily driven by the impact of thereductions in our long-term financial plan assumptions.Theimpairment charges are included in impairments and(gain)/loss ondisposal of assets,net in our consolidated statements ofearnings/(loss).The carrying val
168、ue of the Medical Unit at June 30,2023 after recognizing the impairment charges was$5.7 billion,ofwhich$725 million was goodwill.See Note 4 of the Notes toConsolidated Financial Statements for further discussion.Cardinal Health|Fiscal 2023 Form 10-K17MD&ACritical Accounting Policies and Sensitive Ac
169、counting EstimatesWe performed interim quantitative goodwill impairment testing for theMedical Unit at December 31,2022 and September 30,2022,whichresulted in pre-tax impairment charges of$709 million and$154 million,respectively.The impairment charge recognized in thesecond quarter was driven by ce
170、rtain reductions in our long-termfinancial plan assumptions,and the impairment charge recognized inthe first quarter was driven by an increase in the discount rateprimarily due to an increase in the risk-free interest rate.We alsoperformed quantitative goodwill impairment testing at March 31,2023and
171、 concluded that there was no impairment of goodwill at March 31,2023 as the estimated fair value of the Medical Unit exceeded itscarrying value by approximately 4 percent.Our determinations of the estimated fair value of the Medical Unitwere based on a combination of the income-based approach(using
172、aterminal growth rate of 2 percent),and the market-based approaches.Additionally,we assigned a weighting of 80 percent to the discountedcash flow method,10 percent to the guideline public companymethod and 10 percent to the guideline transaction method.For theincome-based approach,we used discount r
173、ates of 10 percent,10percent,10.5 percent and 10.5 percent for fourth,third,second andfirst quarters,respectively.The decrease in the discount rate for thetesting performed at March 31,2023 and June 30,2023 was primarilydue to a decrease in the risk-free interest rate.While we consider the assumptio
174、ns used in our determination of theestimated fair value of the Medical Unit to be reasonable andappropriate,they are complex and subjective,and additional adversechanges in one key assumption or a combination of key assumptionsduring fiscal 2024 may significantly affect future estimates.Theseassumpt
175、ions include,among other things,a failure to meet expectedearnings or other financial plans,including the execution of keyinitiatives related to optimizing and growing sales of Cardinal Healthbranded medical products,increasing growth in certain strategicdivisions within our Medical segment,and driv
176、ing simplification effortsand cost optimization projects,or unanticipated events andcircumstances,such as changes in assumptions about the durationand magnitude of increasedsupply chain and commodities costs and our efforts to mitigate suchimpact,including price increases or surcharges;further disru
177、ptions inthe supply chain;manufacturing cost inefficiencies resulting fromlower than anticipated sales volume;an increase in the discount rate;a decrease in the terminal growth rate;increases in tax rates;or asignificant change in industry or economic trends.Adverse changes in key assumptions may re
178、sult in a decline in fairvalue below the carrying value in the future and therefore,animpairment of our Medical Unit goodwill in future periods,which couldadversely affect our results of operations.For example,if we were toincrease the discount rate by a hypothetical 0.5 percent to 10.5percent or de
179、crease the terminal growth rate by a hypothetical 1.75percent to 0.25 percent,the fair value for the Medical Unit would havefurther decreased by approximately$250 million.Additionally,ahypothetical 25 basis point decrease in long-term gross margin rates,which could be impacted by changes in Cardinal
180、 Health brandedmedical product sales growth rate assumptions,would haveincreased the impairment charge by approximately$220 million.Other indefinite-lived intangiblesThe impairment test for indefinite-lived intangibles other than goodwill(primarily trademarks)involves first assessing qualitative fac
181、tors todetermine if it is more likely than not that the fair value of theindefinite-lived intangible asset is less than its carrying amount.If so,then a quantitative test is performed to compare the estimated fairvalue of the indefinite-lived intangible asset to the respective assetscarrying amount.
182、Our qualitative evaluation requires the use ofestimates and significant judgments and considers the weight ofevidence and significance of all identified events and circumstancesand most relevant drivers of fair value,both positive and negative,indetermining whether it is more likely than not that th
183、e fair value of theindefinite-lived intangible asset is less than its carrying amount.See Note 1 of Notes to Consolidated Financial Statements foradditional information regarding goodwill and other intangible assets.Loss Contingencies and Self-InsuranceWe regularly review contingencies and self-insu
184、rance accruals todetermine whether our accruals and related disclosures areadequate.Any adjustments for changes in reserves are recorded inthe period in which the change in estimate occurs.Loss ContingenciesWe accrue for contingencies related to disputes,litigation andregulatory matters if it is pro
185、bable that a liability has been incurredand the amount of the loss can be reasonably estimated.Becausethese matters are inherently unpredictable and unfavorabledevelopments or outcomes can occur,assessing contingencies ishighly subjective and requires judgments about future events.Examples of such c
186、ontingencies include various lawsuits related tothe distribution of prescription opioid pain medications and the IVCfilter lawsuits.18Cardinal Health|Fiscal 2023 Form 10-KMD&ACritical Accounting Policies and Sensitive Accounting EstimatesWe develop and periodically update reserve estimates for all l
187、itigationmatters,including IVC claims,received to date and expected to bereceived in the future and related costs.In April 2023,we executed asettlement agreement that,if certain conditions are satisfied,willresolve approximately 4,376 IVC filter product liability claims for$275million.These settleme
188、nts will not resolve all IVC filter product liabilityclaims and we intend to continue to vigorously defend ourselves inthe remaining lawsuits.To project future IVC claim costs,we use amethodology based largely on recent experience,including claimfiling rates,blended average payout influenced by clai
189、m severity,historical sales data,implant and injury to report lag patterns andestimated defense costs.Self-InsuranceWe self-insure through a wholly-owned insurance subsidiary foremployee healthcare,certain product liability matters,auto liability,property and workers compensation and maintain insura
190、nce forlosses exceeding certain limits.Self-insurance accruals include an estimate for expected settlementson pending claims,defense costs,administrative fees,claimsadjustment costs and an estimate for claims incurred but notreported.For certain types of exposures,we develop the estimate ofexpected
191、ultimate costs to settle each claim based on specificinformation related to each claim if available.Other estimates arebased on an assessment of outstanding claims,historical analysisand current payment trends.For claims incurred but not reported,theliabilities are calculated and derived in accordan
192、ce with generallyaccepted actuarial practices or using an estimated lag period.The amount of loss may differ materially from these estimates.SeeNote 7 of the“Notes to Consolidated Financial Statements”foradditional information regarding loss contingencies and productliability lawsuits.Provision for
193、Income TaxesWe account for income taxes using the asset and liability method.Deferred tax assets and liabilities are measured using enacted taxrates in the respective jurisdictions in which we operate.Our incometax expense,deferred income tax assets and liabilities andunrecognized tax benefits refle
194、ct managements assessment ofestimated future taxes to be paid on items in the consolidatedfinancial statements.The following table presents information about our tax position atJune 30:(in millions)20232022Total deferred income tax assets(1)$1,540$1,584 Valuation allowance for deferred income tax as
195、sets(2)(421)(468)Net deferred income tax assets1,119 1,116 Total deferred income tax liabilities(3,164)(3,110)Net deferred income tax liability$(2,045)$(1,994)(1)Total deferred income tax assets included$671 million and$778 million of lossand tax credit carryforwards at June 30,2023 and 2022,respect
196、ively.(2)The valuation allowance primarily relates to federal,state and international lossand credit carryforwards for which the ultimate realization of future benefits isuncertain.Expiring or unusable loss and credit carryforwards and the requiredvaluation allowances are adjusted quarterly when it
197、is more likelythan not that at least a portion of the respective deferred tax assetswill not be realized.After applying the valuation allowances,we donot anticipate any limitations on our use of any of the other netdeferred income tax assets described previously.Tax benefits from uncertain tax posit
198、ions are recognized when it ismore likely than not that the position will be sustained uponexamination of the technical merits of the position,includingresolutions of any related appeals or litigation.The amountrecognized is measured as the largest amount of tax benefit that isgreater than 50 percen
199、t likely of being realized upon settlement.For tax benefits that do not qualify for recognition,we recognize aliability for unrecognized tax benefits.We operate in a complex multinational tax environment and aresubject to tax treaty arrangements and transfer pricing guidelines forintercompany transa
200、ctions that are subject to interpretation.Uncertainty in a tax position may arise as tax laws are subject tointerpretation.Tax Effects of Goodwill Impairment ChargesDuring fiscal 2023 and 2022,we recognized cumulative pre-taxgoodwill impairment charges of$1.2 billion and$2.1 billion,respectively,rel
201、ated to the Medical Unit.The net tax benefits relatedto these charges were$82 million and$150 million,respectively.We file income tax returns in the U.S.federal jurisdiction,various U.S.state jurisdictions and various foreign jurisdictions.With fewexceptions,we are subject to audit by taxing authori
202、ties for fiscalyears 2015 through the current fiscal year.Tax laws are complex andsubject to varying interpretations.During fiscal 2021,we resolved allopen issues with respect to the Companys activity within fiscal years2008 through 2014 with the U.S.Internal Revenue Service(IRS).This resolution res
203、ulted in an adjustment to our provision for incometaxes,including an impact to reserves for later years.New challengesrelated to future audits may adversely affect our effective tax rate ortax payments.Our assumptions and estimates around uncertain tax positionsrequire significant judgment;the actua
204、l amount of tax benefit relatedto uncertain tax positions may differ from these estimates.See Note 8of the“Notes to Consolidated Financial Statements”for additionalinformation regarding unrecognized tax benefits.We believe that our estimates for the valuation allowances againstdeferred tax assets an
205、d unrecognized tax benefits are appropriatebased on current facts and circumstances.The amount weCardinal Health|Fiscal 2023 Form 10-K19MD&ACritical Accounting Policies and Sensitive Accounting Estimatesultimately pay when matters are resolved may differ from theamounts accrued.Changes in our curren
206、t estimates due tounanticipated market conditions,tax law changes or other factorscould have a material effect on our ability to utilize deferred taxassets.For a further discussion on Provision for Income Taxes,seeNote 8 of the“Notes to the Consolidated Financial Statements.”The calculation of our t
207、ax liabilities includes estimates foruncertainties in the application of broad and complex changes to theU.S.tax code as per the Tax Act as enacted by the United Statesgovernment on December 22,2017.We have made reasonableestimates and recorded amounts based on management judgmentand our current und
208、erstanding of the Tax Act which is subject tofurther interpretation by the IRS.See Note 8 of the“Notes toConsolidated Financial Statements”for additional information.20Cardinal Health|Fiscal 2023 Form 10-KExplanation and Reconciliation of Non-GAAP Financial MeasuresExplanation and Reconciliation of
209、Non-GAAP Financial MeasuresThis report,including the Fiscal 2023 Overview section within MD&A,contains financial measures that are not calculated in accordance withGAAP.In addition to analyzing our business based on financial information prepared in accordance with GAAP,we use these non-GAAP financi
210、almeasures internally to evaluate our performance,engage in financial and operational planning and determine incentive compensation becausewe believe that these measures provide additional perspective on and,in some circumstances are more closely correlated to,the performanceof our underlying,ongoin
211、g business.We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers inassessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance tothat of our competitors.However,the non-GAAP
212、financial measures that we use may be calculated differently from,and therefore may not becomparable to,similarly titled measures used by other companies.The non-GAAP financial measures disclosed by us should not be considereda substitute for,or superior to,financial measures calculated in accordanc
213、e with GAAP,and the financial results calculated in accordance withGAAP and reconciliations to those financial statements set forth below should be carefully evaluated.Exclusions from Non-GAAP Financial MeasuresManagement believes it is useful to exclude the following items from the non-GAAP measure
214、s presented in this report for its own and forinvestors 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 aspharmaceutical manufacturer price appreciation or deflat
215、ion and year-end inventory levels(which can be meaningfully influenced bycustomer 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
216、 current financial results to our historicalfinancial results and to our peer group companies financial results.We did not recognize any LIFO charges or credits during the periodspresented.Surgical gown recall costs or income includes inventory write-offs and certain remediation and supply disruptio
217、n costs,net of relatedinsurance recoveries,arising from the January 2020 recall of select Association for the Advancement of Medical Instrumentation(AAMI)Level 3 surgical gowns and voluntary field actions(a recall of some packs and a corrective action allowing overlabeling of otherpacks)for Presourc
218、e Procedure Packs containing affected gowns.Income from surgical gown recall costs represents insurancerecoveries of these certain costs.We have excluded these costs from our non-GAAP metrics to allow investors to better understand theunderlying operating results of the business and to facilitate co
219、mparison of our current financial results to our historical financial resultsand to our peer group companies financial results.State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that weresold or distributed in periods prior
220、to the period in which the expense is incurred.This portion is excluded from non-GAAP financialmeasures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscalyear results of our underlying,ongoing business.Additionally,while st
221、ates 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 stateopioid assessments related to prior fiscal years represents reversals of accruals due to changes in estima
222、tes or when the underlyingassessments 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 theagreement(the Cooperation Agreement)entered into among Elliott Associates,L.P
223、.,Elliott International,L.P.(together,Elliott)andCardinal Health,including costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the BusinessReview Committee of the Board of Directors,which was formed under this Cooperation Agreement.We have excluded these costs fr
224、omour non-GAAP metrics because they do not occur in or reflect the ordinary course of our ongoing business operations and may obscureanalysis of trends and financial performance.Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underly
225、ingbusiness and include,but are not limited to,costs related to divestitures,closing and consolidating facilities,changing the way wemanufacture or distribute our products,moving manufacturing of a product to another location,changes in production or businessprocess outsourcing or insourcing,employe
226、e severance and realigning operations.Amortization and other acquisition-related costs,which include transaction costs,integration costs and changes in the fair value ofcontingent consideration obligations,are excluded because they are not part of the ongoing operations of our underlying business an
227、d tofacilitate comparison of our current financial results to our historical financial results and to our peer groupCardinal Health|Fiscal 2023 Form 10-K21Explanation and Reconciliation of Non-GAAP Financial Measurescompanies financial results.Additionally,costs for amortization of acquisition-relat
228、ed intangible assets are non-cash amounts,which arevariable in amount and frequency and are significantly impacted by the timing and size of acquisitions,so their exclusion facilitatescomparison of historical,current and forecasted financial results.We also exclude other acquisition-related costs,wh
229、ich are directlyrelated to an acquisition but do not meet the criteria to be recognized on the acquired entitys initial balance sheet as part of thepurchase price allocation.These costs are also significantly impacted by the timing,complexity and size of acquisitions.Impairments and gain or loss on
230、disposal of assets,net are excluded because they do not occur in or reflect the ordinary course of ourongoing business operations and are inherently unpredictable in timing and amount,and in the case of impairments,are non-cashamounts,so their exclusion facilitates comparison of historical,current a
231、nd forecasted financial results.Litigation recoveries or charges,net are excluded because they often relate to events that may have occurred in prior or multipleperiods,do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount.Duringfiscal 2
232、022,we incurred a one-time contingent attorneys fee of$18 million related to the finalization of the settlement agreement(the“National Opioid Settlement Agreement”)resulting in the settlement of the vast majority of opioid lawsuits filed by state and localgovernmental entities.Due to the unique natu
233、re and significance of the National Opioid Settlement Agreement,and the one-time,contingent nature of the fee,this fee was included in litigation recoveries or charges,net.Additionally,during fiscal 2022 ourPharmaceutical segment profit was positively impacted by a$16 million judgment for lost profi
234、ts.This judgment was the result of anordinary course intellectual property rights claim and,therefore,is not adjusted in calculating the litigation recoveries or charges,netadjustment.During fiscal 2021,we incurred a tax benefit related to a carryback of a net operating loss.Some pre-tax amounts,whi
235、chcontributed to this loss,relate to litigation charges.As a result,we allocated substantially all of the tax benefit to litigation charges.Loss on early extinguishment of debt is excluded because it does not typically occur in the normal course of business and may obscureanalysis of trends and fina
236、ncial performance.Additionally,the amount and frequency of this type of charge is not consistent and issignificantly impacted by the timing and size of debt extinguishment transactions.(Gain)/Loss on sale of equity interest in naviHealth was incurred in connection with the sale of our remaining equi
237、ty interest innaviHealth in fiscal 2020.The equity interest was retained in connection with the initial sale of our majority interest in naviHealth duringfiscal 2019.We exclude this significant gain because gains or losses on investments of this magnitude do not typically occur in thenormal course o
238、f business and are similar in nature to a gain or loss from a divestiture of a majority interest,which we exclude from non-GAAP results.The gain on the initial sale of our majority interest in naviHealth in fiscal 2019 was also excluded from our non-GAAPmeasures.The tax effect for each of the items
239、listed above is determined using the tax rate and other tax attributes applicable to the item and thejurisdiction(s)in which the item is recorded.The gross,tax and net impact of each item are presented with our GAAP to non-GAAPreconciliations.DefinitionsGrowth rate calculation:growth rates in this r
240、eport are determined by dividing the difference between current period results and prior periodresults by prior period results.Non-GAAP operating earnings:operating earnings/(loss)excluding(1)LIFO charges/(credits),(2)surgical gown recall costs/(income),(3)state opioid assessment related to prior fi
241、scal years,(4)shareholder cooperation agreement costs,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/loss on disposal of assets,net and(8)litigation(recoveries)/charges,net.Non-GAAP earnings before income taxes:earnings/(loss)befo
242、re income taxes excluding(1)LIFO charges/(credits),(2)surgical gown recallcosts/(income),(3)state opioid assessment related to prior fiscal years,(4)shareholder cooperation agreement costs,(5)restructuring andemployee severance,(6)amortization and other acquisition-related costs,(7)impairments and(g
243、ain)/loss on disposal of assets,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equity interest in naviHealth.Non-GAAP net earnings attributable to Cardinal Health,Inc.:net earnings/(loss)attributable to Cardinal Health,Inc.excluding(1)
244、LIFOcharges/(credits),(2)surgical gown recall costs/(income),(3)state opioid assessment related to prior fiscal years,(4)shareholder cooperationagreement costs,(5)restructuring and employee severance,(6)amortization and other acquisition-related costs,(7)impairments and(gain)/losson disposal of asse
245、ts,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equityinterest in naviHealth,each net of tax.22Cardinal Health|Fiscal 2023 Form 10-KExplanation and Reconciliation of Non-GAAP Financial MeasuresNon-GAAP effective tax rate:provision fo
246、r/(benefit from)income taxes adjusted for the tax impacts of(1)LIFO charges/(credits),(2)surgicalgown recall costs/(income),(3)state opioid assessment related to prior fiscal years,(4)shareholder cooperation agreement costs,(5)restructuring and employee severance,(6)amortization and other acquisitio
247、n-related costs,(7)impairments and(gain)/loss on disposal ofassets,net,(8)litigation(recoveries)/charges,net,(9)loss on early extinguishment of debt and(10)(gain)/loss on sale of equity interest innaviHealth divided by(earnings before income taxes adjusted for the ten items above).Non-GAAP diluted e
248、arnings per share attributable to Cardinal Health,Inc.:non-GAAP net earnings attributable to Cardinal Health,Inc.divided by diluted weighted-average shares outstanding.Cardinal Health|Fiscal 2023 Form 10-K23Explanation and Reconciliation of Non-GAAP Financial MeasuresGAAP to Non-GAAP Reconciliations
249、(in millions,except per common shareamounts)OperatingEarnings/(Loss)OperatingEarnings/(Loss)Growth RateEarnings/(Loss)Before IncomeTaxesProvisionfor/(BenefitFrom)IncomeTaxesNetEarnings/(Loss)NetEarnings/(Loss)Growth RateEffectiveTax RateDilutedEPSDilutedEPSGrowthRateFiscal Year 2023GAAP$727 N.M.$638
250、$376$261 N.M.58.9%$1.00 N.M.State opioid assessment related to priorfiscal years(6)(6)(2)(4)(0.02)Shareholder cooperation agreementcosts8 8 2 6 0.02 Restructuring and employee severance95 95 21 74 0.28 Amortization and other acquisition-relatedcosts285 285 74 211 0.80 Impairments and(gain)/loss on d
251、isposalof assets,net1,250 1,250 86 1,164 4.44 Litigation(recoveries)/charges,net(302)(302)(109)(193)(0.73)Non-GAAP$2,057 3%$1,968$448$1,519 7%22.8%$5.79 14%Fiscal Year 2022GAAP$(596)N.M.$(769)$163$(933)N.M.(21.2)%$(3.35)N.M.Surgical gown recall costs/(income)1 1 1 Restructuring and employee severanc
252、e101 101 26 75 0.27 Amortization and other acquisition-relatedcosts324 324 84 240 0.87 Impairments and(gain)/loss on disposalof assets,net2,050 2,050 107 1,943 6.93 Litigation(recoveries)/charges,net109 109 21 88 0.31 Loss on early extinguishment of debt 10 3 7 0.03 Loss on sale of equity interest i
253、nnaviHealth investment(2)(2)Non-GAAP$1,990(12)%$1,824$404$1,419(13)%22.1%$5.06(9)%Fiscal Year 2021GAAP$472 N.M.$323$(289)$611 N.M.(89.7)%$2.08 N.M.Surgical gown recall costs/(income)(28)(28)(7)(21)(0.07)State opioid assessment related to priorfiscal years38 38 9 29 0.10 Restructuring and employee se
254、verance114 114 27 87 0.29 Amortization and other acquisition-relatedcosts451 451 118 333 1.13 Impairments and(gain)/loss on disposalof assets,net79 79 15 64 0.21 Litigation(recoveries)/charges,net1,129 1,129 606 523 1.78 Loss on early extinguishment of debt 14 3 11 0.04 Loss on sale of equity intere
255、st innaviHealth investment 2 1 1 0.01 Non-GAAP$2,255(5)%$2,122$483$1,637 2%22.8%$5.57 2%Attributable to Cardinal Health,Inc.For fiscal 2022,GAAP diluted loss per share attributable to Cardinal Health,Inc.and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculatedusing a w
256、eighted average of 279 million common shares,which excludes potentially dilutive securities from the denominator due to their anti dilutive effects resulting from ourGAAP net loss for the period.Fiscal 2022 non-GAAP diluted EPS is calculated using a weighted average of 280 million common shares,whic
257、h includes potentially dilutiveshares.Impairments and(gain)/loss on disposals of assets,net includes pre-tax goodwill impairment charges of$1.2 billion and$2.1 billion,related to the Medical segment recordedduring fiscal 2023 and 2022,respectively.For fiscal 2023 and 2022,the net tax benefits relate
258、d to these charges were$82 million and$150 million,respectively,and wereincluded in the annual effective tax rate.Litigation(recoveries)/charges,net includes a one-time contingent attorneys fee of$18 million recorded during fiscal 2022 related to the finalization of the National OpioidSettlement Agr
259、eement resulting in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities.Due to the unique nature and significanceof the National Opioid Settlement Agreement,and the one-time,contingent nature of the fee,this fee was included in litigation(recoveries)
260、/charges,net.Litigation(recoveries)/charges,net for fiscal 2022 does not include a$16 million judgement for lost profits related to an ordinary course intellectual property claim,which positivelyimpacted Pharmaceutical segment profit.Litigation(recoveries)/charges,net includes pre-tax charges of$1.1
261、7 billion recorded in fiscal 2021,related to the opioid litigation.The net tax benefit associated with the opioidlitigation charges was$228 million.Litigation(recoveries)/charges,net,includes a tax benefit recorded during fiscal 2021 related to a net operating loss carryback.Our wholly-owned insuran
262、ce subsidiary recorded aself-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation.This self-insurance pre-tax loss,which did not111,21334,56,71 23 4 5 6 7 24Cardinal Health|Fiscal 2023 Form 10-KExplanation and Reconciliation of Non-GAAP Fina
263、ncial Measuresimpact our pre-tax consolidated results,was deducted on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for taxpurposes.The net operating loss was carried back and adjusted our taxable income for fiscal 2015,2016,2017 and 2018
264、as permitted under the Coronavirus Aid,Relief andEconomic Security(“CARES”)Act.The total benefit from the net operating loss carryback was$424 million;however,for purposes of Non-GAAP financial measures,weallocated$389 million of the benefit to litigation(recoveries)/charges,net,which is excluded fr
265、om 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$35 million was included in non-GAAPmeasures.The sum of the components and certain comp
266、utations may reflect rounding adjustments.We apply varying tax rates depending on the items nature and tax jurisdiction where it is incurred.Cardinal Health|Fiscal 2023 Form 10-K25Disclosures about Market RiskQuantitative and Qualitative Disclosures About Market RiskWe are exposed to cash flow and e
267、arnings fluctuations as a result of certain market risks.These market risks primarily relate to foreignexchange,interest rate and commodity price-related changes.We maintain a hedging program to manage volatility related to some of thesemarket exposures which employs operational,economic and derivat
268、ive financial instruments in order to mitigate risk.See Note 1 and Note 10 ofthe“Notes to Consolidated Financial Statements”for further discussion regarding our use of derivative instruments.Foreign Exchange Rate SensitivityBy the nature of our global operations,we are exposed to cash flowand earnin
269、gs fluctuations resulting from foreign exchange ratevariation.These exposures are transactional and translational innature.The following foreign currencies represent the principaldrivers of our foreign exchange exposure:Canadian dollar,euro,Thaibaht,Mexican peso,Chinese renminbi,Australian dollar,Br
270、itishpound,Japanese yen,Philippine peso,Swiss franc and Indian rupee.We apply a Value-At-Risk(VAR)methodology to our transactionaland translational exposures.The VAR model is a risk estimation tooland is not intended to represent actual losses in fair value that couldbe incurred.Transactional Exposu
271、reTransactional exposure arises from the purchase and sale of goodsand services in currencies other than our functional currency or thefunctional currency of our subsidiaries.At the endof each fiscal year,we perform sensitivity analyses on our forecastedtransactional exposure for the upcoming fiscal
272、 year.These analysesinclude the estimated impact of our hedging program,which isdesigned to mitigate transactional exposure.Applying a VARmethodology to our transactional exposure and including the impactof our hedging program,the potential maximum loss in earnings forthe upcoming fiscal year is est
273、imated to be$10 million,which isbased on a one-year horizon and a 95 percent confidence level.Translational ExposureWe have exposure related to the translation of financial statements ofour foreign operations into U.S.dollars,our functional currency.Applying a VAR methodology to our translational ex
274、posure,thepotential maximum loss in earnings for the upcoming fiscal year isestimated to be$5 million,which is based on a one-year horizon anda 95 percent confidence level.Interest Rate SensitivityWe are exposed to changes in interest rates primarily as a result ofour borrowing and investing activit
275、ies to maintain liquidity and fundoperations.The nature and amount of our long-term and short-termdebt can be expected to fluctuate as a result of businessrequirements,market conditions and other factors.Our policy is tomanage exposures to interest rates using a mix of fixed and floatingrate debt as
276、 deemed appropriate by management.We utilize interestrate swap instruments to mitigate our exposure to interest ratemovements.As part of our risk management program related to our debt,weperform an annual sensitivity analysis on our forecasted exposure tointerest rates for the upcoming fiscal year.A
277、t June 30,2023,ahypothetical increase or decrease of 50 basis points in interest rateswould result in an increase or decrease in interest expense of$6million,respectively.We are also exposed to market risk from changes in interest ratesrelated to our cash and cash equivalents,which includes marketab
278、lesecurities that are carried at fair value in the consolidated balancesheets.The fair value of our cash and cash equivalents is subject tochange primarily as a result of changes in market interest rates andinvestment risk related to the issuers credit worthiness.At June 30,2023,a hypothetical incre
279、ase or decrease of 50 basis points ininterest rates would result in an increase or decrease in interestincome of$12 million,respectively.26Cardinal Health|Fiscal 2023 Form 10-KDisclosures about Market RiskCommodity Price SensitivityWe are directly exposed to market price changes for certaincommoditi
280、es,including oil-based resins,nitrile,cotton,diesel fuel andlatex.We typically purchase raw materials at either market prices orprices tied to a commodity index and some finished goods at pricesbased in part on a commodity price index.During fiscal 2023,theprices of certain commodities continued to
281、experience fluctuation dueto inflationary impacts.As part of our risk management program,we perform sensitivityanalysis on our forecasted direct commodity exposure for theupcoming fiscal year.Our forecasted direct commodity exposure atJune 30,2023 increased approximately$40 million from June 30,2022
282、.There were no outstanding commodity contracts in our hedgingprogram at June 30,2023.Our forecasted direct commodity exposures for the upcoming fiscalyear is$540 million.The potential gain/loss given a hypothetical 10percent fluctuation in commodity prices,assuming pricing collectivelyshifts in the
283、same direction and we are unable to change customerpricing in response to those shifts or otherwise offset,for theupcoming fiscal year is$54 million at June 30,2023.Cardinal Health|Fiscal 2023 Form 10-K27BusinessBusinessGeneralCardinal Health,Inc.is a global healthcare services and products company
284、providing customized solutions for hospitals,healthcare systems,pharmacies,ambulatory surgery centers,clinical laboratories,physician offices and patients in the home.We provide medical products andpharmaceuticals and cost-effective solutions that enhance supply chain efficiency.Pharmaceutical Segme
285、ntIn the United States,our Pharmaceutical segment:through its Pharmaceutical Distribution division,distributes brandedand generic pharmaceutical and over-the-counter healthcare andconsumer products to retailers(including chain and independentdrug stores and pharmacy departments of supermarkets and m
286、assmerchandisers),hospitals and other healthcare providers.Thisdivision:maintains prime vendor relationships that streamline thepurchasing process resulting in greater efficiency and lower costsfor our retail,hospital and other healthcare provider customers;provides services to pharmaceutical manufa
287、cturers,includingdistribution,inventory management,data reporting,new productlaunch support and chargeback administration;distributes specialty pharmaceutical products to hospitals andother healthcare providers and provides consulting,patientsupport and other services for specialty pharmaceutical pr
288、oductsto pharmaceutical manufacturers and healthcare providers;provides pharmacy management services to hospitals andoperates a limited number of pharmacies,including in communityhealth centers;and repackages generic pharmaceuticals and over-the-counterhealthcare products;through its Nuclear and Pre
289、cision Health Solutions division,operates nuclear pharmacies and manufacturing facilities,whichmanufacture,prepare and deliver radiopharmaceuticals for use innuclear imaging and other procedures in hospitals and physicianoffices.This division also contract manufactures aradiopharmaceutical treatment
290、(Xofigo)and holds the NorthAmerican rights to manufacture and distribute Lymphoseek,aradiopharmaceutical diagnostic imaging agent.See Note 13 of the“Notes to Consolidated Financial Statements”forPharmaceutical segment revenue,profit and assets for fiscal 2023,2022 and 2021.Pharmaceutical and Special
291、ty PharmaceuticalDistribution and ServicesOur Pharmaceutical Distribution divisions gross margin includesmargin from our generic pharmaceutical program,from distributionservices agreements with branded pharmaceutical manufacturers,including manufacturers of Specialty pharmaceutical products,andfrom
292、over-the-counter healthcare and consumer products.It alsoincludes manufacturer cash discounts.Margin from our generic pharmaceutical program includes pricediscounts,rebates and service fees from manufacturers and may inlimited instances include price appreciation.Our earnings on genericpharmaceutica
293、ls are generally highest during the period immediatelyfollowing the initial launch of a product,because genericpharmaceutical selling prices are generally highest during that periodand tend to decline over time.Margin from distribution services agreements with brandedpharmaceutical manufacturers is
294、derived from compensation wereceive for providing a range of distribution and related services tomanufacturers.Our compensation typically is a percentage of thewholesale acquisition cost that is set by manufacturers.In addition,under a limited number of agreements,branded pharmaceutical priceappreci
295、ation,which is determined by the manufacturers,also servesas part of our compensation.Specialty pharmaceutical products include oncology,rheumatology,urology,nephrology and other pharmaceutical products.Through ourSpecialty division,we also distribute human-derived plasma productsto hospitals,dialys
296、is clinics,physician offices and other healthcareproviders.Our use of the term“specialty pharmaceutical products”may not be comparable to the terminology used by other industryparticipants.We also provide consulting,patient support,logistics,group purchasing and other services to pharmaceuticalmanuf
297、acturers and healthcare providers.Sourcing Venture with CVS Health CorporationRed Oak Sourcing,LLC(Red Oak Sourcing),a U.S.-based genericpharmaceutical sourcing venture with CVS Health negotiates genericpharmaceutical supply contracts on behalf of both companies.Theterm of Red Oak Sourcing extends t
298、hrough June 2029.28Cardinal Health|Fiscal 2023 Form 10-KBusinessMedical SegmentOur Medical segment manufactures and sources Cardinal Healthbranded general and specialty medical,surgical and laboratoryproducts and devices.These products include exam and surgicalgloves;needle,syringe and sharps dispos
299、al;compression;incontinence;nutritional delivery;wound care;single-use surgicaldrapes,gowns and apparel;fluid suction and collection systems;urology;operating room supply;and electrode product lines.OurCardinal Health Brand products are sold directly or through third-partydistributors in the United
300、States,Canada,Europe,Asia and othermarkets.These products are generally higher-margin products.The Medical segment also distributes a broad range of medical,surgical and laboratory products known as national brand productsand provides supply chain services and solutions to hospitals,ambulatory surge
301、ry centers,clinical laboratories and otherhealthcare providers in the United States and Canada and thissegment also assembles and sells sterile and non-sterile procedurekits.Through Cardinal Health at-Home Solutions,this segment alsodistributes medical products to patients homes in the United States
302、.The Medical segment,through its Wavemark division,also providesan automated technology platform for inventory management.The Medical segment,through its OptiFreight Logistics division,supports the shipping and logistic needs of healthcare providers byoptimizing direct shipments through integrated t
303、echnology solutions.Acquisitions and DivestituresAcquisitionsWe have acquired a number of businesses over the years that haveenhanced the strategic areas of Cardinal Health Brand medicalproducts,generic pharmaceutical distribution and services andspecialty pharmaceutical products and services.We exp
304、ect tocontinue to pursue additional acquisitions in the future.During the lastfive fiscal years,we have completed small acquisitions.DivestituresOver the past five fiscal years,we have also completed severaldivestitures.In June 2023,we signed a definitive agreement to contribute ourOutcomes business
305、 to Transaction Data Systems(TDS),a portfoliocompany of BlackRock Long Term Private Capital and GTCR,inexchange for a minority stake in the combined entity.The transactionclosed in July 2023.In August 2021,we completed the divestiture of the Cordis businessto Hellman&Freidman(H&F)for net proceeds of
306、$923 million incash.We have retained certain working capital accounts and productliability for lawsuits related to IVC filters in the U.S.and Canada,asdescribed in Note 7 of the Notes to the Consolidated FinancialStatements.We acquired the Cordis business from Johnson&Johnson for$1.9 billion in Octo
307、ber 2015.This divestiture alsoincluded Access Closure,Inc.,a manufacturer and distributor ofextravascular closure devices,that we acquired for approximately$320 million in May 2014.In August 2018,we completed the sale of our equity interest innaviHealth,Inc.to investor entities controlled by Clayton
308、,Dubilier&Rice,LLC for proceeds of$737 million(after adjusting for certain feesand expenses)and a noncontrolling equity interest in a partnershipthat owned naviHealth.In May 2020,we sold the remainder of ourequity interest in naviHealth.We had acquired our equity interest in naviHealth through a ser
309、ies oftransactions beginning in fiscal 2016,when we acquired a majorityequity interest.Cardinal Health|Fiscal 2023 Form 10-K29BusinessCustomersOur largest customers,CVS Health and OptumRx,accounted for 25percent and 16 percent of our fiscal 2023 revenue,respectively.Inthe aggregate,our five largest
310、customers,including CVS Health andOptumRx,accounted for 51 percent of our fiscal 2023 revenue.We have agreements with group purchasing organizations(“GPOs”)that act as agents to negotiate vendor contracts onbehalf of their members.Our two largest GPO relationships in termsof revenue are with Vizient
311、,Inc.and Premier,Inc.Sales to membersof these two GPOs,under numerous contracts across ourbusinesses,collectively accounted for 16 percent of our revenue infiscal 2023.SuppliersWe rely on many different suppliers.Products obtained from our five largest suppliers accounted for an aggregate of 39 perc
312、ent of our revenueduring fiscal 2023,and our largest suppliers products accounted for approximately 10 percent of revenue.CompetitionWe operate in a highly competitive environment in the distribution ofpharmaceuticals and consumer healthcare products.We also operatein a highly competitive environmen
313、t in the manufacturing anddistribution of medical devices and surgical products.We compete onmany levels,including price,service offerings,support services,customer service,breadth of product lines and product quality andefficacy.In the Pharmaceutical segment,we compete with wholesaledistributors wi
314、th national reach,including McKesson Corporation andAmerisourceBergen Corporation,regional wholesale distributors,self-warehousing chains,specialty distributors,third-party logisticscompanies,companies that provide specialty pharmaceuticalservices and nuclear pharmacies,among others.In addition,the
315、Pharmaceutical segment has experienced competitionfrom a number of organizations offering generic pharmaceuticals,including telemarketers.We also compete with manufacturers thatdistribute their products directly to customers.In the Medical segment,we compete with many diversified healthcarecompanies
316、 and national medical product distributors,such as MedlineIndustries,Inc.,Owens&Minor,Inc.and Becton,Dickinson andCompany,as well as regional medical product distributors andcompanies that are focused on specific product categories.We alsocompete with companies that distribute medical products to pa
317、tientshomes and third-party logistics companies.Human Capital ManagementEmployeesThrough our employees,we improve the lives of people every day bysolving complex healthcare problems.As of June 30,2023,we hadapproximately 48,000 employees globally,of which approximately:17,500 are based outside the U
318、nited States;98%are full time employees,30,900 worked in our distribution centers,manufacturingfacilities and pharmacies,16,900 worked in other functions,including finance,information technology,human resources and sales;and11%of whom are covered by collective bargainingagreements or similar represe
319、ntation.The majority of theseemployees are based outside the United States.Additionally,we have engaged global professional services firms toperform certain business processes on our behalf,including withinfinance,information technology and human resources.Board OversightOur Board of Directors asses
320、ses and monitors our corporate cultureand how it enables our business strategies.To inform the Boardabout human capital and cultural health,we have developed andannually share with the Board a culture scorecard.Additionally,the Human Resources and Compensation Committee ofthe Board of Directors(the“
321、HRCC”)is tasked with,among otherthings,overseeing and advising the Board about human capitalmanagement strategies and policies,including with respect toattracting,developing,retaining and motivating management andemployees;workplace diversity,equity and inclusion initiatives andprogress;employee rel
322、ations;and workplace safety and culture.TheHRCC is also responsible for overseeing the managementsuccession process.Culture&Talent FocusCultureCardinal Healths culture is rooted in our values and behaviors andaligned to the companys strategic framework.Providing a positivework environment supports o
323、ur ability to attract,retain and develop 30Cardinal Health|Fiscal 2023 Form 10-KBusinessour employees and enables business performance.We reinforce,monitor and assess our culture through a variety of programs andprocesses which include performance management,talent/succession planning,as well as emp
324、loyee engagement surveysand other listening strategies.Talent Management and LearningCardinal Healths talent management strategy is a segmented,multi-pronged approach to build capabilities,skills and competencies ofleaders and employees throughout the enterprise ensuringemployees capabilities connec
325、t to business needs and outcomes.This segmented approach includes broad based employee skilldevelopment and learning and manager development.We monitor our turnover data on a monthly and rolling 12-monthbasis and benchmark against Bureau of Labor and Statistics andcompetitor data.Although turnover l
326、evels vary by site and region,weprimarily look at the connection between key operational metrics andemployee turnover.Compensation and BenefitsOur colleagues are essential to our success and we strive to offercomprehensive and competitive wages and benefits.The benefits weoffer include annual bonuse
327、s and stock awards for eligibleemployees,401(k)plans,health care and insurance benefits,paidtime off,flexible work schedules,family leave,dependent careresources,employee assistance programs and many others.Employee FeedbackCardinal Health solicits feedback from employees through variousmechanisms,i
328、ncluding our biennial full employee engagementsurvey,which provides insight into the employee experience.Theresults of this survey are reviewed with the Board of Directors and atall levels throughout the organization.Diversity,Equity&InclusionAt Cardinal Health,we are focused on building a diverse w
329、orkforceand an inclusive workplace that values the unique perspectives andcontributions of all of our employees.Our work is sponsored by our senior executives,led by our Diversity,Equity and Inclusion(DE&I)team,including our Chief DiversityOfficer and HR organization,with input from our DE&I Steerin
330、gCouncil,Black and African American Racial Equity Cabinet and ourEmployee Resource Groups(ERGs).Additionally,our seven ERGs include groups focused on variousracial and ethnic groups,members of the LGBTQ community,employees with disabilities,veterans and women and are designed topromote a culture of
331、diversity,equity and inclusion.We also monitor pay equity.We define pay equity as equal pay forpeople of all gender identities and ethnicities who are performingsubstantially similar work.We have a pay equity committee,whichguides the ongoing analysis and benchmarking,in regularconsultation with an
332、independent third-party,to review and helpinform our salary and compensation practices.Some of the things weconsider include job-related skills,tenure,experience and educationlevel,performance rating and geography.As of the end of fiscal year 2023,53%of our Board of Directors werewomen and 23%were e
333、thnically diverse.36%of our executive team(made up of the CEO,his direct reports and business presidents)were women and 18%were ethnically diverse.Approximately 50%ofour total employee population were women and 50%of U.S.basedemployees were ethnically diverse.Worker Health&SafetyThe health,safety and security of our employees and contractors is apriority for us.We employ systems designed to contin