《嘉德诺(CARDINAL HEALTH)2023年第一季度财报(英文版)(53页).pdf》由会员分享,可在线阅读,更多相关《嘉德诺(CARDINAL HEALTH)2023年第一季度财报(英文版)(53页).pdf(53页珍藏版)》请在三个皮匠报告上搜索。
1、Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549Form 10-QQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31,2023orTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
2、 ACT OF 1934For 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 Place,Dublin,Ohio43017(Add
3、ress of principal 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 Exchan
4、geIndicate 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 of1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject tosuch fili
5、ng requirements for the 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 Rule405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that th
6、e registrant was required tosubmit such files).Yes No oIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reportingcompany,or an emerging growth company.See the definitions of“large accelerated filer,”“accelerated filer,”
7、“smaller reporting company”andemerging growth company in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the exten
8、ded transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No The number of the registrants common s
9、hares,without par value,outstanding as of April 30,2023,was the following:254,600,182.Cardinal HealthQ3 Fiscal 2023 Form 10-QTable of ContentsPageManagements Discussion and Analysis of Financial Condition and Results of Operations2Explanation and Reconciliation of Non-GAAP Financial Measures16Quanti
10、tative and Qualitative Disclosures about Market Risk21Controls and Procedures21Legal Proceedings22Risk Factors23Unregistered Sales of Equity Securities and Use of Proceeds25Financial Statements26Exhibits44Form 10-Q Cross Reference Index45Signatures46About Cardinal HealthCardinal Health,Inc.,an Ohio
11、corporation formed in 1979,is a globally integrated healthcare services and products company providingcustomized solutions for hospitals,healthcare systems,pharmacies,ambulatory surgery centers,clinical laboratories,physician offices andpatients in the home.We provide pharmaceuticals and medical pro
12、ducts and cost-effective solutions that enhance supply chain efficiency.Weconnect patients,providers,payers,pharmacists and manufacturers for integrated care coordination and better patient management.Wemanage our business and report our financial results in two segments:Pharmaceutical and Medical.A
13、s used in this report,“we,”“our,”“us,”andsimilar pronouns refer to Cardinal Health,Inc.and its majority-owned and consolidated subsidiaries,unless the context requires otherwise.Ourfiscal year ends on June 30.References to fiscal 2023 and fiscal 2022 and to FY23 and FY22 are to the fiscal years endi
14、ng or ended June 30,2023 and June 30,2022,respectively.Forward-Looking StatementsThis Quarterly Report on Form 10-Q for the quarter ended March 31,2023(this Form 10-Q)(including information incorporated by reference)includes forward-looking statements addressing expectations,prospects,estimates and
15、other matters that are dependent upon future events ordevelopments.Many forward-looking statements appear in Managements Discussion and Analysis of Financial Condition and Results ofOperations(MD&A),but there are others in this Form 10-Q,which may be identified by words such as expect,anticipate,int
16、end,plan,believe,will,should,could,would,project,continue,likely,and similar expressions,and include statements reflecting future resultsor guidance,statements of outlook and expense accruals.These matters are subject to risks and uncertainties that could cause actual results todiffer materially fro
17、m those made,projected or implied.The most significant of these risks and uncertainties are described in this Form 10-Q,including Exhibit 99.1,and in Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30,2022(our“2022 Form 10-K”).Forward-looking statements in this Form 10-
18、Q speak only as of the date of this document.Except to the extent required by applicable law,weundertake no obligation to update or revise any forward-looking statement.Non-GAAP Financial MeasuresIn the Overview of Consolidated Results section of MD&A,we use financial measures that are derived from
19、our consolidated financial data butare not presented in our condensed consolidated financial statements prepared in accordance with U.S.generally accepted accountingprinciples(GAAP).These measures are considered non-GAAP financial measures under the United States Securities and ExchangeCommission(SE
20、C)rules.The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparableGAAP financial measures are included in the“Explanation and Reconciliation of Non-GAAP Financial Measures”section following MD&A in thisForm 10-Q.1Cardinal Health|Q3 Fiscal 2023 Form
21、 10-QMD&AOverviewManagements Discussion and Analysis of Financial Condition andResults of OperationsThe discussion and analysis presented below is concerned with material changes in financial condition and results of operations,includingamounts and certainty of cash flows from operations and from ou
22、tside sources,between the periods specified in our condensed consolidatedbalance sheets at March 31,2023 and June 30,2022,and in our condensed consolidated statements of earnings/(loss)for the three and ninemonths ended March 31,2023 and 2022.All comparisons presented are with respect to the prior-y
23、ear period,unless stated otherwise.Thisdiscussion and analysis should be read in conjunction with the MD&A included in our 2022 Form 10-K.2Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOverviewOverview of Consolidated ResultsRevenueDuring the three and nine months ended March 31,2023,revenue increased
24、 13 percent to$50.5 billion and$151.6 billion,respectively,primarilydue to branded and specialty pharmaceutical sales growth from existing customers.During the nine months ended March 31,2023,pharmaceutical sales growth from net new customers also contributed to increased revenue.GAAP and Non-GAAP O
25、perating Earnings/(Loss)Three Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangeGAAP operating earnings/(loss)$572$(97)N.M.$590$(632)N.M.Surgical gown recall costs/(income)1 State opioid assessment related to prior fiscal years (6)Shareholder cooperation agree
26、ment costs 8 Restructuring and employee severance16 31 62 56 Amortization and other acquisition-related costs74 79 216 237 Impairments and(gain)/loss on disposal of assets,net20 471 883 1,764 Litigation(recoveries)/charges,net(76)61(256)113 Non-GAAP operating earnings$606$545 11%$1,497$1,540(3)%The
27、sum of the components and certain computations may reflect rounding adjustments.We had GAAP operating earnings of$572 million during the three months ended March 31,2023 and a GAAP operating loss of$97 millionduring the three months ended March 31,2022,which reflects no goodwill impairment charge re
28、cognized during the three months endedMarch 31,2023 and the$474 million pre-tax non-cash goodwill impairment charge related to the Medical segment recognized during the threemonths ended March 31,2022.We had GAAP operating earnings of$590 million and a GAAP operating loss of$632 million during the n
29、ine months ended March 31,2023 and2022,respectively,which included the$863 million and$1.8 billion pre-tax non-cash goodwill impairment charges related to the Medicalsegment,respectively.See Critical Accounting Policies and Sensitive Accounting Estimates section of this MD&A and Note 4 of the Notes
30、toCondensed Consolidated Financial Statements for additional detail related to goodwill impairment.GAAP operating earnings during the three and nine months ended March 31,2023 were favorably impacted by litigation recoveries.SeeResults of Operations section of this MD&A and Note 6 of the Notes to Co
31、ndensed Consolidated Financial Statements for additional detailrelated to litigation recoveries.Non-GAAP operating earnings during the three months ended March 31,2023 increased 11 percent to$606 million primarily due to an increasein Pharmaceutical segment profit largely driven by the performance o
32、f our generics program and an increased contribution from branded andspecialty pharmaceutical products.This increase was partially offset by a decrease in Medical segment profit largely resulting from lowervolumes and unfavorable product sales mix within products and distribution.Non-GAAP operating
33、earnings during the nine months ended March 31,2023 decreased 3 percent to$1.5 billion primarily due to a decrease inMedical segment profit largely resulting from lower volumes and unfavorable product sales mix within products and distribution and netinflationary impacts.This decrease was partially
34、offset by an increase in Pharmaceutical segment profit primarily driven by the performance ofour generics program and an increased contribution from branded and specialty pharmaceutical products.3Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOverviewGAAP and Non-GAAP Diluted EPSThree Months Ended Marc
35、h 31,Nine Months Ended March 31,($per share)20232022Change20232022ChangeGAAP diluted EPS$1.34$(5.05)N.M.$1.23$(3.82)N.M.State opioid assessment related to prior fiscal years 0.02 Shareholder cooperation agreement costs (0.02)Restructuring and employee severance0.05 0.08 0.18 0.15 Amortization and ot
36、her acquisition-related costs0.21 0.21 0.61 0.63 Impairments and(gain)/loss on disposal of assets,net 0.35 6.03 2.82 6.71 Litigation(recoveries)/charges,net(0.21)0.18(0.60)0.33 Loss on early extinguishment of debt 0.03 Non-GAAP diluted EPS$1.74$1.45 20%$4.24$4.01 6%The sum of the components and cert
37、ain computations may reflect rounding adjustments.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 Explanationand Reconciliation of Non-GAAP Financial Measures.(1)Diluted earnings
38、/(loss)per share attributable to Cardinal Health,Inc.(diluted EPS).(2)For the three and nine months ended March 31,2022,GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using aweighted average of 275 million and 281 million common shares,respec
39、tively,which excludes potentially dilutive securities from the denominator due to their anti-dilutiveeffects resulting from our GAAP net loss for the periods.For the three and nine months ended March 31,2022,non-GAAP diluted EPS is calculated using a weighted averageof 277 million and 282 million co
40、mmon shares,respectively,which includes potentially dilutive shares.(3)Impairments and(gain)/loss on disposal of assets,net included pre-tax goodwill impairment charges related to the Medical segment of$863 million recorded during the ninemonths ended March 31,2023.For fiscal 2023,the estimated net
41、tax benefit related to the impairments is$68 million and is included in the annual effective tax rate.As a result,the amount of tax expense recognized increased approximately by an incremental$74 million during the three months ended March 31,2023.The incremental interim taxbenefit recognized during
42、 the nine months ended March 31,2023 was$66 million and will reverse in the fourth quarter of the fiscal year.During the three and nine months ended March 31,2022,impairments and(gain)/loss on disposal of assets,net included pre-tax goodwill impairment charges of$474 millionand$1.8 billion,respectiv
43、ely,related to the Medical segment.For fiscal 2022,the estimated net tax benefit related to the impairment was$126 million and was included in theannual effective tax rate.As a result,the amount of tax expense recognized during the three and nine months ended March 31,2022 increased approximately by
44、 anincremental$1.2 billion and$180 million,respectively,and lowered the provision for income taxes during the fourth quarter of fiscal 2022 by approximately$180 million.GAAP diluted EPS was adversely impacted by the goodwill impairment charges related to the Medical segment,which had a$(2.76)per sha
45、reafter tax impact during the nine months ended March 31,2023,and$(6.01)and$(6.67)per share after tax impact during the three and ninemonths ended March 31,2022,respectively.See Critical Accounting Policies and Sensitive Accounting Estimates section of this MD&A,andNote 4 and Note 7 of the Notes to
46、Condensed Consolidated Financial Statements for additional detail.GAAP EPS during the three and ninemonths ended March 31,2023 also includes the favorable impact of litigation recoveries as described further in the Results of Operationssection of this MD&A and Note 6 of Notes to Condensed Consolidat
47、ed Financial Statements.During the three months ended March 31,2023,non-GAAP diluted EPS increased 20 percent to$1.74 per share due to higher non-GAAPoperating earnings and a lower share count.During the nine months ended March 31,2023,non-GAAP diluted EPS increased 6 percent to$4.24 per share due t
48、o a lower share count andinterest expense,partially offset by lower non-GAAP operating earnings.Cash and EquivalentsOur cash and equivalents balance was$4.0 billion at March 31,2023 compared to$4.7 billion at June 30,2022.During the nine months endedMarch 31,2023,net cash provided by operating activ
49、ities was$2.0 billion,which includes the impact of our second annual payment of$372 million related to the agreement to settle the vast majority of the opioid lawsuits filed by states and local governmental entities(theSettlement Agreement).In addition,during the nine months ended March 31,2023,we d
50、eployed$1.5 billion for share repurchases,$571million for debt repayments,$399 million for cash dividends and$264 million for capital expenditures.(2)(2)(1)(3)(1)4Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOverviewSignificant Developments in Fiscal 2023 and TrendsInflationary ImpactsBeginning in fi
51、scal 2022,Medical segment profit was negatively affected by incremental inflationary impacts,primarily related to transportation(including ocean and domestic freight),commodities and labor,and global supply chain constraints.Since that time,we have taken certainactions to mitigate these impacts,incl
52、uding implementing certain price increases and evolving our pricing and commercial contracting processesto provide us with greater pricing flexibility.In addition,certain decreases in some product-related costs are beginning to be recognized as thehigher-cost inventory is moving through our supply c
53、hain.As a result,during the three months ended March 31,2023,these inflationary impacts,net of our mitigation actions,and global supply chain constraints had a slightly favorable impact on Medical segment profit on a year-over-yearbasis.During the nine months ended March 31,2023,these net inflationa
54、ry impacts negatively affected Medical segment profit on a year-over-year basis.We expect these net inflationary impacts to continue to affect Medical segment profit in fiscal 2023 and beyond,but to a lesser extent than inprior periods.These inflationary costs are difficult to predict and may be gre
55、ater than we expect or continue longer than our current expectations.Any additional benefit to Medical segment profit from further decreases in these product-related costs will be delayed until the higher-costinventory has moved through our supply chain.Our actions to increase prices and evolve our
56、contracting strategies are subject to contingenciesand uncertainties and it is possible that our results of operations will be adversely impacted to a greater extent than we currently anticipate orthat we may not be able to mitigate the negative impact to the extent or on the timeline we anticipate.
57、To a lesser extent,inflationary impacts,primarily related to increased transportation and labor costs,also adversely affected Pharmaceuticalsegment profit during the three and nine months ended March 31,2023 and on a year-over-year basis during the nine months ended March 31,2023.During the three mo
58、nths ended March 31,2023,these inflationary impacts did not have a meaningful impact on Pharmaceutical segmentprofit on a year-over-year basis.PPE Demand and PricingPersonal protective equipment(PPE)refers to protective clothing,medical gloves,face shields,face masks and other equipment designed top
59、rotect the wearer from injury or the spread of infection or illness.PPE adversely impacted Medical segment revenue during the three and nine months ended March 31,2023 on a year-over-year basis,primarilydue to declines in volumes and pricing.Medical segment profit was favorably impacted during the t
60、hree and nine months ended March 31,2023 and on a year-over-year basis by a netpositive contribution from PPE,primarily driven by lower costs.The demand and pricing for PPE is subject to risks and uncertainties,which may continue to impact Medical segment revenue,Medical segmentprofit and consolidat
61、ed operating earnings during the remainder of fiscal 2023.Medical GoodwillDue to changes in our long-term financial plan assumptions made during the three months ended March 31,2023,we performed interimgoodwill impairment testing for the Medical operating segment(excluding our Cardinal Health at-Hom
62、e Solutions division)(the“Medical Unit”)atMarch 31,2023.We concluded that there was no impairment of goodwill at March 31,2023,as the estimated fair value of the Medical Unitexceeded its carrying value.We performed quantitative goodwill impairment testing for the Medical Unit at December 31,2022 and
63、 September 30,2022,which resulted inpre-tax goodwill impairment charges of$709 million and$154 million,respectively.The cumulative pre-tax goodwill impairment charges of$863million were recognized in impairments and(gain)/loss on disposal of assets,net in our condensed consolidated statements of ear
64、nings/(loss)for the nine months ended March 31,2023.See Critical Accounting Policies and Sensitive Accounting Estimates section of this MD&A andNote 4 of the Notes to Condensed Consolidated Financial Statements for additional detail.Adverse changes in key assumptions,including an increase in the dis
65、count rate,or a significant change in industry or economic trends duringthe remainder of fiscal 2023 and beyond could result in additional goodwill impairments.5Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOverviewShareholder Cooperation AgreementIn September 2022,we entered into a Cooperation Agreem
66、ent(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 Elliott,and(2)formed an advisory Business Review Commit
67、tee 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 Elliotts representative ceases to serve on,or resigns fr
68、om,the Board.Inconnection 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 the Business Review Committee and the Board may impact our financialposition and results of operations dur
69、ing the remainder of fiscal 2023 and beyond.In addition,during the nine months ended March 31,2023,weincurred$8 million of expenses related to the negotiation and finalization of the Cooperation Agreement and other consulting expenses.We haveincurred,and expect to continue to incur additional legal,
70、consulting and other expenses related to the Cooperation Agreement and the activitiesof the Business Review Committee.See Risk Factors section for additional detail related to risks associated with the Cooperation Agreement.Pharmaceutical Segment Generics ProgramThe performance of our Pharmaceutical
71、 segment generics program positively impacted the year-over-year comparison of Pharmaceuticalsegment profit during the three and nine months ended March 31,2023.The Pharmaceutical segment generics program includes,among otherthings,the impact of generic pharmaceutical product launches,customer volum
72、es,pricing changes,the Red Oak Sourcing,LLC venture(RedOak Sourcing)with CVS Health Corporation(CVS Health)and generic pharmaceutical contract manufacturing and sourcing costs.During thenine months ended March 31,2023,generic pharmaceutical contract manufacturing inventory-related charges adversely
73、impacted theperformance of our generics program.The frequency,timing,magnitude and profit impact of generic pharmaceutical customer volumes,pricing changes,customer contract renewals,generic pharmaceutical manufacturer pricing changes and generic pharmaceutical contract manufacturing and sourcing co
74、sts all impactPharmaceutical segment profit and are subject to risks and uncertainties.These risks and uncertainties may impact Pharmaceutical segmentprofit and consolidated operating earnings during the remainder of fiscal 2023.6Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AResults of OperationsResul
75、ts of OperationsRevenueThree Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangePharmaceutical$46,809$40,957 14%$140,310$122,154 15%Medical3,684 3,884(5)%11,259 12,118(7)%Total segment revenue50,493 44,841 13%151,569 134,272 13%Corporate(6)(5)N.M.(10)(11)N.M.To
76、tal revenue$50,487$44,836 13%$151,559$134,261 13%Pharmaceutical SegmentPharmaceutical segment revenue increased during the three and nine months ended March 31,2023 due to branded and specialtypharmaceutical sales growth,which increased revenue by$5.8 billion and$17.9 billion,respectively,primarily
77、from existing customers.Duringthe nine months ended March 31,2023,pharmaceutical sales growth from net new customers also contributed to increased revenue.Medical SegmentMedical segment revenue decreased during the three months ended March 31,2023 primarily due to an adverse impact of PPE volumes an
78、dpricing within products and distribution.Medical segment revenue decreased during the nine months ended March 31,2023 primarily due to lower sales within products and distribution,which includes an adverse impact from PPE volumes and pricing,and was partially offset by sales growth in at-Home Solut
79、ions.Cost of Products SoldCost of products sold for the three and nine months ended March 31,2023 increased 13 percent to$48.7 billion and$146.5 billion,respectively,compared to the prior-year periods due to the factors affecting the changes in revenue and gross margin.7Cardinal Health|Q3 Fiscal 202
80、3 Form 10-QMD&AResults of OperationsGross MarginThree Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangeGross margin$1,785$1,682 6%$5,062$4,940 2%Gross margin increased during the three and nine months ended March 31,2023 primarily due to the Pharmaceutical se
81、gment,which includedthe performance of our generics program and a higher contribution from branded and specialty pharmaceutical products.The increase in grossmargin due to the Pharmaceutical segment during the nine months ended March 31,2023 was partially offset by the performance of productsand dis
82、tribution within the Medical segment,primarily driven by lower volumes and unfavorable product sales mix.Gross margin rate declined 21 basis points and 34 basis points during the three and nine months ended March 31,2023,respectively,mainlydue to changes in overall product mix,primarily driven by in
83、creased pharmaceutical distribution branded sales,which have a dilutive impact onour overall gross margin rate.Distribution,Selling,General and Administrative(SG&A)ExpensesThree Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangeSG&A expenses$1,179$1,137 4%$3,5
84、67$3,402 5%During the three and nine months ended March 31,2023,SG&A expenses increased primarily due to inflationary impacts,primarily related toincreased transportation and labor costs,and higher operating expenses(which were partially offset by the beneficial impact of enterprise-widecost-savings
85、 measures).During the nine months ended March 31,2023,we incurred$8 million of expenses primarily related to the finalization of the CooperationAgreement.See Significant Developments in Fiscal 2023 and Trends section in this MD&A for additional detail related to the CooperationAgreement.During the n
86、ine months ended March 31,2023,we recorded$6 million of income to reduce our accrual for the assessment on prescription opioidmedications that were sold or distributed in New York state in calendar year 2018 to the amount invoiced.See Note 6 of the Notes toCondensed Consolidated Financial Statements
87、 for additional information.8Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AResults of OperationsSegment ProfitWe evaluate segment performance based on segment profit,among other measures.See Note 12 of the Notes to Condensed ConsolidatedFinancial Statements for additional information on segment profit
88、.Three Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangePharmaceutical$600$487 23%$1,495$1,319 13%Medical20 59(66)%29 232(88)%Total segment profit620 546 14%1,524 1,551(2)%Corporate(48)(643)N.M.(934)(2,183)N.M.Total consolidated operating earnings/(loss)$572$
89、(97)N.M.$590$(632)N.M.Pharmaceutical Segment ProfitPharmaceutical segment profit increased during the three and nine months ended March 31,2023 primarily due to the performance of ourgenerics program and an increased contribution from branded and specialty pharmaceutical products.Medical Segment Pro
90、fitMedical segment profit decreased during the three and nine months ended March 31,2023 primarily due to the performance of products anddistribution,largely driven by lower volumes and unfavorable product sales mix.Medical segment profit during the nine months ended March 31,2023 was also unfavorab
91、ly affected by net inflationary impacts.CorporateThe changes in Corporate during the three and nine months ended March 31,2023 were due to the factors discussed in the Other Componentsof Consolidated Operating Earnings/(Loss)section that follows.9Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AResults o
92、f 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:Three Months Ended March 31,Nine Months Ended March 31,(in millions)2023202220232022Res
93、tructuring and employee severance$16$31$62$56 Amortization and other acquisition-related costs74 79 216 237 Impairments and(gain)/loss on disposal of assets,net20 471 883 1,764 Litigation(recoveries)/charges,net(76)61(256)113 Restructuring and Employee SeveranceRestructuring and employee severance c
94、osts during the three and nine months ended March 31,2023 were primarily related to theimplementation of certain enterprise-wide cost-savings measures and the divestiture of the Cordis business.During the three and nine monthsended March 31,2022,restructuring also included facility exit costs relate
95、d to decreasing our overall office space.Amortization and Other Acquisition-Related CostsAmortization of acquisition-related intangible assets was$69 million and$78 million for the three months ended March 31,2023 and 2022,respectively,and$211 million and$235 million for the nine months ended March
96、31,2023 and 2022,respectively.Impairments and(Gain)/Loss on Disposal of Assets,NetWe recognized$863 million of pre-tax non-cash goodwill impairment charges related to our Medical segment during the nine months endedMarch 31,2023,and$474 million and$1.8 billion during the three and nine months ended
97、March 31,2022,respectively,as discussed further inthe Critical Accounting Policies and Sensitive Accounting Estimates section of this MD&A and Note 4 of the Notes to Condensed ConsolidatedFinancial Statements.Litigation(Recoveries)/Charges,NetWe recognized income of$71 million and$95 million during
98、the three and nine months ended March 31,2023,respectively,primarily related to areduction of the reserve for the estimated settlement and defense costs for the Cordis OptEase and TrapEase inferior vena cava(IVC)productliability due to the execution of certain settlement agreements.During the three
99、and nine months ended March 31,2022,we recognizedestimated losses and legal defense costs associated with the IVC filter product liability claims of$24 million and$63 million,respectively.SeeNote 6 of the Notes to Condensed Consolidated Financial Statements for additional information.During the nine
100、 months ended March 31,2023,we recognized income of$93 million due to net proceeds from the settlement of a shareholderderivative litigation matter as described further in the Legal Proceedings section.We recognized income for net recoveries in class action antitrust lawsuits in which we were a clas
101、s member or plaintiff of$66 million and$17 million during the nine months ended March 31,2023 and 2022,respectively.During the three and nine months ended March 31,2022,we incurred a one-time contingent attorney fee of$18 million related to the finalizationof the Settlement Agreement resulting in th
102、e settlement of the vast majority of opioid lawsuits filed by state and local governmental entities.Dueto the unique nature and significance of the Settlement Agreement,and the one-time,contingent nature of the fee,this related fee was includedin litigation(recoveries)/charges,net.Earnings/(Loss)Bef
103、ore Income TaxesIn addition to the items discussed above,earnings/(loss)before income taxes were impacted by the following:Three Months Ended March 31,Nine Months Ended March 31,(in millions)20232022Change20232022ChangeOther(income)/expense,net$3 N.M.$(5)$(14)N.M.Interest expense,net28 38(26)%78 115
104、(32)%Loss on early extinguishment of debt N.M.10 N.M.(Gain)/loss on sale of equity interest in naviHealth(1)N.M.(2)N.M.10Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AResults of OperationsInterest Expense,NetDuring the three and nine months ended March 31,2023,interest expense decreased by 26 percent
105、and 32 percent,respectively,primarily dueto increased interest income from cash and equivalents.Loss on Early Extinguishment of DebtDuring the nine months ended March 31,2022,we recognized a$10 million loss in connection with the debt redemption as described further inNote 5 of the“Notes to Condense
106、d Consolidated Financial Statements.”Provision for Income TaxesThe effective tax rate was 36.3 percent and(916.5)percent during the three months ended March 31,2023 and 2022,respectively,and 36.7percent and(44.4)percent during the nine months ended March 31,2023 and 2022,respectively.These tax rates
107、 reflect the impact of the taxeffects of goodwill impairment charges recognized during the three and nine months ended March 31,2023 and 2022.Tax Effects of Goodwill Impairment ChargesDuring the nine months ended March 31,2023,we recognized cumulative pre-tax goodwill impairment charges of$863 milli
108、on related to theMedical Unit.The net tax benefit related to these charges is$68 million for fiscal 2023.Unless an item is considered discrete because it is unusual or infrequent,the tax impact of the item is included in our estimated annual effectivetax rate.When items are recognized through our es
109、timated annual effective tax rate,we apply our estimated annual effective tax rate to theearnings/(loss)before income taxes for the year-to-date period to compute our impact from income taxes for the current quarter and year-to-dateperiod.The tax impacts of discrete items are recognized in their ent
110、irety in the period in which they occur.The tax effect of the goodwill impairment charges recorded during the nine months ended March 31,2023 was included in our estimated annualeffective tax rate because it was not considered unusual or infrequent,given that we recorded goodwill impairments in prio
111、r fiscal years.Theimpact of the non-deductible goodwill increased the estimated annual effective tax rate for fiscal 2023.Applying the higher tax rate to the pre-taxincome for the nine months ended March 31,2023 resulted in recognizing an incremental interim tax expense of approximately$74 million,w
112、hich impacted the provision for income taxes in the condensed consolidated statements of earnings/(loss)during the three months endedMarch 31,2023 and prepaid expenses and other assets in the condensed consolidated balance sheet at March 31,2023.The incrementalinterim tax benefit recognized during t
113、he nine months ended March 31,2023 was$66 million and will reverse in the fourth quarter of fiscal 2023.11Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&ALiquidity and Capital ResourcesLiquidity and Capital ResourcesWe currently believe that,based on available capital resources(cash on hand and committe
114、d credit facilities)and projected operating cash flow,we have adequate capital resources to fund working capital needs;currently anticipated capital expenditures;currently anticipated businessgrowth and expansion;contractual obligations and cash requirements;tax payments;current and projected debt s
115、ervice requirements,upcomingdebt maturities,dividends and share repurchases;and known opioid litigation settlement payments.If we decide to engage in one or moreacquisitions,depending on the size and timing of such transactions,we may need to access capital markets for additional financing.Cash and
116、EquivalentsOur cash and equivalents balance was$4.0 billion at March 31,2023compared to$4.7 billion at June 30,2022.During the nine months ended March 31,2023,net cash provided byoperating activities was$2.0 billion,which includes the impact of oursecond annual payment of$372 million related to the
117、SettlementAgreement.For additional information,see Opioid LitigationSettlement Agreement section below.In addition,we deployed cashof$1.5 billion for share repurchases,$571 million for debtrepayments,$399 million for cash dividends and$264 million forcapital expenditures.At March 31,2023,our cash an
118、d equivalents were held in cashdepository accounts with major banks or invested in high quality,short-term liquid investments.Changes in working capital,which impact operating cash flow,canvary significantly depending on factors such as the timing of customerpayments,inventory purchases,payments to
119、vendors and taxpayments in the regular course of business,as well as fluctuatingworking capital needs driven by customer and product mix.The cash and equivalents balance at March 31,2023 includes$689million of cash held by subsidiaries outside of the United States.Other Financing Arrangements and Fi
120、nancial InstrumentsCredit Facilities and Commercial PaperIn addition to cash and equivalents and operating cash flow,othersources of liquidity at March 31,2023 include a$2.0 billioncommercial paper program,backed by a$2.0 billion revolving creditfacility.We also have a$1.0 billion committed receivab
121、les salesfacility.During the nine months ended March 31,2023,under ourcommercial paper program and our committed receivables program,we had maximum combined total daily amounts outstanding of$445million and average combined daily amount outstanding of$4 million.At March 31,2023,we had no amounts out
122、standing under ourcommercial paper program,revolving credit facility,or our committedreceivables sales facility.In February 2023,we extended our revolving credit facility throughFebruary 25,2028.In September 2022,we renewed our committedreceivables sales facility program through Cardinal Health Fund
123、ing,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 March 31,2023,we were in compliance with this financialcovenant.Long-Term Debt and Other Short-Term Borrowings
124、At March 31,2023 and June 30,2022,we had total long-termobligations,including the current portion and other short-termborrowings,of$4.7 billion and$5.3 billion,respectively.In March2023,we repaid$550 million 3.2%Notes due 2023 at maturity withavailable cash.12Cardinal Health|Q3 Fiscal 2023 Form 10-Q
125、MD&ALiquidity and Capital ResourcesCapital DeploymentOpioid Litigation Settlement AgreementWe had$5.85 billion accrued at March 31,2023 related to certainopioid litigation,as further described within Note 6 of the Notes toCondensed Consolidated Financial Statements.We expect themajority of the remai
126、ning payment amounts to be spread over thenext 17 years.The effective date of the Settlement Agreement wasApril 2,2022.During the nine months ended March 31,2023,wemade our second annual payment of$372 million under theSettlement Agreement.We expect to make subsequent annualpayments under the Settle
127、ment Agreement every July for theremainder of the 18-year term of the Settlement Agreement.Theamounts of these future payments may differ from the payments thatwe have already made.Capital ExpendituresCapital expenditures during the nine months ended March 31,2023and 2022 were$264 million and$223 mi
128、llion,respectively.DividendsOn each of May 10,2022,August 10,2022,November 8,2022 andFebruary 10,2023,our Board of Directors approved a quarterlydividend of$0.4957 per share,or$1.98 per share on an annualizedbasis,which were paid on July 15,2022,October 17,2022,January15,2023 and April 15,2023 to sh
129、areholders of record on July 1,2022,October 3,2022,January 3,2023 and April 3,2023,respectively.Share RepurchasesDuring the nine months ended March 31,2023,we repurchased$1.5 billion of our common shares,in the aggregate,underaccelerated share repurchase(ASR)programs.We funded the ASRprograms with a
130、vailable cash.See Note 10 of the Notes toCondensed Consolidated Financial Statements for additionalinformation.On November 4,2021,our Board of Directors approved a new$3.0 billion share repurchase program,which will expire onDecember 31,2024.As of March 31,2023,we have$1.2 billionauthorized for shar
131、e repurchases remaining under this program.13Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOther ItemsOther ItemsThe MD&A in our 2022 Form 10-K addresses our contractual obligations and cash requirements,as of and for the fiscal year ended June 30,2022.There have been no subsequent material changes ou
132、tside the ordinary course of business to those items.Critical Accounting Policies and Sensitive Accounting EstimatesThe discussion and analysis presented below is a supplemental disclosure to the critical accounting policies and sensitive accounting estimatesspecified in our consolidated balance she
133、et at June 30,2022.This discussion and analysis should be read in conjunction with the CriticalAccounting Policies and Sensitive Accounting Estimates included in our 2022 Form 10-K and our Form 10-Q for the quarters ended September30,2022 and December 31,2022.Critical accounting policies are those a
134、ccounting policies that(i)can have a significant impact on our financial condition and results of operationsand(ii)require the use of complex and subjective estimates based upon past experience and managements judgment.Other people applyingreasonable judgment to the same facts and circumstances coul
135、d develop different estimates.Because estimates are inherently uncertain,actualresults may differ,including due to the risks discussed in Risk Factors and other risks discussed in our 2022 Form 10-K and our other filingswith the SEC since June 30,2022.GoodwillPurchased goodwill is tested for impairm
136、ent annually or whenindicators of impairment exist.Goodwill impairment testing involves acomparison of the estimated fair value of reporting units to therespective carrying amount,which may be performed utilizing either aqualitative or quantitative assessment.Qualitative factors are firstassessed to
137、 determine if it is more likely than not that the fair value ofa reporting unit is less than its carrying amount.If it is determined thatit is more likely than not that the fair value does not exceed thecarrying amount,then a quantitative test is performed.Thequantitative goodwill impairment test in
138、volves a comparison of theestimated fair value of the reporting unit to the respective carryingamount.A reporting unit is defined as an operating segment or onelevel below an operating segment(also known as a component).Our reporting units are:Pharmaceutical operating segment(excludingour Nuclear an
139、d 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 Solutions division.Goodwill impairment testing involves judgment,including theidentific
140、ation 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 reporting unit.Our qualitative evaluation considers theweight of evidence and significance
141、 of all identified events andcircumstances and most relevant drivers of fair value,both positiveand negative,in determining whether it is more likely than not that thefair value of a reporting unit is less than its carrying amount.Medical Unit GoodwillDue to changes in our long-term financial plan a
142、ssumptions madeduring the three months ended March 31,2023,we elected to bypassthe qualitative assessment and perform quantitative goodwillimpairment testing for the Medical Unit.We concluded that there wasno impairment of goodwill at March 31,2023,as the estimated fairvalue of the Medical Unit exce
143、eded its carrying value byapproximately 4 percent,primarily driven by a lower discount rate asdescribed below.We performed quantitative goodwill impairment testing for theMedical Unit at December 31,2022 and September 30,2022,whichresulted in pre-tax goodwill impairment charges of$709 million and$15
144、4 million,respectively.The impairment charge recognized in thesecond quarter was driven by certain 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-fre
145、e interest rate.Thecumulative pre-tax goodwill impairment charges of$863 million wererecognized in impairments and(gain)/loss on disposal of assets,netin our condensed consolidated statements of earnings/(loss)for thenine months ended March 31,2023.Our determinations of the estimated fair value of t
146、he Medical Unit atMarch 31,2023,December 31,2022 and September 30,2022 werebased on a combination of the income-based approach(using aterminal growth rate of 2 percent),and the market-based approaches.For the income-based approach,we used discount rates of 10percent,10.5 percent and 10.5 percent for
147、 each quarter,respectively.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.Thedecrease in the discount rate for the interim testing performed atMarch 31,2023 was p
148、rimarily due to a decrease in the risk-freeinterest rate.14Cardinal Health|Q3 Fiscal 2023 Form 10-QMD&AOther ItemsWhile we consider the assumptions used in our determination of theestimated fair value of the Medical Unit to be reasonable andappropriate,they are complex and subjective,and additional
149、adversechanges in one key assumption or a combination of key assumptionsduring fiscal 2023 may significantly affect future estimates.Theseassumptions include,among other things,a failure to meet expectedearnings or other financial plans,including the execution of keyinitiatives related to optimizing
150、 and growing sales of Cardinal Healthbranded medical products,increasing growth in certain strategicdivisions within our Medical segment,and driving simplification effortsand cost optimization projects,or unanticipated events andcircumstances,such as changes in assumptions about the durationand magn
151、itude of increased supply chain and commodities costs andour efforts to mitigate such impact,including price increases orsurcharges;further disruptions in the supply chain;manufacturingcost inefficiencies resulting from lower than anticipated sales volume;estimated demand and selling prices for PPE;
152、an increase in thediscount rate;a decrease in the terminal growth rate;increases in taxrates;or a significant change in industry or economic trends.Adverse changes in key assumptions may result in a decline in fairvalue below the carrying value in the future and therefore,animpairment of our Medical
153、 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 decrease the terminal growth rate by a hypothetical 1.7percent to 0.3 percent,the carrying value would have excee
154、ded thefair value of the Medical Unit by approximately 1 percent.During the three months ended March 31,2022 and December 31,2021,we performed quantitative goodwill impairment testing for theMedical Unit.This quantitative testing resulted in the carrying amountof the Medical Unit exceeding the fair
155、value,resulting in pre-taximpairment charges of$474 million and$1.3 billion recorded duringthe three months ended March 31,2022 and December 31,2021,respectively.Refer to our 2022 Form 10-K for additional detail.15Cardinal Health|Q3 Fiscal 2023 Form 10-QExplanation and Reconciliation of Non-GAAP Fin
156、ancial MeasuresExplanation and Reconciliation of Non-GAAP Financial MeasuresThe Overview of Consolidated Results section within MD&A in this Form 10-Q contains financial measures that are not calculated inaccordance with GAAP.In addition to analyzing our business based on financial information prepa
157、red in accordance with GAAP,we use these non-GAAP financialmeasures 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 clos
158、ely correlated to,the performanceof our underlying,ongoing 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 pe
159、rformance tothat of our competitors.However,the non-GAAP 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,
160、or superior to,financial measures calculated in accordance 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
161、 to exclude the following items from the non-GAAP measures 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 a
162、spharmaceutical manufacturer price appreciation or deflation 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 cr
163、edits from non-GAAP metrics facilitates comparison of our 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 inventor
164、y write-offs and certain remediation and supply disruption 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 correctiv
165、e action allowing overlabeling of otherpacks)for Presource 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 theunderlyi
166、ng operating results of the business and to facilitate comparison 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 m
167、edications that weresold or distributed in periods prior 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
168、 of our underlying,ongoing business.Additionally,while states laws may require us to make payments on an ongoing basis,the portion of the assessment related to sales in prior periods are contemplated to be one-time,nonrecurring items.Income from stateopioid assessments related to prior fiscal years
169、represents reversals of accruals due to changes in estimates 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 Cooper
170、ation Agreement)entered into among Elliott Associates,L.P.,Elliott International,L.P.(together,Elliott)andCardinal Health,including costs incurred to negotiate and finalize the Cooperation Agreement and costs incurred by the new BusinessReview Committee of the Board of Directors,which was formed und
171、er this Cooperation Agreement.We have excluded these costs fromour 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 becau
172、se they are not part of the ongoing operations of our underlyingbusiness.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 opera
173、tions of our underlying business and tofacilitate comparison of our current financial results to our historical financial results and to our peer group 16Cardinal Health|Q3 Fiscal 2023 Form 10-QExplanation and Reconciliation of Non-GAAP Financial Measurescompanies financial results.Additionally,cost
174、s for amortization of acquisition-related 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 exc
175、lude other acquisition-related costs,which 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 acquis
176、itions.Impairments and gain or loss on 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 facilit
177、ates comparison of historical,current and forecasted financial results.Litigation recoveries or charges,net are excluded because they often relate to events that may have occurred in prior or multipleperiods,do not occur in or reflect the ordinary course of our business and are inherently unpredicta
178、ble in timing and amount.Duringfiscal 2022,we incurred a one-time contingent attorneys fee of$18 million related to the finalization of the settlement agreement(the“Settlement Agreement”)resulting in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entitie
179、s.Due to the unique nature and significance of the Settlement Agreement,and the one-time,contingent nature of the fee,this fee wasincluded in litigation recoveries or charges,net.Additionally,during fiscal 2022 our Pharmaceutical segment profit was positivelyimpacted by a$16 million judgment for los
180、t profits.This judgment was the result of an ordinary course intellectual property rights claimand,therefore,is not adjusted in calculating the litigation recoveries or charges,net adjustment.During fiscal 2021,we incurred a taxbenefit related to a carryback of a net operating loss.Some pre-tax amou
181、nts,which contributed 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
182、and financial 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 remain
183、ing equity 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
184、course of 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 th
185、e items 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 i
186、n this report 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
187、prior fiscal 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/(l
188、oss)before 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)impairmen
189、ts and(gain)/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.excl
190、uding(1)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
191、 of assets,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.17Cardinal Health|Q3 Fiscal 2023 Form 10-QExplanation and Reconciliation of Non-GAAP Financial MeasuresNon-GAAP effective tax rate:p
192、rovision for income taxes adjusted for the tax impacts of(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-re
193、lated costs,(7)impairments and(gain)/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 divided by(earnings before income taxes adjusted for the ten items above).Non-GAAP diluted ear
194、nings per share attributable to Cardinal Health,Inc.:non-GAAP net earnings attributable to Cardinal Health,Inc.divided by diluted weighted-average shares outstanding.18Cardinal Health|Q3 Fiscal 2023 Form 10-QExplanation and Reconciliation of Non-GAAP Financial MeasuresGAAP to Non-GAAP Reconciliation
195、(in millions,except per common share amounts)OperatingEarnings/(Loss)OperatingEarningsGrowth RateEarnings/(Loss)Before IncomeTaxesProvision forIncome TaxesNetEarnings/(Loss)Net EarningsGrowth RateDilutedEPSDilutedEPSGrowthRateThree Months Ended March 31,2023GAAP$572 N.M.$544$197$345 N.M.$1.34 N.M.Re
196、structuring and employee severance16 16 4 12 0.05 Amortization and other acquisition-related costs74 74 19 55 0.21 Impairments and(gain)/loss on disposal of assets,net 20 20(69)89 0.35 Litigation(recoveries)/charges,net(76)(76)(22)(54)(0.21)Non-GAAP$606 11%$578$129$447 11%$1.74 20%Three Months Ended
197、 March 31,2022GAAP$(97)N.M.$(137)$1,253$(1,391)N.M.$(5.05)N.M.Restructuring and employee severance31 31 8 23 0.08 Amortization and other acquisition-related costs79 79 20 59 0.21 Impairments and(gain)/loss on disposal of assets,net 471 471(1,189)1,660 6.03 Litigation(recoveries)/charges,net 61 61 10
198、 51 0.18(Gain)/Loss on sale of equity interest in naviHealth(1)(1)Non-GAAP$545(21)%$504$101$402(11)%$1.45(5)%Nine Months Ended March 31,2023GAAP$590 N.M.$517$189$325 N.M.$1.23 N.M.State opioid assessment related to prior fiscalyears(6)(6)(2)(4)0.02 Shareholder cooperation agreement costs8 8 2 6(0.02
199、)Restructuring and employee severance62 62 14 48 0.18 Amortization and other acquisition-related costs216 216 56 160 0.61 Impairments and(gain)/loss on disposal of assets,net 883 883 138 745 2.82 Litigation(recoveries)/charges,net(256)(256)(98)(158)(0.60)Non-GAAP$1,497(3)%$1,424$299$1,122(1)%$4.24 6
200、%Nine Months Ended March 31,2022GAAP$(632)N.M.$(741)$328$(1,071)N.M.$(3.82)N.M.Surgical gown recall costs/(income)1 1 1 Restructuring and employee severance56 56 14 42 0.15 Amortization and other acquisition-related costs237 237 61 176 0.63 Impairments and(gain)/loss on disposal of assets,net 1,764
201、1,764(119)1,883 6.71 Litigation(recoveries)/charges,net 113 113 19 94 0.33 Loss on early extinguishment of debt 10 3 7 0.03(Gain)/Loss on sale of equity interest in naviHealth(2)(2)Non-GAAP$1,540(20)%$1,438$306$1,131(20)%$4.01(16)%111,21334334,5 19Cardinal Health|Q3 Fiscal 2023 Form 10-QExplanation
202、and Reconciliation of Non-GAAP Financial MeasuresAttributable to Cardinal Health,Inc.For the three and nine months ended March 31,2022,GAAP diluted EPS and the EPS impact from the GAAP to non-GAAP per share reconciling items arecalculated using a weighted average of 275 million and 281 million commo
203、n shares,respectively,which excludes potentially dilutive securities from thedenominator due to their anti-dilutive effects resulting from our GAAP net loss for the periods.For the three and nine months ended March 31,2022,non-GAAP diluted EPS is calculated using a weighted average of 277 million an
204、d 282 million common shares,respectively,which includes potentially dilutiveshares.Impairments and(gain)/loss on disposal of assets,net included pre-tax goodwill impairment charges related to the Medical segment of$863 million recordedduring the nine months ended March 31,2023.For fiscal 2023,the es
205、timated net tax benefit related to the impairments is$68 million and is included in theannual effective tax rate.As a result,the amount of tax expense recognized increased approximately by an incremental$74 million during the three monthsended March 31,2023.The incremental interim tax benefit recogn
206、ized during the nine months ended March 31,2023 was$66 million and will reverse in thefourth quarter of the fiscal year.During the three and nine months ended March 31,2022,impairments and(gain)/loss on disposal of assets,net included pre-tax goodwill impairmentcharges of$474 million and$1.8 billion
207、,respectively,related to the Medical segment.For fiscal 2022,the estimated net tax benefit related to the impairmentwas$126 million and was included in the annual effective tax rate.As a result,the amount of tax expense recognized during the three and nine monthsended March 31,2022 increased approxi
208、mately by an incremental$1.2 billion and$180 million,respectively,and lowered the provision for income taxesduring the fourth quarter of fiscal 2022 by approximately$180 million.Litigation(recoveries)/charges,net includes a one-time contingent attorney fee of$18 million recorded during the three and
209、 nine months ended March 31,2022 related to the finalization of the settlement agreement(the Settlement Agreement)resulting in the settlement of the vast majority of opioid lawsuitsfiled by state and local governmental entities.Due to the unique nature and significance of the Settlement Agreement,an
210、d the one-time,contingent natureof the fee,this related fee was included in litigation(recoveries)/charges,net.Litigation(recoveries)/charges,net for the nine months ended March 31,2022 does not include a$16 million judgement for lost profits related to an ordinarycourse intellectual property claim,
211、which positively impacted Pharmaceutical segment profit.The sum of the components and certain computations may reflect rounding adjustments.We apply varying tax rates depending on the items nature and tax jurisdiction where it is incurred.1 2 3 4 5 .20Cardinal Health|Q3 Fiscal 2023 Form 10-QOtherQua
212、ntitative and Qualitative Disclosures About Market RiskThere have been no material changes in the quantitative and qualitative market risk disclosures included in our 2022 Form 10-K since the end offiscal 2022 through March 31,2023.Controls and ProceduresEvaluation of Disclosure Controls and Procedu
213、resWe evaluated,with the participation of our principal executive officer and principal financial officer,the effectiveness of our disclosure controlsand procedures(as defined in Rule 13a-15(e)under the Securities Exchange Act of 1934(the Exchange Act)as of March 31,2023.Based onthis evaluation,our
214、principal executive officer and principal financial officer have concluded that as of March 31,2023,our disclosure controlsand procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Actis recorded,processed,summarized,and
215、 reported within the time periods specified in the SEC rules and forms and that such information isaccumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.Changes in Internal Control Over Financial ReportingThere were no changes in our intern
216、al control over financial reporting during the quarter ended March 31,2023 that have materially affected,orare reasonably likely to materially affect,our internal control over financial reporting.21Cardinal Health|Q3 Fiscal 2023 Form 10-QOtherLegal ProceedingsIn addition to the proceeding described
217、below,the legal proceedings described in Note 6 of the Notes to Condensed Consolidated FinancialStatements are incorporated in this Legal Proceedings section by reference.Between June 2019 and January 2020,three purported shareholders filed actions on behalf of Cardinal Health,Inc.in the U.S.Distric
218、t Court forthe Southern District of Ohio against certain current and former members of our Board of Directors alleging that the defendants breached theirfiduciary duties by failing to effectively monitor Cardinal Healths distribution of controlled substances and approving certain payments ofexecutiv
219、e compensation.In January,2020,the court consolidated these derivative cases under the caption In re Cardinal Health,Inc.DerivativeLitigation and in March 2020,plaintiffs filed an amended complaint.In December 2021,the parties reached an agreement in principle to settle this matter and in October 20
220、22,the court entered an order approvingthe settlement and dismissing the case.This settlement does not include any admission of liability.Under the settlement,in December 2022,Cardinal Healths director and officer liability insurance carriers,on behalf of the defendants,paid Cardinal Health$124 mill
221、ion,lessapproximately$31 million in attorneys fees and expenses awarded by the court to plaintiffs counsel.22Cardinal Health|Q3 Fiscal 2023 Form 10-QOtherRisk FactorsYou should carefully consider the information in this Form 10-Q,including the Risk Factors below,and the risk factors discussed in Ris
222、kFactors and other risks discussed in our 2022 Form 10-K,our Form 10-Q for the quarter ended December 31,2022 and September 30,2022,and our other filings with the SEC since June 30,2022.These risks could materially and adversely affect our results of operations,financialcondition,liquidity,and cash
223、flows.Our business also could be affected by risks that we are not presently aware of or that we currently considerimmaterial to our operations.Our business could be affected by activist shareholders.In September 2022,we entered into a Cooperation Agreement(theCooperation Agreement)with Elliott Asso
224、ciates,L.P.and ElliottInternational,L.P.(together,Elliott)under which our Board ofDirectors,among other things,(1)appointed four new independentdirectors,including a representative from Elliott,and(2)formed anadvisory Business Review Committee of the Board,which is taskedwith undertaking a comprehen
225、sive review of our strategy,portfolio,capital-allocation framework and operations.In May 2023,weextended the term of the Cooperation Agreement until the later of July15,2024 or until Elliotts representative ceases to serve on,or resignsfrom,our Board of Directors.The Cooperation Agreement may create
226、 unintended consequences,such as creating uncertainty about our management,operations orfuture strategic direction,which could result in the loss of futurebusiness opportunities or negatively impact our ability to attract andretain qualified talent.Additionally,implementing any actionsrecommended by
227、 the Business Review Committee and the Boardmay be costly and time-consuming,may be disruptive to our ongoingbusiness operations and may ultimately be unsuccessful.It is possible that activist shareholders may,among other things,attempt to effect additional changes and exert influence over ourBoard
228、of Directors and management or initiate a proxy contest,whichmay disrupt our operations by diverting the attention of managementand the Board and be costly and time-consuming.Any such proxycontests,actions or requests,or the mere public presence of activistshareholders,may cause the market price for
229、 our shares toexperience volatility,which could be significant.We could be subject to adverse changes in the tax laws oradditional challenges to our tax positions.We are a large multinational corporation with operations in the UnitedStates and many foreign countries.As a result,we are subject to the
230、tax laws of many jurisdictions.From time to time,proposals are made in the United States and otherjurisdictions in which we operate that could adversely affect our taxpositions,effective tax rate or tax payments.Specific initiatives thatmay impact us include possible increases in U.S.or foreign corp
231、orateincome tax rates or other changes in tax law to raise revenue,therepeal of the LIFO(last-in,first-out)method of inventory accountingfor income tax purposes,the establishment or increase in taxation atthe U.S.state level on the basis of gross revenues,recommendationsof the base erosion and profi
232、t shifting project undertaken by theOrganization for Economic Cooperation and Development and theEuropean Commissions investigationinto illegal state aid.In August 2022,the U.S.federal governmentenacted the Inflation Reduction Act,which imposed a 15 percentcorporate minimum tax on certain large corp
233、orations and a 1 percenttax on share repurchases after December 31,2022.These provisionsmay adversely impact our financial position and results of operations.Additionally,in connection with the accruals taken in connection withopioid-related lawsuits in fiscal years 2021 and 2020,we recordednet tax
234、benefits of$228 million and$488 million,respectively,reflecting our current assessment of the estimated future deductibilityof the amount that may be paid.We have made reasonable estimatesand recorded amounts based on managements judgment and ourcurrent understanding of the U.S.Tax Cuts and Jobs Act
235、(Tax Act);however,these estimates require significant judgment,and it ispossible that they could be subject to challenges by the U.S.InternalRevenue Service(IRS).The U.S.tax law governing deductibility was changed by the Tax Act.The taxing authorities could challenge our interpretation of the TaxAct
236、 or the estimates and assumptions used to assess the futuredeductibility of these benefits,or tax law could change again.We alsoregularly review these estimates and assumptions from time to timeand adjust our accruals based on our review,resulting in changes inour tax provision/(benefit).The actual
237、amount of tax benefit related touncertain tax positions may differ materially from these estimates.See Note 7 of the Notes to Condensed Consolidated FinancialStatements for more information regarding these matters.In fiscal year 2021,our provision for income taxes reflected a$424million benefit from
238、 the tax benefits of a self-insurance pre-tax netoperating loss carryback under the Coronavirus Aid,Relief andEconomic Security(“CARES”)Act.Also,as a result of this netoperating loss carryback,we received a U.S.federal income taxrefund of$966 million.In connection with this net operating losscarryba
239、ck,certain industry participants,including us,received a letterfrom the U.S.House of Representatives Committee on Oversightand Reform questioning,among other things,our plans to take taxdeductions for opioid-related losses,including our use of the netoperating loss carryback provisions under the CAR
240、ES Act anddeductibility under the Tax Act.We responded to the letter.It ispossible that the IRS could challenge our tax position with respect tothis self-insurance loss.If these initiatives are successful,oureffective tax rate could be adversely impacted.Additionally,lawsgoverning insurance coverage
241、 vary by state and 23Cardinal Health|Q3 Fiscal 2023 Form 10-QOthersome state courts have interpreted laws and insurance policies inways that may impact our self-insurance loss,which could negativelyimpact our financial position.We file income tax returns in the U.S.federal jurisdiction,various U.S.s
242、tate jurisdictions and various foreign jurisdictions.Tax laws arecomplex and subject to varying interpretations.With few exceptions,we are subject to audit by taxing authorities for fiscal years 2015through the current fiscal year.Proposed adjustments in ongoingaudits may adversely affect our effect
243、ive tax rate or tax payments.24Cardinal Health|Q3 Fiscal 2023 Form 10-QOtherUnregistered Sales of Equity Securities and Use of ProceedsIssuer Purchases of Equity SecuritiesPeriodTotal Numberof SharesPurchased(1)Average Price Paid per Share(2,3)Total Number of SharesPurchasedas Part of Publicly Annou
244、ncedPrograms(2,3,4)ApproximateDollar Value ofShares That MayYet be PurchasedUnder the Program(4)(in millions)January 2023614,596$81.40 614,248$1,493 February 20232,596,570 77.03 2,596,391 1,293 March 2023639,115 78.25 638,930 1,243 Total3,850,281$77.93 3,849,569$1,243(1)Reflects 348,179 and 185 comm
245、on shares purchased in January,February,and March 2023,respectively,through a rabbi trust as investments of participants in our DeferredCompensation Plan.(2)On February 6,2023,we entered into an accelerated share repurchase(ASR)program to purchase common shares for an aggregate purchase price of$250
246、 million andreceived an initial delivery of 2.6 million common shares using a reference price of$77.03.The ASR program concluded on February 28,2023 at a volume weighted averageprice per common share of$77.27 resulting in a final delivery of 0.6 million common shares.See Note 10 of the Notes to Cond
247、ensed Consolidated Financial Statements foradditional information.(3)On November 17,2022,we entered into an ASR program to purchase common shares for an aggregate purchase price of$250 million and received an initial delivery of 2.6million common shares using a reference price of$76.58.The ASR progr
248、am concluded on January 13,2023 at a volume weighted average price per common share of$77.50resulting in a final delivery of 0.6 million common shares.See Note 10 of the Notes to Condensed Consolidated Financial Statements for additional information.(4)On November 4,2021,our Board of Directors appro
249、ved a new$3.0 billion share repurchase program,which will expire on December 31,2024.As of March 31,2023,we have$1.2 billion authorized for share repurchases remaining under this program.25Cardinal Health|Q3 Fiscal 2023 Form 10-QFinancial StatementsCondensed Consolidated Statements of Earnings/(Loss
250、)(Unaudited)Three Months Ended March 31,Nine Months Ended March 31,(in millions,except per common share amounts)2023202220232022Revenue$50,487$44,836$151,559$134,261 Cost of products sold48,702 43,154 146,497 129,321 Gross margin1,785 1,682 5,062 4,940 Operating expenses:Distribution,selling,general
251、 and administrative expenses1,179 1,137 3,567 3,402 Restructuring and employee severance16 31 62 56 Amortization and other acquisition-related costs74 79 216 237 Impairments and(gain)/loss on disposal of assets,net20 471 883 1,764 Litigation(recoveries)/charges,net(76)61(256)113 Operating earnings/(
252、loss)572(97)590(632)Other(income)/expense,net 3(5)(14)Interest expense,net28 38 78 115 Loss on early extinguishment of debt 10(Gain)/loss on sale of equity interest in naviHealth(1)(2)Earnings/(loss)before income taxes544(137)517(741)Provision for income taxes197 1,253 189 328 Net earnings/(loss)347
253、(1,390)328(1,069)Less:Net earnings attributable to noncontrolling interests(2)(1)(3)(2)Net earnings/(loss)attributable to Cardinal Health,Inc.$345$(1,391)$325$(1,071)Earnings/(Loss)per common share attributable to Cardinal Health,Inc.:Basic$1.35$(5.05)$1.24$(3.82)Diluted1.34(5.05)1.23(3.82)Weighted-
254、average number of common shares outstanding:Basic256275263281Diluted258275264281Cash dividends declared per common share$0.4957$0.4908$1.4871$1.4724 See notes to condensed consolidated financial statements.26Cardinal Health|Q3 Fiscal 2023 Form 10-QFinancial StatementsCondensed Consolidated Statement
255、s of ComprehensiveIncome/(Loss)(Unaudited)Three Months Ended March 31,Nine Months Ended March 31,(in millions)2023202220232022Net earnings/(loss)$347$(1,390)$328$(1,069)Other comprehensive income/(loss):Foreign currency translation adjustments and other4(4)(34)(47)Net unrealized gain on derivative i
256、nstruments,net of tax 12 6 4 Total other comprehensive income/(loss),net of tax4 8(28)(43)Total comprehensive income/(loss)351(1,382)300(1,112)Less:comprehensive income attributable to noncontrolling interests(2)(1)(3)(2)Total comprehensive income/(loss)attributable to Cardinal Health,Inc.$349$(1,38
257、3)$297$(1,114)See notes to condensed consolidated financial statements.27Cardinal Health|Q3 Fiscal 2023 Form 10-QFinancial StatementsCondensed Consolidated Balance Sheets(in millions)March 31,2023June 30,2022(Unaudited)AssetsCurrent assets:Cash and equivalents$3,990$4,717 Trade receivables,net10,992
258、 10,561 Inventories,net16,620 15,636 Prepaid expenses and other1,895 2,021 Total current assets33,497 32,935 Property and equipment,net2,362 2,361 Goodwill and other intangibles,net6,567 7,629 Other assets951 953 Total assets$43,377$43,878 Liabilities and Shareholders DeficitCurrent liabilities:Acco
259、unts payable$29,601$27,128 Current portion of long-term obligations and other short-term borrowings26 580 Other accrued liabilities2,876 2,842 Total current liabilities32,503 30,550 Long-term obligations,less current portion4,708 4,735 Deferred income taxes and other liabilities8,384 9,299 Sharehold
260、ers deficit:Preferred shares,without par value:Authorized500 thousand shares,Issuednone Common shares,without par value:Authorized755 million shares,Issued327 million shares at March 31,2023 and June 30,20222,818 2,813 Accumulated deficit(342)(280)Common shares in treasury,at cost:72 million shares
261、and 54 million shares at March 31,2023 and June 30,2022,respectively(4,554)(3,128)Accumulated other comprehensive loss(142)(114)Total Cardinal Health,Inc.shareholders deficit(2,220)(709)Noncontrolling interests2 3 Total shareholders deficit(2,218)(706)Total liabilities and shareholders deficit$43,37
262、7$43,878 See notes to condensed consolidated financial statements.28Cardinal Health|Q3 Fiscal 2023 Form 10-QFinancial StatementsCondensed Consolidated Statements of ShareholdersEquity/(Deficit)(Unaudited)Common SharesRetainedEarnings/(AccumulatedDeficit)Treasury SharesAccumulatedOtherComprehensiveLo
263、ssNoncontrollingInterestsTotalShareholdersEquity/(Deficit)(in millions)SharesIssuedAmountSharesAmountThree Months Ended March 31,2023Balance at December 31,2022327$2,747$(560)(68)$(4,254)$(146)$1$(2,212)Net earnings345 2 347 Other comprehensive income,net of tax4 4 Employee stock plans activity,net
264、of shareswithheld for employee taxes 21 3 24 Share repurchase program activity50(4)(303)(253)Dividends declared(128)(128)Other1(1)Balance at March 31,2023327$2,818$(342)(72)$(4,554)$(142)$2$(2,218)Three Months Ended March 31,2022Balance at December 31,2021327$2,721$1,245(50)$(2,883)$(85)$4$1,002 Net
265、 earnings/(loss)(1,391)1(1,390)Other comprehensive income,net of tax8 8 Employee stock plans activity,net of shares withheldfor employee taxes 20 3 23 Share repurchase program activity20(4)(220)(200)Dividends declared(135)(135)Other(1)(1)Balance at March 31,2022327$2,761$(281)(54)$(3,100)$(77)$4$(69
266、3)Nine Months Ended March 31,2023Balance at June 30,2022327$2,813$(280)(54)$(3,128)$(114)$3$(706)Net earnings325 3 328 Other comprehensive loss,net of tax(28)(28)Purchase of noncontrolling interests(2)(2)Employee stock plans activity,net of shares withheldfor employee taxes5 2 77 82 Share repurchase
267、 program activity(20)(1,503)(1,503)Dividends declared(388)(388)Other1(2)(1)Balance at March 31,2023327$2,818$(342)(72)$(4,554)$(142)$2$(2,218)Nine Months Ended March 31,2022Balance at June 30,2021327$2,806$1,205(36)$(2,186)$(34)$3$1,794 Net earnings/(loss)(1,071)2(1,069)Other comprehensive loss,net
268、of tax(43)(43)Employee stock plans activity,net of shares withheldfor employee taxes(5)1 46 41 Share repurchase program activity(40)(19)(960)(1,000)Dividends declared(415)(415)Other(1)(1)Balance at March 31,2022327$2,761$(281)(54)$(3,100)$(77)$4$(693)See notes to condensed consolidated financial sta
269、tements.29Cardinal Health|Q3 Fiscal 2023 Form 10-QFinancial StatementsCondensed Consolidated Statements of Cash Flows(Unaudited)Nine Months Ended March 31,(in millions)20232022Cash flows from operating activities:Net earnings/(loss)$328$(1,069)Adjustments to reconcile net earnings/(loss)to net cash
270、provided by operating activities:Depreciation and amortization516 513 Impairments and(gain)/loss on disposal of assets,net883 1,764 Impairments and loss on sale of other investments 3(Gain)/loss on sale of equity interest in naviHealth(2)Loss on early extinguishment of debt 10 Share-based compensati
271、on69 65 Provision for bad debts79 46 Change in operating assets and liabilities,net of effects from acquisitions and divestitures:Increase in trade receivables(510)(1,193)Increase in inventories(1,012)(922)Increase in accounts payable2,473 1,121 Other accrued liabilities and operating items,net(845)
272、(206)Net cash provided by operating activities1,981 130 Cash flows from investing activities:Proceeds from divestitures,net of cash sold 923 Acquisition of subsidiaries,net of cash acquired(10)Additions to property and equipment(264)(223)Proceeds from disposal of property and equipment2 11 Purchases
273、 of investments(6)(38)Proceeds from investments1 27 Proceeds from net investment hedge terminations29 71 Net cash provided by/(used in)investing activities(248)771 Cash flows from financing activities:Reduction of long-term obligations(571)(597)Net tax proceeds/(withholdings)from share-based compens
274、ation11(26)Dividends on common shares(399)(425)Purchase of treasury shares(1,500)(1,000)Net cash used in financing activities(2,459)(2,048)Effect of exchange rate changes on cash and equivalents(1)(13)Cash and equivalents reclassified from assets held for sale 109 Net decrease in cash and equivalent
275、s(727)(1,051)Cash and equivalents at beginning of period4,717 3,407 Cash and equivalents at end of period$3,990$2,356 See notes to condensed consolidated financial statements.30Cardinal Health|Q3 Fiscal 2023 Form 10-QNotes to Financial StatementsNotes to Condensed Consolidated Financial Statements1.
276、Basis of Presentation and Summary ofSignificant Accounting PoliciesBasis of PresentationOur condensed consolidated financial statements include theaccounts of all majority-owned or consolidated subsidiaries,and allsignificant intercompany transactions and amounts have beeneliminated.The results of b
277、usinesses acquired or disposed of areincluded in the condensed consolidated financial statements from thedate of the acquisition or up to the date of disposal,respectively.References to we,our,and similar pronouns in this QuarterlyReport on Form 10-Q for the quarter ended March 31,2023(thisForm 10-Q
278、)refer to Cardinal Health,Inc.and its majority-owned orconsolidated subsidiaries unless the context requires otherwise.Our fiscal year ends on June 30.References to fiscal 2023 and 2022in these condensed consolidated financial statements are to the fiscalyears ending or ended June 30,2023 and June 3
279、0,2022,respectively.Our condensed consolidated financial statements have beenprepared in accordance with the U.S.Securities and ExchangeCommission(SEC)instructions to Quarterly Reports on Form 10-Qand include the information and disclosures required by accountingprinciples generally accepted in the
280、United States(GAAP)forinterim financial reporting.The preparation of financial statements inconformity with GAAP requires us to make estimates,judgments andassumptions that affect amounts reported in the condensedconsolidated financial statements and accompanying notes.Actualamounts may differ from
281、these estimated amounts.In our opinion,all adjustments necessary for a fair presentation of thecondensed consolidated financial statements have been included.Except as disclosed elsewhere in this Form 10-Q,all suchadjustments are of a normal and recurring nature.In addition,financial results present
282、ed for this fiscal 2023 interim period are notnecessarily indicative of the results that may be expected for the fullfiscal year ending June 30,2023.These condensed consolidatedfinancial statements are unaudited and,accordingly,should be readin conjunction with the audited consolidated financial sta
283、tements andrelated notes contained in our Annual Report on Form 10-K for thefiscal year ended June 30,2022(our 2022 Form 10-K).Recently Issued Financial Accounting StandardsNot Yet AdoptedWe assess the adoption impacts of recently issued accountingstandards by the Financial Accounting Standards Boar
284、d(FASB)onour condensed consolidated financial statements as well as materialupdates to previous assessments,if any,from our fiscal 2022 Form10-K.There were no accounting standards issued in fiscal 2023 thatwill have a material impact on our condensed consolidated financialstatements.Recently Adopted
285、 Financial Accounting StandardsThere were no new material accounting standards adopted during thenine months ended March 31,2023.2.DivestituresIn August 2021,we sold the Cordis business to Hellman&Friedmanfor proceeds of$923 million,net of cash transferred,and we retainedcertain working capital acco
286、unts.Cardinal Health also retainedproduct liability associated with lawsuits and claims related to theCordis OptEase and TrapEase inferior vena cava(IVC)filterproducts in the U.S.and Canada,as well as authority for thesematters discussed in Note 6.The Cordis business operated within ourMedical segme
287、nt.31Cardinal Health|Q3 Fiscal 2023 Form 10-QNotes to Financial Statements3.Restructuring and Employee SeveranceThe following table summarizes restructuring and employeeseverance:Three Months Ended March 31,(in millions)20232022Employee-related$3$12 Facility exit and other13 19 Total restructuring a
288、nd employeeseverance$16$31 Nine Months Ended March 31,(in millions)20232022Employee-related$32$22 Facility exit and other30 34 Total restructuring and employeeseverance$62$56 Employee-related costs primarily consist of termination benefitsprovided to employees who have been involuntarily terminated,
289、duplicate payroll costs and retention bonuses incurred duringtransition periods.Facility exit and other costs primarily consist ofproject consulting fees,accelerated depreciation,professional,project management and other service fees to support divestitures,costs associated with vacant facilities,an
290、d certain other divestiture-related costs.Restructuring and employee severance costs during the three andnine months ended March 31,2023 and March 31,2022 wereprimarily related to the implementation of certain enterprise-widecost-savings measures and the divestiture of the Cordis business.During the
291、 three and nine months ended March 31,2022,restructuring also included costs related to decreasing our overalloffice space.The following table summarizes activity related to liabilitiesassociated with restructuring and employee severance:(in millions)Employee-Related CostsFacility Exitand OtherCosts
292、TotalBalance at June 30,2022$56$10$66 Additions29 8 37 Payments and other adjustments(36)(15)(51)Balance at March 31,2023$49$3$52 4.Goodwill and Other Intangible AssetsGoodwillThe following table summarizes the changes in the carrying amountof goodwill by segment and in total:(in millions)Pharmaceut
293、icalMedical(1)TotalBalance at June 30,2022$2,673$3,182$5,855 Goodwill acquired,net ofpurchase price adjustments 13 13 Foreign currency translationadjustments and other(5)(5)Goodwill impairment(863)(863)Balance at March 31,2023$2,673$2,327$5,000(1)At March 31,2023 and June 30,2022,the Medical segment
294、 accumulatedgoodwill impairment loss was$4.4 billion and$3.5 billion,respectively.Due to changes in our long-term financial plan assumptions madeduring the three months ended March 31,2023,we elected to bypassthe qualitative assessment and perform quantitative goodwillimpairment testing for the Medi
295、cal Unit.The fair value of the reportingunit was estimated to be approximately 4 percent in excess of itscarrying value,primarily driven by a lower discount rate as describedbelow.We performed quantitative goodwill impairment testing for theMedical Unit at December 31,2022 and September 30,2022,whic
296、hresulted in pre-tax goodwill impairment charges of$709 million and$154 million,respectively.The impairment charge recognized in thesecond quarter was driven by certain reductions in our long-termfinancial plan assumptions,and the impairment charge recognized inthe first quarter was driven by an inc
297、rease in the discount rateprimarily due to an increase in the risk-free interest rate.Thecumulative pre-tax goodwill impairment charges of$863 million wererecognized in impairments and(gain)/loss on disposal of assets,netin our condensed consolidated statements of earnings/(loss)for thenine months e
298、nded March 31,2023.Our determinations of the estimated fair value of the Medical Unit atMarch 31,2023,December 31,2022 and September 30,2022 werebased on a combination of the income-based approach(using aterminal growth rate of 2 percent),and the market-based approaches.For the income-based approach
299、,we used discount rates of 10percent,10.5 percent and 10.5 percent for each quarter,respectively.The decrease in the discount rate for the interim testing performed atMarch 31,2023 was primarily due to a decrease in the risk-freeinterest rate.Additionally,we assigned a weighting of 80 percent tothe
300、discounted cash flow method,10 percent to the guideline publiccompany method,and 10 percent to the guideline transactionmethod.Our fair value estimates utilize significant unobservableinputs and thus represent Level 3 fair value measurements.During the three months ended March 31,2022 and December 3
301、1,2021,we performed quantitative goodwill impairment testing for theMedical Unit.This quantitative testing resulted in the carrying 32Cardinal Health|Q3 Fiscal 2023 Form 10-QNotes to Financial Statementsamount of the Medical Unit exceeding the fair value,resulting in apre-tax impairment charges of$4
302、74 million and$1.3 billion recordedduring the three months ended March 31,2022 and December 31,2021,respectively.Other Intangible AssetsThe following tables summarize other intangible assets by class at:March 31,2023(in millions)GrossIntangibleAccumulatedAmortizationNetIntangibleWeighted-AverageRema
303、iningAmortizationPeriod(Years)Indefinite-lifeintangibles:Trademarks andpatents$11$11 N/ATotal indefinite-lifeintangibles11 11 N/ADefinite-lifeintangibles:Customerrelationships3,235 2,267 968 10Trademarks,tradenames and patents550 376 174 9Developedtechnology andother1,037 623 414 9Total definite-lif
304、eintangibles4,822 3,266 1,556 10Total otherintangibleassets$4,833$3,266$1,567 N/AJune 30,2022(in millions)GrossIntangibleAccumulatedAmortizationNetIntangibleIndefinite-life intangibles:Trademarks and patents$11$11 Total indefinite-life intangibles11 11 Definite-life intangibles:Customer relationship
305、s3,272 2,165 1,107 Trademarks,trade names andpatents552 360 192 Developed technology and other1,038 574 464 Total definite-life intangibles4,862 3,099 1,763 Total other intangible assets$4,873$3,099$1,774 Total amortization of intangible assets was$69 million and$78 millionfor the three months ended
306、 March 31,2023 and 2022,respectively,and$211 million and$235 million for the nine months endedMarch 31,2023 and 2022,respectively.Estimated annualamortization of intangible assets for the remainder of fiscal 2023through 2027 is as follows:$71 million,$261 million,$236 million,$209 million and$177 mi
307、llion.5.Long-Term Obligations and Other Short-TermBorrowingsLong-Term DebtWe had total long-term obligations,including the current portion andother short-term borrowings,of$4.7 billion and$5.3 billion forMarch 31,2023 and June 30,2022,respectively.All the notesrepresent unsecured obligations of Card
308、inal Health,Inc.and rankequally in right of payment with all of our existing and futureunsecured and unsubordinated indebtedness.Interest is paidpursuant to the terms of the obligations.These notes are effectivelysubordinated to the liabilities of our subsidiaries,including tradepayables of$29.6 bil
309、lion and$27.1 billion at March 31,2023 andJune 30,2022,respectively.During the three months ended March 31,2023,we repaid the fullprincipal of the$550 million 3.2%Notes due 2023 at maturity withavailable cash.During the nine months ended March 31,2022,we redeemed alloutstanding$572 million principal
310、 amount of 2.616%Notes due June2022 at a redemption price equal to 100%of the principal amountand accrued but unpaid interest,plus the make-whole premiumapplicable to the notes.In connection with this redemption,werecorded a$10 million loss on early extinguishment of debt.The earlyredemption was fun
311、ded with available cash.Other Financing ArrangementsIn addition to cash and equivalents and operating cash flow,othersources of liquidity include a$2.0 billion commercial paper programbacked by a$2.0 billion revolving credit facility.We also have a$1.0billion committed receivables sales facility.Dur
312、ing the nine monthsended March 31,2023,under our commercial paper program and ourcommitted receivables program,we had maximum combined totaldaily amounts outstanding of$445 million and average combineddaily amount outstanding of$4 million.At March 31,2023,we had noamounts outstanding under our comme
313、rcial paper program,revolvingcredit facility or our committed receivables sales facility.In February 2023,we extended our$2.0 billion revolving credit facilitythrough February 25,2028.In September 2022,we renewed ourcommitted receivables sales facility program through Cardinal HealthFunding,LLC(“CHF
314、”)through September 30,2025.CHF wasorganized for the sole purpose of buying receivables and sellingundivided interests in those receivables to third-party purchasers.Although consolidated with Cardinal Health,33Cardinal Health|Q3 Fiscal 2023 Form 10-QNotes to Financial StatementsInc.in accordance wi
315、th GAAP,CHF is a separate legal entity fromCardinal Health,Inc.and from our subsidiary that sells receivables toCHF.CHF is designed to be a special purpose,bankruptcy-remoteentity whose assets are available solely to satisfy the claims of itscreditors.Our revolving credit and committed receivables s
316、ales facilities requireus to maintain a consolidated net leverage ratio of no more than 3.75-to-1.As of March 31,2023,we were in compliance with this financialcovenant.6.Commitments,Contingent Liabilities andLitigationCommitmentsGeneric Sourcing Venture with CVS Health Corporation(CVSHealth)In July
317、2014,we established Red Oak Sourcing,LLC(Red OakSourcing),a U.S.-based generic pharmaceutical sourcing venturewith CVS Health for an initial term of 10 years.Red Oak Sourcingnegotiates generic pharmaceutical supply contracts on behalf of itsparticipants.In August 2021,we amended our agreement to ext
318、endthe term through June 2029.We are required to make quarterlypayments to CVS Health for the term of the arrangement.ContingenciesNew York Opioid Stewardship ActIn April 2018,the State of New York passed a budget which includedthe Opioid Stewardship Act(the OSA).The OSA created anaggregate$100 mill
319、ion annual assessment on all manufacturers anddistributors licensed to sell or distribute opioids in New York.Underthe OSA,each licensed manufacturer and distributor would berequired to pay a portion of the assessment based on its share of thetotal morphine milligram equivalents sold or distributed
320、in New Yorkduring the applicable calendar year,beginning in 2017.Subsequently,New York passed a new statute that modified the assessment goingforward and limited the OSA to two years(2017 and 2018).We accrue contingencies if it is probable that a liability has beenincurred and the amount can be esti
321、mated.In the second quarter offiscal year 2022,we paid the State of New York$20 million,ourportion of the assessment for calendar year 2017.At June 30,2022,we had an accrual of$20 million,which represented our estimate ofour portion of the assessment for calendar year 2018.During the ninemonths ende
322、d March 31,2023,we recorded$6 million of income toreduce this accrual to the invoiced amount for the calendar year 2018assessment and we paid$7 million,resulting in an accrual of$7 million at March 31,2023.Legal ProceedingsWe become involved from time to time in disputes,litigation andregulatory mat
323、ters.From time to time,we determine that products we source,manufacture or market do not meet our specifications,regulatoryrequirements,or published standards.When we or a regulatoryagency identify a potential quality or regulatory issue,we investigateand take appropriate corrective action.Such acti
324、ons have led toproduct recalls,costs to repair or replace affected products,temporary interruptions in product sales,product liability claims andlawsuits and can lead to action by regulators.Even absent anidentified regulatory or quality issue or product recall,we can becomesubject to product liabil
325、ity claims and lawsuits.From time to time,we become aware through employees,internalaudits or other parties of possible compliance matters,such ascomplaints or concerns relating to accounting,internal accountingcontrols,financial reporting,auditing,or other ethical matters orrelating to compliance w
326、ith laws such as healthcare fraud and abuse,anti-corruption or anti-bribery laws.When we become aware of suchpossible compliance matters,we investigate internally and takeappropriate corrective action.In addition,from time to time,wereceive subpoenas or requests for information from various federal
327、orstate agencies relating to our business or to the business of acustomer,supplier or other industry participants.Internalinvestigations,subpoenas or requests for information could directly orindirectly lead to the assertion of claims or the commencement oflegal proceedings against us or result in s
328、anctions.We have been named from time to time in qui tam actions initiated byprivate third parties.In such actions,the private parties purport to acton behalf of federal or state governments,allege that false claimshave been submitted for payment by the government and mayreceive an award if their cl
329、aims are successful.After a private partyhas filed a qui tam action,the government must investigate theprivate partys claim and determine whether to intervene in and takecontrol over the litigation.These actions may remain under seal whilethe government makes this determination.If the government dec
330、linesto intervene,the private party may nonetheless continue to pursuethe litigation on his or her own purporting to act on behalf of thegovernment.We accrue for contingencies related to disputes,litigation andregulatory matters if it is probable that a liability has been incurredand the amount of t
331、he loss can be reasonably estimated.Becausethese matters are inherently unpredictable and unfavorabledevelopments or resolutions can occur,assessing contingencies ishighly subjective and requires judgments about future events.Weregularly review contingencies to determine whether our accruals andrela
332、ted disclosures are adequate.The amount of ultimate loss maydiffer from these estimates.We recognize income from the favorable outcome of litigation whenwe receive the associated cash or assets.We recognize estimated loss contingencies for certain litigation andregulatory matters and income from fav
333、orable resolution of litigationin litigation(recoveries)/charges,net in our condensed consolidatedstatements of earnings/(loss);however,losses and recoveries of lostprofits from disputes that occur in the ordinary course of business areincluded within segment profit.For example,in the second quarter offiscal year 2022,our 34Cardinal Health|Q3 Fiscal 2023 Form 10-QNotes to Financial StatementsPharm