10-Q 1 cah-20220331.htm 10-Q cah-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 1-11373
Cardinal Health, Inc.
(Exact name of registrant as specified in its charter)
Ohio31-0958666
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
7000 Cardinal Place,Dublin,Ohio43017
(Address of principal executive offices)(Zip Code)
(614)757-5000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common shares (without par value)CAHNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  þ    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  þ
The number of the registrant’s common shares, without par value, outstanding as of April 30, 2022, was the following: 272,427,362.



Cardinal Health
Q3 Fiscal 2022 Form 10-Q
Table of Contents

About Cardinal Health
Cardinal Health, Inc. is an Ohio corporation formed in 1979 and is a globally integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. We connect patients, providers, payers, pharmacists and manufacturers for integrated care coordination and better patient management. We manage our business and report our financial results in two segments: Pharmaceutical and Medical. As used in this report, “we,” “our,” “us,” and similar pronouns refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires otherwise. Our fiscal year ends on June 30. References to fiscal 2022 and fiscal 2021 and to FY22 and FY21 are to the fiscal years ending or ended June 30, 2022 and June 30, 2021, respectively.
Forward-Looking Statements
This Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (this "Form 10-Q") (including information incorporated by reference) includes "forward-looking statements" addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. Many forward-looking statements appear in Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), but there are others in this Form 10-Q, which may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results, trends or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those made, projected or implied. The most significant of these risks and uncertainties are described in this Form 10-Q, including Exhibit 99.1, and in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (our “2021 Form 10-K”). Forward-looking statements in this Form 10-Q speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.
Non-GAAP Financial Measures
In the "Overview of Consolidated Results" section of MD&A, we use financial measures that are derived from our consolidated financial data but are not presented in our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These measures are considered "non-GAAP financial measures" under the United States Securities and Exchange Commission ("SEC") rules. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in the “Explanation and Reconciliation of Non-GAAP Financial Measures” section following MD&A in this Form 10-Q.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&A
Overview
Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis presented below is concerned with material changes in financial condition and results of operations between the periods specified in our condensed consolidated balance sheets at March 31, 2022 and June 30, 2021, and in our condensed consolidated statements of earnings/(loss) for the three and nine months ended March 31, 2022 and 2021. All comparisons presented are with respect to the prior-year period, unless stated otherwise. This discussion and analysis should be read in conjunction with the MD&A included in our 2021 Form 10-K.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview
Overview of Consolidated Results
Revenue
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During the three and nine months ended March 31, 2022, revenue increased 14 percent and 12 percent to $44.8 billion and $134.3 billion, respectively, primarily due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers, which largely consisted of branded pharmaceutical sales to existing and net new customers.
GAAP and Non-GAAP Operating Earnings/(Loss)
Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
GAAP operating earnings/(loss)$(97)$473 N.M.$(632)$310 N.M.
Surgical gown recall costs/(income) (1)1 (3)
State opioid assessment related to prior fiscal years (2) 39 
Restructuring and employee severance31 24 56 81 
Amortization and other acquisition-related costs79 111 237 345 
Impairments and (gain)/loss on disposal of assets471 69 1,764 78 
Litigation (recoveries)/charges, net61 15 113 1,085 
Non-GAAP operating earnings$545 $689 (21)%$1,540 $1,935 (20)%
The sum of the components and certain computations may reflect rounding adjustments.
We had GAAP operating losses of $97 million and $632 million during the three and nine months ended March 31, 2022, respectively, due to $474 million and $1.8 billion pre-tax non-cash goodwill impairment charges related to the Medical segment, respectively. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements" for additional detail.
During the nine months ended March 31, 2021, we recognized a $1.02 billion pre-tax charge for the estimated liability associated with lawsuits and claims brought against us by states and political subdivisions relating to the distribution of prescription opioid pain medications. See further description of opioid lawsuits and claims in the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements."
Non-GAAP operating earnings during the three and nine months ended March 31, 2022 decreased 21 percent and 20 percent, respectively, due to the decrease in Medical segment profit largely resulting from increased inflationary impacts, primarily related to commodities and transportation, and the adverse impact of global supply chain constraints.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview
GAAP and Non-GAAP Diluted EPS
Three Months Ended March 31,Nine Months Ended March 31,
($ per share)
2022 (2,3)
2021 (2)
Change
2022 (2,3)
2021 (2)
Change
GAAP diluted EPS (1)
$(5.05)$0.40 N.M$(3.82)$1.68 N.M.
State opioid assessment related to prior fiscal years —  0.10 
Restructuring and employee severance0.08 0.06 0.15 0.21 
Amortization and other acquisition-related costs0.21 0.28 0.63 0.88 
Impairments and (gain)/loss on disposal of assets (4)
6.03 0.25 6.71 0.22 
Litigation (recoveries)/charges, net (5)
0.18 0.54 0.33 1.70 
Loss on early extinguishment of debt — 0.03 — 
Non-GAAP diluted EPS (1)
$1.45 $1.53 (5)%$4.01 $4.79 (16)%
The sum of the components and certain computations may reflect rounding adjustments.
(1)Diluted earnings/(loss) per share attributable to Cardinal Health, Inc. ("diluted EPS").
(2)The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the "Explanation and Reconciliation of Non-GAAP Financial Measures."
(3)For the three 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 a weighted average of 275 million and 281 million common shares, respectively, which excludes potentially dilutive securities from the denominator 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 and 282 million common shares, which includes potentially dilutive shares.
(4)Impairments and (gain)/loss on disposals of assets, net includes pre-tax goodwill impairment charges of $474 million and $1.8 billion related to our Medical segment recorded during the three and nine months ended March 31, 2022, respectively. For fiscal 2022, the estimated net tax benefit related to these impairments is $126 million and is included in the annual effective tax rate. As a result, the amount of tax expense in the current quarter and year-to-date periods increased by approximately $1.2 billion and approximately $180 million, respectively, and is expected to lower the provision for income taxes during the fourth quarter of fiscal 2022 by approximately $180 million.
(5)Litigation (recoveries)/charges, net, includes a tax benefit recorded during the nine months ended March 31, 2021 related to a net operating loss carryback. Our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, was deducted on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss was carried back and adjusted our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. During the nine months ended March 31, 2021, the total benefit from the net operating loss carryback was $419 million; however, for purposes of Non-GAAP financial measures, we allocated $385 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $34 million is included in non-GAAP measures.
During the three and nine months ended March 31, 2022, GAAP diluted EPS was adversely impacted by the goodwill impairment charges related to the Medical segment, which had a $(6.01) and $(6.67) per share after-tax impact, respectively. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A, and Note 4 and Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional detail.
During the nine months ended March 31, 2021, GAAP diluted EPS included a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss. Refer to Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional detail. During the nine months ended March 31, 2021, GAAP diluted EPS was adversely impacted by the opioid litigation charge recognized for the estimated liability associated with lawsuits and claims brought against us by states and political subdivisions relating to the distribution of prescription opioid pain medications, which had a $(2.85) per share after-tax impact on GAAP diluted EPS. See the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
During the three and nine months ended March 31, 2022, non-GAAP diluted EPS decreased 5 percent and 16 percent to $1.45 and $4.01 per share, respectively. This decrease was primarily due to the factors impacting non-GAAP operating earnings, partially offset by a lower share count as a result of share repurchases. The year-over-year comparison also benefited from a lower non-GAAP effective tax rate due to favorable discrete items during the three months ended March 31, 2022 and the impact of adverse tax matters in the prior year, including adjustments to our tax provision for the resolution of certain open matters with the U.S. Internal Revenue Service ("IRS").

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview
Cash and Equivalents
Our cash and equivalents balance was $2.4 billion at March 31, 2022 compared to $3.4 billion at June 30, 2021. During the nine months ended March 31, 2022, net cash provided by operating activities was $130 million, which was adversely impacted by the payment of the majority of our first annual settlement payment under the Settlement Agreement and payments for other litigation matters, the timing of collections of customer receivables and the day of the week on which a fiscal period ends. During the nine months ended March 31, 2022, we deployed $1.0 billion for share repurchases, $597 million for debt repayment, and $425 million for cash dividends. We also received proceeds of $923 million, net of cash transferred, from the divestiture of the Cordis business.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview
Significant Developments in Fiscal 2022 and Trends
Opioid Lawsuits Development
In February 2022, we and two other national distributors announced that each company had determined that a sufficient number of political subdivisions had agreed to participate in the previously disclosed settlement agreement (the “Settlement Agreement”) to settle the vast majority of the opioid lawsuits filed by states and local governmental entities. This Settlement Agreement became effective on April 2, 2022.
Parties to this Settlement Agreement include 46 out of 49 eligible states as well as the District of Columbia and all eligible territories. As of April 28, 2022, over 98 percent of eligible political subdivisions (as calculated by population under the Settlement Agreement) that had brought opioid-related suits against the companies have joined the settlement or otherwise had their claims addressed by state legislation.
The Settlement Agreement includes a cash component, pursuant to which we will pay up to approximately $6.0 billion, the majority of which would be paid over 18 years. The exact payment amount will depend on several factors, including the extent to which states take action to foreclose opioid lawsuits by political subdivisions (e.g., by passing laws barring or limiting opioid lawsuits by political subdivisions) and the extent to which additional political subdivisions in participating states file opioid lawsuits against us.
The Settlement Agreement also includes injunctive relief terms related to distributors’ controlled substance anti-diversion programs, including with respect to: (1) governance; (2) independence and training of the personnel operating controlled substances monitoring programs; (3) due diligence for new and existing customers; (4) ordering limits for certain products; and (5) suspicious order monitoring. A monitor will be selected to oversee compliance with these provisions for a period of five years. In addition, we and the two other settling distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which distributors will fund for ten years.
West Virginia subdivisions and Native American tribes are not a part of this settlement process and we have been involved in separate negotiations with these groups. In September 2021 we announced that we, along with two other national distributors, had reached an agreement with the Cherokee Nation in connection with ongoing negotiations toward a broader agreement with Native American tribes. In January 2022, we, along with two other national distributors, executed a term sheet with the Native American tribes.
The first phase of a bench trial in West Virginia State Court for a consolidated case brought by 63 West Virginia subdivisions against the Company and two other national distributors is scheduled to begin July 5, 2022. A bench trial before a federal judge in West Virginia brought by Cabell County and City of Huntington against us and two other national distributors concluded in July 2021. The judge has not yet issued a decision.
In May 2022, we and two other national distributors reached an agreement with the Washington Attorney General, under which we will pay up to approximately $160 million to the State of Washington and its participating political subdivisions to resolve opioid-related claims. This amount is consistent with the amount that would have been allocated to Washington under the Settlement Agreement, had Washington agreed to participate, plus certain attorneys’ fees and costs. The terms of this agreement are consistent with the Settlement Agreement. This agreement is subject to certain contingencies, including the rate of subdivision participation.
During the nine months ended March 31, 2022, we paid into escrow the majority of our first annual payment under the Settlement Agreement. We also made payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under Cherokee Nation settlement and Native American term sheet. During the nine months ended March 31, 2022, we paid $348 million in connection with these matters. In total, we have $6.70 billion accrued at March 31, 2022, of which $738 million is included in other accrued liabilities, and the remainder is included in deferred income taxes and other liabilities in our condensed consolidated balance sheets.
In addition to the lawsuits and claims brought by states and governmental entities, described above, we are involved in other opioid-related litigation and investigations, which are described further in Note 6 of the “Notes to Condensed Consolidated Financial Statements.”
Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. We regularly review these opioid litigation matters to determine whether our accrual is adequate. The amount of ultimate loss may differ materially from this accrual, whether as a result of settlement discussions, a judicial decision or verdict or otherwise. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview
Inflationary Impacts and Global Supply Chain Constraints, and Medical Goodwill
Medical segment profit was negatively impacted by increased inflationary impacts, primarily related to transportation (including ocean and domestic freight), commodities, labor and the adverse impact of global supply chain constraints during the three and nine months ended March 31, 2022.
Due to the risks and uncertainties related to these impacts, we performed interim goodwill impairment testing at March 31, 2022 and December 31, 2021, which resulted in year-to-date pre-tax non-cash goodwill impairment charges of $1.8 billion, included in impairments and (gain)/loss on disposal of assets in our condensed consolidated statements of earnings/(loss). See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements" for additional detail. For fiscal 2022, the estimated net tax benefit related to these impairments is $126 million and is included in the annual effective tax rate. As a result, the amount of tax expense in the current quarter and year-to-date periods increased by approximately $1.2 billion and approximately $180 million, respectively, and is expected to lower the provision for income taxes during the fourth quarter of fiscal 2022 by approximately $180 million. Refer to Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional detail.
We expect these inflationary impacts and global supply chain constraints to continue to adversely impact Medical segment profit. In order to partially mitigate the impact, we have implemented an initial phase of price increases and we are evolving our commercial contracting processes and investing in additional supply chain capacity. If these increased costs and the adverse impact of global supply chain constraints are greater than we expect, continue beyond our expectations, or we are unable to increase prices, our results of operations will be adversely impacted to a greater extent than we currently anticipate.
We also experienced increased costs in the Pharmaceutical segment, primarily related to transportation and labor, during the three and nine months ended March 31, 2022.

PPE Demand and Pricing
Personal protective equipment ("PPE") refers to protective clothing, medical and non-medical grade gloves, face shields, face masks and other equipment designed to protect the wearer from injury or the spread of infection or illness. Demand for PPE has fluctuated during fiscal 2021 and fiscal 2022 resulting in variability in sales volumes, inventory levels and costs to manufacture and source these products.
PPE adversely impacted Medical segment profit on a year-over-year basis for the three and nine months ended March 31, 2022 and we expect further adverse impacts due to lower volumes. In addition, the prior year included the timing favorability related to our cost mitigation efforts, primarily pricing.
We experienced the peak of heightened demand for PPE during the second and third quarters of fiscal 2021. This increased demand resulted in higher sales volume for certain products, increased costs to manufacture and source these products and higher inventory levels to meet customer commitments. As a result, we sought out additional sources for these products and to mitigate the impact of these cost increases, we have raised our selling prices for the affected products. During the fourth quarter of fiscal 2021, selling prices and customer demand for certain PPE decreased as compared to the peak. This resulted in inventory cost above net realizable value, requiring an inventory reserve of $197 million, primarily related to certain categories of gloves, which adversely impacted Medical segment profit.

COVID-19
The COVID-19 pandemic (“COVID-19”) began to materially affect our businesses during the third quarter of fiscal 2020. However, due to the passage of time, intervening events and other market dynamics, the comparison to pre-COVID-19 operations has become less meaningful as a basis for us to assess our financial condition.
In the Pharmaceutical segment, volumes have rebounded and stabilized from the declines we experienced during the height of COVID-19 and we believe fluctuations between periods are driven by current market dynamics, rather than the ongoing effects of COVID-19.
Our Medical segment continues to experience the effects of inflation, global supply chain constraints and PPE dynamics, which we consider to be independent of COVID-19 for purposes of assessing our financial results and which are discussed separately above. Due to the magnitude of the impact these factors have had on our Medical segment, as well as the passage of time, we no longer believe that comparisons to pre-COVID-19 operations are relevant in assessing our results of operations or financial condition.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AOverview

Cordis Divestiture
In August 2021, we sold our Cordis business to Hellman & Friedman for proceeds of $923 million, net of cash transferred, and we retained certain working capital accounts and certain liabilities. The purchase price is subject to adjustments based on working capital requirements as set forth in the agreement. Cardinal Health will retain product liability associated with lawsuits and claims related to inferior vena cava ("IVC") filters in the U.S. and Canada, as well as authority for these matters discussed in Note 6 of the "Notes to Condensed Consolidated Financial Statements." In connection with the closing, we entered into a Transition Services Agreement ("TSA") with the buyer to provide support functions for a period of up to twenty-four months following the sale. See Note 2 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
As anticipated, Medical segment revenue and Medical segment profit were adversely impacted during the three and nine months ended March 31, 2022 due to the divestiture of the Cordis business. We expect the divestiture will decrease Medical segment revenue by approximately $700 million and adversely impact Medical segment profit by approximately $70 million in fiscal 2022. The divestiture of the Cordis business resulted in a decrease in amortization of acquisition-related intangible assets during the three and nine months ended March 31, 2022, which we expect to continue for the remainder of fiscal 2022. The divestiture of the Cordis business is subject to risks and uncertainties that may further adversely impact Medical segment profit. For example, the TSA period may be extended beyond our current expectations or could have unintended consequences, and the costs associated with the exit or disposal activities and stranded costs could be greater than anticipated.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AResults of Operations
Results of Operations
Revenue
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Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
Pharmaceutical$40,957 $35,104 17 %$122,154 $107,452 14 %
Medical3,884 4,174 (7)%12,118 12,441 (3)%
Total segment revenue44,841 39,278 14 %134,272 119,893 12 %
Corporate(5)(3)N.M(11)(12)N.M
Total revenue$44,836 $39,275 14 %$134,261 $119,881 12 %
Pharmaceutical Segment
During the three and nine months ended March 31, 2022, revenue increased primarily due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers, which together increased revenue by $5.8 billion and $14.6 billion, respectively, and largely consisted of branded pharmaceutical sales to existing and net new customers.
Medical Segment
Medical segment revenue decreased during the three months ended March 31, 2022 primarily due to the impact of the divestiture of the Cordis business and lower volumes within products and distribution, including the adverse impact of global supply chain constraints.
During the nine months ended March 31, 2022, the adverse impact of the divestiture of the Cordis business was partially offset by sales growth in at-Home solutions.
Cost of Products Sold
Cost of products sold for the three and nine months ended March 31, 2022 increased 15 percent to $43.2 billion and 13 percent to $129.3 billion, respectively, compared to the respective prior-year periods as a result of the factors affecting the changes in revenue and gross margin.



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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AResults of Operations
Gross Margin
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Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
Gross margin$1,682 $1,812 (7)%$4,940 $5,303 (7)%
Gross margin during the three and nine months ended March 31, 2022 was adversely impacted due to the divestiture of the Cordis business and increased costs in the Medical segment due to inflationary impacts and the adverse impact of global supply chain constraints, partially offset by the performance of our generics program, which includes an improvement in volumes compared to the prior-year periods.
Gross margin rate declined 86 basis points and 74 basis points during the three and nine months ended March 31, 2022, respectively, mainly due to changes in overall product mix resulting primarily from increased pharmaceutical distribution branded sales, which have a dilutive impact on our overall gross margin rate. The performance of Medical segment products and distribution, which reflects the divestiture of the Cordis business and increased costs due to inflationary impacts and the adverse impact of global supply chain constraints, also had an adverse impact on gross margin rate.
Distribution, Selling, General and Administrative ("SG&A") Expenses
Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
SG&A expenses$1,137 $1,120 2 %$3,402 $3,404  %
During the three and nine months ended March 31, 2022, SG&A expenses were adversely impacted by higher operations expenses and increased expenses related to investments in information technology infrastructure, mostly offset by the divestiture of the Cordis business.
During the nine months ended March 31, 2022, the year-over-year comparison was also favorably impacted by the prior-year $41 million accrual for our estimated portion of the assessment on prescription opioid medications that were sold or distributed in New York state in calendar year 2017 and 2018, which was recognized during the three months ended September 30, 2020. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the New York Opioid Stewardship Act.




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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AResults of Operations
Segment Profit
We evaluate segment performance based on segment profit, among other measures. See Note 12 of the "Notes to Condensed Consolidated Financial Statements" for additional information on segment profit.
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Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
Pharmaceutical$487 $511 (5)%$1,319 $1,326 (1)%
Medical59 174 (66)%232 640 (64)%
Total segment profit546 685 (20)%1,551 1,966 (21)%
Corporate(643)(212)N.M.(2,183)(1,656)N.M
Total consolidated operating earnings/(loss)$(97)$473 N.M.$(632)$310 N.M
Pharmaceutical Segment Profit
During the three and nine months ended March 31, 2022, Pharmaceutical segment profit decreased due to increased expenses related to investments in information technology infrastructure and higher operations expenses, partially offset by the performance of our generics program. Pharmaceutical segment profit during the nine months ended March 31, 2022 was also positively impacted by improvement in volumes compared to the prior-year period.
Pharmaceutical segment profit includes opioid-related litigation defense and compliance costs, but does not include a one-time contingent attorney fee of $18 million incurred during the three and nine months ended March 31, 2022 related to the finalization of the Settlement Agreement. Due to the unique nature and significance of the Settlement Agreement, and the one-time, contingent nature of the fee, this related fee was included in litigation (recoveries)/charges, net in the condensed consolidated statements of earnings/(loss).
Pharmaceutical segment profit during the nine months ended March 31, 2022 was positively impacted by a $16 million judgment for lost profits related to an ordinary course intellectual property rights claim.
Medical Segment Profit
Medical segment profit decreased during the three and nine months ended March 31, 2022 largely due to increased inflationary costs, primarily related to transportation and commodities, and the adverse impact of global supply chain constraints. Medical segment profit during the nine months ended March 31, 2022 also reflects an adverse impact related to the prior-year net positive impact of PPE.
Corporate
The changes in Corporate during the three and nine months ended March 31, 2022 were due to the factors discussed in the Other Components of Consolidated Operating Earnings/(Loss) section that follows.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AResults of Operations
Other Components of Consolidated Operating Earnings/(Loss)
In addition to revenue, gross margin and SG&A expenses discussed previously, consolidated operating earnings/(loss) were impacted by the following:
Three Months Ended March 31,Nine Months Ended March 31,
(in millions)2022202120222021
Restructuring and employee severance$31 $24 $56 $81 
Amortization and other acquisition-related costs79 111 237 345 
Impairments and (gain)/loss on disposal of assets, net471 69 1,764 78 
Litigation (recoveries)/charges, net61 15 113 1,085 
Restructuring and Employee Severance
Restructuring costs during both the three and nine months ended March 31, 2022 and 2021 were primarily related to the implementation of certain enterprise-wide cost-savings measures, which includes facility exit costs related to decreasing our overall office space, and the divestiture of the Cordis business.
Amortization and Other Acquisition-Related Costs
Amortization of acquisition-related intangible assets was $78 million and $109 million for the three months ended March 31, 2022 and 2021, respectively, and $235 million and $337 million for the nine months ended March 31, 2022 and 2021, respectively. The decrease in amortization of acquisition-related intangible assets was primarily due to the divestiture of the Cordis business.
Impairments and (Gain)/Loss on Disposal of Assets, Net
During the three and nine months ended March 31, 2022, we recognized $474 million and $1.8 billion pre-tax non-cash goodwill impairment charges related to our Medical segment, respectively, as discussed further in the "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements."
During the three and nine months ended March 31, 2021 we recognized a $58 million pre-tax write-down of the assets held for sale from the divestiture of the Cordis business.
Litigation (Recoveries)/Charges, Net
During the nine months ended March 31, 2021, we recognized a pre-tax charge of $1.02 billion associated with certain opioid matters. See the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
During the three and nine months ended March 31, 2022, we incurred a one-time contingent attorney fee of $18 million related to the finalization of the Settlement Agreement resulting in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities. Due to the unique nature and significance of the Settlement Agreement, and the one-time, contingent nature of the fee, this related fee was included in litigation (recoveries)/charges, net.
We recognized estimated losses and legal defense costs associated with the IVC filter product liability claims of $24 million and $12 million during the three months ended March 31, 2022 and 2021, respectively, and $63 million and $40 million during the nine months ended March 31, 2022 and 2021, respectively. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
During the nine months ended March 31, 2022, we recognized income of $17 million for recoveries in class action antitrust lawsuits in which we were a class member.
During the nine months ended March 31, 2021, we recognized a $13 million charge in connection with a civil investigation by the United States Attorney’s Office for the District of Massachusetts related to discounts and rebates offered or provided to certain Specialty Solutions customers, as described further in Note 6 of the "Notes to Condensed Consolidated Financial Statements."
Earnings/(Loss) Before Income Taxes
In addition to the items discussed above, earnings/(loss) before income taxes were impacted by the following:

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&AResults of Operations
Three Months Ended March 31,Nine Months Ended March 31,
(in millions)20222021Change20222021Change
Other (income)/expense, net$3 $(12)N.M$(14)$(31)N.M
Interest expense, net38 45 (16)%115 136 (15)%
Loss on early extinguishment of debt — N.M10 N.M
(Gain)/loss on sale of equity interest in naviHealth(1)— N.M(2)— N.M
Other (Income)/Expense, Net
During the three and nine months ended March 31, 2022, other (income)/expense, net was unfavorable compared to the prior-year periods primarily due to a decrease in the value of our deferred compensation plan investments, which offsets fluctuations included within SG&A expenses as discussed further in Note 8 of the "Notes to Condensed Consolidated Financial Statements." The year-over-year comparison was also unfavorably impacted by gains on investments in non-marketable equity securities during the three months ended March 31, 2021.
Interest Expense, Net
The decrease in interest expense during the three and nine months ended March 31, 2022 was primarily due to less debt outstanding.
Loss on Early Extinguishment of Debt
During nine months ended March 31, 2022, we recognized a $10 million loss in connection with the debt redemption as described further in Note 5 of the “Notes to Condensed Consolidated Financial Statements.”
Provision for/(Benefit from) Income Taxes
During the three and nine months ended March 31, 2022, the effective tax rate was (916.5) percent and (44.4) percent, respectively, and reflects the impact of the tax effect of the year-to-date goodwill impairment charges recognized during the nine months ended March 31, 2022.
During the three and nine months ended March 31, 2021, the effective tax rate was 72.8 percent and (143.3) percent, respectively, and included the impact related to the treatment of the tax effect of opioid litigation charges, adjustments to our provision for the resolution of all open matters with the IRS for fiscal years 2008 to 2010 as well as certain transfer pricing matters for fiscal years 2011 to 2014, which also impacted reserves for later years, and withholding taxes for planned distributions from foreign subsidiaries. During the nine months ended March 31, 2021, the effective tax rate included the benefit from a net operating loss carryback primarily related to a self-insurance pre-tax loss.
Tax Effects of Goodwill Impairment Charge
During the nine months ended March 31, 2022, we recognized year-to-date pre-tax charges of $1.8 billion for goodwill impairments related to the Medical segment. The net tax benefit related to these charges is $126 million for fiscal 2022.
Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings/(loss) before income taxes for the year-to-date period to compute our benefit from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur.
The tax effect of the goodwill impairment charges during the nine months ended March 31, 2022 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairment in prior fiscal years. The impact of the non-deductible goodwill significantly decreased the estimated annual effective tax rate for fiscal 2022. Applying the lower tax rate to the year-to-date loss resulted in recognizing an interim tax expense of approximately $1.2 billion, which impacted the provision for income taxes in the condensed consolidated statements of earnings/(loss) during the three and nine months ended March 31, 2022 and prepaid expenses and other assets in the condensed consolidated balance sheet at March 31, 2022.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&ALiquidity and Capital Resources
Liquidity and Capital Resources
We currently believe that, based on available capital resources (cash on hand and committed credit facilities) and projected operating cash flow, we have adequate capital resources to fund working capital needs; currently anticipated capital expenditures; currently anticipated business growth and expansion; contractual obligations; tax payments; current and projected debt service requirements, dividends and share repurchases; and opioid litigation settlement payments associated with the Settlement Agreement, the state agreements and Cherokee Nation and Native American tribes agreements. If we decide to engage in one or more acquisitions, depending on the size and timing of such transactions, we may need to access capital markets for additional financing.
Cash and Equivalents
Our cash and equivalents balance was $2.4 billion at March 31, 2022 compared to $3.4 billion at June 30, 2021. At March 31, 2022, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.
During the nine months ended March 31, 2022, net cash provided by operating activities was $130 million, which includes $348 million of payments related to the Settlement Agreement, payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under Cherokee Nation settlement and Native American term sheet. Net cash provided by operating activities was also adversely impacted by the timing of collections of customer receivables and the day of the week on which a fiscal period ends. We deployed $1.0 billion for share repurchases, $597 million for debt repayment, and $425 million for cash dividends. We also received proceeds of $923 million, net of cash transferred, from the divestiture of the Cordis business.

Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, and payments to vendors in the regular course of business, as well as fluctuating working capital needs driven by customer and product mix.
The cash and equivalents balance at March 31, 2022 includes $652 million of cash held by subsidiaries outside of the United States.



Other Financing Arrangements and Financial Instruments
Credit Facilities and Commercial Paper
In addition to cash and equivalents and operating cash flow, other sources of liquidity at March 31, 2022 include a $2.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility. We also have a $1.0 billion committed receivables sales facility. At March 31, 2022, we had no amounts outstanding under our commercial paper program, revolving credit facility, or our committed receivables sales facility. During the nine months ended March 31, 2022, we had a daily maximum amount outstanding under our commercial paper and committed receivables programs of $1.2 billion and an average daily amount outstanding of $25 million.
Our revolving credit and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of March 31, 2022, we were in compliance with this financial covenant.

Long-Term Debt and Other Short-Term Borrowings
At March 31, 2022 and June 30, 2021, we had total long-term obligations, including the current portion and other short-term borrowings, of $5.6 billion and $6.2 billion, respectively. During the nine months ended March 31, 2022, we redeemed $572 million of the 2.616% Notes due June 2022 with available cash. In connection with this redemption, we recorded a $10 million loss on early extinguishment of debt. The early redemption was funded with available cash.

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MD&ALiquidity and Capital Resources
Capital Resources
Tax Effects of Self-Insurance Pre-tax Loss
In connection with a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss as described further in our 2021 Form 10-K, we filed for a refund of $974 million. Because we expected to receive the refund within 12 months, we had a current asset for this amount on our condensed consolidated balance sheets at both March 31, 2022 and June 30, 2021. In April 2022, we received a payment for $966 million, which is net of certain adjustments. See Note 7 of the "Notes to Condensed Consolidated Financial Statements for additional detail.
Capital Deployment
Opioid Litigation Settlement Agreement
We had $6.70 billion accrued at March 31, 2022 related to certain opioid litigation, as further described within the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the payment amounts to be spread over 18 years. During the nine months ended March 31, 2022, we paid our first annual payment under the Settlement Agreement, which is reflected in prepaid expenses and other assets in our condensed consolidated balance sheets. We also made certain payments under the separate New York and Ohio settlements. The effective date of the Settlement Agreement is April 2, 2022. We expect to make subsequent annual payments under the Settlement Agreement every July for the term of the Settlement Agreement beginning in July 2022. The amounts of these future payments may differ from the payment made during the nine months ended March 31, 2022.
Capital Expenditures
Capital expenditures during the nine months ended March 31, 2022 and 2021 were $223 million and $274 million, respectively.

Dividends
On each of May 5, 2021, August 4, 2021, November 4, 2021 and February 8, 2022, our Board of Directors approved a quarterly dividend of $0.4908 per share, or $1.96 per share on an annualized basis, which were paid on July 15, 2021, October 15, 2021, January 15, 2022 and April 15, 2022 to shareholders of record on July 1, 2021, October 1, 2021, January 3, 2022 and April 1, 2022 respectively.
Share Repurchases
During the nine months ended March 31, 2022, we repurchased $1.0 billion of our common shares, in the aggregate, under accelerated share repurchase ("ASR") programs. See Note 10 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
On November 4, 2021, our Board of Directors approved a $3.0 billion share repurchase program, which will expire on December 31, 2024. As of April 30, 2022, we had $2.7 billion remaining authorized for share repurchases under this program.

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MD&AOther Items

Other Items
The MD&A in our 2021 Form 10-K addresses our contractual obligations and off-balance sheet arrangements, as of and for the fiscal year ended June 30, 2021. There have been no subsequent material changes outside the ordinary course of business to those items.


Critical Accounting Policies and Sensitive Accounting Estimates
The discussion and analysis presented below is a supplemental disclosure to the critical accounting policies and sensitive accounting estimates specified in our consolidated balance sheet at June 30, 2021. This discussion and analysis should be read in conjunction with the Critical Accounting Policies and Sensitive Accounting Estimates included in our 2021 Form 10-K and our Form 10-Q for the quarters ended September 30, 2021 and December 31, 2021.
Critical accounting policies are those accounting policies that (i) can have a significant impact on our financial condition and results of operations and (ii) require the use of complex and subjective estimates based upon past experience and management’s judgment. Other people applying reasonable judgment to the same facts and circumstances could develop different estimates. Because estimates are inherently uncertain, actual results may differ, including due to the risks discussed in "Risk Factors" and other risks discussed in our 2021 Form 10-K and our other filings with the SEC since June 30, 2021.
Inventory
A portion of our inventories are valued at the lower of cost, using the last-in, first-out ("LIFO") method, or market. These are primarily merchandise inventories at the core pharmaceutical distribution facilities within our Pharmaceutical segment (“distribution facilities”).
Our remaining inventory, including inventory in our Medical segment, that is not valued at the lower of LIFO cost or market is stated at the lower of cost, using the first-in, first-out method ("FIFO"), or net realizable value. We reserve for the lower of cost or net realizable value using the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Due to the unprecedented demand for certain PPE as a result of COVID-19, our Medical segment manufactured and sourced inventory at higher costs than
in periods prior to COVID-19. As selling prices and customer demand decreased compared to the peak of COVID-19, we recorded a reserve of $197 million in fiscal 2021, primarily related to certain categories of gloves, to reduce the carrying value of certain PPE to its net realizable value.
We continued to monitor and assess changes in selling prices and customer demand related to PPE during the nine months ended March 31, 2022. While we consider that our assumptions continue to be reasonable and appropriate, our estimates for selling prices and demand are inherently uncertain and if our assumptions decline in the future, additional inventory reserves may be required.
Goodwill
Purchased goodwill is tested for impairment annually or when indicators of impairment exist. Goodwill impairment testing involves a comparison of the estimated fair value of reporting units to the respective carrying amount, which may be performed utilizing either a qualitative or quantitative assessment. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment (also known as a component).
Our reporting units are: Pharmaceutical operating segment (excluding our Nuclear and Precision Health Solutions division);
Nuclear and Precision Health Solutions division; Medical operating segment (excluding our Cardinal Health at-Home Solutions division) (“Medical Unit”); and Cardinal Health at-Home Solutions division.
Goodwill impairment testing involves judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit. Our qualitative evaluation considers the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



MD&A
Other Items
Medical Unit Goodwill
During the three and nine months ended March 31, 2022, the Medical Unit continued to experience adverse financial results related to inflationary impacts and the adverse impact of global supply chain constraints. Due to the risks and uncertainties related to these impacts, we elected to bypass the qualitative assessment in the second and third quarters of fiscal 2022 and perform interim goodwill impairment testing for the Medical Unit. This quantitative testing resulted in the carrying amount of the Medical Unit exceeding the fair value, resulting in pre-tax impairment charges of $474 million and $1.3 billion, which were recognized during the three months ended March 31, 2022 and December 31, 2021, respectively, and are included in impairments and (gain)/loss on disposal of assets in our condensed consolidated statements of earnings/(loss).
Our determination of the estimated fair value of the Medical Unit is based on a combination of the income-based approach (using a terminal growth rate of 2 percent), and the market-based approach. For the income-based approach, we also used discount rates of 9.5 percent and 9 percent for the interim testing at March 31, 2022 and December 31, 2021, respectively. The increase in the discount rate was primarily due to an increase in the risk-free interest rate.
In connection with the interim testing performed at December 31, 2021, we updated our assumptions from prior periods to include the increased magnitude and breadth of the inflationary impacts to supply chain and commodities costs as well as adverse impacts due to global supply chain constraints. In addition, our planned price increases did not impact the second quarter of fiscal 2022 and therefore, we updated our assumptions to reflect a longer duration to implement such actions.
In connection with the interim testing performed at March 31, 2022, we further updated our assumptions for the adverse impact of global supply chain constraints, the timing of inflationary impacts and lower volumes from PPE. These changes did not have a meaningful impact on the fair value of the Medical Unit. The decrease in the fair value of the Medical Unit at March 31, 2022 was due to the increase in the discount rate described above.
The carrying value of the Medical Unit at March 31, 2022 after recognizing the impairment charge was $7.6 billion, of which $2.3 billion was goodwill. See Note 4 of the "Notes to Condensed Consolidated Financial Statements" for further discussion.



While we consider these assumptions to be reasonable and appropriate, they are complex and subjective, and additional adverse changes in one key assumption or a combination of key assumptions may significantly affect future estimates. These assumptions include, among other things, a failure to meet expected earnings or other financial plans, or unanticipated events and circumstances, such as changes in assumptions about the duration and magnitude of increased supply chain and commodities costs and our planned efforts to mitigate such impact, including price increases or surcharges; further disruptions in the supply chain; the impact of the Cordis divestiture; the COVID-19 pandemic, including estimated demand and selling prices for PPE; an increase in the discount rate; a decrease in the terminal growth rate; increases in tax rates (including potential tax reform); or a significant change in industry or economic trends. Adverse changes in key assumptions may result in further decline in fair value below the carrying value in the future and therefore, an impairment of our Medical Unit goodwill in future periods, which could adversely affect our results of operations. For example, if we were to increase the discount rate by a hypothetical 0.5 percent or decrease the terminal growth rate by a hypothetical 1.5 percent, the fair value for the Medical Unit would have further decreased by approximately $400 million.

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Explanation and Reconciliation of Non-GAAP Financial Measures
Explanation and Reconciliation of Non-GAAP Financial Measures
The "Overview of Consolidated Results" section within MD&A in this Form 10-Q contains financial measures that are not calculated in accordance with GAAP.
In addition to analyzing our business based on financial information prepared in accordance with GAAP, we use these non-GAAP financial measures internally to evaluate our performance, engage in financial and operational planning, and determine incentive compensation because we believe that these measures provide additional perspective on and, in some circumstances are more closely correlated to, the performance of our underlying, ongoing business. We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance to that of our competitors. However, the non-GAAP financial measures that we use may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by us should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.
Exclusions from Non-GAAP Financial Measures
Management believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and for investors’ assessment of the business for the reasons identified below:
LIFO charges and credits are excluded because the factors that drive last-in first-out ("LIFO") inventory charges or credits, such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end), are largely out of our control and cannot be accurately predicted. The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies’ financial results. We did not recognize any LIFO charges or credits during the periods presented.
Surgical gown recall costs or income includes inventory write-offs and certain remediation and supply disruption costs, net of related insurance recoveries, arising from the January 2020 recall of select Association for the Advancement of Medical Instrumentation ("AAMI") Level 3 surgical gowns and voluntary field actions (a recall of some packs and a corrective action allowing overlabeling of other packs) for Presource Procedure Packs containing affected gowns. Income from surgical gown recall costs represents insurance recoveries of these certain costs. We have excluded these costs from our non-GAAP metrics to allow investors to better understand the underlying operating results of the business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies’ financial results.
State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that were sold or distributed in periods prior to the period in which the expense is incurred. This portion is excluded from non-GAAP financial measures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying, ongoing business. Additionally, while states' laws may require us to make payments on an ongoing basis, the portion of the assessment related to sales in prior periods are contemplated to be one-time, nonrecurring items. Income from state opioid assessments related to prior fiscal years represents reversals of accruals when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.
Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business.
Amortization and other acquisition-related costs, which include transaction costs, integration costs, and changes in the fair value of contingent consideration obligations, are excluded because they are not part of the ongoing operations of our underlying business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies' financial results. Additionally, costs for amortization of acquisition-related intangible assets are non-cash amounts, which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion facilitates comparison of historical, current and forecasted financial results. We also exclude other acquisition-related costs, which are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity’s initial balance sheet as part of the purchase price allocation. These costs are also significantly impacted by the timing, complexity and size of acquisitions.

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Explanation and Reconciliation of Non-GAAP Financial Measures
Impairments and gain or loss on disposal of assets are excluded because they do not occur in or reflect the ordinary course of our ongoing business operations and are inherently unpredictable in timing and amount, and in the case of impairments, are non-cash amounts, so their exclusion facilitates comparison of historical, current and forecasted financial results.
Litigation recoveries or charges, net are excluded because they often relate to events that may have occurred in prior or multiple periods, do not occur in or reflect the ordinary course of our business and are inherently unpredictable in timing and amount. During fiscal 2021, we incurred a tax benefit related to a carryback of a net operating loss. Some pre-tax amounts, which contributed to this loss, relate to litigation charges. As a result, we allocated substantially all of the tax benefit to litigation charges. During fiscal 2022, we incurred a one-time contingent attorney 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 entities. Due to the unique nature and significance of the Settlement Agreement, and the one-time, contingent nature of the fee, this related fee was included in litigation recoveries or charges, net. Additionally, during fiscal 2022 our Pharmaceutical segment profit was positively impacted by a $16 million judgment for lost profits. This judgment was the result of an ordinary course intellectual property rights claim and, therefore, is not adjusted in calculating the litigation recoveries or charges, net adjustment.
Loss on early extinguishment of debt is excluded because it does not typically occur in the normal course of business and may obscure analysis of trends and financial performance. Additionally, the amount and frequency of this type of charge is not consistent and is significantly impacted by the timing and size of debt extinguishment transactions.
(Gain)/Loss on sale of equity interest in naviHealth was incurred in connection with the sale of our remaining equity interest in naviHealth in fiscal 2020. The equity interest was retained in connection with the initial sale of our majority interest in naviHealth during fiscal 2019. We exclude this significant gain because gains or losses on investments of this magnitude do not typically occur in the normal 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-GAAP measures.
Transitional tax benefit, net related to the Tax Cuts and Jobs Act is excluded because it results from the one-time impact of a very significant change in the U.S. federal corporate tax rate and, due to the significant size of the benefit, obscures analysis of trends and financial performance. The transitional tax benefit includes the initial estimate and subsequent adjustments for the re-measurement of deferred tax assets and liabilities due to the reduction of the U.S. federal corporate income tax rate and the repatriation tax on undistributed foreign earnings.
The tax effect for each of the items listed above, other than the transitional tax benefit item, is determined using the tax rate and other tax attributes applicable to the item and the jurisdiction(s) in which the item is recorded. The gross, tax and net impact of each item are presented with our GAAP to non-GAAP reconciliations.
Definitions
Growth rate calculation: growth rates in this report are determined by dividing the difference between current-period results and prior-period results by prior-period results.
Non-GAAP operating earnings: operating earnings/(loss) excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, and (7) litigation (recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings/(loss) before income taxes excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth.
Non-GAAP net earnings attributable to Cardinal Health, Inc.: net earnings/(loss) attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth, each net of tax, and (10) transitional tax benefit, net.
Non-GAAP effective tax rate: provision for/(benefit from) income taxes adjusted for (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on

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Explanation and Reconciliation of Non-GAAP Financial Measures
early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth, each net of tax, and (10) transitional tax benefit, net divided by (earnings/(loss) before income taxes adjusted for the first nine items).
Non-GAAP diluted earnings per share attributable to Cardinal Health, Inc.: non-GAAP net earnings attributable to Cardinal Health, Inc. divided by diluted weighted-average shares outstanding.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Explanation and Reconciliation of Non-GAAP Financial Measures
GAAP to Non-GAAP Reconciliation
(in millions, except per common share amounts)Operating Earnings/(Loss)Operating Earnings Growth RateEarnings/(Loss) Before Income TaxesProvision for/
(Benefit from) Income Taxes
Net Earnings/(Loss)1
Net Earnings1 Growth Rate
Diluted EPS1,2
Diluted EPS1 Growth Rate
Three Months Ended March 31, 2022
GAAP$(97)N.M.$(137)$1,253 $(1,391)N.M.$(5.05)N.M.
Restructuring and employee severance31 31 23 0.08 
Amortization and other acquisition-related costs79 79 20 59 0.21 
Impairments and (gain)/loss on disposal of assets, net 3
471 471 (1,189)1,660 6.03 
Litigation (recoveries)/charges, net 4
61 61 10 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)%
Three Months Ended March 31, 2021
GAAP$473 (16)%$440 $320 $119 N.M$0.40 N.M
Surgical gown recall costs/(income)(1)(1)— (1)— 
State opioid assessment related to prior fiscal years(2)(2)(1)(1)— 
Restructuring and employee severance24 24 18 0.06 
Amortization and other acquisition-related costs111 111 28 83 0.28 
Impairments and (gain)/loss on disposal of assets, net69 69 (4)73 0.25 
Litigation (recoveries)/charges, net 6
15 15 (144)159 0.54 
Non-GAAP$689 (4)%$657 $205 $451 (5)%$1.53 (6)%
Nine Months Ended March 31, 2022
GAAP
$(632)N.M.$(741)$328 $(1,071)N.M.$(3.82)N.M.
Surgical gown recall costs/(income)— — 
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 3
1,764 1,764 (119)1,883 6.71 
Litigation (recoveries)/charges, net (4) (5)
113 113 19 94 0.33 
Loss on early extinguishment of debt— 10 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)%
Nine Months Ended March 31, 2021
GAAP$310 N.M.$204 $(293)$495 N.M.$1.68 N.M.
Surgical gown recall costs/(income)(3)(3)(1)(2)— 
State opioid assessment related to prior fiscal years39 39 30 0.10 
Restructuring and employee severance81 81 20 61 0.21 
Amortization and other acquisition-related costs345 345 86 259 0.88 
Impairments and (gain)/loss on disposal of assets, net78 78 12 66 0.22 
Litigation (recoveries)/charges, net 6
1,085 1,085 584 501 1.70 
Loss on early extinguishment of debt— — — 
Non-GAAP$1,935 — %$1,830 $417 $1,411 %$4.79 %


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Explanation and Reconciliation of Non-GAAP Financial Measures
1    Attributable to Cardinal Health, Inc.
2    For the three and nine months ended March 31, 2022, GAAP diluted loss per share attributable to Cardinal Health, Inc. ("GAAP diluted EPS") and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 275 million and 281 million common shares, respectively, which excludes potentially dilutive securities from the denominator 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 and 282 million common shares, which includes potentially dilutive shares.

3    Impairments and (gain)/loss on disposals of assets, net includes pre-tax goodwill impairment charges of $474 million and $1.8 billion related to our Medical segment recorded in the third quarter and year-to-date periods of fiscal 2022, respectively. For fiscal 2022, the estimated net tax benefit related to these impairments is $126 million and is included in the annual effective tax rate. As a result, the amount of tax expense in the current quarter and year-to-date periods increased by approximately $1.2 billion and approximately $180 million, respectively, and is expected to lower the provision for income taxes during the fourth quarter of fiscal 2022 by approximately $180 million.
4    Litigation (recoveries)/charges, net includes a one-time contingent attorney fee of $18 million recorded during the third quarter of fiscal 2022 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 entities. Due to the unique nature and significance of the Settlement Agreement, and the one-time, contingent nature of the fee, this related fee was included in litigation (recoveries)/charges, net.
5    Litigation (recoveries)/charges, net for fiscal 2022 does not include a $16 million judgement for lost profits related to an ordinary course intellectual property claim, which positively impacted Pharmaceutical segment profit.
.
6    Litigation (recoveries)/charges, net includes a pre-tax charge of $1.02 billion recorded in the first quarter of fiscal 2021 related to the opioid litigation. For fiscal 2021, the amount of tax expense increased by approximately $140 million during the three months ended March 31, 2021 while the amount of tax benefit increased by approximately $180 million during the nine months ended March 31, 2021 compared to the tax impacts that would have been recognized without the opioid litigation charge. The net tax benefit associated with the opioid litigation charges was $228 million for fiscal 2021.
    Litigation(recoveries)/charges, net also includes a tax benefit recorded during the nine months ended March 31, 2021 related to a net operating loss carryback. Our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, was deducted on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss was carried back and adjusted our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. During the nine months ended March 31, 2021, the total net benefit was $419 million; however, for purposes of reconciling Non-GAAP financial measures, we allocated $385 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $34 million is included in non-GAAP measures.

The sum of the components and certain computations may reflect rounding adjustments.
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.


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Other

Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the quantitative and qualitative market risk disclosures included in our 2021 Form 10-K since the end of fiscal 2021 through March 31, 2022.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of March 31, 2022. Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of March 31, 2022, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
As explained below, there were changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Pharmaceutical Segment Information Technology Initiative
The Pharmaceutical segment is in a multi-year project to implement a replacement of certain finance and operating information systems. During the three and nine months ended March 31, 2022, we transitioned selected processes to the new systems which affected our internal control over financial reporting. It is possible that ongoing transitions to new systems may adversely impact internal control over financial reporting.

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Other

Legal Proceedings
In addition to the proceeding described below, the legal proceedings described in Note 6 of the "Notes to Condensed Consolidated Financial Statements" are incorporated in this "Legal Proceedings" section by reference.
In June 2019, Melissa Cohen, a purported shareholder, filed an action on behalf of Cardinal Health, Inc. in the U.S. District Court for the Southern District of Ohio against certain current and former members of our Board of Directors alleging that the defendants breached their fiduciary duties by failing to effectively monitor Cardinal Health's distribution of controlled substances and approving certain payments of executive compensation. In December 2019 and January 2020, similar complaints were filed in the U.S. District Court for the Southern District of Ohio by purported shareholders, Stanley M. Malone and Michael Splaine, respectively. In January, 2020, the court consolidated the derivative cases under the caption In re Cardinal Health, Inc. Derivative Litigation and in March 2020, plaintiffs filed an amended complaint. The amended consolidated derivative complaint seeks, among other things, unspecified money damages against the defendants and an award of attorneys' fees. In February 2021, the court granted in part and denied in part defendants' motion to dismiss. The court dismissed the claim with respect to executive compensation but declined to dismiss the failure to monitor claim.
Subject to definitive documentation and court approval and notice process, in December 2021, the parties reached an agreement in principle to resolve these lawsuits. Under this agreement, our director and officer's liability insurance carriers, on behalf of the defendants, would pay Cardinal Health $124 million, less any attorneys' fees and expenses awarded by the court to plaintiffs' counsel. This settlement does not include any admission of liability.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Other
Risk Factors
You should carefully consider the information in this Form 10-Q, including the risk factors below, and the risk factors discussed in "Risk Factors" and other risks discussed in our 2021 Form 10-K and our filings with the SEC since June 30, 2021. These risks could materially and adversely affect our results of operations, financial condition, liquidity, and cash flows. Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.
We depend on direct and indirect suppliers to make their products and raw materials available to us and are subject to fluctuations in costs, availability and regulatory risk associated with these products and raw materials.
Our manufacturing businesses use oil-based resins, pulp, cotton, latex and other commodities as raw materials in many products. Prices of oil and gas also affect our distribution and transportation costs. Prices of these commodities are volatile and can fluctuate significantly, causing our costs to produce and distribute our products to fluctuate. Beginning in the fourth quarter of fiscal year 2021, we have experienced higher supply chain costs, primarily related to international freight and commodities, which had a negative impact on Medical segment profit in fiscal 2021 and the first three quarters of fiscal 2022. Supply chain constraints have also had a negative impact on sales within our Medical segment. We expect these cost increases and supply chain constraints to continue to have a negative impact on segment profit, primarily in the Medical segment, in fiscal 2022. Due to competitive dynamics and contractual limitations, passing along cost increases is challenging and it unlikely that we will be able to offset the impact of these costs increases through higher prices. If we continue to have challenges sufficiently offsetting these cost increases through other cost reductions, or recovering these costs through price increases or surcharges, Medical segment profit could be negatively impacted to a greater extent than we currently anticipate.
We depend on others to manufacture some products that we market and distribute. Our operations are also dependent on various components, compounds, raw materials and energy supplied by others. We purchase many of these components, raw materials and energy, and source certain products from numerous suppliers in various countries. In some instances, for reasons of quality assurance, cost effectiveness, or availability, we procure certain components and raw materials from a sole supplier. Our supplier relationships could be interrupted, become less favorable to us or be terminated and the supply of these components, compounds, raw materials or products could be interrupted or become insufficient. These supply interruptions or other disruptions in manufacturing processes could be caused by events
beyond our control, including natural disasters, supplier facility shut-downs, defective raw materials, the impact of epidemics or pandemics, such as COVID-19, and actions by U.S. or international governments, including export restrictions or tariffs.
In addition, due to the stringent regulatory requirements regarding the manufacture and sourcing of our products, we may not be able to quickly establish additional or replacement sources for certain components, materials or products. A sustained supply reduction or interruption, and an inability to develop alternative and additional sources for such supply, could result in lost sales, increased cost, damage to our reputation, and may have an adverse effect on our business.
Our goodwill may become further impaired, which could require us to record additional significant charges to earnings in accordance with generally accepted accounting principles.
U.S. GAAP requires us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist. As a result of adverse financial results in our Medical Unit resulting from inflationary impacts and global supply chain constraints, we performed interim goodwill impairment testing for the Medical Unit for the periods ended December 31, 2021 and March 31, 2022. As a result of both of these interim tests, we recorded an aggregate $1.8 billion impairment to goodwill related to our Medical Unit in the nine months ended March 31, 2022. This testing involves estimates and significant judgments by management. We believe our assumptions and estimates are reasonable and appropriate; however additional adverse changes in key assumptions, including a failure to meet expected earnings or other financial plans, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain and commodities costs and our planned efforts to mitigate such impacts, further disruptions in the supply chain, the impact of the Cordis divestiture, estimated demand and selling prices for PPE, a further increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends could affect the accuracy or validity of such estimates and may result in an additional goodwill impairment in our Medical Unit. It is also possible that we may record significant charges related to other reporting units. Any charge or charges could adversely affect our results of operations. See "Critical Accounting Policies and Sensitive Accounting Estimates" in MD&A above for more information regarding goodwill impairment testing.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Other
Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
PeriodTotal Number
of Shares
Purchased (1)
Average Price Paid per Share (2,3)Total Number of Shares
Purchased
as Part of Publicly Announced Programs (2,3,4)
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under the Program (4)
(in millions)
January 20221,304,012 $46.05 1,303,017 $2,943 
February 2022226 53.01 — 2,943 
March 20222,962,630 54.01 2,962,414 2,783 
Total4,266,868 $51.58 4,265,431 $2,783 
(1)Reflects 995, 226, and 216 common shares purchased in January, February, and March 2022, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.
(2)On November 10, 2021, we entered into an ASR program to purchase common shares for an aggregate purchase price of $300 million and received an initial delivery of 4.8 million common shares using a reference price of $50.30. The program concluded on January 31, 2022 at a volume weighted average price per common share of $49.39 resulting in a final delivery of 1.3 million common shares. See Note 10 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
(3)On February 28, 2022, we entered into an ASR program to purchase common shares for an aggregate purchase price of $200 million and received an initial delivery of 3.0 million common shares using a reference price of $54.01. The program concluded on April 18, 2022 at a volume weighted average price per common share of $56.02 resulting 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 7, 2018, our Board of Directors approved a $1.0 billion share repurchase program that expired on December 31, 2021. On November 4, 2021, our Board of Directors approved a new $3.0 billion share repurchase program, which will expire on December 31, 2024. The ASR program with an aggregate purchase price of $200 million concluded on April 18, 2022, which reduced the amount remaining under our existing share repurchase authorization to $2.7 billion.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Financial Statements

Condensed Consolidated Statements of Earnings/(Loss)
(Unaudited)
Three Months Ended March 31,Nine Months Ended March 31,
(in millions, except per common share amounts)2022202120222021
Revenue$44,836 $39,275 $134,261 $119,881 
Cost of products sold43,154 37,463 129,321 114,578 
Gross margin1,682 1,812 4,940 5,303 
Operating expenses:
Distribution, selling, general and administrative expenses1,137 1,120 3,402 3,404 
Restructuring and employee severance31 24 56 81 
Amortization and other acquisition-related costs79 111 237 345 
Impairments and (gain)/loss on disposal of assets, net471 69 1,764 78 
Litigation (recoveries)/charges, net61 15 113 1,085 
Operating earnings/(loss)(97)473 (632)310 
Other (income)/expense, net3 (12)(14)(31)
Interest expense, net38 45 115 136 
Loss on early extinguishment of debt  10 1 
(Gain)/loss on sale of equity interest in naviHealth(1) (2) 
Earnings/(loss) before income taxes(137)440 (741)204 
Provision for/(benefit from) income taxes1,253 320 328 (293)
Net earnings/(loss)(1,390)120 (1,069)497 
Less: Net earnings attributable to noncontrolling interests(1)(1)(2)(2)
Net earnings/(loss) attributable to Cardinal Health, Inc. $(1,391)$119 $(1,071)$495 
Earnings/(Loss) per common share attributable to Cardinal Health, Inc.:
Basic$(5.05)$0.41 $(3.82)$1.69 
Diluted(5.05)0.40 (3.82)1.68 
Weighted-average number of common shares outstanding:
Basic275292281293
Diluted275294281294
Cash dividends declared per common share$0.4908 $0.4859 $1.4724 $1.4577 
See notes to condensed consolidated financial statements.

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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Financial Statements
Condensed Consolidated Statements of Comprehensive Income/(Loss)
(Unaudited)
Three Months Ended March 31,Nine Months Ended March 31,
(in millions)2022202120222021
Net earnings/(loss)$(1,390)$120 $(1,069)$497 
Other comprehensive income/(loss):
Foreign currency translation adjustments and other(4)9 (47)42 
Net unrealized gain/(loss) on derivative instruments, net of tax12 (4)4 14 
Total other comprehensive income/(loss), net of tax8 5 (43)56 
Total comprehensive income/(loss)(1,382)125 (1,112)553 
Less: comprehensive income attributable to noncontrolling interests(1)(1)(2)(2)
Total comprehensive income/(loss) attributable to Cardinal Health, Inc. $(1,383)$124 $(1,114)$551 
See notes to condensed consolidated financial statements.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Financial Statements
Condensed Consolidated Balance Sheets
(in millions)March 31, 2022June 30, 2021
(Unaudited)
Assets
Current assets:
Cash and equivalents$2,356 $3,407 
Trade receivables, net10,250 9,103 
Inventories, net15,493 14,594 
Prepaid expenses and other2,785 2,843 
Assets held for sale 1,101 
Total current assets30,884 31,048 
Property and equipment, net2,298 2,360 
Goodwill and other intangibles, net8,022 10,094 
Other assets907 951 
Total assets$42,111 $44,453 
Liabilities and Shareholders’ Equity/(Deficit)
Current liabilities:
Accounts payable$24,821 $23,700 
Current portion of long-term obligations and other short-term borrowings861 871 
Other accrued liabilities3,033 2,957 
Liabilities related to assets held for sale 96 
Total current liabilities28,715 27,624 
Long-term obligations, less current portion4,751 5,365 
Deferred income taxes and other liabilities9,338 9,670 
Shareholders’ equity/(deficit):
Preferred shares, without par value:
Authorized—500 thousand shares, Issued—none
  
Common shares, without par value:
Authorized—755 million shares, Issued—327 million shares at March 31, 2022 and June 30, 2021
2,761 2,806 
Retained earnings/(accumulated deficit)(281)1,205 
Common shares in treasury, at cost: 54 million shares and 36 million shares at March 31, 2022 and June 30, 2021, respectively
(3,100)(2,186)
Accumulated other comprehensive loss(77)(34)
Total Cardinal Health, Inc. shareholders' equity/(deficit)(697)1,791 
Noncontrolling interests4 3 
Total shareholders’ equity/(deficit)(693)1,794 
Total liabilities and shareholders’ equity/(deficit)$42,111 $44,453 
See notes to condensed consolidated financial statements.


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Cardinal Health | Q3 Fiscal 2022 Form 10-Q



Financial Statements
Condensed Consolidated Statements of Shareholders'
Equity/(Deficit)
(Unaudited)
Common SharesTreasury SharesAccumulated Other
Comprehensive
Loss
Noncontrolling InterestsTotal
Shareholders’
Equity/ (Deficit)
(in millions)Shares IssuedAmountRetained
Earnings/ (Accumulated Deficit)
SharesAmount
Three Months Ended March 31, 2022
Balance at December 31, 2021327 $2,721 $1,245 (50)$(2,883)$(85)$4 $1,002 
Net earnings/(loss)(1,391)1 (1,390)
Other comprehensive income, net of tax8 8 
Employee stock plans activity, net of shares withheld for 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 $(693)
Three Months Ended March 31, 2021
Balance at December 31, 2020327 $2,778 $1,255 (33)$(2,009)$(53)$4 $1,975 
Net earnings119 1 120 
Other comprehensive income, net of tax5 5 
Employee stock plans activity, net of shares withheld for employee taxes 29  7 36 
Share repurchase program activity(4)(200)(200)
Dividends declared(143)(143)