Cardinal Health announces leadership changes aside Q4, full-year results
Cardinal Health today reported fourth quarter fiscal year 2022 revenues of $47.1 billion, an increase of 11% from the fourth quarter of last year.
The Dublin, Ohio-based company also announced two leadership changes, naming Jason Hollar, the company’s current chief financial officer, to serve as its next CEO, effective Sept. 1. Hollar will succeed Mike Kaufmann, the CEO since January 2018. Hollar also will join the company’s board of directors.
Additionally, Patricia English, Cardinal Health’s current chief accounting officer, will serve as interim CFO, while the company conducts an external search for a permanent CFO.
[Read more: Cardinal Health reports revenue growth in Q3]
In sharing the company’s results, Cardinal Health reported GAAP operating earnings were $36 million, primarily due to a non-cash, pre-tax goodwill impairment charge of $303 million in the medical segment. GAAP diluted earnings per share were 50 cents, primarily due to this impairment, net of tax effects. Non-GAAP operating earnings increased 41% to $450 million primarily due to the increase in pharmaceutical segment profit, and non-GAAP diluted EPS increased 36% to $1.05 in the quarter.
Fiscal year 2022 revenues were $181.4 billion, a 12% increase from fiscal year 2021. GAAP operating loss was $596 million due to non-cash, pre-tax goodwill impairment charges of $2.1 billion in the medical segment. GAAP diluted loss per share was $3.35, primarily due to these impairments, net of tax effects. Non-GAAP operating earnings decreased 12% to $2 billion, primarily due to net inflationary impacts and global supply chain constraints in the Medical segment. Non-GAAP diluted EPS decreased 9% to $5.06 due to the decline in medical segment profit, partially offset by an increase in pharmaceutical segment profit, net of tax effects.
“In fiscal year 2022, medical segment performance was significantly impacted by inflation and supply chain constraints,” said Mike Kaufmann, CEO of Cardinal Health. "In addition, the pharmaceutical segment grew 5% and we generated strong cash flow, returning $1.6 billion to our shareholders through share repurchases and dividends."
[Read more: Cardinal Health to expand footprint in Columbus, Ohio]
Hollar said, “Looking forward, we have confidence in our Medical Improvement Plan and our long-term targets for growth. We remain committed to the essential role our company plays in health care and to delivering value for our customers, employees and investors.”
Fourth-quarter revenue for the pharmaceutical segment increased 13% to $43.3 billion. The increase was driven by branded pharmaceutical sales growth from existing and net new pharmaceutical distribution and specialty customers, Cardinal Health said.
Cardinal Health’s pharmaceutical segment profit increased 26% to $451 million in the fourth quarter. The increase was driven by generics program performance and a higher contribution from brand sales mix. The increase was partially offset by inflationary supply chain costs. Additionally, this reflects a favorable comparison due to prior year inventory adjustments, the company said.
[Read more: Cardinal Health’s Outcomes acquires smart prescription platform ScalaMed]
Fourth-quarter revenue for the medical segment decreased 11% to $3.8 billion, due to the divestiture of the Cordis business and lower products and distribution volumes.
Medical segment loss of $16 million in the fourth quarter was primarily due to net inflationary impacts and global supply chain constraints in products and distribution. Additionally, the favorable comparison to the prior year PPE inventory reserve was offset by a lower contribution from PPE and the divestiture of the Cordis business, Cardinal Health noted.
The company reiterated its long-term targets of low to mid-single digit segment profit growth in the pharmaceutical segment, mid to high-single digit segment profit growth in the medical segment and to average a double-digit combined Non-GAAP EPS growth and dividend yield. Additionally, the company is targeting medical segment profit of at least $650 million by fiscal year 2025, based on its Medical Improvement Plan.
[Read more: Cardinal Health acquires Bendcare CPO-GPO]
With regard to the company’s leadership changes, Cardinal said that Hollar, an experienced financial and operating executive, has served as it's chief financial officer since May 2020, leading financial activities across the enterprise, including financial strategy, capital deployment, treasury, tax, investor relations, risk management, accounting and reporting.
During his tenure, he has helped Cardinal Health prioritize investments in growth businesses, strengthened the balance sheet and returned capital to shareholders. Prior to joining Cardinal Health, Hollar served as chief financial officer and executive vice president for Tenneco. Before that, Hollar served as chief financial officer and senior vice president of finance for Sears Holdings Corporation.
English currently serves as chief accounting officer and senior vice president of Cardinal Health and previously served as vice president of accounting in both the pharmaceutical and medical segments. Cardinal Health's board will engage an executive search firm to evaluate candidates for the permanent chief financial officer position, the company said.
Read more: Cardinal Health to open distribution center in Central Ohio]
“Mike has been a tremendous leader during his tenure at Cardinal Health, helping the company navigate a period of unprecedented challenges, directing strategic investments for growth and innovation and cultivating an inclusive and vibrant workforce culture,” said Gregory Kenny, independent chairman of the board. “We are grateful for Mike's many contributions over his more than 30 years of service and wish him the best in his future endeavors. We look forward to leveraging Jason's broad executive experience and are confident in his ability to lead Cardinal Health on a path to long-term growth.”
“I am grateful for the privilege of serving alongside such a dedicated, purpose-driven, and talented team over the past three decades. It was truly the honor of a lifetime to serve as CEO of Cardinal Health these last five years. The board and I are confident that Jason is the right person to lead Cardinal Health in the years to come,” Kaufmann said.
Read more: Cardinal Health, Kinaxis partner to optimize digital supply chain planning]
“I sincerely appreciate the confidence the board has placed in me to help position the company for future growth. This is a transformational period at Cardinal Health and I am humbled to have the opportunity to lead a business that plays such a vital role in the healthcare ecosystem,” Hollar said. “I look forward to working closely with Cardinal Health's talented employees, management team, and board as we continue to build upon our strong foundation and deliver value to our customers, communities and shareholders.”
Hollar continued, “I also look forward to continuing to work alongside Trish, who has been a valuable member of the Cardinal Health family for over 16 years. She brings a strong combination of financial expertise and leadership experience to the role as interim chief financial officer.”