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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 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
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  þ
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  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 filerþAccelerated 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
 
þ
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 aggregate market value of voting stock held by non-affiliates on December 31, 2021, was the following: $14,223,756,327.
The number of the registrant’s common shares, without par value, outstanding as of July 31, 2022, was the following: 272,512,364.

Documents Incorporated by Reference:
Portions of the registrant’s Definitive Proxy Statement to be filed for its 2022 Annual Meeting of Shareholders are incorporated by reference into the sections of this Form 10-K addressing the requirements of Part III of Form 10-K.



Cardinal Health
Fiscal 2022 Form 10-K
Table of Contents
Page


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Cardinal Health | Fiscal 2022 Form 10-K


Introduction

Introduction
References to Cardinal Health and Fiscal Years
As used in this report, "we," "our," "us," "Cardinal Health" and similar pronouns refer to Cardinal Health, Inc. and its majority-owned and consolidated subsidiaries, unless the context requires otherwise. Our fiscal year ends on June 30. References to fiscal 2023, 2022, 2021, 2020, 2019 and 2018 are to the fiscal years ended June 30, 2023, 2022, 2021, 2020, 2019 and 2018, respectively. Except as otherwise specified, information in this report is provided as of June 30, 2022.
Non-GAAP Financial Measures
In this report, including in the "Fiscal 2022 Overview" section of Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), we use financial measures that are derived from consolidated financial data but are not presented in our financial statements that are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). These measures are considered “non-GAAP financial measures” under the 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 report.
Management's Discussion and Analysis of Financial Condition and Results of Operations
Our MD&A within this Form 10-K generally discusses fiscal 2022 and fiscal 2021 items and year-to-year comparisons between fiscal 2022 and fiscal 2021. Fiscal 2020 items and discussions of year-to-year comparisons between fiscal 2021 and fiscal 2020 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (the "Fiscal 2021 Form 10-K").
Important Information Regarding Forward-Looking Statements
This report (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 MD&A and Risk Factors, but there are others throughout this report, which may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” “likely,” and similar expressions, and include statements reflecting future results or 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 projected, anticipated or implied. The most significant of these risks and uncertainties are described in “Risk Factors” in this report and in Exhibit 99.1 to the Form 10-K included in this report. Forward-looking statements in this report speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge on our website (www.cardinalhealth.com), under the “Investor Relations — Financial Reporting — SEC Filings” caption, as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. The SEC also maintains a website (www.sec.gov) where you can search for annual, quarterly and current reports, proxy and information statements, and other information regarding us and other public companies.


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Cardinal Health | Fiscal 2022 Form 10-K


MD&AAbout Cardinal Health


Management's Discussion and Analysis of Financial Condition and Results of Operations
About Cardinal Health
Cardinal Health, Inc., an Ohio corporation formed in 1979, is a globally integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and patients in the home. 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.
Pharmaceutical Segment
Our Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products in the United States. This segment also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products; operates nuclear pharmacies and radiopharmaceutical manufacturing facilities; provides pharmacy management services to hospitals, as well as medication therapy management and patient outcomes services to hospitals, other healthcare providers and payers; and repackages generic pharmaceuticals and over-the-counter healthcare products.
Medical Segment
Our Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. In addition to distributing Cardinal Health branded products, this segment also distributes a broad range of medical, surgical and laboratory products known as national brand products and provides supply chain services and solutions to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers in the United States and Canada. This segment also distributes medical products to patients' homes in the United States through our Cardinal Health at-Home Solutions division.

Cardinal Health | Fiscal 2022 Form 10-K
3



MD&AOverview
Consolidated Results

Fiscal 2022 Overview
Revenue
Revenue for fiscal 2022 was $181.4 billion, a 12 percent increase from the prior year, primarily due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers, which largely consisted of branded pharmaceutical sales to existing and net new customers.
GAAP and Non-GAAP Operating Earnings/(Loss)
(in millions)20222021Change
GAAP operating earnings/(loss)$(596)$472 N.M.
Surgical gown recall costs/(income)1 (28)
State opioid assessment related to prior fiscal years 38 
Restructuring and employee severance101 114 
Amortization and other acquisition-related costs324 451 
Impairments and (gain)/loss on disposal of assets2,050 79 
Litigation (recoveries)/charges, net109 1,129 
Non-GAAP operating earnings$1,990 $2,255 (12)%
The sum of the components and certain computations may reflect rounding adjustments.
We had a GAAP operating loss of $596 million during fiscal 2022 due to $2.1 billion pre-tax non-cash goodwill impairment charges related to the Medical segment. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Consolidated Financial Statements" for additional detail. During fiscal 2021, we recognized pre-tax charges of $1.17 billion for the estimated liability associated with lawsuits and claims brought against us by states and political subdivisions relating to the distribution of prescription opioid pain medications. See further description of opioid lawsuits in the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 7 of the "Notes to Consolidated Financial Statements."
Non-GAAP operating earnings during fiscal 2022 decreased 12 percent primarily due to the decrease in Medical segment profit, largely resulting from net inflationary impacts (which primarily related to increased transportation and commodities costs, partially offset by certain price increases) and the adverse impact of global supply chain constraints.
GAAP and Non-GAAP Diluted EPS
($ per share)
2022 (2)(3)
2021 (2)
Change
GAAP diluted EPS (1)
$(3.35)$2.08 N.M.
Surgical gown recall costs/(income) (0.07)
State opioid assessment related to prior fiscal years 0.10 
Restructuring and employee severance0.27 0.29 
Amortization and other acquisition-related costs0.87 1.13 
Impairments and (gain)/loss on disposal of assets(4)
6.93 0.21 
Litigation (recoveries)/charges, net (5)
0.31 1.78 
Loss on early extinguishment of debt0.03 0.04 
(Gain)/loss on sale of equity interest in naviHealth 0.01 
Non-GAAP diluted EPS (1)
$5.06 $5.57 (9)%
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" or "diluted loss per share").
(2)The reconciling items are presented within this table net of tax. See quantification of tax effect of each reconciling item in our GAAP to Non-GAAP Reconciliations in the section titled "Explanation and Reconciliation of Non-GAAP Financial Measures."
(3)For fiscal 2022, GAAP diluted loss per share attributable to Cardinal Health, Inc. and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 279 million common shares, which excludes potentially dilutive securities from the denominator due to their anti-dilutive effects resulting from our GAAP net loss for the period. Fiscal 2022 non-GAAP diluted EPS is calculated using a weighted average of 280 million common shares, which includes potentially dilutive shares.
(4)Impairments and (gain)/loss on disposals of assets, net includes pre-tax goodwill impairment charges of $2.1 billion related to the Medical segment recorded during fiscal 2022. The net tax benefit related to these charges was $150 million.
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Cardinal Health | Fiscal 2022 Form 10-K


MD&AOverview
(5)Litigation (recoveries)/charges, net, includes a tax benefit recorded during fiscal 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. The total benefit from the net operating loss carryback was $424 million; however, for purposes of Non-GAAP financial measures, we allocated $389 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 $35 million is included in non-GAAP measures.
During fiscal 2022, GAAP diluted EPS was adversely impacted by the goodwill impairment charges related to the Medical segment, which had a $(6.94) per share after-tax impact. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A, and Note 4 and Note 8 of the "Notes to Consolidated Financial Statements" for additional detail.
During fiscal 2021, GAAP diluted EPS was positively impacted by $1.44 per share due to a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss, as further described in Note 8 of the "Notes to Consolidated Financial Statements." The charges we recognized in fiscal 2021 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 had a $(3.21) per share after-tax impact on GAAP diluted EPS.
During fiscal 2022, non-GAAP diluted EPS decreased 9 percent to $5.06 due to factors impacting non-GAAP operating earnings, partially offset by a lower share count as a result of share repurchases.
Cash and Equivalents
Our cash and equivalents balance was $4.7 billion at June 30, 2022 compared to $3.4 billion at June 30, 2021. The increase in cash during fiscal 2022 was due to net cash provided by operating activities of $3.1 billion. Net cash provided by operating activities includes a refund of $966 million for the tax benefit from the net operating loss carryback related to a self-insurance pre-tax loss, and reflects the impact of $417 million of payments related to the settlement agreement (the "Settlement Agreement") to settle the vast majority of the opioid lawsuits filed by states and local governmental entities, payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under the Cherokee Nation settlement. Fiscal 2022 operating cash flow was also impacted by favorable timing of net working capital.
We also received proceeds of $923 million, net of cash transferred, from the divestiture of the Cordis business, and we deployed $1.0 billion for share repurchases, $885 million for debt repayments, $559 million for dividends and $387 million for capital expenditures.
Cardinal Health | Fiscal 2022 Form 10-K
5



MD&AOverview
Significant Developments in Fiscal 2022 and Trends
Opioid Lawsuits Developments
National Settlement
Beginning in fiscal year 2017, state attorneys general, counties and municipalities began filing lawsuits related to the distribution of prescription opioid pain medications against pharmaceutical wholesalers, including us, and other participants in the pharmaceutical supply chain. By fiscal year 2022, Cardinal Health was a defendant in approximately 2,775 lawsuits brought by state attorneys general and counties, municipalities and other political subdivisions. In July 2021, we and two other national distributors (collectively, the “Distributors”) announced a proposed settlement with a group of state attorneys general intended to resolve the vast majority of these lawsuits (the "National Settlement") as well as a proposed settlement agreement (the "Settlement Agreement") containing, among other things, a sign-on process to allow states and political subdivisions to participate in the National Settlement.
In February 2022, the Distributors announced that each company had determined that a sufficient number of states and political subdivisions had agreed to participate in the National Settlement to proceed to effectiveness of that settlement. The Settlement Agreement became effective on April 2, 2022.
Parties to the National Settlement include 46 out of 49 eligible states as well as the District of Columbia and all eligible territories. As of August 9, 2022, over 99 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 is expected to 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 oversee compliance with these provisions for a period of five years. In addition, the Distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which the Distributors will fund for ten years.
During fiscal 2022, we made our first annual payment under the Settlement Agreement. Prior to the effective date of the Settlement Agreement, the Distributors had entered into separate settlement agreements with each of the states of Florida, New York, Ohio and Rhode Island. When the Settlement Agreement became effective, each of these states and their participating subdivisions became a part of the National Settlement; however, the New York, Ohio and Rhode Island agreements required us to make certain payments separately from those required by the Settlement Agreement. Accordingly, during fiscal 2022, we made payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under the Cherokee Nation settlement. In total, we paid $417 million in connection with these matters during fiscal 2022. We have $6.36 billion accrued at June 30, 2022, of which $532 million is included in other accrued liabilities, and the remainder is included in deferred income taxes and other liabilities in our consolidated balance sheets. In July 2022, we made our second annual payment of $374 million under the Settlement Agreement.
Other Settlements
West Virginia subdivisions and Native American tribes are not a part of the National Settlement and we had separate negotiations with these groups. A bench trial before a federal judge in West Virginia in a case brought by Cabell County and City of Huntington against the Distributors concluded in July 2021. In July 2022, a judgment in favor of the Distributors was entered. In July 2022, the Distributors reached an agreement to settle the opioid-related claims of the majority of the remaining West Virginia subdivisions. Under this agreement, Cardinal Health agreed to pay eligible West Virginia subdivisions up to approximately $124 million over an eleven-year period. This agreement is subject to certain contingencies related to subdivision participation. In September 2021, we announced that the 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, the Distributors executed a term sheet with the Native American tribes.
In May 2022, the Distributors reached an agreement with the Washington Attorney General, under which Cardinal Health 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 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.
In June 2022, the Distributors reached an agreement with the State of Oklahoma to resolve the opioid-related claims of the state and its political subdivisions. Under this agreement, Cardinal Health agreed to pay up to approximately $95 million to the State and its participating
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Cardinal Health | Fiscal 2022 Form 10-K


MD&AOverview
subdivisions. This amount is consistent with the amount that would have been allocated to Oklahoma under the Settlement Agreement. The terms of this agreement are consistent with the terms of the Settlement Agreement. This agreement is subject to certain contingencies, including the rate of subdivision participation. If this agreement and the Washington agreement are finalized, Oklahoma and Washington would be subject to the Settlement Agreement and 48 of 49 eligible states would then be subject to the Settlement Agreement.
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 7 of the “Notes to 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. See Note 7 of the "Notes to Consolidated Financial Statements" for additional information.

Inflationary Impacts and Global Supply Chain Constraints
Medical segment profit was significantly negatively affected by inflationary impacts, primarily related to transportation (including ocean and domestic freight), commodities, labor, and global supply chain constraints in fiscal 2022.
We expect these inflationary impacts and global supply chain constraints to continue to adversely impact Medical segment profit in fiscal 2023 and beyond. In order to partially mitigate this impact, we have implemented initial phases of price increases and we intend to implement additional price increases. We are also evolving our commercial contracting processes to provide us with greater pricing flexibility and investing in additional supply chain capacity. These increased costs and global supply chain constraints are difficult to predict and may be greater than we expect or continue longer than our current expectations. In the event these costs decrease, the benefit to Medical segment profit will be delayed until the higher-cost inventory has moved through our supply chain. Our plans to increase prices and evolve our contracting strategies are subject to contingencies and uncertainties and it is possible that our results of operations will be adversely impacted to a greater extent than we currently anticipate.
To a lesser extent, inflationary impacts, primarily related to increased transportation and labor costs, also adversely impacted Pharmaceutical segment profit during fiscal 2022. We expect these inflationary costs to continue to adversely impact Pharmaceutical segment profit in fiscal 2023.

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 2022 and 2021, 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 during fiscal 2022 primarily due to declines in volume and the prior-year positive impact of the timing of PPE cost mitigation efforts (primarily pricing). The demand and pricing for PPE is subject to risks and uncertainties, which may impact Medical segment profit and consolidated operating earnings in fiscal 2023.
The year-over-year comparison was also impacted by an inventory reserve of $197 million, primarily related to certain categories of gloves, which adversely impacted Medical segment profit in fiscal 2021. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A for additional detail.

Medical Goodwill
Due to the adverse impact on our financial results from, the risks and uncertainties related to inflationary impacts, global supply chain constraints and PPE demand and pricing, and increases in the risk-free interest rate, we performed goodwill impairment testing for the Medical reporting unit within the Medical segment during fiscal 2022. This testing resulted in cumulative pre-tax charges of $2.1 billion, which are included in impairments and (gain)/loss on disposal of assets in our 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 Consolidated Financial Statements" for additional detail.
Adverse changes in key assumptions or a significant change in industry or economic trends during fiscal 2023 could result in additional goodwill impairment.

Cardinal Health | Fiscal 2022 Form 10-K
7



MD&AOverview
Pharmaceutical Segment Generics Program
The performance of our Pharmaceutical segment generics program positively impacted the year-over-year comparison of Pharmaceutical segment profit in fiscal 2022, which includes improvement in volumes compared to the prior-year period. The Pharmaceutical segment generics program includes, among other things, the impact of generic pharmaceutical product launches, customer volumes, pricing changes and the Red Oak Sourcing, LLC venture ("Red Oak Sourcing") with CVS Health Corporation ("CVS Health"). The frequency, timing, magnitude and profit impact of generic pharmaceutical customer volumes, pricing changes, customer contract renewals, and branded and generic pharmaceutical manufacturer pricing changes all impact Pharmaceutical segment profit and are subject to risks and uncertainties. These risks and uncertainties may impact Pharmaceutical segment profit and consolidated operating earnings in fiscal 2023.

Cordis Divestiture
In August 2021, we sold the Cordis business to Hellman & Friedman for proceeds of $923 million, net of cash transferred, and we retained certain working capital accounts and certain liabilities. 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 7 of the "Notes to 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 Consolidated Financial Statements" for additional information.
As anticipated, Medical segment revenue and Medical segment profit were adversely impacted by approximately $700 million and $70 million, respectively, in fiscal 2022 due to the divestiture of the Cordis business. The divestiture also resulted in a decrease in amortization of acquisition-related intangible assets during 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 | Fiscal 2022 Form 10-K


MD&AResults of Operations
Results of Operations
Revenue
cah-20220630_g1.jpgcah-20220630_g2.jpg
Revenue
(in millions)20222021Change
Pharmaceutical$165,491 $145,796 14 %
Medical15,887 16,687 (5)%
Total segment revenue181,378 162,483 12 %
Corporate(14)(16)N.M.
Total revenue$181,364 $162,467 12 %

Fiscal 2022 Compared to Fiscal 2021
Pharmaceutical Segment
Fiscal 2022 Pharmaceutical segment revenue grew by $19.6 billion 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.
Medical Segment
Fiscal 2022 Medical segment revenue decreased by $800 million, primarily due to the impact of the divestiture of the Cordis business. Medical segment revenue was also adversely impacted by lower volumes within products and distribution, which was partially offset by sales growth in at-Home Solutions.

Cost of Products Sold
Cost of products sold for fiscal 2022 increased $19.1 billion (12 percent) due to the factors affecting the changes in revenue and gross margin.


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9



MD&AResults of Operations
Gross Margin
cah-20220630_g3.jpg    cah-20220630_g4.jpg
Consolidated Gross Margin
(in millions)20222021Change
Gross margin$6,545 $6,778 (3)%
Fiscal 2022 Compared to Fiscal 2021
Fiscal 2022 consolidated gross margin decreased primarily due to the divestiture of the Cordis business and increased costs in the Medical segment due to net inflationary impacts and the adverse impact of global supply chain constraints, partially offset by the performance of our Pharmaceutical segment generics program and an improvement in volumes, primarily in generic and branded pharmaceuticals, compared to the prior-year period. The year-over-year comparison was also favorably impacted by the prior-year inventory reserve recorded in the Medical segment to reduce the carrying value of certain PPE, primarily certain categories of gloves, to net realizable value.
Gross margin rate declined 56 basis points during fiscal 2022 mainly due to changes in overall product mix, primarily driven by 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 net inflationary impacts and the adverse impact of global supply chain constraints, also had an adverse impact on gross margin rate. The year-over-year comparison was favorably impacted by the prior-year inventory reserve recorded in the Medical segment to reduce the carrying value of certain PPE, primarily certain categories of gloves, to net realizable value.
Distribution, Selling, General and Administrative ("SG&A") Expenses
SG&A Expenses
(in millions)20222021Change
SG&A expenses$4,557 $4,533 1 %
Fiscal 2022 Compared to Fiscal 2021
SG&A expenses increased slightly during fiscal 2022 largely due to inflationary impacts, primarily related to increased transportation and labor costs, increased costs related to investments in information technology infrastructure and higher costs to support sales growth, primarily offset by the impact of the divestiture of the Cordis business.
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 fiscal 2021. See Note 7 of the "Notes to Consolidated Financial Statements" for additional information on the New York Opioid Stewardship Act.

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Cardinal Health | Fiscal 2022 Form 10-K


MD&AResults of Operations
Segment Profit
We evaluate segment performance based on segment profit, among other measures. See Note 13 of the "Notes to Consolidated Financial Statements" for additional information on segment profit.
cah-20220630_g5.jpgcah-20220630_g6.jpg
Segment Profit and Operating Earnings
(in millions)20222021Change
Pharmaceutical$1,770 $1,684 5 %
Medical216 577 (63)%
Total segment profit1,986 2,261 (12)%
Corporate(2,582)(1,789)N.M.
Total consolidated operating earnings/(loss)$(596)$472 N.M.
Fiscal 2022 Compared to Fiscal 2021
Pharmaceutical Segment Profit
Fiscal 2022 Pharmaceutical segment profit increased due to the performance of our generics program, partially offset by increased costs related to investments in information technology infrastructure and inflationary impacts, primarily related to increased transportation and labor costs. Pharmaceutical segment profit was also positively impacted by improvement in volumes, primarily in generic and branded pharmaceuticals, 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 attorneys' fee of $18 million recorded in fiscal 2022, which 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 fee was included in litigation (recoveries)/charges, net in the consolidated statements of earnings/(loss).
Fiscal 2022 Pharmaceutical segment profit was positively impacted by a $16 million judgment for lost profits related to an ordinary course intellectual property rights claim.
Medical Segment Profit
Fiscal 2022 Medical segment profit decreased largely due to net inflationary impacts (which primarily related to increased transportation and commodities costs, partially offset by price increases), the adverse impact of global supply chain constraints and the divestiture of the Cordis business. The year-over-year comparison of Medical segment profit was also impacted favorably by the prior-year inventory reserve recorded to reduce the carrying value of certain PPE, primarily certain categories of gloves, to net realizable value, and unfavorably by the prior-year net positive impact of PPE sales.
Corporate
The changes in Corporate during fiscal 2022 are due to the factors discussed in the Other Components of Consolidated Operating Earnings/(Loss) section that follows.

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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:
(in millions)20222021
Restructuring and employee severance$101 $114 
Amortization and other acquisition-related costs324 451 
Impairments and (gain)/loss on disposal of assets, net2,050 79 
Litigation (recoveries)/charges, net109 1,129 
Restructuring and Employee Severance
In fiscal 2022, restructuring costs 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 $311 million and $428 million for fiscal 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 fiscal 2022, we recognized $2.1 billion of pre-tax non-cash goodwill impairment charges related to our Medical segment, as discussed further in the "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Consolidated Financial Statements."
During fiscal 2021, we recognized a $60 million pre-tax write-down of the assets held for sale from the divestiture of the Cordis business.
Litigation (Recoveries)/Charges, Net
During fiscal 2022 and 2021, we recognized estimated losses and legal defense costs associated with the IVC filter product liability claims of $87 million and $56 million, respectively. See Note 7 of the "Notes to Consolidated Financial Statements" for additional information.
During fiscal 2022, we incurred a one-time contingent attorneys' 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 fee was included in litigation (recoveries)/charges, net.
During fiscal 2022 and 2021, we recognized income of $18 million and $112 million, respectively, for recoveries in class action antitrust lawsuits in which we were a class member.
During fiscal 2021, we recognized pre-tax charges of $1.17 billion associated with certain opioid matters. See Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 7 of the "Notes to Consolidated Financial Statements" for additional information.
During fiscal 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 7 of the "Notes to Consolidated Financial Statements" for additional information.
Other Components of Earnings/(Loss) Before Income Taxes
In addition to the items discussed above, earnings/(loss) before income taxes was impacted by the following:
(in millions)20222021Change
Other (income)/expense, net$16 $(47)N.M.
Interest expense, net149 180 (17)%
Loss on early extinguishment of debt10 14 N.M.
(Gain)/Loss on sale of equity interest in naviHealth(2)N.M.
Other (Income)/Expense, Net
During fiscal 2022, other (income)/expense, net was unfavorable compared to the prior-year period primarily due to a decrease in the value of our deferred compensation plan investments, which offsets fluctuations included within SG&A expenses and is discussed further in Note 9 of the "Notes to Consolidated Financial Statements." The year-over-year comparison was also adversely impacted from net losses on investments in non-marketable equity securities recognized during fiscal 2022 compared to net gains recognized in fiscal 2021.
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Cardinal Health | Fiscal 2022 Form 10-K


MD&AResults of Operations
Interest Expense, Net
Fiscal 2022 interest expense decreased from fiscal 2021 primarily due to less debt outstanding.
Loss On Early Extinguishment of Debt
During fiscal 2022 and 2021, we recognized losses of $10 million and $14 million, respectively, in connection with the redemption and early debt repurchases as described further in Note 6 of the "Notes to Consolidated Financial Statements."
Provision for Income Taxes
Fluctuations in the effective tax rates are primarily due to the impact of the goodwill impairment charges recognized in the Medical segment in fiscal 2022, the opioid litigation accrual recognized in fiscal 2021, as well as the impact of the carryback claim filed in accordance with the CARES Act provision in fiscal year 2021.
A reconciliation of the provision based on the federal statutory income tax rate to our effective income tax rate from continuing operations is as follows (see Note 8 of the "Notes to Consolidated Financial Statements" for additional information):
 
2022 (1)
2021 (1)
Provision at Federal statutory rate21.0 %21.0 %
State and local income taxes, net of federal benefit2.2 3.2 
Tax effect of foreign operations3.5 0.7 
Nondeductible/nontaxable items (2)
1.2 1.6 
Impact of Divestitures(4.9)7.0 
Withholding Taxes (2)
(1.1)9.0 
Change in Valuation Allowances3.5 (1.4)
US Taxes on International Income (2)(3)
3.2 (6.7)
Impact of Resolutions with IRS and other related matters (2)
(0.6)(13.6)
Opioid litigation(0.5)17.7 
Goodwill Impairment(49.5)— 
Loss Carryback Claims (129.9)
Other (2)
0.8 1.7 
Effective income tax rate(21.2)%(89.7)%
(1)     The table represents the following: fiscal 2022 is pretax loss with tax expense and fiscal 2021 is pretax income with tax benefit.
(2)     Certain prior year amounts have been reclassified to conform to current year presentation.
(3)    Includes the tax impact of Global Intangible Low-Taxed Income ("GILTI") tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code.
Fiscal 2022 Compared to Fiscal 2021
During fiscal 2022 and 2021, the effective tax rate was (21.2) percent and (89.7) percent, respectively. Included in the effective tax rate for fiscal 2022 was $150 million of benefit related to the impairment of goodwill within the Medical segment. Included in the effective tax rate for fiscal 2021 was a $424 million benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss and net tax benefits related to the treatment of the tax impacts of the fiscal 2021 opioid litigation charges.
Tax Effects of Goodwill Impairment Charge
During fiscal 2022, we recognized year-to-date cumulative pre-tax charges of $2.1 billion for goodwill impairment related to the Medical Unit. The net tax benefit related to these charges was $150 million for fiscal 2022.
Tax Effects of Self-Insurance Pre-tax Loss
During fiscal 2021, 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 applied to adjust our taxable income for fiscal 2015, 2016, 2017, and 2018 as permitted under the CARES Act enacted by the United States Congress in March 2020.
Accordingly, our provision for income taxes during fiscal 2021 included a $424 million benefit from the net operating loss carryback primarily to reflect the difference between the federal statutory income tax rate during the fiscal years from 2015 to 2018 (35 percent for fiscal 2015, 2016, and 2017 and 28 percent for fiscal 2018) and the current federal statutory income tax rate of 21 percent.
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MD&AResults of Operations
During fiscal 2022, we received a U.S. federal income tax refund of $966 million in connection with this matter. We also increased our non-current deferred tax liability by approximately $700 million during fiscal 2021 related to this matter.
Tax Effect of Opioid Litigation Charges
The net tax benefits associated with the opioid litigation charges were $228 million for fiscal 2021. Our tax benefits are estimates, which reflect our current assessment of the estimated future deductibility of the amount that may be paid under the accrual taken in connection with the opioid litigation and are net of unrecognized tax benefits of $219 million. The fiscal 2021 net tax benefit and unrecognized tax benefits were primarily due to our assessment of the specific terms of the Settlement Agreement. Our assumptions and estimates around this benefit and uncertain tax position require significant judgment and the actual amount of tax benefit may differ materially from these estimates.
Ongoing Audits
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal years 2015 through the current fiscal year. Tax laws are complex and subject to varying interpretations. New challenges related to future audits may adversely affect our effective tax rate or tax payments.



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Cardinal Health | Fiscal 2022 Form 10-K


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 and cash requirements; tax payments; current and projected debt service requirements, dividends and share repurchases; and known opioid litigation settlement payments. 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 $4.7 billion at June 30, 2022 compared to $3.4 billion at June 30, 2021. Net cash provided by operating activities includes a refund of $966 million for the tax benefit from the net operating loss carryback related to a self-insurance pre-tax loss, and reflects the impact of $417 million of payments related to the settlement agreement (the "Settlement Agreement") to settle the vast majority of the opioid lawsuits filed by states and local governmental entities, payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under the Cherokee Nation settlement. Fiscal 2022 operating cash flow was also impacted by favorable timing of net working capital and we expect some of this favorability to be offset in fiscal 2023. We also received proceeds of $923 million, net of cash transferred, from the divestiture of the Cordis business. We deployed $1.0 billion for share repurchases, $885 million for debt repayments, $559 million for dividends and $387 million for capital expenditures. At June 30, 2022, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.
During fiscal 2021, our cash and equivalents increased due to $2.4 billion of net cash provided by operating activities, offset by cash deployed of $573 million for dividends, $570 million for debt repayments, $400 million for capital expenditures and $200 million for share repurchases.
Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, payments to vendors and tax payments 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 June 30, 2022 included $588 million of cash and equivalents held by subsidiaries outside of the United States.
In June 2022, we returned $160 million of cash held by foreign subsidiaries to the U.S.
At June 30, 2022, foreign earnings of approximately $833 million are considered indefinitely reinvested for working capital and other offshore investment needs. The computation of tax required if those earnings are repatriated is not practicable. For amounts not considered indefinitely reinvested, we have recorded an immaterial amount of income tax expense in our consolidated financial statements in fiscal 2022.




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 June 30, 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 June 30, 2022, we had no amounts outstanding under our commercial paper program, revolving credit facility or our committed receivables sales facility. During fiscal 2022, under our commercial paper program and our committed receivables program, we had maximum combined total daily amounts outstanding of $1.2 billion and an average combined daily amount outstanding of $19 million.
In May 2022, we amended our receivables sales facility to temporarily increase the maximum permitted delinquency ratio.

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 June 30, 2022, we were in compliance with this financial covenant.
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MD&ALiquidity and Capital Resources
Long-Term Obligations
At June 30, 2022, we had total long-term obligations, including the current portion and other short-term borrowings of $5.3 billion.
During fiscal 2022, we redeemed all outstanding $572 million principal amount of 2.616% Notes due 2022 at a redemption price equal to 100% of the principal amount and accrued but unpaid interest, plus the make-whole premium applicable to the notes. In connection with this redemption, we recorded a $10 million loss on early extinguishment of debt. We also repaid the full principal of the $282 million Floating Rate Notes due 2022 as they became due.
During fiscal 2021, we redeemed all outstanding 3.2% Notes due June 2022 for $238 million and $262 million aggregate principal amount of 2.616% Notes due June 2022 at a redemption price equal to 100% of the principal amount and accrued but unpaid interest, plus the make-whole premium applicable to the notes. In connection with these redemptions, we recorded a $13 million loss on early extinguishment of debt. We also early repurchased $40 million of the Floating Rate Notes due 2022 and $2 million of the 2.616% Notes due 2022 with available cash. In connection with the early debt repurchases, we recorded a $1 million loss on early extinguishment of debt.
The redemption and repurchases were paid for with available cash and other short-term borrowings.
Risk Management
We use interest rate swaps, foreign currency contracts and commodity contracts to manage our exposure to cash flow variability. We also use interest rate swaps to protect the value of our debt and use foreign currency forward contracts to protect the value of our existing and forecasted foreign currency assets and liabilities. See the "Quantitative and Qualitative Disclosures About Market Risk" section as well as Note 1 and Note 10 of the “Notes to Consolidated Financial Statements” for information regarding the use of financial instruments and derivatives as well as foreign currency, interest rate and commodity exposures.
Capital Deployment
Opioid Litigation Settlement Agreement
We had $6.36 billion accrued at June 30, 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 7 of the "Notes to Consolidated Financial Statements." We expect the majority of the payment amounts to be spread over 18 years. During fiscal 2022, we paid our first annual payment under the Settlement Agreement. We also made certain payments under the separate New York, Ohio and Rhode Island settlements, as well as certain payments under the Cherokee Nation Settlement. The effective date of the Settlement Agreement was April 2, 2022. In July 2022, we made our second annual payment of $374 million under the Settlement Agreement. We expect to make subsequent annual payments under the Settlement Agreement every July for the term of the Settlement Agreement. The amounts of these future payments may differ from the payments that we have already made.
Capital Expenditures
Capital expenditures during fiscal 2022 and 2021 were $387 million and $400 million, respectively.
We expect capital expenditures in fiscal 2023 to be around $500 million and to be primarily related to manufacturing and distribution infrastructure projects.
Dividends
During fiscal 2022, we paid quarterly dividends totaling $1.96 per share, an increase of 1 percent from fiscal 2021.
On May 10, 2022, our Board of Directors approved a quarterly dividend of $0.4957 per share, or $1.98 per share on an annualized basis, which was paid on July 15, 2022 to shareholders of record on July 1, 2022.
On August 10, 2022, our Board of Directors approved a quarterly dividend of $0.4957 per share, payable on October 15, 2022 to shareholders of record on October 3, 2022.
Share Repurchases
During fiscal 2022 and 2021, we repurchased $1.0 billion and $200 million, respectively, of our common shares. We funded the repurchases with available cash. See Note 11 of the "Notes to Consolidated Financial Statements" for additional information.
At June 30, 2021, we had $743 million authorized for share repurchases remaining on a program that expired on December 31, 2021. On November 4, 2021, our Board of Directors approved a $3.0 billion share repurchase program, which will expire on December 31, 2024. At June 30, 2022, we had $2.7 billion remaining authorized for share repurchases under this program.
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Cardinal Health | Fiscal 2022 Form 10-K

MD&AOther

Contractual Obligations and Cash Requirements
At June 30, 2022, our contractual obligations and future cash requirements, including estimated payments due by period, were as follows:
(in millions)20232024 to 20252026 to 2027There-afterTotal
Long-term debt and short-term borrowings (1)$556 $1,704 $1,317 $1,664 $5,241 
Interest on long-term debt204 354 267 1,536 2,361 
Finance lease obligations (2)24 33 12 75 
Operating lease obligations (3)114 186 125 114 539 
Purchase obligations and other payments (4)791 415 182 190 1,578 
Opioid litigation settlement agreements (5)491 859 835 4,137 6,322 
Total contractual obligations and cash requirements (6)$2,180 $3,551 $2,738 $7,647 $16,116 
(1)Represents maturities of our long-term debt obligations and other short-term borrowings excluding finance lease obligations described below. See Note 6 of the “Notes to Consolidated Financial Statements” for further information.
(2)Represents minimum finance lease obligations included within current portion of long-term obligations and other short-term borrowings and long-term obligations, less current portion in our consolidated balance sheets and further described in Note 5 of the “Notes to Consolidated Financial Statements.”
(3)Represents minimum operating lease obligations included within other accrued liabilities and deferred income taxes and other liabilities in our consolidated balance sheets and further described in Note 5 of the “Notes to Consolidated Financial Statements.”
(4)A purchase obligation is defined as an agreement to purchase goods or services that is legally enforceable and specifies all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or
variable price provisions; and approximate timing of the transaction. The purchase obligation amounts disclosed above represent estimates of the minimum for which we are obligated and the time period in which cash outflows will occur. Purchase orders and authorizations to purchase that involve no firm commitment from either party are excluded from the above table. In addition, contracts that can be unilaterally canceled with no termination fee or with proper notice are excluded from our total purchase obligations except for the amount of the termination fee or the minimum amount of goods that must be purchased during the requisite notice period. Purchase obligations and other payments also includes quarterly payments to CVS Health in connection with Red Oak Sourcing. See Note 7 of the “Notes to Consolidated Financial Statements” for additional information.
(5)Represents future cash obligations under the Settlement Agreement, which became effective on April 2, 2022, as well as future cash obligations under the separate settlement agreements with the States of Oklahoma, Washington and West Virginia and the Cherokee Nation. We have $6.36 billion accrued at June 30, 2022, of which $532 million is included in other accrued liabilities, and the remainder is included in deferred income taxes and other liabilities in our consolidated balance sheets. Excluded from the table is $41 million that remained in escrow at June 30, 2022, which is included in prepaid expenses and other assets in our consolidated balance sheets. The Settlement Agreement includes a cash component, pursuant to which we will pay up to approximately $6.0 billion, the majority of which is expected to 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, the conditions of the state agreements being satisfied, and the extent to which additional political subdivisions in participating states continue to litigate against us. See Note 7 of the “Notes to Consolidated Financial Statements” for additional information.
(6)Long-term liabilities, such as unrecognized tax benefits, deferred taxes and other tax liabilities, have been excluded from the above table due to the inherent uncertainty of the underlying tax positions or because of the inability to reasonably estimate the timing of any cash outflows. See Note 8 of the "Notes to Consolidated Financial Statements" for further discussion of income taxes.


Recent Financial Accounting Standards
See Note 1 of the “Notes to Consolidated Financial Statements” for a discussion of recent financial accounting standards.
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MD&ACritical Accounting Policies and Sensitive Accounting Estimates
Critical Accounting Policies and Sensitive Accounting Estimates
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. In this section, we describe the significant policies applied in preparing our consolidated financial statements that management believes are the most dependent on estimates and assumptions. For further discussion of accounting policies for items within this section and of additional accounting policies, see Note 1 of the “Notes to Consolidated Financial Statements.”
Allowance for Doubtful Accounts
The allowance for doubtful accounts includes general and specific reserves. We determine our allowance for doubtful accounts by reviewing accounts receivable aging, historical write-off trends, payment history, pricing discrepancies, industry trends, customer financial strength, customer credit ratings or bankruptcies. We regularly evaluate how changes in economic conditions may affect credit risks. See Note 1 of the “Notes to Consolidated Financial Statements” for further information on our policy for Receivables and Allowance for Doubtful Accounts.
A hypothetical 0.1 percent increase or decrease in the reserve as a percentage of trade receivables at June 30, 2022, would result in an increase or decrease in bad debt expense of $11 million. We believe the reserve maintained and expenses recorded in fiscal 2022 are appropriate.
At this time, we are not aware of any analytical findings or customer issues that are likely to lead to a significant future
increase in the allowance for doubtful accounts as a percentage of revenue. The following table presents information regarding our allowance for doubtful accounts over the past three fiscal years:
(in millions, except percentages)202220212020
Allowance for doubtful accounts at beginning of period$243 $207 $194 
Charged to costs and expenses155 130 140 
Reduction to allowance for customer deductions and write-offs (125)(94)(127)
Allowance for doubtful accounts at end of period$273 $243 $207 
Allowance as a percentage of customer receivables2.6 %2.7 %2.5 %
Allowance as a percentage of revenue0.15 %0.15 %0.14 %
The sum of the components may not equal the total due to rounding.
Inventories
LIFO Inventory
A portion of our inventories (52 percent and 50 percent at June 30, 2022 and 2021, respectively) 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”). The LIFO impact on the consolidated statements of earnings/(loss) depends on pharmaceutical manufacturer price appreciation or deflation and our fiscal year-end inventory levels, which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end. Historically, prices for branded pharmaceuticals have generally tended to rise, resulting in an increase in cost of products sold, whereas prices for generic pharmaceuticals generally tend to decline, resulting in a decrease in cost of products sold. See Note 1 of the “Notes to Consolidated Financial Statements” for further information on our policy for Inventories.
Using LIFO, if there is a decrease in inventory levels that have experienced pharmaceutical price appreciation, the result generally will be a decrease in future cost of products sold as our older inventory is held at a lower cost. Conversely, if there is a decrease in inventory levels that have experienced a pharmaceutical price decline, the result generally will be an
increase in future cost of products sold as our older inventory is held at a higher cost.
We believe that the average cost method of inventory valuation provides a reasonable approximation of the current cost of replacing inventory within these distribution facilities. As such, the LIFO reserve is the difference between (a) inventory at the lower of LIFO cost or market and (b) inventory at replacement cost determined using the average cost method of inventory valuation. At June 30, 2022 and 2021, respectively, inventories valued at LIFO cost were $416 million and $565 million higher than the average cost value. We do not record inventories in excess of replacement cost. As such, we did not write-up the value of our inventory from average cost to LIFO cost at June 30, 2022 or 2021.
FIFO Inventory
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 ("FIFO") method, or net realizable value. We reserve for the lower of cost or net realizable value using the estimated selling prices and estimated sales demand in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Due to the unprecedented demand for certain PPE
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Cardinal Health | Fiscal 2022 Form 10-K


MD&ACritical Accounting Policies and Sensitive Accounting Estimates
as a result of the COVID-19 pandemic ("COVID-19") in fiscal 2021 and 2020, 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. The remaining reserve at June 30, 2022 was $42 million, primarily due to sales of certain PPE during fiscal 2022. Our estimates for selling prices and demand are inherently uncertain and if our assumptions decline in the future, additional inventory reserves may be required.
Excess and Obsolete Inventory
We reserve for inventory obsolescence using estimates based on historical experience, historical and projected sales trends, specific categories of inventory, age and expiration dates of on-hand inventory and manufacturer return policies. Inventories presented in the consolidated balance sheets are net of reserves for excess and obsolete inventory which were $147 million and $185 million at June 30, 2022 and 2021, respectively. If actual conditions are less favorable than our assumptions, additional inventory reserves may be required.

Goodwill and Other Indefinite-Lived Intangible Assets
Purchased goodwill and intangible assets with indefinite lives are 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. There is an option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. We have elected to bypass the qualitative assessment for the annual goodwill impairment test in the current year. 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).
We have two operating segments, which are the same as our reportable segments: Pharmaceutical and Medical. These operating segments are comprised of divisions (which are components), for which discrete financial information is available. Components are aggregated into reporting units for purposes of goodwill impairment testing to the extent that they share similar economic characteristics. 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 determination of estimated fair value of our reporting units is based on a combination of the income-based and market-based approaches (using discount rates ranging from 10 to 12 percent). We use discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in our
internally-developed forecasts. Under the market-based guideline public company method, we determine fair value by comparing our reporting units to similar businesses or guideline companies whose securities are actively traded in public markets. We also use the market-based guideline transaction method to determine fair value based on pricing multiples derived from the sale of companies that are similar to our reporting units.
Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. The use of alternate estimates and assumptions, changes in the industry or peer groups, or changes in weightings assigned to the discounted cash flow method, guideline public company method or guideline transaction method could materially affect the determination of fair value for each reporting unit and potentially result in goodwill impairment. If a reporting unit fails to achieve expected earnings or operating cash flow, or otherwise fails to meet current financial plans, or if there were changes to any other key assumptions used in the tests, the reporting unit could incur a goodwill impairment in a future period.
We performed annual impairment testing in fiscal 2022, 2021 and 2020 and, with the exception of the Medical Unit in fiscal 2022, concluded that there were no impairments of goodwill as the estimated fair value of each reporting unit exceeded its carrying value.
Medical Unit Goodwill
During fiscal 2022, the Medical Unit experienced adverse financial results related to inflationary impacts and the adverse impact of global supply chain constraints and lower volumes from PPE. Due to the risks and uncertainties related to these impacts and an increase in the risk-free interest rate used in the discount rate, we elected to bypass the qualitative assessment and perform quantitative goodwill impairment testing for the Medical Unit at June 30, 2022. This quantitative testing resulted in the carrying amount of the Medical Unit exceeding the fair value, resulting in a pre-tax impairment charge of $303 million and cumulative pre-tax impairment charges of $2.1 billion recognized during fiscal 2022, due to the impairment charges recognized during the third and second quarters of fiscal 2022 as described further below. This
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MD&ACritical Accounting Policies and Sensitive Accounting Estimates
impairment charge was driven by an increase in the discount rate primarily due to an increase in the risk-free interest rate. Our determination of the estimated fair value of the Medical Unit was based on a combination of the income-based approach and the market-based approach. For this testing performed at June 30, 2022, we used a discount rate of 10 percent and a terminal growth rate of 2 percent. Additionally, we assigned a weighting of 80 percent to the discounted cash flow method, 10 percent to the guideline public company method, and 10 percent to the guideline transaction method. The carrying value of the Medical Unit at June 30, 2022 after recognizing the impairment charges was $7.0 billion, of which $1.9 billion was goodwill. See Note 4 of the "Notes to Consolidated Financial Statements" for further discussion.
During the third and second quarters of fiscal 2022, we performed interim goodwill impairment testing for the Medical Unit at March 31, 2022 and December 31, 2021, which resulted in pre-tax impairment charges of $474 million and $1.3 billion, respectively. Our determination of the estimated fair value of the Medical Unit was 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.
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; 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 1.75 percent, the fair value for the Medical Unit would have further decreased by approximately $330 million.
The impairment test for indefinite-lived intangibles other than goodwill (primarily trademarks) involves first assessing qualitative factors to determine if it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If so, then a quantitative test is performed to compare the estimated fair value of the indefinite-lived intangible asset to the respective asset's carrying amount. Our qualitative evaluation requires the use of estimates and significant judgments and 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 the indefinite-lived intangible asset is less than its carrying amount.
See Note 1 of "Notes to Consolidated Financial Statements" for additional information regarding goodwill and other intangible assets.
Loss Contingencies and Self-Insurance
We regularly review contingencies and self-insurance accruals to determine whether our accruals and related disclosures are adequate. Any adjustments for changes in reserves are recorded in the period in which the change in estimate occurs.
Loss Contingencies
We accrue for contingencies related to disputes, litigation and regulatory matters if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because these matters are inherently unpredictable and unfavorable developments or outcomes can occur, assessing contingencies is highly subjective and requires judgments about future events.
Examples of such contingencies include various lawsuits related to the distribution of prescription opioid pain medications and the IVC filter lawsuits.
In connection with the opioid litigation as described further in the Significant Developments in Fiscal 2022 and Trends section in this MD&A, we recorded pre-tax charges of $1.17 billion during fiscal 2021. 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 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.
We develop and periodically update reserve estimates for the IVC claims, including those received to date and expected to be received in the future and related costs. To project future IVC claim costs, we use a methodology based largely on recent experience, including claim filing rates, estimated severity by claim type, historical sales data, implant and injury to report lag patterns and estimated defense costs.
Self-Insurance
We self-insure through a wholly-owned insurance subsidiary for employee healthcare, certain product liability matters, auto liability, property and workers' compensation and maintain insurance for losses exceeding certain limits.
Self-insurance accruals include an estimate for expected settlements on pending claims, defense costs, administrative fees,
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Cardinal Health | Fiscal 2022 Form 10-K


MD&ACritical Accounting Policies and Sensitive Accounting Estimates
claims adjustment costs and an estimate for claims incurred but not reported. For certain types of exposures, we develop the estimate of expected ultimate costs to settle each claim based on specific information related to each claim if available. Other estimates are based on an assessment of outstanding claims, historical analysis and current payment trends. For claims incurred but not reported, the liabilities are calculated and derived in accordance with generally accepted actuarial practices or using an estimated lag period.
The amount of loss may differ materially from these estimates. See Note 7 of the “Notes to Consolidated Financial Statements” for additional information regarding loss contingencies and product liability lawsuits.
We regularly review contingencies and self-insurance accruals to determine whether our accruals and related disclosures are adequate. Any adjustments for changes in reserves are recorded in the period in which the change in estimate occurs.
Provision for Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. Our income tax expense, deferred income tax assets and liabilities, and unrecognized tax benefits reflect management’s assessment of estimated future taxes to be paid on items in the consolidated financial statements.
The following table presents information about our tax position at June 30:
(in millions)20222021
Total deferred income tax assets (1)$1,584 $1,808 
Valuation allowance for deferred income tax assets (2)(468)(515)
   Net deferred income tax assets1,116 1,293 
Total deferred income tax liabilities(3,110)(3,225)
   Net deferred income tax liability$(1,994)$(1,932)
(1)    Total deferred income tax assets included $778 million and $805 million of loss and tax credit carryforwards at June 30, 2022 and 2021, respectively.
(2)    The valuation allowance primarily relates to federal, state and international loss and credit carryforwards for which the ultimate realization of future benefits is uncertain.
Expiring or unusable loss and credit carryforwards and the required valuation allowances are adjusted quarterly when it is more likely than not that at least a portion of the respective deferred tax assets will not be realized. After applying the valuation allowances, we do not anticipate any limitations on our use of any of the other net deferred income tax assets described previously. We operate in a complex multinational tax environment and are subject to tax treaty arrangements and transfer pricing guidelines for intercompany transactions that are subject to interpretation. Uncertainty in a tax position may arise as tax laws are subject to interpretation.
Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination of the technical merits of the position, including resolutions of any related appeals or litigation. The amount recognized is measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement. For tax benefits that do not qualify for recognition, we recognize a liability for unrecognized tax benefits.
Tax Effects of Goodwill Impairment Charges
During fiscal 2022, we recognized cumulative pre-tax charges of $2.1 billion for goodwill impairments related to the Medical Unit. The net tax benefit related to these charges was $150 million.
Tax Effects of Self-Insurance Pre-tax Loss
During fiscal 2021, 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 applied to adjust our taxable income for fiscal 2015, 2016, 2017, and 2018 as permitted under the CARES Act enacted by the United States Congress in March 2020.
Accordingly, our provision for income taxes during fiscal 2021 included a $424 million benefit from the net operating loss carryback primarily to reflect the difference between the federal statutory income tax rate during the fiscal years from 2015 to 2018 (35 percent for fiscal 2015, 2016, and 2017 and 28 percent for fiscal 2018) and the current federal statutory income tax rate of 21 percent.
We filed for a U.S. federal income tax refund of $974 million as a result of the net operating loss carryback under the CARES Act. In April 2022, we received a payment for $966 million, which was net of certain adjustments. See Note 8 of the "Notes to Consolidated Financial Statements" for additional detail. We also increased our non-current deferred tax liability by approximately $700 million during fiscal 2021 related to this matter.
Tax Effects of Opioid Litigation Charges
In connection with the $1.17 billion pre-tax charges for the opioid litigation during fiscal year 2021, respectively we recorded a tax benefit of $228 million. Our tax benefits are estimates, which reflect our current assessment of the estimated future deductibility of the amount that may be paid under the accrual taken in connection with the opioid litigation and are net of unrecognized tax benefits of $219 million.
We have made reasonable estimates and recorded amounts based on management's judgment and our current understanding of the U.S. Tax Cuts and Jobs Act ("Tax Act"); however, these estimates require significant judgment since the U.S. tax law
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21



MD&ACritical Accounting Policies and Sensitive Accounting Estimates
governing deductibility was changed by the Tax Act. Further, it is possible Congress or the tax authorities could challenge our interpretation of the Tax Act or the estimates and assumptions used to assess the future deductibility of these benefits. The actual amount of the tax benefit may differ materially from these estimates.
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. With few exceptions, we are subject to audit by taxing authorities for fiscal years 2015 through the current fiscal year. Tax laws are complex and subject to varying interpretations. During fiscal 2021, we resolved all open issues with respect to the Company’s activity within fiscal years 2008 through 2014 with the U.S. Internal Revenue Service ("IRS"). This resolution resulted in an adjustment to our provision for income taxes, including an impact to reserves for later years. New challenges related to future audits may adversely affect our effective tax rate or tax payments.
Our assumptions and estimates around uncertain tax positions require significant judgment; the actual amount of tax benefit related to uncertain tax positions may differ from these estimates. See Note 8 of the “Notes to Consolidated Financial Statements” for additional information regarding unrecognized tax benefits.
We believe that our estimates for the valuation allowances against deferred tax assets and unrecognized tax benefits are appropriate based on current facts and circumstances. The amount we ultimately pay when matters are resolved may differ from the amounts accrued. Changes in our current estimates due to unanticipated market conditions, tax law changes or other factors could have a material effect on our ability to utilize deferred tax assets. For a further discussion on Provision for Income Taxes, see Note 8 of the “Notes to the Consolidated Financial Statements.”
The calculation of our tax liabilities includes estimates for uncertainties in the application of broad and complex changes to the U.S. tax code as per the Tax Act as enacted by the United States government on December 22, 2017. We have made reasonable estimates and recorded amounts based on management judgment and our current understanding of the Tax Act which is subject to further interpretation by the IRS. See Note 8 of the “Notes to Consolidated Financial Statements” for additional information.



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Cardinal Health | Fiscal 2022 Form 10-K


Explanation and Reconciliation of Non-GAAP Financial Measures
Explanation and Reconciliation of Non-GAAP Financial Measures
This report, including the "Fiscal 2022 Overview" section within MD&A, 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.
Cardinal Health | Fiscal 2022 Form 10-K
23



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 2022, we incurred a one-time contingent attorneys' fee of $18 million related to the finalization of the settlement agreement (the “Settlement Agreement”) resulting in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities. Due to the unique nature and significance of the Settlement Agreement, and the one-time, contingent nature of the fee, this fee was included in litigation recoveries or charges, net. Additionally, during fiscal 2022 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. 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.
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 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 before income taxes adjusted for the first nine items).
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Cardinal Health | Fiscal 2022 Form 10-K


Explanation and Reconciliation of Non-GAAP Financial Measures
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.



Cardinal Health | Fiscal 2022 Form 10-K
25



Explanation and Reconciliation of Non-GAAP Financial Measures

GAAP to Non-GAAP Reconciliations
(in millions, except per common share amounts)Operating Earnings/(Loss)Operating Earnings/(Loss) Growth RateEarnings/(Loss) Before Income TaxesProvision for/(Benefit From) Income Taxes
Net Earnings/(Loss)1
Net Earnings/(Loss)1 Growth Rate
Effective Tax Rate
Diluted EPS1,2
Diluted EPS1 Growth Rate
Fiscal Year 2022
GAAP$(596)N.M.$(769)$163 $(933)N.M.(21.2)%$(3.35)N.M.
Surgical gown recall costs/(income)— — 
Restructuring and employee severance101 101 26 75 0.27 
Amortization and other acquisition-related costs324 324 84 240 0.87 
Impairments and (gain)/loss on disposal of assets3
2,050 2,050 107 1,943 6.93 
Litigation (recoveries)/charges, net4,5
109 109 21 88 0.31 
Loss on early extinguishment of debt— 10 0.03 
Loss on sale of equity interest in naviHealth investment— (2)— (2)— 
Non-GAAP$1,990 (12)%$1,824 $404 $1,419 (13)%22.1 %$5.06 (9)%
Fiscal Year 2021
GAAP$472 N.M.$323 $(289)$611 N.M.(89.7)%$2.08 N.M.
Surgical gown recall costs/(income)(28)(28)(7)(21)(0.07)
State opioid assessment related to prior fiscal years38 38 29 0.10 
Restructuring and employee severance114 114 27 87 0.29 
Amortization and other acquisition-related costs451 451 118 333 1.13 
Impairments and (gain)/loss on disposal of assets79 79 15 64 0.21 
Litigation (recoveries)/charges, net6
1,129 1,129 606 523 1.78 
Loss on early extinguishment of debt— 14 11 0.04 
Loss on sale of equity interest in naviHealth investment— 0.01 
Non-GAAP$2,255 (5)%$2,122 $483 $1,637 %22.8 %$5.57 %
Fiscal Year 2020
GAAP$(4,098)N.M.$(3,772)$(79)$(3,696)N.M.2.1 %$(12.61)N.M.
Surgical gown recall costs85 85 22 63 0.22 
State opioid assessment related to prior fiscal years0.01 
Restructuring and employee severance122 122 29 93 0.31 
Amortization and other acquisition-related costs524 524 130 394 1.34 
Impairments and (gain)/loss on disposal of assets0.02 
Litigation (recoveries)/charges, net6
5,741 5,741 514 5,227 17.84 
Loss on early extinguishment of debt— 16 12 0.04 
Gain on sale of equity interest in naviHealth investment— (579)(86)(493)(1.68)
Transitional tax benefit, net7
— — (2)(0.01)
Non-GAAP$2,384 %$2,147 $539 $1,605 
1 %
25.1 %$5.45 %
    
1    Attributable to Cardinal Health, Inc.
2    For fiscal 2022 and 2020, GAAP diluted loss per share attributable to Cardinal Health, Inc. and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using weighted averages of 279 and 293 million common shares, respectively, which exclude potentially dilutive securities from the denominator due to their anti-dilutive effects resulting from our GAAP net loss for the period. Fiscal 2022 and 2020 non-GAAP diluted EPS are calculated using weighted averages of 280 and 295 million common shares, respectively, which included potentially dilutive shares.
3     Impairments and (gain)/loss on disposals of assets, net includes pre-tax goodwill impairment charges of $2.1 billion related to the Medical segment recorded during fiscal 2022. For fiscal 2022, the net tax benefit related to these charges is $150 million and is included in the annual effective tax rate.
4    Litigation (recoveries)/charges, net includes a one-time contingent attorneys' fee of $18 million recorded during fiscal 2022 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 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.

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Cardinal Health | Fiscal 2022 Form 10-K


Explanation and Reconciliation of Non-GAAP Financial Measures
6    Litigation (recoveries)/charges, net includes pre-tax charges of $1.17 billion and $5.63 billion recorded in fiscal 2021 and 2020, respectively, related to the opioid litigation. The net tax benefits associated with the opioid litigation charges were $228 million and $488 million for fiscal 2021 and 2020, respectively.
Litigation (recoveries)/charges, net, includes a tax benefit recorded during fiscal 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. The total benefit from the net operating loss carryback was $424 million; however, for purposes of Non-GAAP financial measures, we allocated $389 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 $35 million is included in non-GAAP measures.
7    Reflects the net transitional benefit from the remeasurement of our deferred tax assets and liabilities partially offset by the repatriation tax on cash and earnings of foreign subsidiaries. See Note 8 of the "Notes to Consolidated Financial Statements" for more information.


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.
Cardinal Health | Fiscal 2022 Form 10-K
27



Explanation and Reconciliation of Non-GAAP Financial Measures

Quantitative and Qualitative Disclosures About Market Risk
We are exposed to cash flow and earnings fluctuations as a result of certain market risks. These market risks primarily relate to foreign exchange, interest rate, and commodity price-related changes. We maintain a hedging program to manage volatility related to some of these market exposures which employs operational, economic, and derivative financial instruments in order to mitigate risk. See Note 1 and Note 10 of the “Notes to Consolidated Financial Statements” for further discussion regarding our use of derivative instruments.
Foreign Exchange Rate Sensitivity
By the nature of our global operations, we are exposed to cash flow and earnings fluctuations resulting from foreign exchange rate variation. These exposures are transactional and translational in nature. The following foreign currencies represent the principal drivers of our foreign exchange exposure: Canadian dollar, euro, Thai baht, Mexican peso, Chinese renminbi, Australian dollar, British pound, Japanese yen and Philippine peso.
We apply a Value-At-Risk ("VAR") methodology to our transactional and translational exposures. The VAR model is a risk estimation tool and is not intended to represent actual losses in fair value that could be incurred.
Transactional Exposure
Transactional exposure arises from the purchase and sale of goods and services in currencies other than our functional currency or the functional currency of our subsidiaries. At the end of each fiscal year, we perform sensitivity analyses on our
forecasted transactional exposure for the upcoming fiscal year. These analyses include the estimated impact of our hedging program, which is designed to mitigate transactional exposure. Applying a VAR methodology to our transactional exposure and including the impact of our hedging program, the potential maximum loss in earnings for the upcoming fiscal year is estimated to be $11 million, which is based on a one-year horizon and a 95 percent confidence level.
Translational Exposure
We have exposure related to the translation of financial statements of our foreign operations into U.S. dollars, our functional currency. Applying a VAR methodology to our translational exposure, the potential maximum loss in earnings for the upcoming fiscal year is estimated to be $5 million, which is based on a one-year horizon and a 95 percent confidence level.
Interest Rate Sensitivity
We are exposed to changes in interest rates primarily as a result of our borrowing and investing activities to maintain liquidity and fund operations. The nature and amount of our long-term and short-term debt can be expected to fluctuate as a result of business requirements, market conditions and other factors. Our policy is to manage exposures to interest rates using a mix of fixed and floating rate debt as deemed appropriate by management. We utilize interest rate swap instruments to mitigate our exposure to interest rate movements.
As part of our risk management program, we perform an annual sensitivity analysis on our forecasted exposure to interest rates for the upcoming fiscal year. This analysis assumes a hypothetical 50 basis point change in interest rates. At June 30, 2022, the potential increase or decrease in annual interest expense under this analysis as a result of this hypothetical change would be $5 million.
We are also exposed to market risk from changes in interest rates related to our cash and cash equivalents, which includes marketable securities that are carried at fair value in the consolidated balance sheets. The fair value of our cash and cash equivalents is subject to change primarily as a result of changes in market interest rates and investment risk related to the issuers' credit worthiness. At June 30, 2022, a hypothetical increase or decrease of 50 basis points in interest rates would result in a hypothetical $8 million change in the estimated fair value.

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Cardinal Health | Fiscal 2022 Form 10-K


Explanation and Reconciliation of Non-GAAP Financial Measures

Commodity Price Sensitivity
We are directly exposed to market price changes for certain commodities, including oil-based resins, nitrile, cotton, diesel fuel and latex. We typically purchase raw materials at either market prices or prices tied to a commodity index and some finished goods at prices based in part on a commodity price index. During fiscal 2022, the prices of certain commodities experienced significant fluctuation due to inflationary impacts and the adverse impact of global supply chain constraints.
As part of our risk management program, we perform sensitivity analysis on our forecasted direct commodity exposure for the upcoming fiscal year. Our forecasted direct commodity exposure at June 30, 2022 increased approximately $51 million from June 30, 2021. At June 30, 2021, we had hedged a portion of these direct commodity exposures (see Note 10 of the “Notes to Consolidated
Financial Statements” for further discussion). There were no outstanding commodity contracts in our hedging program at June 30, 2022.
Our forecasted direct commodity exposures for the upcoming fiscal year is $500 million. The potential gain/loss given a hypothetical 10 percent fluctuation in commodity prices, assuming pricing collectively shifts in the same direction and we are unable to change customer pricing in response to those shifts or otherwise offset, for the upcoming fiscal year is $50 million at June 30, 2022. The hypothetical offsetting impact of hedges in both periods was minimal.



Cardinal Health | Fiscal 2022 Form 10-K
29



Business

Business
General
Cardinal Health, Inc. is a global integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices and patients in the home. We provide medical products and pharmaceuticals and cost-effective solutions that enhance supply chain efficiency.
Pharmaceutical Segment
In the United States, our Pharmaceutical segment:
through its Pharmaceutical Distribution division, distributes branded and generic pharmaceutical and over-the-counter healthcare and consumer products to retailers (including chain and independent drug stores and pharmacy departments of supermarkets and mass merchandisers), hospitals and other healthcare providers. This division:
maintains prime vendor relationships that streamline the purchasing process resulting in greater efficiency and lower costs for our retail, hospital and other healthcare provider customers;
provides services to pharmaceutical manufacturers, including distribution, inventory management, data reporting, new product launch support and chargeback administration;
through the Outcomes service offering, connects pharmacists, payers and pharmaceutical companies and delivers health solutions for personalized medication therapy management, digital patient engagement and telepharmacy;
provides pharmacy management services to hospitals and operates a limited number of pharmacies, including in community health centers; and
repackages generic pharmaceuticals and over-the-counter healthcare products;
through its Specialty Solutions division, distributes specialty pharmaceutical products to hospitals and other healthcare providers and provides consulting, patient support and other services for specialty pharmaceutical products to pharmaceutical manufacturers and healthcare providers; and
through its Nuclear and Precision Health Solutions division, operates nuclear pharmacies and manufacturing facilities, which manufacture, prepare and deliver radiopharmaceuticals for use in nuclear imaging and other procedures in hospitals and physician offices. This division also contract manufactures a radiopharmaceutical treatment (Xofigo) and holds the North American rights to manufacture and distribute Lymphoseek, a radiopharmaceutical diagnostic imaging agent.
See Note 13 of the “Notes to Consolidated Financial Statements” for Pharmaceutical segment revenue, profit and assets for fiscal 2022, 2021 and 2020.
Pharmaceutical Distribution
Our Pharmaceutical Distribution division’s gross margin includes margin from our generic pharmaceutical program, from distribution services agreements with branded pharmaceutical manufacturers and from over-the-counter healthcare and consumer products. It also includes manufacturer cash discounts.
Margin from our generic pharmaceutical program includes price discounts and rebates from manufacturers and may in limited instances include price appreciation. Our earnings on generic pharmaceuticals are generally highest during the period immediately following the initial launch of a product, because generic pharmaceutical selling prices are generally highest during that period and tend to decline over time.
Margin from distribution services agreements with branded pharmaceutical manufacturers is derived from compensation we receive for providing a range of distribution and related services to manufacturers. Our compensation typically is a percentage of the wholesale acquisition cost that is set by manufacturers. In addition, under a limited number of agreements, branded pharmaceutical price appreciation, which is determined by the manufacturers, also serves as part of our compensation.
Sourcing Venture with CVS Health Corporation
Red Oak Sourcing, LLC ("Red Oak Sourcing"), a U.S.-based generic pharmaceutical sourcing venture with CVS Health negotiates generic pharmaceutical supply contracts on behalf of both companies. In August 2021, we amended our agreement with CVS Health to extend the term of Red Oak Sourcing through June 2029.
Specialty Pharmaceutical Products and Services
We refer to products and services offered by our Specialty Solutions division as “specialty pharmaceutical products and services.” The Specialty Solutions division distributes oncology, rheumatology, urology, nephrology and other pharmaceutical products ("specialty pharmaceutical products") and human-derived plasma products to hospitals, dialysis clinics, physician offices and other healthcare providers; provides consulting, patient support, logistics, group purchasing and other services to pharmaceutical manufacturers and healthcare providers primarily supporting the development, marketing and distribution of specialty pharmaceutical products; and provides specialty pharmacy services. Our use of the terminology "specialty pharmaceutical products and services" may not be comparable to the terminology used by other industry participants.
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Cardinal Health | Fiscal 2022 Form 10-K


Business


Medical Segment
Our Medical segment manufactures and sources Cardinal Health branded general and specialty medical, surgical and laboratory products and devices. These products include exam and surgical gloves; needle, syringe and sharps disposal; compression; incontinence; nutritional delivery; wound care; single-use surgical drapes, gowns and apparel; fluid suction and collection systems; urology; operating room supply; and electrode product lines. Our Cardinal Health Brand products are sold directly or through third-party distributors in the United States, Canada, Europe, Asia and other markets. These products are generally higher-margin products.
The Medical segment also distributes a broad range of medical, surgical and laboratory products known as national brand products
and provides supply chain services and solutions to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers in the United States and Canada and this segment also assembles and sells sterile and non-sterile procedure kits.
Through Cardinal Health at-Home Solutions, this segment also distributes medical products to patients' homes in the United States.
The Medical segment, through its Wavemark division, also provides an automated technology platform for inventory management.


Acquisitions and Divestitures
Acquisitions
We have acquired a number of businesses over the years that have enhanced our core strategic areas of Cardinal Health Brand medical products, generic pharmaceutical distribution and services, specialty pharmaceutical products and services, international and post-acute care. We expect to continue to pursue additional acquisitions in the future.
In July 2017, we acquired the Patient Care, Deep Vein Thrombosis, and Nutritional Insufficiency businesses (the "Patient Recovery Business") from Medtronic plc for $6.1 billion in cash. We also completed several smaller acquisitions during the last five fiscal years.
DateCompanyLocation
Lines
of Business
Acquisition
Price
(in billions)
07/17Patient Recovery Business of Medtronic, plcMansfield, MAPatient Care, Deep Vein Thrombosis and Nutritional Insufficiency$6.1
Divestitures
Over the past five fiscal years, we have also completed several divestitures.
On August 2, 2021, we completed the divestiture of the Cordis business to Hellman & Freidman ("H&F") for net proceeds of $923 million in cash. We have retained certain working capital accounts and product liability for lawsuits related to IVC filters in the U.S. and Canada, as described in Note 7 of the Notes to the Consolidated Financial Statements. We acquired the Cordis business from Johnson & Johnson for $1.9 billion in October 2015. This divestiture also included Access Closure, Inc., a manufacturer and distributor of extravascular closure devices, that we acquired for approximately $320 million in May 2014.
In August 2018, we completed the sale of our equity interest in naviHealth, Inc. to investor entities controlled by Clayton, Dubilier & Rice, LLC for proceeds of $737 million (after adjusting for certain fees and expenses) and a noncontrolling equity interest in a partnership that owned naviHealth. In May 2020, we sold the remainder of our equity interest in naviHealth.
We had acquired our equity interest in naviHealth through a series of transactions beginning in fiscal 2016, when we acquired a majority equity interest.
In February 2018, we completed the sale of our pharmaceutical and medical products distribution business in China to Shanghai Pharmaceuticals Holding Co., Ltd. for proceeds of $861 million (after adjusting for third party indebtedness and preliminary transaction adjustments).


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Customers
Our largest customers, CVS Health and OptumRx, accounted for 25 percent and 16 percent of our fiscal 2022 revenue, respectively. In the aggregate, our five largest customers, including CVS Health and OptumRx, accounted for 49 percent of our fiscal 2022 revenue.
In August 2021, we extended our pharmaceutical distribution agreements with CVS Health through June 2027.
We have agreements with group purchasing organizations (“GPOs”) that act as agents to negotiate vendor contracts on behalf of their members. Our two largest GPO relationships in terms of revenue are with Vizient, Inc. and Premier, Inc. Sales to members of these two GPOs, under numerous contracts across our businesses, collectively accounted for 19 percent of our revenue in fiscal 2022.
Suppliers
We rely on many different suppliers. Products obtained from our five largest suppliers accounted for an aggregate of 35 percent of our revenue during fiscal 2022, and our largest supplier’s products accounted for approximately 9 percent of revenue.
Competition
We operate in a highly competitive environment in the distribution of pharmaceuticals and consumer healthcare products. We also operate in a highly competitive environment in the manufacturing and distribution of medical devices and surgical products. We compete on many levels, including price, service offerings, support services, customer service, breadth of product lines and product quality and efficacy.
In the Pharmaceutical segment, we compete with wholesale distributors with national reach, including McKesson Corporation and AmerisourceBergen Corporation, regional wholesale distributors, self-warehousing chains, specialty distributors, third-party logistics companies, companies that provide specialty pharmaceutical services and nuclear pharmacies, among others.
In addition, the Pharmaceutical segment has experienced competition from a number of organizations offering generic pharmaceuticals, including telemarketers. We also compete with manufacturers that distribute their products directly to customers.
In the Medical segment, we compete with many diversified healthcare companies and national medical product distributors, such as Medline Industries, Inc., Owens & Minor, Inc. and Becton, Dickinson and Company, as well as regional medical product distributors and companies that are focused on specific product categories. We also compete with companies that distribute medical products to patients' homes and third-party logistics companies.
Human Capital Management
Employees
We, through our employees, improve the lives of people every day by solving complex healthcare problems. As of June 30, 2022, we had approximately 46,500 employees globally, approximately 16,300 of whom are based outside the United States. Approximately 98% of our workforce is full time employees. Approximately 28,700 of our employees worked in our distribution centers, manufacturing facilities and pharmacies, and 17,500 worked in other functions, including finance, information technology, human resources and sales.
Approximately 3,230 employees were primarily associated with the Cordis business and were transferred in the divestiture in August 2021. Most of these employees were based outside the United States.
Approximately 11% of our workforce is covered by collective bargaining agreements or similar representation. The majority of these employees are based outside the United States.
Additionally, we have engaged global professional services firms to perform certain business processes on our behalf, including within finance, information technology and human resources.
Board Oversight
Our Board of Directors assesses and monitors our corporate culture and how it enables our business strategies. To inform the Board about human capital and cultural health, we have developed and annually share with the Board a culture scorecard.
Additionally, the Human Resources and Compensation Committee of the Board of Directors (the “HRCC”) is tasked with, among other things, overseeing and advising the Board about human capital management strategies and policies, including with respect to attracting, developing, retaining and motivating management and employees; workplace diversity, equity and inclusion initiatives and progress; employee relations; and workplace safety and culture. The HRCC is also responsible for overseeing the management succession process.
Culture & Talent Focus
Culture
Cardinal Health’s culture is rooted in our values and behaviors and aligned to the company’s strategic framework. Providing a positive work environment supports our ability to attract, retain and develop
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our employees and enables business performance. We reinforce, monitor and assess our culture through a variety of programs and processes which include performance management, talent/succession planning, as well as employee engagement surveys and other listening strategies.
Talent Development and Learning
Cardinal Health’s talent development strategy is a segmented, multi-pronged approach to build capabilities, skills and competencies of leaders and employees throughout the enterprise ensuring employees capabilities connect to business needs and outcomes. This segmented approach includes broad based employee skill development and learning, manager development, differentiated diverse talent development and executive development.
We have been refining our recruiting, development, succession and retention practices to promote equitable access and opportunity by expanding differentiated development programs and creating new offerings to bring an equity lens to our development practices.
We have taken steps to increase available manufacturing and distribution talent for operational positions, including by decreasing the time needed to recruit and on-board new employees.
We monitor our turnover data on a monthly and 12-month basis and benchmark against Bureau of Labor and Statistics and competitor data. Although turnover levels vary by site and region, we primarily look at the connection between key operational metrics and employee turnover.
Compensation and Benefits
Our colleagues are essential to our success and we strive to offer comprehensive and competitive wages and benefits. The benefits we offer include annual bonuses and stock awards for eligible employees, 401(k) plans, health care and insurance benefits, paid time off, flexible work schedules, family leave, dependent care resources, employee assistance programs and many others.
During fiscal year 2022, we proactively invested in employee compensation to remain competitive in the labor market. These investments included increasing the U.S. minimum wage for hourly employees, broadly adjusting front-line wages in many locations and making targeted salary adjustments based on market dynamics.
Employee Feedback
Cardinal Health solicits feedback from employees through various mechanisms, including our biennial full employee engagement survey, which provides insight into the employee experience. The results of this survey are reviewed with the Board of Directors and at all levels throughout the organization.
Diversity, Equity & Inclusion
At Cardinal Health, we are focused on building a diverse workforce and an inclusive workplace that values the unique perspectives and contributions of all of our employees.
Our work is sponsored by our senior executives, led by our Diversity, Equity and Inclusion ("DE&I") team, including our Chief Diversity Officer and HR organization, with input from our DE&I Steering Council, African American and Black Racial Equity
Cabinet and our Employee Resource Groups ("ERGs"). All of our manager level and above employees are required to complete unconscious bias and racial equity training, which is included as a component of our annual incentive program.
Our DE&I Council is composed of senior leaders from across the organization and is charged with identifying and discussing barriers to DE&I, challenging the status quo and empowering change. Our African American and Black Racial Equity Cabinet is made up of senior leaders who provide guidance to our senior executives in addressing racism, social injustice and other matters.
Additionally, our seven ERGs include groups focused on various racial and ethnic groups, members of the LGBTQ community, employees with disabilities, veterans and women and are designed to promote a culture of diversity, equity and inclusion. They are designed to foster an inclusive and engaged workforce and develop future leaders.
We also monitor pay equity. We define pay equity as equal pay for people of all gender identities and ethnicities who are performing substantially similar work. We have a pay equity committee, which guides the ongoing analysis and benchmarking, in regular consultation with an independent third-party, to review and help inform our salary and compensation practices.
As of the end of fiscal year 2022, 36% of our Board of Directors were women and 18% were ethnically diverse. 38% of our executive team (made up of the CEO, his direct reports and business presidents) were women and 12% were ethnically diverse. Approximately 50% of our total employee population were women and 49% of U.S. based employees were ethnically diverse. We have established long-range aspirational representation goals for specific under-represented groups in our manager-and-above level employee population. Progress toward those goals is evaluated as part of both our annual and long-term incentive programs.
We also regularly assess our progress in our DE&I journey through a robust employee-listening strategy, which includes engagement surveys, focus groups and onboarding assessments.
Employee Health & Safety
The health, safety and security of our employees is a priority for us. We employ systems designed to continually monitor our facilities and work environment to promote employee safety and identify and prevent or mitigate any potential risks. This includes procedures and equipment for security. We routinely assess facilities to closely monitor adherence to established security and safety standards. Our employees receive specialized training related to their role, work setting, and equipment used in their work environment. As our processes evolve, we update relevant safety training modules, which may include new employee training programs.
For more information on our approach to human capital management, please refer to our annual Corporate Citizenship Report, which is available on our website.




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Intellectual Property
We rely on a combination of trade secret, patent, copyright and trademark laws, nondisclosure and other contractual provisions, and technical measures to protect our products, services and intangible assets. We hold patents, and continue to pursue patent protection throughout the world, relating to the manufacture, operation and use of various medical and surgical products, to certain distribution and logistics systems, to the production and distribution of our nuclear pharmacy products and to other service offerings. We also operate under licenses for certain proprietary technologies, and in certain instances we license our technologies to third parties.
We believe that we have taken all necessary steps to protect our proprietary rights, but no assurance can be given that we will be able to successfully enforce or protect our rights in the event that they are infringed upon by a third party. While all of these proprietary rights are important to our operations, we do not consider any particular patent, trademark, license, franchise or concession to be material to our overall business.
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Regulatory Matters
Our business is highly regulated in the United States, at both the federal and state level, and in foreign countries. Depending upon the specific business, we may be subject to regulation by government entities including:
the U.S. Drug Enforcement Administration (the “DEA”);
certain agencies within the U.S. Department of Health and Human Services, including the U.S. Food and Drug Administration (the “FDA”), the Centers for Medicare and Medicaid Services, the Office of Inspector General and the Office for Civil Rights;
state health departments, insurance departments, Medicaid departments or other comparable state agencies;
state boards of pharmacy and other controlled substance authorities;
the U.S. Nuclear Regulatory Commission (the “NRC”);
the U.S. Federal Trade Commission (the "FTC");
U.S. Customs and Border Protection; and
agencies comparable to those listed above in markets outside the United States.
These regulatory agencies have a variety of civil, administrative and criminal sanctions at their disposal for failure to comply with applicable legal or regulatory requirements. They can suspend our ability to manufacture and distribute products, restrict our ability to import products, require us to initiate product recalls, seize products or impose criminal, civil and administrative sanctions.
Distribution
State Boards of Pharmacy, FDA, DEA and various other state authorities regulate the marketing, purchase, storage and distribution of pharmaceutical and medical products under various federal and state statutes including the federal Prescription Drug Marketing Act of 1987, Drug Quality and Security Act of 2013 (the “DQSA”), and Controlled Substances Act (the "CSA"). The CSA governs the sale, packaging, storage and distribution of controlled substances. Wholesale distributors of controlled substances must hold valid DEA registrations and state-level licenses, meet various security and operating standards including effective anti-diversion programs, and comply with the CSA. They must also comply with state requirements relating to controlled substances that differ from state to state.
The Settlement Agreement, as described in the Significant Developments in Fiscal 2021 and Trends section in MD&A and Note 7 of the Notes to Consolidated Financial Statements includes injunctive relief terms related to settling distributors' controlled substance anti-diversion programs, including with respect to: (1) governance; (2) independence and training of the personnel operating our controlled substances monitoring program; (3) due diligence for new and existing customers; (4) ordering limits for certain products; and (5) suspicious order monitoring. A monitor will oversee compliance with these provisions for a period of five years. In addition, the settling distributors will engage a third-party
vendor to act as a clearinghouse for data aggregation and reporting and will fund the clearinghouse for ten years. See Note 7 of the "Notes to Consolidated Financial Statements" for more information about the Settlement Agreement and other opioid-related matters.
Manufacturing, Sourcing and Marketing
We sell our manufactured products in the United States, Canada, Europe, Asia, Latin America and other markets. The FDA and other governmental agencies in the United States, as well as foreign governmental agencies, administer requirements that cover the design, testing, safety, effectiveness, manufacturing (including good manufacturing practices), quality systems, labeling, promotion and advertising (including restrictions on promoting or advertising a product other than for the product's cleared or approved uses), distribution, importation and post-market surveillance for most of our manufactured products. We are also subject to these requirements when we source certain Medical segment products from third-party manufacturers.
We need specific approval or clearance from, and registrations with, regulatory authorities before we can market and sell some products in the United States and certain other countries, including countries in the European Union ("EU").
In the United States, authorization to commercially market a medical device is generally received in one of two ways. The first, known as pre-market notification or the 510(k) process, requires us to demonstrate that a medical device is substantially equivalent to a legally marketed medical device. The second more rigorous process, known as pre-market approval (“PMA”), requires us to independently demonstrate that a medical device is safe and effective. Many of our Medical segment branded products are cleared through the 510(k) process and certain products must be approved through the PMA process.
In the EU, we are required to obtain CE Mark Certification in order to market medical devices. In 2017, EU regulatory bodies finalized a new Medical Device Regulation ("MDR") became effective in May 2021. Under the MDR, medical devices marketed in the EU require significant pre-market and post-market requirements.
It can be costly and time-consuming to obtain regulatory approvals, clearances and registrations of medical devices, and they might not be granted on a timely basis, if at all. Even after we obtain approval or clearance to market a product or obtain product registrations, the product and our manufacturing processes are subject to continued regulatory oversight, including periodic inspection of manufacturing facilities by FDA and other regulatory authorities both in the United States and internationally.
From time to time, we may determine that products we manufacture or market do not meet our specifications, regulatory requirements or published standards. When we or a regulatory agency identify a quality or regulatory issue, we investigate and take appropriate corrective action, which may include recalling the
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product, correcting the product at the customer location, revising product labeling and notifying customers.
Any adverse regulatory action, depending on its magnitude, may limit our ability to effectively manufacture, source, market and sell our products, limit our ability to obtain future premarket approvals or result in a substantial modification to our business practices and operations. For additional information, please see our Risk Factor entitled "Our business is subject to rigorous quality regulatory and licensing requirements."
Privacy and Data Protection
We are subject to various and evolving privacy laws and regulations in many jurisdictions. Because we collect, handle and maintain patient-identifiable health information, we are subject to laws that require specified privacy and security measures and that regulate the use and disclosure of such information, including the U.S. Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), as augmented by the Health Information Technology for Economic and Clinical Health Act as well as state laws, in the United States.
We also collect, handle, and maintain other personal and financial information. Within the U.S., these activities are regulated by certain federal and state laws. California, Colorado, Utah and Virginia have recently enacted privacy laws that grant specified rights to consumers over the use of their personal information, including increased transparency. Other states are considering adopting similar or different comprehensive privacy laws and a comprehensive federal privacy bill has been proposed in the U.S. House of Representatives. Internationally, we are also subject to privacy and data protection laws that require significant compliance efforts, including the EU's General Data Protection Regulation (GDPR), Canada's Personal Information Protection and Electronic Documents Act, Japan's Act on the Protection of Personal Information, and China's Personal Information Protection Law, among many others.
Nuclear Pharmacies and Related Businesses
Our nuclear pharmacies and radiopharmaceutical manufacturing facilities (including for Xofigo) require licenses or permits and must abide by regulations issued by the NRC, applicable state boards of pharmacy and the radiologic health agency or department of health of each state in which we operate, including pharmacy sterile compounding standards and practices. In addition, our radiopharmaceutical manufacturing facilities also must comply with FDA regulations, including good manufacturing practices.
Product Tracing and Supply Chain Integrity
Title II of the DQSA, known as the Drug Supply Chain Security Act or "Track and Trace," establishes a phased-in national system for tracing pharmaceutical products through the pharmaceutical distribution supply chain to detect, prevent and rapidly respond to the introduction of drugs that may be counterfeit, diverted, stolen, adulterated, subject of a fraudulent transaction or otherwise unfit for distribution. The first phase of implementation began in 2015, and upon full implementation in 2023, we and other supply chain stakeholders will participate in an electronic, interoperable,
prescription drug tracing system. In addition, the FDA also has issued regulations requiring most medical device labeling to bear a unique device identifier. The MDR, described above, also introduces a new unique device identifier requirement.
Government Healthcare Programs
We are subject to U.S. federal healthcare fraud and abuse laws. These laws generally prohibit persons from soliciting, offering, receiving or paying any compensation in order to induce someone to order, recommend or purchase products or services that are in any way paid for by Medicare, Medicaid or other federally-funded healthcare programs. They also prohibit submitting any fraudulent claim for payment by the federal government. There are similar state healthcare fraud and abuse laws that apply to Medicaid and other state-funded healthcare programs. Violations of these laws may result in criminal or civil penalties, as well as breach of contract claims and qui tam actions (false claims cases initiated by private parties purporting to act on behalf of federal or state governments).
Some businesses within each of our segments are Medicare-certified suppliers or participate in other federal and state healthcare programs, such as state Medicaid programs and the federal 340B drug pricing program. These businesses are subject to accreditation and quality standards and other rules and regulations, including applicable reporting, billing, payment and record-keeping requirements. Other businesses within each segment manufacture pharmaceutical or medical products or repackage pharmaceuticals that are purchased or reimbursed through, or are otherwise governed by, federal or state healthcare programs. Failure to comply with applicable eligibility requirements, standards and regulations could result in civil or criminal sanctions, including the loss of our ability to participate in Medicare, Medicaid and other federal and state healthcare programs. For example, during fiscal year 2022, we agreed to pay approximately $13 million to the Department of Justice and our Specialty Pharmaceutical Distribution business in our Specialty Solutions division entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services in connection with an investigation into discounts and rebates offered or provided to certain Specialty Solutions customers. For more information on this matter, see Note 7 to the Consolidated Financial Statements.
Our U.S. federal and state government contracts are subject to specific procurement requirements. Failure to comply with applicable rules or regulations or with contractual or other requirements may result in monetary damages and criminal or civil penalties as well as termination of our government contracts or our suspension or debarment from government contract work.





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Environmental, Health and Safety Laws
In the United States and other countries, we are subject to various federal, state and local environmental laws, including laws regulating the production or use of hazardous substances, as well as laws relating to safe working conditions and laboratory practices. Additionally, industry participants, including us, rely on ethylene oxide ("EtO") to sterilize certain medical products that we manufacture or distribute. Regulatory actions have been taken by certain environmental regulatory authorities to reduce EtO emissions during the sterilization and distribution process.
Antitrust Laws
The U.S. federal government, most U.S. states and many foreign countries have laws that prohibit certain types of conduct deemed to be anti-competitive. Violations of these laws can result in various sanctions, including criminal and civil penalties. Private plaintiffs also could bring civil lawsuits against us in the United States for alleged antitrust law violations, including claims for treble damages.
Laws Relating to Foreign Trade and Operations
U.S. and foreign laws require us to abide by standards relating to the import and export of finished goods, raw materials and supplies and the handling of information. We also must comply with various export control and trade embargo laws, which may require licenses or other authorizations for transactions within some countries or with some counterparties.
Similarly, we are subject to U.S. and foreign laws concerning the conduct of our foreign operations, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act and other foreign anti-bribery laws. Among other things, these laws generally prohibit companies and their intermediaries from offering, promising or making payments to officials of foreign governments for the purpose of obtaining or retaining business.
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Other Information
Although our agreements with manufacturers sometimes require us to maintain inventory levels within specified ranges, our distribution businesses are generally not required by our customers to maintain particular inventory levels other than as needed to meet service level requirements. Certain customer contracts require us to maintain sufficient inventory to meet emergency demands, but we do not believe those requirements materially affect inventory levels.
Our customer return policies generally require that the product be physically returned, subject to restocking fees. We only allow customers to return product for credit that can be added back to inventory and resold at full value, or that can be returned to vendors for credit.
We offer market payment terms to our customers.
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Risk Factors

Risk Factors
The risks described below could materially and adversely affect our results of operations, financial condition, liquidity or cash flows. These are not the only risks we face. Our businesses also could be affected by risks we do not currently consider material to our operations or of which we are not presently aware.
Legal, Regulatory & Compliance Risks
The public health crisis involving the abuse of prescription opioid pain medication and our efforts to resolve related claims could have additional or unexpected material negative effects on our business.
Our Pharmaceutical segment distributes prescription opioid pain medications. The abuse of prescription opioid pain medication has become a public health crisis.
A significant number of states, counties, municipalities and other public plaintiffs, have filed lawsuits against pharmaceutical manufacturers, pharmaceutical wholesale distributors (including us), retail chains and others relating to the manufacturing, marketing or distribution of prescription opioid pain medications.
In April 2022, an agreement settling the vast majority of opioid-related lawsuits filed against us by state and local governmental entities (the "Settlement Agreement") became effective. The Settlement Agreement includes a cash component, pursuant to which we will pay up to approximately $6.0 billion, the majority of which we expect to be paid over 18 years. The Settlement Agreement also includes injunctive relief terms relating 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 oversee compliance with these provisions for a period of five years. In addition, the distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which the distributors will fund for ten years. It is possible that the implementation and maintenance of the required changes to distributors' controlled substance anti-diversion programs may result in unforeseen costs or operational challenges which could have an adverse impact on our results of operations or performance.
In addition to the claims brought by states and other local governmental entities, we are also being sued by private plaintiffs, such as unions, other health and welfare funds, hospital systems, third party payors, other healthcare providers and individuals alleging personal injury for the same activities and could be named as a defendant in additional lawsuits.
We have received federal grand jury subpoenas issued in connection with investigations being conducted by the U.S. Attorney's Office for the Eastern District of New York and the Fraud Section of the U.S. Department of Justice ("DOJ"). We have also received civil requests for information from other DOJ offices.
We believe that these investigations concern operation of our anti-diversion program, our anti-diversion policies and procedures, and distribution of certain controlled substances.
We are involved in legal proceedings with insurers related to the availability of insurance coverage for some matters described above, but the defense and resolution of current and future lawsuits and investigations are subject to uncertainty and could have a material adverse effect on our results of operations, financial condition, cash flows, liquidity, or our ability to pay dividends or repurchase our shares, beyond the amounts accrued and beyond what we may be able to recover from our insurers. In addition, they could have adverse reputational or operational effects on our business.
Other legislative, regulatory or industry measures related to the public health crisis involving the abuse of prescription opioid pain medication and the distribution of these medications could affect our business in ways that we may not be able to predict. For example, several states have adopted or proposed taxes or other fees on the sale of opioids. These laws and proposals vary in the tax amounts imposed and the means of calculation. Liabilities for taxes or assessments under any such laws could have an adverse impact on our results of operations unless we are able to mitigate them through operational changes or commercial arrangements where permitted.
Ongoing unfavorable publicity regarding the abuse or misuse of prescription opioid pain medications and the role of wholesale distributors in the supply chain of such prescription medications, as well as the continued proliferation of the opioid lawsuits, investigations, regulations and legislative actions, and unfavorable publicity in relation to those lawsuits could continue to have a material adverse effect on our reputation or results of operations.
Our business is subject to other rigorous quality, regulatory and licensing requirements.
As described in greater detail in the "Business" section, products that we manufacture, source, distribute or market must comply with quality and regulatory requirements. Noncompliance or concerns over noncompliance, including noncompliance by third-party contract manufacturers, may result in suspension of our ability to distribute, import, manufacture or source products, as well as product bans, recalls, safety alerts or seizures, or criminal or civil sanctions, which, in turn, could result in product liability claims and lawsuits, including class actions. In addition, it can be costly and time-consuming to obtain regulatory approvals or product registrations to market a medical device or other product, and such approvals or registrations might not be granted on a timely basis, if at all.
Also as described in greater detail in the "Business" section, our business is highly regulated in the United States, at both the federal and state level, and in foreign countries. If we fail to comply with regulatory requirements, or if allegations are made that we fail to comply, our results of operations and financial condition could be adversely affected.
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Risk Factors

To lawfully operate our businesses, we are required to obtain and hold permits, product registrations, licenses and other regulatory approvals from, and to comply with operating and security standards of, numerous governmental bodies. For example, as a wholesale distributor of controlled substances, we must hold valid DEA registrations and state-level licenses, meet various security and operating standards, and comply with the CSA. Failure to maintain or renew necessary permits, product registrations, licenses or approvals, or to comply with required standards, could have an adverse effect on our results of operations and financial condition.
We collect, handle and maintain patient-identifiable health information and other sensitive personal and financial information which are subject to federal, state and foreign laws that regulate the use and disclosure of such information. Regulations currently in place continue to evolve, and new laws in this area could further restrict our ability to collect, handle and maintain personal or patient information, or could require us to incur additional compliance costs, either of which could have an adverse impact on our results of operations. Violations of federal, state or foreign laws concerning privacy and data protection could subject us to civil or criminal penalties, breach of contract claims, costs for remediation and harm to our reputation.
We are required to comply with laws relating to healthcare fraud and abuse. The requirements of these laws are complex and subject to varying interpretations. From time to time, regulatory authorities investigate our policies or practices, and may challenge them. We are periodically subject to federal or state government investigations or qui tam actions (false claims cases initiated by private parties purporting to act on behalf of federal or state governments), which could result in civil or criminal sanctions, including the loss of licenses or the ability to participate in Medicare, Medicaid and other federal and state healthcare programs or other remedial measures.
For example, the United States Attorney’s Office for the District of Massachusetts and the Office of Inspector General of the Department of Health and Human Services conducted an investigation related to discounts and rebates offered or provided to certain Specialty Solutions customers as a result of qui tam actions. For more information on this investigation, see Note 7 to the Consolidated Financial Statements. In connection with this investigation, in January 2022, our Specialty Pharmaceutical Distribution business in the Specialty Solutions division entered into a Corporate Integrity Agreement with the Office of Inspector General of the Department of Health and Human Services. It is possible that, as a result of the Corporate Integrity Agreement, we could incur greater costs or operational impacts than anticipated that may adversely impact our business.
Some businesses within each of our segments are Medicare-certified suppliers or participate in other federal and state healthcare programs, such as state Medicaid programs and the federal 340B drug pricing program. In addition, some businesses manufacture pharmaceutical or medical products or repackage pharmaceuticals that are purchased or reimbursed through, or are
otherwise governed by, federal or state healthcare programs. Failure to comply with applicable eligibility requirements, standards and regulations could result in civil or criminal sanctions, including the loss of our ability to participate in Medicare, Medicaid and other federal and state healthcare programs.
Private challenges to government healthcare policy may also have a significant impact on our business. For example, the federal 340B drug pricing program requires pharmaceutical manufacturers to offer discounts on certain drugs purchased by covered entities, and some of our Pharmaceutical segment customers are covered entities or contract pharmacies for covered entities. Over a dozen pharmaceutical manufacturers have unilaterally restricted sales under the 340B drug pricing program to contract pharmacies. These practices are the subject of ongoing litigation; however, if manufacturers continue this practice and if courts uphold this practice, our customers may be adversely impacted, which could adversely impact our business.
Industry participants, including us, rely on ethylene oxide (“EtO”) to sterilize certain medical products that we manufacture or distribute. Regulatory actions have been taken by certain environmental regulatory authorities to reduce EtO emissions during the sterilization and distribution process. If such measures become more widespread, we could experience increased costs to comply with reduced emissions standards and it is possible that we and other industry participants may be unable to effectively sterilize medical products, possibly resulting in industry-wide supply shortages or a reduction in surgical or medical procedures. Such increased costs or industry-wide reductions in surgical and medical procedures would have a negative impact on our Medical segment profit. Additionally, we have been named as a defendant in several lawsuits alleging personal injury as a result of EtO emissions. As a result of a notice of violation we received from an environmental regulator in Georgia, we are making specified changes to a replenishment center in that state. It is possible that these or future regulatory actions or lawsuits could adversely impact our ability to procure products to distribute, resulting in increased costs or industry supply disruptions.
Our government contracts are subject to specific procurement requirements. Failure to comply with applicable rules or regulations or with contractual or other requirements may result in monetary damages and criminal or civil penalties as well as termination of our government contracts or our suspension or debarment from government contract work.
Our global operations (including transition services in connection with divestitures) are subject to the U.S. Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act and similar anti-bribery laws in other jurisdictions and U.S. and foreign export control, trade embargo and customs laws. If we fail to comply, or are alleged to fail to comply, with any of these laws, we could be subject to investigations or suffer civil or criminal sanctions.
We are also subject to government import and export controls and regulations, including the requirement that we make a determination, based on the best information that we have available at the time, as to the country of origin of products that we
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Risk Factors

source or manufacture outside the United States. U.S. Customs and Border protection may challenge our determinations, which could result in products being detained, or the imposition of fines and penalties and may result in supply disruptions.
We could be subject to adverse changes in the tax laws or
challenges to our tax positions.
We are a large multinational corporation with operations in the United States and many foreign countries. As a result, we are subject to the tax laws of many jurisdictions.
From time to time, proposals are made in the United States and other jurisdictions in which we operate that could adversely affect our tax positions, effective tax rate or tax payments. Specific initiatives that may impact us include possible increases in U.S. or foreign corporate income tax rates or other changes in tax law to raise revenue, the repeal of the LIFO (last-in, first-out) method of inventory accounting for income tax purposes, the establishment or increase in taxation at the U.S. state level on the basis of gross revenues, recommendations of the base erosion and profit shifting project undertaken by the Organization for Economic Cooperation and Development and the European Commission’s investigation into illegal state aid.
Additionally, in connection with the accruals taken in connection with opioid-related lawsuits in fiscal years 2021 and 2020, we recorded net tax benefits of $228 million and $488 million, respectively, reflecting our current assessment of the estimated future deductibility of the amount that may be paid. We have made reasonable estimates and recorded amounts based on management's judgment and our current understanding of the Tax Act; however, these estimates require significant judgment and it is possible that they could be subject to challenges by the IRS.
The U.S. tax law governing deductibility was changed by the Tax Act and the tax authorities could challenge our interpretation of the Tax Act or the estimates and assumptions used to assess the future deductibility of these benefits, or tax law could change again. The actual amount of tax benefit related to uncertain tax positions may differ materially from these estimates. See Note 7 of the "Notes to Consolidated Financial Statements" for more information regarding these matters.
In fiscal year 2021, our provision for income taxes reflects a $424 million benefit from the tax benefits of a net operating loss carryback under the CARES Act. Also, as a result of this net operating loss carryback, we received a U.S. federal income tax refund of $966 million. In connection with this net operating loss carryback, certain industry participants, including us, received a letter from the U.S. House of Representatives’ Committee on Oversight and Reform questioning, among other things, our plans to take tax deductions for opioid-related losses, including our use of the net operating loss carryback provisions under the CARES Act and deductibility under the Tax Act. We responded to the letter. It is possible that the IRS could challenge our tax position with respect to this self-insurance loss. If these initiatives are successful, our effective tax rate could be adversely impacted.
We file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and various foreign jurisdictions. Tax laws
are complex and subject to varying interpretations. With few exceptions, we are subject to audit by taxing authorities for fiscal years 2015 through the current fiscal year. Proposed adjustments in ongoing audits may adversely affect our effective tax rate or tax payments.
Changes to the U.S. healthcare environment may not be favorable to us.
Over a number of years, the U.S. healthcare industry has undergone significant changes designed to increase access to medical care, improve safety and patient outcomes, contain costs and increase efficiencies. These changes include a general decline in Medicare and Medicaid reimbursement levels, efforts by healthcare insurance companies to limit or reduce payments to pharmacies and providers, the basis for payments beginning to transition from a fee-for-service model to value-based payments and risk-sharing models, and the industry shifting away from traditional healthcare venues like hospitals and into clinics, physician offices and patients’ homes.
We expect the U.S. healthcare industry to continue to change significantly in the future. Possible changes include further reduction of or limitations on governmental funding at the state or federal level, efforts by healthcare insurance companies to further limit payments for products and services or changes in legislation or regulations governing prescription pharmaceutical pricing, healthcare services or mandated benefits. These possible changes, and the uncertainty surrounding these possible changes, may adversely affect us.
Legal proceedings could adversely impact our cash flows or results of operations.
Due to the nature of our business, which includes the distribution of controlled substances and other pharmaceutical products and the sourcing, marketing and manufacturing of medical products, we regularly become involved in disputes, litigation and regulatory matters. Litigation is inherently unpredictable and the unfavorable outcome of legal proceedings could adversely affect our results of operations or financial condition.
For example, we are subject to a number of lawsuits and investigations related to the national health crisis involving the abuse of opioid pain medication as described above in the Risk Factor titled "The public health crisis involving the abuse of prescription opioid pain medication and our efforts to resolve related claims could have additional or unexpected material negative effects on our business" and in Note 7 to the "Notes to Consolidated Financial Statements."
Additionally, some of the products that we distribute or manufacture have been and may in the future be alleged to cause personal injury, subjecting us to product liability claims. For example, we are a defendant in product liability lawsuits that allege personal injuries associated with the use of Cordis OptEase and TrapEase IVC filter products and in lawsuits alleging impurities in the active pharmaceutical ingredients in certain pharmaceutical products. In addition, product liability insurance for these types of claims is becoming more limited and may not be available to us at
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Risk Factors

amounts that we historically have obtained or that we would like to obtain. It is possible that a settlement of or judgment for a product liability claim may not be covered by insurance or exceed available insurance recoveries. If this happens, and if any such settlement or judgment is in excess of any prior accruals, our results of operations and financial condition could be adversely affected.
We also operate in an industry characterized by extensive intellectual property litigation. Patent litigation can result in significant damage awards and injunctions that could prevent the manufacture and sale of affected products or force us to make royalty payments in order to continue selling the affected products.
In connection with legal proceedings, we occasionally enter into settlement agreements or become subject to consent decrees containing ongoing financial or operational obligations, including the injunctive relief provisions of the National Settlement Agreement and the Corporate Integrity Agreement mentioned above. Failure to comply with obligations under these agreements or decrees could lead to monetary or other penalties.
Business & Operational Risks
Our business and operations depend on the proper functioning of information systems, business processes, critical facilities and distribution networks.
We rely on our and third-party service providers' information systems for a wide variety of critical operations, including to obtain, rapidly process, analyze and manage data to:
facilitate the purchase and distribution of inventory items from numerous distribution centers;
receive, process and ship orders on a timely basis;
manage accurate billing and collections for thousands of customers;
process payments to suppliers;
facilitate manufacturing and assembly of medical products; and
generate financial information.
Our business also depends on the proper functioning of our and our suppliers' business processes, critical facilities, including our national logistics center, and our distribution networks. Our results of operations could be adversely affected if our or a service provider's business processes, information systems, critical facilities or distribution networks are disrupted (including disruption of access), are damaged or fail, whether due to physical disruptions, such as fire, natural disaster, pandemic (as they have been by the COVID-19 pandemic) or power outage, or due to cyber-security incidents, ransomware or other actions of third parties, including labor strikes or shortages, political unrest and terrorist attacks. Manufacturing disruptions also can occur due to regulatory action, production quality deviations, safety issues or raw material shortages or defects, or because a key product or component is manufactured at a single manufacturing facility with limited alternate facilities.
From time to time, our businesses perform business process improvements or infrastructure modernizations or use service
providers for key systems and processes, such as receiving and processing customer orders, customer service and accounts payable. For example, during fiscal 2022, our Pharmaceutical segment implemented a replacement of certain finance and operating information systems and we have also transitioned certain finance processes to a third-party service provider. If any of these initiatives or similar initiatives are not successfully or efficiently implemented or maintained, they could adversely affect our business and our internal control over financial reporting.
Our ability to compete effectively is increasingly dependent on access to and interpretation of data. Data quality impacts customer ordering, order fulfillment and higher order processing. If we fail to effectively implement and maintain data governance structures across our businesses or to effectively interpret and utilize such data, our operations could be impacted and we may be at a competitive disadvantage.
Our business and results of operations could be adversely affected if we experience a material cyber-attack or other systems breach.
Our business relies on the secure transmission, storage and hosting of patient-identifiable health information, financial information and other sensitive protected information relating to our customers, company, workforce and individuals with whom we and our customers conduct business. We have programs in place to detect, contain and respond to information security incidents. However, because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, hardware, software or applications developed internally or procured from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security.
Unauthorized parties have gained access and will continue to attempt to gain access to our or a service provider's systems or facilities through fraud, trickery or other forms of deception. We have been the target of cyber attacks, including, in prior fiscal years, incidents where certain customer account information was accessed. Although we do not believe these incidents had a material impact on us, similar incidents or events in the future may negatively impact our business, reputation or financial results.
Any compromise of our or a service provider's information systems, including unauthorized access to or use or disclosure of sensitive information, could adversely impact our operations, results of operations or our ability to satisfy legal or regulatory requirements, including the EU general data protection regulation (GDPR) and those related to patient-identifiable health information and other sensitive personal and financial information as further described in the Risk Factor titled “Our business is subject to rigorous regulatory and licensing requirements,” above.
In addition, insurance for losses arising from cyber-attacks or other breaches is becoming more costly and limited and may not be available to us at amounts that we historically have obtained or that we would like to obtain. It is possible that we could incur
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Risk Factors

losses that may not be covered by insurance or that would exceed available insurance recoveries. If this happens, our results of operations and financial condition could be adversely affected.
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 and the annual test conducted for the period ended June 30, 2022, we recorded an aggregate $2.1 billion impairment to goodwill related to our Medical Unit in fiscal year 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.
Our sales and credit concentration is significant.
CVS Health and OptumRx are large customers that generate a significant amount of our revenue. CVS Health accounted for 25 percent of our fiscal 2022 revenue and 24 percent of our gross trade receivable balance at June 30, 2022 and OptumRx accounted for 16 percent of our fiscal 2022 revenue. If either of these customers terminates their agreements due to an alleged default by us, defaults in payment or significantly reduces their purchases from us, our results of operations and financial condition could be adversely affected.
Our results of operations could be adversely impacted if we fail to manage and complete divestitures.
We regularly evaluate our portfolio of businesses to determine whether an asset or business may no longer help us meet our objectives or whether there may be a more advantaged owner for that business. For example, we completed the divestiture of the Cordis business in fiscal 2022, and in the past few years, we have also divested our pharmaceutical and medical products distribution
business in China and our ownership interest in naviHealth, Inc. When we decide to sell assets or a business, we may encounter difficulty finding buyers or alternative exit strategies, which could delay the achievement of our strategic objectives. We could also incur higher costs or charges than planned or incur unexpected charges and could experience greater dis-synergies than expected, which could have a negative impact on our results of operations.
Our ability to manage and complete acquisitions could impact our strategic objectives and financial condition.
From time to time, we look to acquire other businesses that expand or complement our existing businesses. Completion of acquisitions and the integration of acquired businesses involve a number of risks, including the following: we may overpay for a business or fail to realize the synergies and other benefits we expect from the acquisition; our management’s attention may be diverted to integration efforts; we may fail to retain key personnel of the acquired business; future developments may impair the value of our purchased goodwill or intangible assets; we may face difficulties or delays establishing, integrating or combining operations and systems, including manufacturing facilities; we may assume liabilities related to legal proceedings involving the acquired business; we may face challenges retaining the customers of the acquired business; or we may encounter unforeseen internal control, regulatory or compliance issues.
Industry & Economic Risks
We could continue to suffer the adverse effects of competitive pressures.
As described in greater detail in the "Business" section, we operate in markets that are highly competitive and dynamic. In addition, competitive pressures in our pharmaceutical and medical segments may be increased by new business models, new entrants, new regulations, changes in consumer demand or general competitive dynamics. Our businesses face continued pricing pressure from these factors, which adversely affects our margins. If we are unable to offset margin reductions caused by these pricing pressures through steps such as sourcing or cost control measures, additional service offerings and sales of higher margin products, our results of operations could continue to be adversely affected.
Our Pharmaceutical segment’s profit margin could be adversely affected by changes in industry or market dynamics that we are not able to accurately predict.
As has been the case for several years, the frequency, timing, magnitude and profit impact of generic pharmaceutical customer purchase volumes, pricing changes, customer contract renewals, generic pharmaceutical launches, and generic pharmaceutical manufacturer pricing changes remain uncertain as does their impact on Pharmaceutical segment profit and consolidated operating earnings. These factors have contributed to declines in some prior years and have more than offset the benefits from sourcing generic pharmaceuticals through our Red Oak Sourcing venture with CVS Health. If performance of our generic pharmaceutical program declines in future fiscal years and we are
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Risk Factors

unable to offset the decline, our Pharmaceutical segment profit and consolidated operating earnings will be adversely affected.
With respect to branded pharmaceutical products, compensation under our contractual arrangements with manufacturers for the purchase of branded pharmaceutical products is generally based on the wholesale acquisition cost set by the manufacturer. Sales prices of branded pharmaceutical products to our customers generally are a percentage discount from wholesale acquisition cost.
Also, almost all of our distribution services agreements with branded pharmaceutical manufacturers provide that we receive fees from the manufacturers to compensate us for services we provide them. However, under certain agreements, branded pharmaceutical price appreciation, which is determined by the manufacturers also serves as a part of our compensation. In recent years, manufacturers have increased prices less than in prior years. If manufacturers, in the aggregate, change their historical approach to setting and increasing wholesale acquisition cost, decide to reduce prices, not to increase prices or to implement only small increases and we are unable to negotiate alternative ways to be compensated by manufacturers or customers for the value of our services, our margins could be adversely affected.
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, which had a negative impact on Medical segment profit in fiscal 2021 and 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 2023.
We do not expect to offset the full impact of these cost increases in fiscal year 2023. We intend to offset some cost increases through cost reductions and through price increases or surcharges; however, due to competitive dynamics and contractual limitations, passing along cost increases is challenging. If we are not able to increase prices as planned, 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 shutdowns, defective raw materials, the impact of epidemics or pandemics, such as COVID-19, and actions by U.S. or international governments, including import or export restrictions or tariffs. For example, the Uyghur Forced Labor Prevention Act, which went into effect in June 2022 prohibits the importation of any goods grown, produced, manufactured or mined in the Xinjiang Uyghur Autonomous Region of China unless importers can provide clear and convincing evidence that goods were not made using forced labor. If we determine that some of our imported source materials derive from this region, we could experience additional supply constraints and our performance could be negatively impacted.
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.
Employee attrition may have an adverse impact on our business, results of operations or internal controls.
Our ability to attract, retain and develop qualified and experienced employees, including key executives and other talent, is critical for us to meet our business objectives. We compete with many other businesses to attract and retain employees. Competition among potential employers has resulted in increases in salaries and wages, benefits and other employee-related costs. It is possible that we could experience loss of key personnel for a variety of causes. If we do not adequately plan for succession of key roles or if we are not successful in attracting or retaining new talent, our performance or internal control over financial reporting could be adversely impacted.
Consolidation in the U.S. healthcare industry may negatively impact our results of operations.
In recent years, U.S. healthcare industry participants, including distributors, manufacturers, suppliers, healthcare providers, insurers and pharmacy chains, have consolidated or formed strategic alliances. Consolidations create larger enterprises with greater negotiating power, and also could result in the possible loss of a customer where the combined enterprise selects one distributor from two incumbents. If this consolidation trend continues, it could adversely affect our results of operations.
Changes or uncertainty in U.S. or international trade policies and exposure to economic, political and currency and other
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Risk Factors

risks could disrupt our global operations or negatively impact our financial results.
We conduct our operations in various regions of the world outside of the United States, including Europe, Asia and Latin America. Global developments can affect our business in many ways. Our global operations are affected by local economic environments, including inflation, recession and competition. Additionally, divergent or unfamiliar regulatory systems and labor markets can increase the risks and burdens of operating in numerous countries.
Our foreign operations expose us to a number of risks related to trade protection laws, tariffs, excise or other border taxes on goods sourced from certain countries or on the importation or exportation of products or raw materials. Changes or uncertainty in U.S. or international trade policies or tariffs could impact our global operations, as well as our customers and suppliers. We may be required to spend more money to source certain products or materials that we need or to manufacture certain of our products. This could adversely impact our business and results of operations.
In addition, we conduct our business in U.S. dollars and various functional currencies of our foreign subsidiaries. Changes in foreign currency exchange rates could adversely affect our financial results, which are reported in U.S. dollars. We may not be able to hedge to protect us against these exposures, and any hedges may not successfully mitigate these exposures.
Geopolitical dynamics caused by political, economic, social or other conditions in foreign countries and regions may continue to impact our business and results of operations. Both of our segments have experienced increased costs, including for fuel, and it is possible that we could experience supply disruptions or shortages if tariffs or other protective measures are enacted.
COVID-19 Risks
We have been and expect to continue to be negatively affected by the ongoing COVID-19 pandemic.
The COVID-19 pandemic has significantly impacted our businesses in a variety of ways beginning in fiscal year 2020, including volume declines in our Pharmaceutical segment and supply chain constraints and unusual PPE supply and demand dynamics in our Medical segment. While volumes within the Pharmaceutical segment have largely rebounded, our Medical segment continues to experience the effects of inflation, supply chain constraints and PPE dynamics, which, due to the passage of time, intervening events and other market dynamics, we now consider to be independent from COVID-19 for purposes of our assessment of our financial condition.
However, the COVID-19 pandemic is ongoing and we cannot estimate its continued length or severity or the related consequences on our business and operations, including whether and when normal economic and operating conditions will resume or the extent to which further disruption may impact our business, financial position, results of operations or cash flow. The COVID-19 pandemic has also heightened other risks, including risks associated with competitive pressures, supplier relationships,
international operations, regulatory and licensing, changes to the U.S. healthcare environment, cyber security, and access to capital markets.








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Properties and Legal Proceedings
Properties
In the United States, at June 30, 2022, the Pharmaceutical segment operated one national logistics center; a number of primary pharmaceutical and specialty distribution facilities as well as nuclear pharmacy and radiopharmaceutical manufacturing facilities. The Medical segment operated medical-surgical distribution, assembly, manufacturing and other operating facilities in the United States.
At June 30, 2022, our Medical segment also operated manufacturing facilities in Canada, Costa Rica, the Dominican Republic, Germany, Ireland, Japan, Malaysia, Malta, Mexico and Thailand.
Our principal executive offices are headquartered in an owned building located at 7000 Cardinal Place in Dublin, Ohio.
We consider our operating properties to be in satisfactory condition and adequate to meet our present needs. However, we regularly evaluate operating properties and may make further additions and improvements or consolidate locations as we seek opportunities to expand or enhance the efficiency of our business.

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Cardinal Health | Fiscal 2022 Form 10-K


Properties and Legal Proceedings
Legal Proceedings
In addition to the proceedings described below, the legal proceedings described in Note 7 of the "Notes to 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.
In December 2021, the parties reached an agreement in principle to settle this matter and in July 2022, the court granted preliminary approval of the settlement. Subject to final approval by the court, as part of this settlement, Cardinal's director and officer's liability insurance carriers, on behalf of the defendants, will pay Cardinal $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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Market for Registrant's Common Equity
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are listed on the New York Stock Exchange under the symbol “CAH.”
At July 31, 2022 there were approximately 6,857 shareholders of record of our common shares.
We anticipate that we will continue to pay quarterly cash dividends in the future. The payment and amount of future dividends remain, however, within the discretion of our Board of Directors and will depend upon our future earnings, financial condition, capital requirements and other factors.
Issuer Purchases of Equity Securities
PeriodTotal Number
of Shares
Purchased (1)
Average Price Paid per ShareTotal Number of Shares
Purchased
as Part of Publicly Announced Programs (2)
Approximate
Dollar Value of
Shares That May
Yet be Purchased
Under the Programs (3)
(in millions)
April 2022608,582 $65.80 607,823 $2,743 
May 2022216 56.93 — 2,743 
June 2022253 52.93 — 2,743 
Total609,051 $65.79 607,823 $2,743 
(1)Reflects 759, 216 and 253 common shares purchased in April, May and June 2022, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.
(2)On February 28, 2022, we entered into an accelerated share repurchase program ("ASR") 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 Consolidated Financial Statements" for additional information.
(3)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. As of June 30, 2022, we have $2.7 billion authorized for share repurchases remaining under this program.


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Market for Registrant's Common Equity
Five Year Performance Graph
The following line graph compares the cumulative total return of our common shares with the cumulative total return of the Standard & Poor’s Composite—500 Stock Index (the "S&P 500 Index") and the Standard & Poor's Composite—500 Healthcare Index (the "S&P 500 Healthcare Index"). The line graph assumes, in each case, an initial investment of $100 invested at the closing price on June 30, 2017, and is based on the market prices at the end of each fiscal year through and including June 30, 2022, and reinvestment of dividends. The S&P 500 Index and S&P 500 Healthcare Index investments are weighted on the basis of market capitalization at the beginning of each period.
cah-20220630_g7.jpg
June 30
201720182019202020212022
Cardinal Health, Inc.$100.00 $64.67 $64.89 $74.75 $84.75 $80.55 
S&P 500 Index100.00 114.36 126.26 135.72 191.06 170.74 
S&P 500 Healthcare Index100.00 107.11 121.02 134.21 171.68 177.47 
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Reports
Management Reports
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 June 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were effective as of June 30, 2022 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.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, controls deemed effective now may become inadequate in the future because of changes in conditions, or because compliance with policies or procedures has deteriorated or been circumvented.
Management assessed the effectiveness of our internal control over financial reporting as of June 30, 2022. In making this assessment, management used the criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the “COSO criteria”). Based on management’s assessment and the COSO criteria, management believes that our internal control over financial reporting was effective as of June 30, 2022.
Our independent registered public accounting firm, Ernst & Young LLP, has issued a report on our internal control over financial reporting. Ernst & Young LLP’s report appears following this "Management Reports" section and expresses an unqualified opinion on the effectiveness of our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended June 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Pharmaceutical Segment Information Technology Initiative
During fiscal 2022, the Pharmaceutical segment implemented a replacement of certain finance and operating information systems. As a part of this project, we transitioned selected processes to new systems which affected our internal control over financial reporting during the fiscal year.


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Reports
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting
The Shareholders and the Board of Directors of Cardinal Health, Inc.
Opinion on Internal Control over Financial Reporting