Cardinal Health 2014 Annual Report Download - page 3

See page 6 for a reconciliation of the dierences between the non-GAAP
nancial measures and the most directly comparable GAAP nancial measures.
1
Dear Shareholders
of Cardinal Health:
You could make a strong argument that this has been
a transition year for the industry as well. It’s been an
extraordinary 12 months, particularly here in the U.S.
Last fall, we saw the rst rollout of the exchanges under the
Aordable Care Act, and, throughout the year, our system
continued to explore dierent models for providing coverage
for patients, delivering care and managing costs. We saw
consumers playing a more active role in their own healthcare,
much of this fueled by the impact of changing healthcare
benet design. And we saw some medical breakthroughs that
expanded our system’s capacity to manage and even cure
disease, but also test our ability or readiness to pay for that
innovation. At the same time, we saw clear signs of an industry
actively repositioning and consolidating upstream among
pharmaceutical and medical device manufacturers,
as well as downstream among providers and health systems;
and, we saw a continued blurring of the lines that delineated
what used to be distinct segments of the healthcare market.
This has certainly been a year of transition.
Fiscal 2014 performance overview
With that as context, I’ll review our performance in scal
2014. As I mentioned, scal year 2014 required some major
transitions for Cardinal Health after the expiration of the
Walgreens contract, and given this headwind, I am particularly
pleased with our results. Our revenues for the year, excluding
Walgreens, grew 8 percent, fueled primarily by strong growth
from existing customers. Our reported revenues, including
the impact from Walgreens for the year, declined by
10 percent to $91.1 billion. Non-GAAP operating earnings rose
4 percent to $2.1 billion, while non-GAAP diluted earnings
per share were $3.84, up 3 percent. And our gross margin rate
expanded by 80 basis points to 5.7 percent for the year.
Our team continued to drive capital eciency this year,
generating $2.5 billion in cash from operations. We returned
more than $1.1 billion to shareholders in scal 2014, through
both our strong dividend and share buybacks, and I’m
very pleased that we were able to provide our investors with
a total shareholder return of 46.7 percent for the year.
Fiscal 2014 was an enormously important year for
Cardinal Health. Our organization exceeded its nancial
goals for the year along multiple dimensions: revenue,
gross margin dollars, non-GAAP operating earnings,
operating margin rate and cash ow. Of particular note,
we were able to absorb a revenue headwind
of nearly $17 billion due to the scal year 2014 rst
quarter expiration of the Walgreens contract and
still grow our non-GAAP earnings over the prior year.
At the same time, we have been able to enhance
our market position, deploy capital eciently and
continue to grow the talent so critical to our future.
Equally important, we begin our scal 2015 stronger
and better positioned than ever to address the needs
of a healthcare system looking for solutions to two
very basic questions. First, how do we deliver better
care more cost-eectively? And, second, who are
those industry players who listen and act to bring
innovative solutions to the table?
Answering these questions is at the heart of what we do.
Our team has approached this recognizing that we need
to compete and win, every day in today’s marketplace,
while at the same time making the important moves to
adapt to a changing healthcare environment.
George S. Barrett
Chairman and CEO
Cardinal Health, Inc.