庫藏普通股，成本價格：85百萬持續經營活動中普通股股東的收益83 million shares at 2024年9月30日 and 2024年6月30日，分別
(5,963)
(5,677)
累計其他綜合損失
(155)
(167)
總計Cardinal Health, Inc.股東赤字
(3,277)
(3,213)
非控制權益
1
1
股東權益不足合計
(3,276)
(3,212)
負債總額和股東權益赤字
$
43,059
$
45,121
請參閱附註的簡明合併財務報表。
卡地納健康 | Q12025財年10-Q表格
23
基本報表
股東權益累計赤字的簡明綜合財務報表
(未經審計)
普通股份。
庫藏股
其他積累 綜合 損失
非控制權益
總費用
股東的
$
（單位百萬）
已發行股票
數量
留存盈餘/(累積虧損)
股份
數量
2024年9月30日止三個月
2024年6月30日餘額
327
$
2,917
$
(286)
(83)
$
(5,677)
$
(167)
$
1
$
(3,212)
淨收益
416
1
417
其他綜合收益，扣除稅後
12
12
員工股票計劃活動，扣除員工稅收後的淨股份
—
(15)
1
17
2
股票回購計劃活動
(75)
(3)
(303)
(378)
3,341,700
(119)
(119)
其他
3
(1)
2
2024年9月30日的餘額
327
$
2,827
$
14
(85)
$
(5,963)
$
(155)
$
1
$
(3,276)
2023年9月30日止三個月
2023年6月30日的餘額
327
$
2,746
$
(642)
(76)
$
(4,911)
$
(151)
$
1
$
(2,957)
淨收益/(虧損)
(12)
1
(11)
其他綜合損失，淨額
(14)
(14)
僱員股票計劃活動，扣除員工稅金的股份淨額
—
(18)
1
25
7
股份回購計劃活動
(5)
(505)
(505)
3,341,700
(125)
(125)
其他
(1)
(1)
(2)
2023年9月30日結餘
327
$
2,728
$
(780)
(80)
$
(5,391)
$
(165)
$
1
$
(3,607)
請參閱附註的簡明合併財務報表。
卡地納健康 | Q12025財年10-Q表格
24
基本報表
簡明的綜合現金流量表
(未經審計)
截至9月30日的三個月
（單位百萬）
2024
2023
經營活動現金流量：
淨收益/(虧損)
$
417
$
(11)
調整以調和淨收益/（虧損）至由經營活動提供的現金淨額
折舊和攤銷
182
172
減值損失和投資出售（收益）/損失
1
—
資產處置的淨損益和資產減值
(1)
541
股權酬金
30
29
壞賬準備
16
9
經營性資產和負債的變化，扣除收購和處置的影響
交易應收賬款減少
288
58
存貨的增加
(678)
(1,073)
應付賬款的增加/(減少)
(1,394)
1,762
其他應計負債和運營項目，淨額
(508)
(959)
經營活動提供的淨現金流量
(1,647)
528
投資活動現金流量：
淨脫售現金收入
2
—
固定資產的增加
(90)
(92)
處置固定資產所得
—
1
淨投資對沖終止收益
—
28
投資活動產生的淨現金流出
(88)
(63)
籌集資金的現金流量：
長期負債的減少
(9)
(7)
股票薪酬的淨稅預扣
(28)
(28)
普通股股息
(128)
(131)
購買公司庫存股
(375)
(500)
籌集資金淨額
(540)
(666)
現金及現金等價物的匯率變動影響
9
(5)
現金及現金等價物淨減少額
(2,266)
(206)
本期期初現金及等價物餘額
5,133
4,076
本期期末現金及等價物餘額
$
2,867
$
3,870
See notes to condensed consolidated financial statements.
Cardinal Health | Q1Fiscal 2025 Form 10-Q
25
Notes to Financial Statements
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our condensed consolidated financial statements include the accounts of all majority-owned or consolidated subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively.
References to "we," "our," and similar pronouns in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (this "Form 10-Q") are to Cardinal Health, Inc. and its majority-owned or consolidated subsidiaries unless the context requires otherwise.
Our fiscal year ends on June 30. References to fiscal 2025 and 2024 in these condensed consolidated financial statements are to the fiscal years ending or ended June 30, 2025 and June 30, 2024, respectively.
Our condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission ("SEC") instructions to Quarterly Reports on Form 10-Q and include the information and disclosures required by accounting principles generally accepted in the United States ("GAAP") for interim financial reporting. The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments, and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts.
In our opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal 2025 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2025. These condensed consolidated financial statements are unaudited and, accordingly, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024 (the "2024 Form 10-K").
Revision of Prior Period Consolidated Financial Statements
As previously disclosed in the 2024 Form 10-K, we revised our prior period financial statements to correct for an accounting error related to the at-Home Solutions operating segment that was not
material, individually or in the aggregate, to our previously issued Consolidated Financial Statements, as well as other unrelated immaterial errors. The appropriate revisions to our historical condensed consolidated financial statements and the notes thereto are reflected herein. See Note 1 and Note 16 to the "Consolidated Financial Statements" in the 2024 Form 10-K for additional information.
Updated Segment Reporting Structure
Effective January 1, 2024, we operated under an updated organizational structure and re-aligned our reporting structure under two reportable segments: Pharmaceutical and Specialty Solutions ("Pharma") segment and Global Medical Products and Distribution ("GMPD") segment. The remaining operating segments, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight® Logistics, are not significant enough to require separate reportable disclosures and are included in Other. The Pharma reportable segment consists of all businesses formerly within our Pharmaceutical segment, excluding Nuclear and Precision Health Solutions. The GMPD reportable segment consists of all businesses formerly within our Medical segment, excluding at-Home Solutions and OptiFreight® Logistics. Our previously reported segment results have been recast to conform to this re-aligned reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. See Note 13 for segment results under the new reporting structure.
Major Customers
On April 22, 2024, we announced that our pharmaceutical distribution contracts with OptumRx, which expired at the end of June 2024, would not be renewed. Sales to OptumRx generated 17 percent of our consolidated revenue in fiscal 2024.
Recently Issued Financial Accounting Standards And Disclosure Rules Not Yet Adopted
We assess the adoption impacts of recently issued accounting standards by the FASB on our consolidated financial statements as well as material updates to previous assessments, if any, from the 2024 Form 10-K.
Segment Reporting
In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, primarily through disclosures of significant segment expenses. This guidance will be effective for us in the 2025 Form 10-K and the guidance must be applied retrospectively to all prior periods presented. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Cardinal Health | Q1Fiscal 2025 Form 10-Q
26
Notes to Financial Statements
Income Tax Disclosure
In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for us in the 2026 Form 10-K and should be applied on a prospective basis, with retrospective application permitted. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Climate-Related Disclosures
In March 2024, the SEC issued final rules on climate-related disclosures that will require annual disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates. These rules also require disclosure of climate risk oversight practices of the Board of Directors and management, and the disclosure of governance, risk management, and strategy related to material climate-related risks. In April 2024, the SEC voluntarily stayed the new rules pending the completion of judicial review. We are currently evaluating the impact of adoption of these final rules on our disclosures.
Recently Adopted Financial Accounting Standards
There were no new material accounting standards adopted in the three months ended September 30, 2024.
2. Acquisitions
On September 20, 2024, we announced that we have entered into a definitive agreement to acquire Integrated Oncology Network ("ION"), a physician-led independent community oncology network, for a purchase price of $1.1 billion in cash, subject to certain adjustments. ION includes more than 50 practice sites in 10 states representing more than 100 providers. ION supports a complete continuum of care across its member sites including medical oncology, radiation oncology, urology diagnostic testing and other ancillary services. This transaction is subject to the satisfaction of customary closing conditions, including receipt of required regulatory approvals.
On March 18, 2024, we completed the acquisition of Specialty Networks for a purchase price of $1.2 billion in cash. Specialty Networks creates clinical and economic value for providers and partners across multiple specialty group purchasing organizations ("GPOs"): UroGPO, Gastrologix and GastroGPO, and United Rheumatology.
The allocation of the purchase price for the acquisition of Specialty Networks is not yet finalized and is subject to adjustment as we complete the valuation analysis of the acquisition. The pro forma results of operations and the results of operations for Specialty Networks have not been separately disclosed because the effects were not significant compared to the consolidated financial statements.
3. Divestitures
On June 5, 2023, we signed a definitive agreement to contribute the Outcomes™ business to TDS, a portfolio company of BlackRock Long Term Private Capital and GTCR, in exchange for a 16 percent equity interest in the combined entity. The transaction closed on July 10, 2023 and we recognized a pre-tax gain of $53 million during the three months ended September 30, 2023, which was included in impairments and (gain)/loss on disposal of assets, net in our condensed consolidated statements of earnings/(loss). This gain includes our initial recognition of an equity method investment in the combined entity for $147 million, which was recorded in other assets in our condensed consolidated balance sheets.
We determined that the divestiture of the Outcomes™ business did not meet the criteria to be classified as discontinued operations. The Outcomes™ business operated within our former Pharmaceutical segment and its results before the divestiture are reflected within the Pharma segment.
4. Restructuring and Employee Severance
The following table summarizes restructuring and employee severance costs:
Three Months Ended September 30,
(in millions)
2024
2023
Employee-related costs
$
16
$
7
Facility exit and other costs
8
18
Total restructuring and employee severance
$
24
$
25
Employee-related costs primarily consist of termination benefits provided to employees who have been involuntarily terminated, duplicate payroll costs, and retention bonuses incurred during transition periods. Facility exit and other costs primarily consist of project consulting fees, accelerated depreciation, professional project management, and costs associated with vacant facilities.
During the three months ended September 30, 2024, restructuring and employee severance costs were primarily related to the implementation of certain enterprise-wide cost-savings measures and certain initiatives to rationalize our manufacturing operations. During the three months ended September 30, 2023, restructuring and employee severance costs were primarily related to certain
Cardinal Health | Q1Fiscal 2025 Form 10-Q
27
Notes to Financial Statements
projects resulting from reviews of our strategy, portfolio, capital-allocation framework, and operations and the implementation of certain enterprise-wide cost-savings measures.
The following table summarizes activity related to liabilities associated with restructuring and employee severance:
(in millions)
Employee- Related Costs
Facility Exit and Other Costs
Total
Balance at June 30, 2024
$
92
$
5
$
97
Additions
7
—
7
Payments and other adjustments
(5)
(5)
(10)
Balance at September 30, 2024
$
94
$
—
$
94
5. Goodwill and Other Intangible Assets
Goodwill
The following table summarizes the carrying amount of goodwill by segment and in total:
(in millions)
Pharmaceutical and Specialty Solutions
Global Medical Products and Distribution
Other (1)
Total
Balance at June 30, 2024
$
3,555
$
—
$
1,170
$
4,725
Goodwill acquired, net of purchase price adjustments
—
—
—
—
Balance at September 30, 2024
$
3,555
$
—
$
1,170
$
4,725
(1)Comprised of the remaining operating segments, Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight® Logistics.
During the three months ended September 30, 2023, we performed interim quantitative goodwill impairment testing for GMPD. This quantitative testing resulted in the carrying amount of GMPD exceeding the fair value, resulting in a pre-tax impairment charge of $585 million. GMPD goodwill was fully impaired during the third quarter of fiscal 2024.
Other Intangible Assets
The following tables summarize other intangible assets by class at:
September 30, 2024
(in millions)
Gross Intangible
Accumulated Amortization
Net Intangible
Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles:
Trademarks and patents
$
12
$
—
$
12
N/A
Total indefinite-life intangibles
12
—
12
N/A
Definite-life intangibles:
Customer relationships
3,651
2,495
1,156
11
Trademarks, trade names and patents
562
415
147
7
Developed technology and other
1,047
699
348
7
Total definite-life intangibles
5,260
3,609
1,651
10
Total other intangible assets
$
5,272
$
3,609
$
1,663
N/A
June 30, 2024
(in millions)
Gross Intangible
Accumulated Amortization
Net Intangible
Indefinite-life intangibles:
Trademarks and patents
$
12
$
—
$
12
Total indefinite-life intangibles
12
—
12
Definite-life intangibles:
Customer relationships
3,628
2,431
1,197
Trademarks, trade names and patents
561
408
153
Developed technology and other
1,047
684
363
Total definite-life intangibles
5,236
3,523
1,713
Total other intangible assets
$
5,248
$
3,523
$
1,725
Total amortization of intangible assets was $68 million and $64 million for the three months ended September 30, 2024 and 2023, respectively. Estimated annual amortization of intangible assets for the remainder of fiscal 2025 through 2029 is as follows: $200 million, $246 million, $219 million, $191 million, and $186 million.
Cardinal Health | Q1Fiscal 2025 Form 10-Q
28
Notes to Financial Statements
6. Long-Term Obligations and Other Short-Term Borrowings
Long-Term Debt
We had total long-term obligations, including the current portion and other short-term borrowings, of $5.2 billion and $5.1 billion at September 30, 2024 and June 30, 2024, respectively. All the notes represent unsecured obligations of Cardinal Health, Inc. and rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness. Interest is paid pursuant to the terms of the obligations. These notes are effectively subordinated to the liabilities of our subsidiaries, including trade payables of $30.4 billion and $31.8 billion at September 30, 2024 and June 30, 2024, respectively.
Other Financing Arrangements
In addition to cash and equivalents and operating cash flow, other sources of liquidity at September 30, 2024 include a $2.0 billion commercial paper program, backed by a $2.0 billion revolving credit facility, which expires in February 2028. We also have a $1.0 billion committed receivables sales facility through September 2025. At September 30, 2024, we had no amounts outstanding under our commercial paper program, revolving credit facility, or our committed receivables sales facility.
In October 2024, we entered into a new 364-Day Revolving Credit Facility, under which we have access to $1.0 billion of committed liquidity through October 2025. We also increased our Commercial Paper program from $2.0 billion to $3.0 billion.
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 September 30, 2024, we were in compliance with this financial covenant.
7. Commitments, Contingent Liabilities and Litigation
Commitments
Generic Sourcing Venture with CVS Health
In July 2014, we established Red Oak Sourcing, LLC ("Red Oak Sourcing"), a U.S.-based generic pharmaceutical sourcing venture with CVS Health for an initial term of 10 years. Red Oak Sourcing negotiates generic pharmaceutical supply contracts on behalf of its participants. In August 2021, we amended our agreement to extend the term through June 2029. We are required to make quarterly payments to CVS Health for the term of the arrangement.
Contingencies
New York Opioid Stewardship Act
In April 2018, the State of New York passed a budget which included the Opioid Stewardship Act (the "OSA"). The OSA created an aggregate $100 million annual assessment on all manufacturers and distributors that was assessed based on each
manufacturer or distributor's share of the total morphine milligram equivalents sold or distributed in New York during the applicable calendar year, beginning in 2017. Subsequently, New York passed a new opioid excise tax and limited the OSA to two years (2017 and 2018).
We accrue contingencies if it is probable that a liability has been incurred and the amount can be estimated. Since fiscal 2021, we have made certain payments to New York State for our portion of the assessment in 2017 and 2018. However, we, and other distributors, challenged the OSA as unconstitutional. In May 2024, the New York Appellate Division held that the 2017 assessment was unconstitutionally retroactive, directing a refund of assessments paid for calendar year 2017, but upheld the 2018 assessment. Both parties have appealed the decision of the New York Appellate Division to the New York Court of Appeals, the state's highest court. We have not recorded a receivable for any possible recoveries related to these assessments.
Legal Proceedings
We become involved from time to time in disputes, litigation, and regulatory matters.
From time to time, we determine that products we distribute, source, manufacture, or market do not meet our specifications, regulatory requirements, or published standards. When we or a regulatory agency identify a potential quality or regulatory issue, we investigate and take appropriate corrective action. Such actions have led to product recalls, costs to repair or replace affected products, temporary interruptions in product sales, restrictions on importation, product liability claims, and lawsuits and can lead to action by regulators. Even absent an identified regulatory or quality issue or product recall, we can become subject to product liability claims and lawsuits.
From time to time, we become aware through employees, internal audits or other parties of possible compliance matters, such as complaints or concerns relating to accounting, internal accounting controls, financial reporting, auditing, or other ethical matters or relating to compliance with laws such as healthcare fraud and abuse, anti-corruption or anti-bribery laws. When we become aware of such possible compliance matters, we investigate internally and take appropriate corrective action. In addition, from time to time, we receive subpoenas or requests for information from various federal or state agencies relating to our business or to the business of a customer, supplier, or other industry participants. Internal investigations, subpoenas, or requests for information could directly or indirectly lead to the assertion of claims or the commencement of legal proceedings against us or result in sanctions.
We have been named from time to time in qui tam actions initiated by private third parties. In such actions, the private parties purport to act on behalf of federal or state governments, allege that false claims have been submitted for payment by the government and may receive an award if their claims are successful. After a private party has filed a qui tam action, the government must investigate
Cardinal Health | Q1Fiscal 2025 Form 10-Q
29
Notes to Financial Statements
the private party's claim and determine whether to intervene in and take control over the litigation. These actions may remain under seal while the government makes this determination. If the government declines to intervene, the private party may nonetheless continue to pursue the litigation on his or her own purporting to act on behalf of the government.
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 resolutions can occur, assessing contingencies is highly subjective and requires judgments about future events. We regularly review contingencies to determine whether our accruals and related disclosures are adequate. The amount of ultimate loss may differ from these estimates.
We recognize income from the favorable outcome of litigation when we receive the associated cash or assets.
We recognize estimated loss contingencies for certain litigation and regulatory matters and income from favorable resolution of litigation in litigation (recoveries)/charges, net, in our condensed consolidated statements of earnings/(loss); however, losses and recoveries of lost profits from disputes that occur in the ordinary course of business are included within segment profit.
Opioid Lawsuits and Investigations
Cardinal Health, other pharmaceutical wholesalers, and other participants in the pharmaceutical supply chain have been named as defendants in lawsuits related to the distribution of opioid pain medications. These lawsuits seek equitable relief and monetary damages based on a variety of legal theories, including various common law claims, such as public nuisance, negligence, unjust enrichment, personal injury, as well as violations of controlled substance laws, the Racketeer Influenced and Corrupt Organizations Act, and various other statutes. Plaintiffs in these lawsuits include governmental entities, as well as private parties, such as unions and other health and welfare funds, hospital systems and other healthcare providers, businesses, and individuals.
Additionally, 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, subpoenas, and other requests from other DOJ offices. These investigations concern operation of our anti-diversion program, our anti-diversion policies and procedures, and distribution of certain controlled substances. We are cooperating with these investigations. We are unable to predict the outcome of any of these investigations.
In total, as of September 30, 2024, we have $5.0 billion accrued for these matters, of which $789 million is included in other accrued liabilities and the remainder is included in deferred income taxes and other liabilities in our condensed consolidated balance sheets. During fiscal 2024, we recognized expense of $340 million
in connection with opioid-related matters, including agreements in principle with counsel representing classes of third-party payors and acute care hospitals, and settlements with the City of Baltimore and the State of Alabama. This expense was partially offset by a benefit of $105 million related to prepayments at a prenegotiated discount of certain future payments totaling $344 million.
Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. We regularly review these opioid litigation matters to determine whether our accrual is adequate. The amount of ultimate loss may differ materially from this accrual, whether as a result of settlement discussions, a judicial decision or verdict or otherwise, but we are not able to estimate a range of reasonably possible additional losses for these matters. We continue to strongly dispute the allegations made in these lawsuits and none of the agreements described below is an admission of liability or wrongdoing. Please see below for additional description of these matters.
States & Political Subdivisions
In 2022, we along with two other national distributors (collectively, the "Distributors") entered into the National Opioid Settlement Agreement to settle the vast majority of opioid lawsuits and claims brought by states and political subdivisions. In addition to the Distributors, parties to the National Opioid Settlement Agreement include 48 states, the District of Columbia and 5 U.S. territories. Over 99 percent of political subdivisions in settling states (by population as calculated under the National Opioid Settlement Agreement) that had brought opioid-related suits against us have chosen to join the National Opioid Settlement Agreement or have had their claims addressed by state legislation (together with settling states and territories that joined the National Opioid Settlement Agreement, the "Settling Governmental Entities").
During fiscal 2024, we recognized a $22 million charge in litigation (recoveries)/charge, net in the condensed consolidated statements of earnings/(loss) related to an agreement with the Alabama Attorney General under which we agreed to pay approximately $123 million to the State of Alabama over a period of ten years to resolve opioid-related claims brought by the State and its political subdivisions (the "Alabama Settlement"). Including the National Opioid Settlement Agreement, the Alabama Settlement and a prior settlement with the State of West Virginia, we have now resolved the opioid-related claims of all 50 states and the District of Columbia. Additionally, in August 2024, we entered into a settlement agreement with the City of Baltimore to resolve its opioid-related claims. Under this agreement, we agreed to pay $153 million.
Under the National Opioid Settlement Agreement, through October 2024, we have paid the Settling Governmental Entities approximately $1.9 billion. We expect to pay Settling Governmental Entities additional amounts up to $4.4 billion
30
Cardinal Health | Q1Fiscal 2025 Form 10-Q
Notes to Financial Statements
through 2038. The National Opioid Settlement Agreement also includes injunctive relief terms related to Distributors’ controlled substance anti-diversion programs. A monitor is overseeing compliance with these provisions until 2027. In addition, the Distributors have engaged a third-party vendor to act as a clearinghouse for data aggregation and reporting, which Distributors will fund for 10 years. As a result of the National Opioid Settlement Agreement, the vast majority of lawsuits brought against us by political subdivisions have been dismissed. We continue to engage in resolution discussions with certain nonparticipating political subdivisions. We intend to defend ourselves vigorously against all remaining lawsuits.
Other Settlements
West Virginia subdivisions and Native American tribes were not a part of the National Opioid Settlement Agreement. In July 2022, a judgment in favor of the Distributors was entered in a bench trial before a federal judge in West Virginia in a case brought by Cabell County and City of Huntington. Plaintiffs have appealed this decision to the Fourth Circuit Court of Appeals. In July 2022, we entered into separate agreements to settle the opioid-related claims of the majority of the remaining West Virginia subdivisions and Native American Tribes for approximately $124 million over 11-years and $136 million over five years, respectively.
Private Plaintiffs
The National Opioid Settlement Agreement does not address claims by private parties, which includes unions and other health and welfare funds, hospital systems and other healthcare providers, businesses, and individuals alleging personal injury. There were approximately 367 lawsuits brought by private plaintiffs pending as of October 28, 2024. Of these, 98 are purported class actions. The causes of action asserted by these plaintiffs are similar to those asserted by public plaintiffs. We are vigorously defending ourselves in all of these matters.
Following resolution discussions with certain private plaintiffs, during the three months ended September 30, 2024, Distributors finalized agreements with classes of third-party payors and acute care hospitals to settle their claims for $213 million. These agreements remain subject to certain contingencies, including court approval. Active litigation brought by hospital and third-party payor plaintiffs, including certain scheduled trials, has been stayed as to Distributors pending court approval of these settlements.
A trial in a case involving 21 plaintiffs began in state court in Georgia in January 2023 and concluded in March 2023 with a verdict for the company and other defendants on all claims. Following cross-appeals, in September 2024, The Georgia Supreme Court affirmed the defense verdict in full.
Insurance Litigation
We are involved in ongoing legal proceedings with insurers related to their obligations to reimburse us for defense and indemnity costs in connection with the lawsuits described above. During fiscal 2024, we received $34 million in insurance recoveries related to these matters and $9 million in the three months ended
September 30, 2024. We have not recorded a receivable for any additional recoveries related to these insurance litigation matters as of September 30, 2024. Certain recoveries from our insurers are recorded in the Pharmaceutical and Specialty Solutions segment.
Department of Justice Civil Investigative Demand
In November 2023, we received a Civil Investigative Demand ("CID") from the Department of Justice focused on potential violations of the Anti-Kickback Statute and False Claims Act in connection with a 2022 transaction in which we purchased a minority ownership interest in a rheumatology managed services organization and a group purchasing organization. We are cooperating with this investigation.
Cordis IVC Filter Matters
We have been named as a defendant in product liability lawsuits coordinated in Alameda County Superior Court in California involving claims by plaintiffs that allege personal injuries associated with the use of inferior vena cava ("IVC") filter products. These lawsuits sought a variety of remedies, including unspecified monetary damages. The divestiture of the Cordis business did not include product liability related to the IVC filters in the U.S. and Canada, which we retained.
In April 2023, we executed a settlement agreement that, if certain conditions are satisfied, will resolve approximately 4,375 claims for $275 million. This settlement agreement is subject to certain conditions, including certain opt-in thresholds. Between May and September 2023, we made settlement payments totaling $275 million into a qualified settlement fund, which will be disbursed to the plaintiffs if required conditions are satisfied. Since July 2021, while we have also entered into agreements to settle the vast majority of IVC filter product liability claims, these settlements will not resolve all of them, and we intend to continue to vigorously defend ourselves in the remaining lawsuits.
We recognized income of $103 million during fiscal year 2023, primarily related to a reduction of the reserve for the estimated settlement and defense costs for these matters due to the execution of the settlements noted above. At September 30, 2024, we had a total of $289 million accrued for losses and legal defense costs, related to the IVC filter product liability lawsuits in our condensed consolidated balance sheets, which includes the $275 million in the qualified settlement fund.
In December 2019, pharmaceutical distributors including us were added as defendants in a civil class action lawsuit filed by indirect purchasers of generic drugs, such as hospitals and retail pharmacies. The indirect purchaser case is part of a multidistrict litigation consisting of multiple individual class action matters condensed consolidated in the Eastern District of Pennsylvania. The indirect purchaser plaintiffs allege that pharmaceutical distributors encouraged manufacturers to increase prices, provided
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Notes to Financial Statements
anti-competitive pricing information to manufacturers, and improperly engaged in customer allocation. In May 2020, the court granted our motion to dismiss. In July 2022, the indirect purchasers filed an amended complaint and in August 2022, we filed a motion to dismiss the amended complaint. We are vigorously defending ourselves in this matter, which remains pending as of September 30, 2024.
Antitrust Litigation Proceeds
We recognized income for net recoveries in class action antitrust lawsuits in which we were a class member or plaintiff of $43 million and $41 million, which were recognized in litigation (recoveries)/charges, net, during the three months ended September 30, 2024 and 2023, respectively.
8. Income Taxes
Fluctuations in our provision for/(benefit from) income taxes as a percentage of our pre-tax earnings/(loss) (“effective tax rate”) are due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items.
Effective Tax Rate
During the three months ended September 30, 2024 and 2023, the effective tax rate was 23.0 percent and 75.1 percent, respectively. The tax rate during the three months ended September 30, 2023 reflects the impact of the tax effects of the goodwill impairment charge recognized in the same quarter.
Tax Effects of Goodwill Impairment Charge
During the three months ended September 30, 2023, we recognized a $585 million pre-tax charge for goodwill impairment related to the GMPD segment. The net tax benefit related to this charge is $45 million for fiscal 2024.
Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings/(loss) before income taxes for the year-to-date period to compute our impact from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur.
The tax effect of the goodwill impairment charge during the three months ended September 30, 2023 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairments in prior fiscal years. The impact of the non-deductible goodwill increased the estimated annual effective tax rate for fiscal 2024. Applying the higher tax rate to pre-tax loss for three months ended September 30, 2023 resulted in recognizing an incremental interim tax benefit of approximately $102 million, which impacted the benefit from income taxes in the condensed consolidated statements of earnings/(loss) during the three months ended September 30, 2023 and prepaid expenses and other assets in the condensed
consolidated balance sheets at September 30, 2023. This interim tax benefit reversed in the remainder of fiscal 2024.
Unrecognized Tax Benefits
We had $952 million and $981 million of unrecognized tax benefits at September 30, 2024 and June 30, 2024, respectively. The September 30, 2024 and June 30, 2024 balances include $871 million and $882 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate.
At September 30, 2024 and June 30, 2024, we had $69 million and $65 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for/(benefit from) from income taxes in the condensed consolidated statements of earnings/(loss). These balances are gross amounts before any tax benefits and are included in deferred income taxes and other liabilities in the condensed consolidated balance sheets.
It is reasonably possible that there could be a change in the amount of unrecognized tax benefits within the next 12 months due to activities of the U.S. Internal Revenue Service ("IRS") or other taxing authorities, possible settlement of audit issues, reassessment of existing unrecognized tax benefits, or the expiration of statutes of limitations. We estimate that the range of the possible change in unrecognized tax benefits within the next 12 months is between zero and a net decrease of $20 million, exclusive of penalties and interest.
Other Tax Matters
We file income tax returns in the U.S. federal jurisdiction, various U.S. state and local 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.
9. Fair Value Measurements
Assets and Liabilities Measured on a Recurring Basis
The following tables present the fair values for assets and (liabilities) measured on a recurring basis at:
September 30, 2024
(in millions)
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents
$
678
$
—
$
—
$
678
Other investments (1)
105
—
—
105
Liabilities:
Forward contracts (2)
—
(37)
—
(37)
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June 30, 2024
(in millions)
Level 1
Level 2
Level 3
Total
Assets:
Cash equivalents
$
1,442
$
—
$
—
$
1,442
Other investments (1)
108
—
—
108
Liabilities:
Forward contracts (2)
—
(87)
—
(87)
(1)The other investments balance includes investments in mutual funds, which offset fluctuations in deferred compensation liabilities. These mutual funds invest in the equity securities of companies with both large and small market capitalization and high quality fixed income debt securities. The fair value of these investments is determined using quoted market prices.
(2) The fair value of interest rate swaps, foreign currency contracts, and net investment hedges is determined based on the present value of expected future cash flows considering the risks involved, including non-performance risk, and using discount rates appropriate for the respective maturities. Observable Level 2 inputs are used to determine the present value of expected future cash flows. The fair value of these derivative contracts, which are subject to master netting arrangements under certain circumstances, is presented on a gross basis in prepaid expenses and other, other assets, other accrued liabilities, and deferred income taxes and other liabilities within the condensed consolidated balance sheets.
10. Financial Instruments
We utilize derivative financial instruments to manage exposure to certain risks related to our ongoing operations. The primary risks managed through the use of derivative instruments include interest rate risk, currency exchange risk, and commodity price risk. We do not use derivative instruments for trading or speculative purposes. While the majority of our derivative instruments are designated as hedging instruments, we also enter into derivative instruments that are designed to hedge a risk, but are not designated as hedging instruments. These derivative instruments are adjusted to current fair value through earnings at the end of each period. We are exposed to counterparty credit risk on all of our derivative instruments. Accordingly, we have established and maintain strict counterparty credit guidelines and only enter into derivative instruments with major financial institutions that are rated investment grade or better. We do not have significant exposure to any one counterparty and we believe the risk of loss is remote. Additionally, we do not require collateral under these agreements.
Interest Rate Risk Management
We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities on our fixed-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.
Currency Exchange Risk Management
We conduct business in several major international currencies and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow
management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments, and anticipated foreign currency revenue and expenses.
Commodity Price Risk Management
We are exposed to changes in the price of certain commodities. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative contracts when possible to manage the price risk associated with certain forecasted purchases.
Fair Value Hedges
We enter into pay-floating interest rate swaps to hedge the changes in the fair value of fixed-rate debt resulting from fluctuations in interest rates. These contracts are designated and qualify as fair value hedges. Accordingly, the gain or loss recorded on the pay-floating interest rate swaps is directly offset by the change in fair value of the underlying debt. Both the derivative instrument and the underlying debt are adjusted to market value at the end of each period with any resulting gain or loss recorded in interest expense, net in the condensed consolidated statements of earnings/(loss). For the three months ended September 30, 2024 and 2023, there were no gains or losses recorded to interest expense as changes in the market value of our derivative instruments offset changes in the market value of the underlying debt.
During the three months ended September 30, 2023 we entered into pay-floating interest rate swaps with total notional amounts of $100 million. These swaps were designated as fair value hedges of our fixed rate debt and are included in deferred income taxes and other liabilities in our condensed consolidated balance sheets.
Cash Flow Hedges
We enter into derivative instruments to hedge our exposure to changes in cash flows attributable to interest rate, foreign currency, and commodity price fluctuations associated with certain forecasted transactions. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.
Pre-tax gains recognized in other comprehensive income/(loss) were $3 million and immaterial for the three months ended September 30, 2024 and 2023, respectively. Gains and losses recognized in accumulated other comprehensive loss and reclassified into earnings were a $1 million loss and a $1 million gain for the three months ended September 30, 2024 and 2023, respectively. Losses currently included within accumulated other comprehensive loss associated with our cash flow hedges to be
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Notes to Financial Statements
reclassified into net earnings within the next 12 months are $3截至2021年3月27日，未償還本金總額爲$。
淨投資套期保值
We hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries. To accomplish this, we enter into cross-currency swaps that are designated as hedges of net investments.
In September 2023, we entered into ¥18163.9120 million) cross-currency swaps maturing in September 2025 and ¥18163.91202027年6月到期的價值1億日元的跨貨幣互換交易。2024年6月，我們終止了這筆交易¥18163.9120價值1億美元的2027年6月到期的跨貨幣互換交易。
在2024年9月30日結束的三個月中，未包括在攤薄後每股收益計算中的潛在攤薄員工股票期權、限制性股份單位和業績股份單位對於財務影響不大 2 在2023年9月30日結束的三個月中爲百萬美元 1 million of which were anti-dilutive as a result of the net loss during the period.
13. Segment Information
Effective January 1, 2024, we operated under an updated organizational structure and re-aligned our reporting structure under 兩個 reportable segments: Pharma segment and GMPD segment. All remaining operating segments that are not significant enough to require separate reportable segment disclosures are included in Other, which is comprised of Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight® Logistics. The factors for determining the reportable segments include the manner in which management evaluates performance for purposes of allocating resources and assessing performance combined with the nature of the individual business activities. Our previously reported segment results have been recast to conform to this re-aligned reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change.
Our Pharma 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; provides pharmacy management services to hospitals and operates a limited number of pharmacies, including pharmacies in community health centers; and repackages generic pharmaceuticals and over-the-counter healthcare products.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
