Cardinal Health (CAH) 10-K risk factor changes: FY2021 vs FY2020

| [Table of [removed: Contents](#sF3DBCA2E656157EDB1A7D54CCD0EEA92)] [added: Contents](#i4f0ec56b9c604f1782a65ea4a19c284d_7)] | | | [added: | | | | | |]

[removed: Form 10-K][added: Form 10-K]

| ☑ | [added: | |] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

For the fiscal year ended June 30, [removed: 2020][added: 2021]

| ☐ | [added: | |] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | [added: | |]

| Ohio | | | | | | [added: | | | | | | | | | | | |] 31-0958666 | [added: | |]

| (State or other jurisdiction [removed: of incorporation] [added: of incorporation] or organization) | | | | | | [added: | | | | | | | | | | | |] (IRS [removed: Employer Identification] [added: Employer Identification] No.) | [added: | |]

| 7000 Cardinal Place | [added: | |] , | [added: | |] Dublin | [added: | |] , | [added: | |] Ohio | | [added: | | | |] 43017 | [added: | |]

| (Address of principal executive offices) | | | | | | [added: | | | | | | | | | | | |] (Zip Code) | [added: | |]

| | | | | [added: | | | | | | | |] (614) | | [added: | | | |] 757-5000 | [added: | |]

| (Registrant’s telephone number, including area code) | | | | | | | [added: | | | | | | | | | | | | | |]

| Securities registered pursuant to Section 12(b) of the Act: | | | [added: | | | | | |]

| Title of each class | [added: | |] Trading Symbol(s) | [added: | |] Name of each exchange on which registered | [added: | |]

| Common shares (without par value) | [added: | |] CAH | [added: | |] New York Stock Exchange | [added: | |]

| Securities registered pursuant to Section 12(g) of the Act: None | | | [added: | | | | | |]

| Large accelerated filer | [added: | |] þ | | [added: | | | |] Accelerated filer | [added: | |] ☐ | | [added: | | | |]

| Non-accelerated filer | [added: | |] ☐ | | [added: | | | |] Smaller reporting company | [added: | |] ☐ | | [added: | | | |]

| | | | [added: | | | | | |] Emerging growth company | [added: | |] ☐ | | [added: | | | |]

| 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 | | | | | | [added: | | | | | | | | | | | |]

| 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. [removed: þ] | | | | | | [added: | | | | | | | | | | | |]

The aggregate market value of voting stock held by non-affiliates on December 31, [removed: 2019,] [added: 2020,] was the following: [removed: $14,729,138,108.][added: $15,693,865,917.]

The number of the registrant’s common shares, without par value, outstanding as of July 31, [removed: 2020,] [added: 2021,] was the following: [removed: 292,444,079.][added: 290,441,408.]

Portions of the registrant’s Definitive Proxy Statement to be filed for its [removed: 2020] [added: 2021] 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 [removed: 2020] [added: 2021] Form 10-K | [added: | |]

| | [added: | | | | |] Page | [added: | |]

| [removed: [Introduction](#sF8AF79492EBB5EFEB52BE55FA3BE82CC)] [added: Introduction] | [removed: [2](#sF8AF79492EBB5EFEB52BE55FA3BE82CC)] | [added: | | | | | | |]

| [added: | | |] [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s8FE50BC6625E53A7A2EBD36A964A3F58)] [added: Operations](#i4f0ec56b9c604f1782a65ea4a19c284d_13)] | [removed: [3](#s8FE50BC6625E53A7A2EBD36A964A3F58)] | [added: | [3](#i4f0ec56b9c604f1782a65ea4a19c284d_13) | | |]

| [removed: [Explanation] [added: Explanation] and Reconciliation of Non-GAAP Financial [removed: Measures](#s2B855D2F667B5A31AF19D34479AAEA66)] [added: Measures] | [removed: [20](#s2B855D2F667B5A31AF19D34479AAEA66)] | [added: | | | | | | |]

| [added: | | |] [Quantitative and Qualitative Disclosures about Market [removed: Risk](#s333C75A276DE55268DA27780A098DE09)] [added: Risk](#i4f0ec56b9c604f1782a65ea4a19c284d_49)] | [removed: [24](#s333C75A276DE55268DA27780A098DE09)] | [added: | [30](#i4f0ec56b9c604f1782a65ea4a19c284d_49) | | |]

| [removed: [Business](#s64B4883BB1AB5C45A2F86FABE0A8B842)] [added: Business] | [removed: [26](#s64B4883BB1AB5C45A2F86FABE0A8B842)] | [added: | | | | | | |]

| [removed: [Risk Factors](#sB887CB0119C25A08BEA9BE55BDBCD36D)] [added: Risk Factors] | [removed: [33](#sB887CB0119C25A08BEA9BE55BDBCD36D)] | [added: | | | | | | |]

| [added: | | |] [Legal [removed: Proceedings](#s2AE08030210259CCAE9BFFC1DD370010)] [added: Proceedings](#i4f0ec56b9c604f1782a65ea4a19c284d_61)] | [removed: [40](#s2AE08030210259CCAE9BFFC1DD370010)] | [added: | [48](#i4f0ec56b9c604f1782a65ea4a19c284d_61) | | |]

| [removed: [Market] [added: Market] for Registrant's Common [removed: Equity](#s38459D2E4A45535DA3214D65091BE252)] [added: Equity] | [removed: [41](#s38459D2E4A45535DA3214D65091BE252)] | [added: | | | | | | |]

| [removed: [Reports](#s5B394966EB4C511684797CFE02614449)] [added: Reports] | [removed: [43](#s5B394966EB4C511684797CFE02614449)] | [added: | | | | | | |]

| [added: | | |] [Financial Statements and Supplementary [removed: Data](#s7F3CE990DD1859BF8C1573967BC05AFD)] [added: Data](#i4f0ec56b9c604f1782a65ea4a19c284d_76)] | [removed: [48](#s7F3CE990DD1859BF8C1573967BC05AFD)] | [added: | [56](#i4f0ec56b9c604f1782a65ea4a19c284d_76) | | |]

| [removed: [Directors,] [added: Directors,] Executive Officers, and Corporate [removed: Governance](#s3C67236E06545A9EBF4D40D9E989AF63)] [added: Governance] | [removed: [79](#s3C67236E06545A9EBF4D40D9E989AF63)] | [added: | | | | | | |]

| [removed: [Exhibits](#s836DADB5C449535FB68FD62583FB443E)] [added: Exhibits] | [removed: [81](#s836DADB5C449535FB68FD62583FB443E)] | [added: | | | | | | |]

| [removed: [Form] [added: Form] 10-K Cross Reference [removed: Index](#s4FD952D373C65C1E8C00962F94F20840)] [added: Index] | [removed: [85](#s4FD952D373C65C1E8C00962F94F20840)] | [added: | | | | | | |]

| [removed: [Signatures](#sEF38C628ED485BCE881358888B51576D)] [added: Signatures] | [removed: [86](#sEF38C628ED485BCE881358888B51576D)] | [added: | | | | | | |]

| 1 | [added: | |] Cardinal Health \| Fiscal [removed: 2020] [added: 2021] Form 10-K | | [added: | | | |]

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| | | | [Explanation and Reconciliation of Non-GAAP Financial Measures](#i4f0ec56b9c604f1782a65ea4a19c284d_40) | | | [26](#i4f0ec56b9c604f1782a65ea4a19c284d_40) | | |

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| | | | [Business](#i4f0ec56b9c604f1782a65ea4a19c284d_52) | | | [32](#i4f0ec56b9c604f1782a65ea4a19c284d_52) | | |

| | | | [Risk Factors](#i4f0ec56b9c604f1782a65ea4a19c284d_55) | | | [40](#i4f0ec56b9c604f1782a65ea4a19c284d_55) | | |

| | | | [Properties](#i4f0ec56b9c604f1782a65ea4a19c284d_58) | | | [47](#i4f0ec56b9c604f1782a65ea4a19c284d_58) | | |

| | | | [Market for Registrant's Common Equity](#i4f0ec56b9c604f1782a65ea4a19c284d_64) | | | [49](#i4f0ec56b9c604f1782a65ea4a19c284d_64) | | |

| | | | [Reports](#i4f0ec56b9c604f1782a65ea4a19c284d_67) | | | [51](#i4f0ec56b9c604f1782a65ea4a19c284d_67) | | |

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| | | | [Exhibits](#i4f0ec56b9c604f1782a65ea4a19c284d_184) | | | [91](#i4f0ec56b9c604f1782a65ea4a19c284d_184) | | |

| | | | [Signatures](#i4f0ec56b9c604f1782a65ea4a19c284d_190) | | | [96](#i4f0ec56b9c604f1782a65ea4a19c284d_190) | | |

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See further description of opioid lawsuits in the Significant Developments in Fiscal 2021 and Trends section in this MD&A and [Note 7](#i4f0ec56b9c604f1782a65ea4a19c284d_130) of the "Notes to Consolidated Financial Statements."

GAAP and Non-GAAP operating earnings during fiscal 2021 were adversely impacted by COVID-19, which includes an inventory reserve recorded to reduce the carrying value of certain Medical segment personal protective equipment, primarily certain categories of gloves, to net realizable value.

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.

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| [Selected Financial Data](#sAD9595E6A7565841838053780BA1B0B4) | [23](#sAD9595E6A7565841838053780BA1B0B4) |

| [Properties](#s38B7FE605CD85F5ABED26E8E13F7E935) | [40](#s38B7FE605CD85F5ABED26E8E13F7E935) |

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The increase in non-GAAP operating earnings was primarily due to the beneficial impact of enterprise-wide cost-savings measures, a higher contribution from branded pharmaceutical sales mix, the favorable year-over-year impact of fiscal 2019 charges related to an exclusive distribution agreement with a Medical segment supplier and growth from specialty solutions, partially offset by the adverse impact of Pharmaceutical segment customer contract renewals and the adverse impact of the pandemic associated with the novel strain of coronavirus (“COVID-19”).

The charge had a $(17.54) per share after tax impact on GAAP diluted EPS.

GAAP diluted EPS during fiscal 2019 included a $1.26 per share gain from the divestiture of our majority interest in naviHealth.

Fiscal 2020 non-GAAP diluted EPS increased 3% to $5.45.

This increase was primarily due to the factors discussed above impacting non-GAAP operating earnings, as well as a lower share count as a result of share repurchases and lower interest expense due to less debt outstanding and lower interest rates.

The year-over-year comparison was unfavorably impacted by a higher effective tax rate due to the benefit in the prior-year from discrete tax items, largely related to international legal entity changes.

The COVID-19 pandemic continues to severely impact the U.S. and global economies.

Our businesses have been impacted in a variety of ways beginning in the third quarter of fiscal 2020, as discussed in the following paragraphs and under “Results of Operations.” We estimate that the COVID-19 pandemic had a net negative impact to operating earnings/(loss) of approximately $100 million in fiscal 2020.

Within our manufacturing and distribution facilities, we have implemented sustained protocols designed to protect the safety of our employees and maintain continuity of our operations, and have generally continued to operate our distribution and manufacturing facilities in the ordinary course of business.

Additionally, in line with various governmental recommendations to reduce large gatherings and practice social distancing, we have enabled most office-based employees to work remotely.

These measures have created additional burdens on our infrastructure and information technology systems.

Furthermore, if a significant number of our employees are unable to perform their duties for a period of time, we may experience difficulties in operating one or more of our facilities which could adversely impact our financial results.

We manufacture, source and distribute some PPE products and distribute PPE manufactured by others.

This increased demand resulted in an increase in sales volume for certain products in fiscal 2020.

The cost to manufacture and source certain PPE products has also significantly increased, which had a slight negative impact on our margin for these products in fiscal 2020 and is expected to have a larger negative impact in fiscal 2021.

We continue to seek alternate and additional sources for these products and otherwise mitigate cost increases.

We also are increasing certain PPE product prices to reflect some of our higher costs and are seeking to modify affected customer contracts.

If these efforts are unsuccessful, our margins may be adversely impacted even more significantly.

In addition, we could experience decreased sales and customer disputes.

Federal, state and local governmental policies and orders and certain private initiatives designed to reduce the transmission of COVID-19 also resulted in, among other things, the cancellation or deferral of many elective medical procedures and some of our customers closing or severely curtailing their operations.

As a result, our Medical segment has experienced decreased sales volume (apart from PPE products described above), which had a negative impact on Medical segment profit in fiscal 2020 and which we currently assume will have a negative impact in fiscal 2021.

The decrease in elective procedures and physician office visits has also resulted in a significant decrease in sales by our Nuclear and Precision Health Solutions division in our Pharmaceutical segment in fiscal 2020.

Fluctuating or decreasing elective procedure volume may have a greater or lesser adverse impact on the sales of these products and services than we anticipate.

Our Pharmaceutical Distribution and Specialty Solutions businesses experienced a temporary increase in sales volume during the third quarter of fiscal 2020, which we believe to be related to accelerated purchasing by some customers due to the COVID-19 pandemic and which was largely offset by a decrease in sales volume in the fourth quarter of fiscal 2020.

We assume fiscal 2021 Pharmaceutical segment revenue will be negatively impacted by COVID-19, and we are uncertain when sales volume will return to pre-COVID-19 levels.

Political, legal or regulatory actions taken in response to the COVID-19 pandemic in certain jurisdictions where we manufacture, source or distribute products have created supply disruptions within both our Medical and, to a lesser extent, our Pharmaceutical segments and are likely to cause additional supply disruptions or shortages in the future.