Cardinal Health (CAH) 10-K risk factor changes: FY2022 vs FY2021

| [Table of [removed: Contents](#i4f0ec56b9c604f1782a65ea4a19c284d_7)] [added: Contents](#i06b8b3ff48e94029843042d968c5bda7_7)] | | | | | | | | |

For the fiscal year ended June 30, [removed: 2021][added: 2022]

The aggregate market value of voting stock held by non-affiliates on December 31, [removed: 2020,] [added: 2021,] was the following: [removed: $15,693,865,917.][added: $14,223,756,327.]

The number of the registrant’s common shares, without par value, outstanding as of July 31, [removed: 2021,] [added: 2022,] was the following: [removed: 290,441,408.][added: 272,512,364.]

Portions of the registrant’s Definitive Proxy Statement to be filed for its [removed: 2021] [added: 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 [removed: 2021] [added: 2022] Form 10-K | | |

| | | | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#i4f0ec56b9c604f1782a65ea4a19c284d_13)] [added: Operations](#i06b8b3ff48e94029843042d968c5bda7_13)] | | | [removed: [3](#i4f0ec56b9c604f1782a65ea4a19c284d_13)] [added: [3](#i06b8b3ff48e94029843042d968c5bda7_13)] | | |

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

| | | | [Quantitative and Qualitative Disclosures about Market [removed: Risk](#i4f0ec56b9c604f1782a65ea4a19c284d_49)] [added: Risk](#i06b8b3ff48e94029843042d968c5bda7_49)] | | | [removed: [30](#i4f0ec56b9c604f1782a65ea4a19c284d_49)] [added: [28](#i06b8b3ff48e94029843042d968c5bda7_49)] | | |

| [added: Business] | | | [removed: [Business](#i4f0ec56b9c604f1782a65ea4a19c284d_52)] | | | [removed: [32](#i4f0ec56b9c604f1782a65ea4a19c284d_52)] | | |

| | | | [Risk [removed: Factors](#i4f0ec56b9c604f1782a65ea4a19c284d_55)] [added: Factors](#i06b8b3ff48e94029843042d968c5bda7_55)] | | | [removed: [40](#i4f0ec56b9c604f1782a65ea4a19c284d_55)] [added: [39](#i06b8b3ff48e94029843042d968c5bda7_55)] | | |

| | | | [Legal [removed: Proceedings](#i4f0ec56b9c604f1782a65ea4a19c284d_61)] [added: Proceedings](#i06b8b3ff48e94029843042d968c5bda7_61)] | | | [removed: [48](#i4f0ec56b9c604f1782a65ea4a19c284d_61)] [added: [47](#i06b8b3ff48e94029843042d968c5bda7_61)] | | |

| | | | [Market for Registrant's Common [removed: Equity](#i4f0ec56b9c604f1782a65ea4a19c284d_64)] [added: Equity](#i06b8b3ff48e94029843042d968c5bda7_64)] | | | [removed: [49](#i4f0ec56b9c604f1782a65ea4a19c284d_64)] [added: [48](#i06b8b3ff48e94029843042d968c5bda7_64)] | | |

| | | | [Financial Statements and Supplementary [removed: Data](#i4f0ec56b9c604f1782a65ea4a19c284d_76)] [added: Data](#i06b8b3ff48e94029843042d968c5bda7_76)] | | | [removed: [56](#i4f0ec56b9c604f1782a65ea4a19c284d_76)] [added: [55](#i06b8b3ff48e94029843042d968c5bda7_76)] | | |

| | | | [Directors, Executive Officers, and Corporate [removed: Governance](#i4f0ec56b9c604f1782a65ea4a19c284d_178)] [added: Governance](#i06b8b3ff48e94029843042d968c5bda7_151)] | | | [removed: [89](#i4f0ec56b9c604f1782a65ea4a19c284d_178)] [added: [89](#i06b8b3ff48e94029843042d968c5bda7_151)] | | |

| | | | [Form 10-K Cross Reference [removed: Index](#i4f0ec56b9c604f1782a65ea4a19c284d_187)] [added: Index](#i06b8b3ff48e94029843042d968c5bda7_160)] | | | [removed: [95](#i4f0ec56b9c604f1782a65ea4a19c284d_187)] [added: [95](#i06b8b3ff48e94029843042d968c5bda7_160)] | | |

| 1 | | | Cardinal Health \| Fiscal [removed: 2021] [added: 2022] Form 10-K | | | | | |

As used in this report, "we," "our," "us," "Cardinal Health" and similar pronouns refer to Cardinal Health, Inc. and its majority-owned [added: and consolidated] subsidiaries, unless the context requires otherwise.

References to fiscal [added: 2023,] 2022, 2021, 2020, [removed: 2019, 2018] [added: 2019] and [removed: 2017] [added: 2018] are to the fiscal years ended June 30, [added: 2023,] 2022, 2021, 2020, [removed: 2019, 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

Except as otherwise specified, information in this report is provided as of June 30, [removed: 2021.][added: 2022.]

In this report, including in the "Fiscal [removed: 2021] [added: 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”).

Our MD&A within this Form 10-K generally discusses fiscal [removed: 2021] [added: 2022] and fiscal [removed: 2020] [added: 2021] items and year-to-year comparisons between fiscal [removed: 2021] [added: 2022] and fiscal [removed: 2020.][added: 2021.]

Fiscal [removed: 2019] [added: 2020] items and discussions of year-to-year comparisons between fiscal [removed: 2020] [added: 2021] and fiscal [removed: 2019] [added: 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, [removed: 2020] [added: 2021] (the "Fiscal [removed: 2020] [added: 2021] Form 10-K").

| 2 | | | Cardinal Health \| Fiscal [removed: 2021] [added: 2022] Form 10-K | | | | | |

Pharmaceutical [removed: Segment][added: Segment Generics Program]

| | | | Cardinal Health \| Fiscal [removed: 2021] [added: 2022] Form 10-K | | | 3 | | |

Fiscal [removed: 2021] [added: 2022] Overview

Revenue for fiscal [removed: 2021] [added: 2022] was [removed: $162.5] [added: $181.4] billion, a [removed: 6] [added: 12] percent increase from the prior year, primarily due to sales growth from pharmaceutical distribution and specialty [removed: solutions] [added: pharmaceutical customers, which largely consisted of branded pharmaceutical sales to existing and net new] customers.

| (in millions) | | | [removed: 2021] [added: 2022] | | | | | | [removed: 2020] [added: 2021] | | | | | | Change | | |

| GAAP operating earnings/(loss) | | | $ | [removed: 472] [added: (596)] | | | | | $ | [removed: (4,098)] [added: 472] | | | | | N.M. | | |

| Surgical gown recall costs/(income) | | | [removed: (28)] [added: 1] | | | | | | [removed: 85] [added: (28)] | | | | | | | | |

| State opioid assessment related to prior fiscal years | | | [removed: 38] [added: —] | | | | | | [removed: 3] [added: 38] | | | | | | | | |

| Restructuring and employee severance | | | [removed: 114] [added: 101] | | | | | | [removed: 122] [added: 114] | | | | | | [added: 122] | | |

| Amortization and other acquisition-related costs | | | [removed: 451] [added: 324] | | | | | | [removed: 524] [added: 451] | | | | | | [added: 524] | | |

| Impairments and (gain)/loss on disposal of assets | | | [removed: 79] [added: 2,050] | | | | | | [removed: 7] [added: 79] | | | | | | | | |

| Litigation (recoveries)/charges, net | | | [removed: 1,129] [added: 109] | | | | | | [removed: 5,741] [added: 1,129] | | | | | | [added: 5,741] | | |

| Non-GAAP operating earnings | | | $ | [removed: 2,255] [added: 1,990] | | | | | $ | [removed: 2,384] [added: 2,255] | | | | | [removed: (5)] [added: (12)] | | % |

[removed: We had GAAP operating earnings of $472 million and a GAAP operating loss of $4.1 billion during] [added: During] fiscal [removed: 2021 and 2020, respectively, which includes] [added: 2021, we recognized] pre-tax charges of $1.17 billion [removed: and $5.63 billion, respectively, recognized] 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 [removed: 2021] [added: 2022] and Trends section in this MD&A and [Note [removed: 7](#i4f0ec56b9c604f1782a65ea4a19c284d_130)] [added: 7](#i06b8b3ff48e94029843042d968c5bda7_118)] of the "Notes to Consolidated Financial Statements."

[removed: GAAP and Non-GAAP operating earnings during fiscal 2021 were adversely] [added: The year-over-year comparison was favorably] impacted by [removed: COVID-19, which includes an] [added: the prior-year] inventory reserve recorded [added: in the Medical segment] to reduce the carrying value of certain [removed: Medical segment personal protective equipment,] [added: PPE,] primarily certain categories of gloves, to net realizable value.

| | | | [Introduction](#i06b8b3ff48e94029843042d968c5bda7_10) | | | [2](#i06b8b3ff48e94029843042d968c5bda7_10) | | |

| | | | [Explanation and Reconciliation of Non-GAAP Financial Measures](#i06b8b3ff48e94029843042d968c5bda7_40) | | | [23](#i06b8b3ff48e94029843042d968c5bda7_40) | | |

| | | | [Business](#i06b8b3ff48e94029843042d968c5bda7_52) | | | [30](#i06b8b3ff48e94029843042d968c5bda7_52) | | |

| | | | [Properties](#i06b8b3ff48e94029843042d968c5bda7_58) | | | [46](#i06b8b3ff48e94029843042d968c5bda7_58) | | |

| | | | [Reports](#i06b8b3ff48e94029843042d968c5bda7_67) | | | [50](#i06b8b3ff48e94029843042d968c5bda7_67) | | |

| | | | [Exhibits](#i06b8b3ff48e94029843042d968c5bda7_157) | | | [91](#i06b8b3ff48e94029843042d968c5bda7_157) | | |

| | | | [Signatures](#i06b8b3ff48e94029843042d968c5bda7_163) | | | [96](#i06b8b3ff48e94029843042d968c5bda7_163) | | |

| MD&A | | | Overview | | | | | |

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.

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.

(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.

| MD&A | | | Overview | | | | | |

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](#i06b8b3ff48e94029843042d968c5bda7_106) and [Note 8](#i06b8b3ff48e94029843042d968c5bda7_121) of the "Notes to Consolidated Financial Statements" for additional detail.

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.

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.

| MD&A | | | Overview | | | | | |

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.

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.

In July 2022, we made our second annual payment of $374 million under the Settlement Agreement.

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.

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.

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| | | | [Introduction](#i4f0ec56b9c604f1782a65ea4a19c284d_10) | | | [2](#i4f0ec56b9c604f1782a65ea4a19c284d_10) | | |

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

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

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

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

Medical Segment

| MD&A | | | Results of Operations | | | | | |

Volume declines in our Pharmaceutical segment generics program, which includes the impact of COVID-19, also had an adverse impact.

These factors were partially offset by the beneficial impact of enterprise-wide cost-savings measures, including global manufacturing efficiencies in the Medical segment, and higher contribution from branded pharmaceutical sales mix.

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.

During fiscal 2021, GAAP and non-GAAP diluted EPS were positively impacted by $1.44 and $0.12 per share, respectively, due to a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss, as further described in 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 diluted EPS during fiscal 2020 was favorably impacted by a $1.68 per share gain from the sale of the remainder of our equity interest in naviHealth described further in [Note 2](#i4f0ec56b9c604f1782a65ea4a19c284d_106) of the "Notes to Consolidated Financial Statements."

COVID-19

The COVID-19 pandemic ("COVID-19") continues to affect the U.S. and global economies, and as previously disclosed, the pandemic began to materially affect our businesses during the third quarter of fiscal 2020.

The length and severity of the pandemic and its impacts on our businesses and results of operations are uncertain.

COVID-19 had a negative impact on our consolidated operating earnings/(loss) in fiscal 2021 and fiscal 2020.

We estimate that the impact on fiscal 2021 operating earnings was approximately $200 million greater than on fiscal 2020 operating earnings, and we estimate that the impact on fiscal 2020 operating earnings/(loss) was approximately $100 million.

Pharmaceutical segment profit has been negatively impacted by COVID-19 largely due to volume declines in our generics program and Nuclear and Precision Health Solutions.

While fiscal 2021 volumes within our generics program were lower than levels prior to COVID-19, the impact on Pharmaceutical segment profit improved on a year-over-year basis during the fourth quarter of fiscal 2021.

Similarly, in comparison to prior year, the impact of COVID-19 on Nuclear and Precision Health Solutions was positive for Pharmaceutical segment profit during the fourth quarter of fiscal 2021.

Our Medical segment experienced dramatically increased demand for certain personal protective equipment due to COVID-19.

The peak of this heightened demand was during the second and third quarters of fiscal 2021.

This increased demand resulted in higher sales volume for certain products, increased costs to manufacture and source these products and higher inventory levels to meet customer commitments.

As a result, we sought out additional sources for these products and to mitigate the impact of these cost increases, we have raised our selling prices for the affected products.

During the fourth quarter of fiscal 2021, selling prices and customer demand for certain PPE decreased as compared to the peak, and we expect this decline to continue into fiscal 2022.

Our estimates for customer demand and selling prices are inherently uncertain and if customer demand or selling prices decline in the future beyond our current assumptions, additional inventory reserves may be required that would adversely impact Medical segment profit.

During fiscal 2021, COVID-19 benefited Medical segment profit in some ways as well.

Higher volumes in our laboratory business and cost savings positively impacted Medical segment profit.

Additionally, despite declining customer demand and selling prices in some categories of PPE as described above, Medical segment profit was benefited by pricing actions intended to mitigate the impact of cost increases in certain other PPE categories.

In addition, while lower demand for surgical products resulting from reduced elective procedures had an adverse impact on Medical segment profit during the first nine months of fiscal 2021, demand improved during the fourth quarter of fiscal 2021 and was a positive contributor to year-over-year segment profit.

We currently anticipate that the negative impact of the COVID-19 pandemic on operating earnings will be less in fiscal 2022 than it was in fiscal 2021, which includes the inventory reserve of $197 million described above.

As a result, in comparison to prior year, we expect the COVID-19 impact for fiscal 2022 will be positive.

Its impact may be greater or less than we anticipate.

In July 2021, we announced that we and two other national distributors have negotiated a proposed settlement agreement (the “Proposed Settlement Agreement”) and settlement process that, if all conditions are satisfied (including Boards of Directors' approval), would result in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities.

The settlement process does not contemplate participation by any non-governmental or non-political entities or individuals.

In connection with the negotiations of the Proposed Settlement Agreement, we and the two other national distributors entered into a settlement with the State of New York and its participating subdivisions.