
(1)	~~diluted earnings~~Diluted earnings/(loss) per share attributable to Cardinal Health, Inc. ("diluted EPS")


(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 "Explanation and Reconciliation of Non-GAAP Financial Measures."

(3)

For the six months ended December 31, 2019, GAAP diluted loss per share attributable to Cardinal Health, Inc. ("GAAP diluted EPS") and the EPS impact from the GAAP to non-GAAP per share reconciling items are calculated using a weighted average of 294 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. Year-to-date fiscal 2020 non-GAAP diluted EPS is calculated using a weighted average of 295 million common shares, which includes potentially dilutive shares.

During the three months ended December 31, 2019, GAAP diluted earnings per share attributable to Cardinal Health, Inc. ("GAAP diluted EPS") decreased primarily due to factors discussed above impacting GAAP operating earnings, partially offset by a lower effective tax rate due to favorable changes in jurisdictional mix and discrete tax items.

During the six months ended December 31, 2019, we had a $(15.99) GAAP diluted loss per share due to the charge we 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. The charge had a $(17.49) per share after tax impact on GAAP diluted EPS during the six months ended December 31, 2019. GAAP diluted EPS during the six months ended December 31, 2018 was favorably impacted by a $1.25 per share gain from the divestiture of naviHealth.

During the three months ended December 31, ~~2018, GAAP~~2019, non-GAAP diluted EPS ~~decreased~~increased 18 percent to $1.52 per share. This increase was primarily due to ~~transitional~~the factors discussed above impacting non-GAAP operating earnings, a lower effective tax ~~benefits related to the enactment of the U.S. Tax Cuts and Jobs Act ("Tax Act") in the prior year.~~

~~During the six months ended December 31, 2018, GAAP diluted EPS decreased primarily~~rate due to ~~transitional tax benefits related to the enactment of the Tax Act~~favorable changes in ~~the prior year, partially offset by the factors impacting GAAP operating earnings~~jurisdictional mix and ~~the benefit from~~ a lower share count as a result of share repurchases.

During the ~~three~~six months ended December 31, ~~2018,~~2019, non-GAAP diluted EPS ~~decreased~~increased 9 percent to $2.80 per share. This increase was primarily due to the factors ~~impacting non-GAAP operating earnings.~~

~~During the six months ended December 31, 2018, non-GAAP diluted EPS was down slightly. The factors~~discussed above impacting non-GAAP operating earnings, ~~were offset by the benefits from applying a lower federal tax rate to our U.S. pre-tax earnings under the Tax Act, discrete tax items and~~ a lower share count as a result of share ~~repurchases.~~repurchases and lower interest expense due to less debt outstanding. The year-over-year comparison was unfavorably impacted by the prior-year benefit from discrete tax items, largely related to international legal entity changes.

Cash and Equivalents

Our cash and equivalents balance was ~~$2.2~~$1.7 billion at December 31, ~~2018~~2019 compared to ~~$1.8~~$2.5 billion at June 30, ~~2018. The increase in cash and equivalents during~~2019. During the six months ended December 31, ~~2018 was due to $737 million of~~2019, net cash ~~proceeds from the sale of our naviHealth business and $736 million~~ provided by operating activities ~~offset in part by~~ ~~$600~~was $44 million ~~paid~~and we deployed $793 million for long-term debt repayments, $350 million for share repurchases, and ~~$293~~ $287 million ~~paid in~~for cash dividends. At December 31, 2019, we had $458 million outstanding under our commercial paper program and $225 million outstanding under our committed receivables sales facility.




	Cardinal Health \| Q2Fiscal ~~2019~~2020 Form 10-Q	4



MD&A	Overview

Significant Developments in Fiscal ~~2019~~2020 and Trends

Opioid Lawsuits Development

~~Divestitures~~

In October 2019, we agreed in principle to a global settlement framework with a leadership group of state attorneys general that is designed to resolve all pending and future opioid lawsuits and claims by states and political subdivisions (the "Settlement Framework"). This Settlement Framework is subject to contingencies and uncertainties as to final terms, but is the basis for our negotiation of definitive terms and documentation. The Settlement Framework includes (1) a cash component, pursuant to which we would pay up to $5.56 billion over eighteen years, (2) development and participation in a program for free or rebated distribution of opioid abuse treatment medications for a period of ten years, and (3) industry-wide changes to be specified to controlled substance anti-diversion programs. In order to continue working on the Settlement Framework, we also agreed, with two other national distributors, to a $215 million settlement with two plaintiffs counties of a trial that had been scheduled for October 2019; our portion of that settlement is $66 million, which was paid in January 2020.

In connection with these matters, we recorded a total pre-tax charge of $5.63 billion ($5.14 billion after tax) during the six months ended December 31, 2019 in litigation (recoveries)/charges, net, in the condensed consolidated statement of earnings for the cash component. We accrue for contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. Final terms of a settlement under the Settlement Framework continue to be negotiated, and there is no assurance that the necessary parties will agree to a definitive settlement agreement or that the contingencies to any agreement will be satisfied. We will regularly review these opioid litigation matters to determine whether our accrual is adequate. We are unable to reasonably estimate the liability associated with any potential distribution of treatment medications and any incremental costs for changes to our controlled substance anti-diversion program that we may agree to under the Settlement Framework. The amount of ultimate loss may differ materially from this accrual. See Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional information.

Also in connection with these matters, we recorded a tax benefit of $487 million, which is net of unrecognized tax benefits of $468 million, during the six months ended December 31, 2019, reflecting our current assessment of the estimated future deductibility of the amount that may be paid under the $5.63 billion accrual taken in connection with the opioid litigation. 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. Our assumptions and estimates around this benefit and uncertain tax position require significant judgment since the definitive settlement terms and documentation, including provisions related to deductibility, under the Settlement Framework have not been negotiated and the U.S. tax law governing deductibility was changed by the U.S. Tax Cuts and Jobs Act (“Tax Act”). We have made reasonable estimates and recorded amounts based on management's judgment and our current understanding of the Tax Act which is subject to further interpretation by the U.S. Internal Revenue Service ("IRS"). Further, it is possible that 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 tax benefit related to uncertain tax positions may differ materially from these estimates. See Note 8 of the “Notes to the Condensed Consolidated Financial Statements” for additional information.

Surgical Gown Recalls

In ~~August 2018,~~January, 2020, we ~~sold our 98 percent ownership interest in naviHealth in exchange~~issued a voluntary recall for ~~cash proceeds~~9.1 million AAMI Level 3 surgical gowns and two voluntary field actions (a recall of ~~$737 million~~some packs and a ~~44 percent equity interest~~corrective action allowing overlabeling of other packs) for 2.9 million Presource Procedure Packs containing affected gowns (together, the "Recalls"). These Recalls were necessary because we discovered in ~~a partnership~~December 2019 that ~~owns 100 percent~~one of ~~naviHealth. We also have certain call rights~~our FDA-registered suppliers in China had shifted production of some gowns to ~~reacquire naviHealth. We recognized a pre-tax gain~~unapproved sites with uncontrolled environments. Because of ~~$508 million related to~~ this, ~~divestiture during~~we could not assure sterility of the ~~six~~gowns.

In connection with these Recalls, in the three months ended December 31, ~~2018.~~2019, we recorded a total charge of $96 million, of which $56 million is within cost of products sold and $40 million is within SG&A in the condensed consolidated statements of earnings. This charge represents our best estimate of costs for the Recalls and include inventory write-off costs and certain remediation and supply disruption costs, such as costs to replace recalled products. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. The amount of ultimate loss may differ materially from this accrual. This charge, and any future increases or adjustments, will be excluded from our non-GAAP results and the results of our Medical segment. See Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional information.




5	Cardinal Health \| Q2Fiscal ~~2019~~2020 Form 10-Q



MD&A	Overview

In addition to the charge for the three months ended December 31, 2019, we expect that the Recalls will have other negative impacts, which could include: government investigations and enforcement actions by the U.S. Food and Drug Administration or other regulators or U.S. or international governmental bodies (possibly resulting in product seizures, additional recalls, the issuance of safety alerts, the suspension or revocation of the authority to produce, distribute and sell products and other civil or criminal sanctions); losses due to patient claims, including product liability claims and lawsuits; and customer claims unrelated to their direct costs from the supply chain disruption.

Additionally, these surgical gowns and procedure packs are used in surgeries throughout the United States and internationally. Due to quality standards, it is challenging to quickly establish additional or replacement suppliers. These Recalls are expected to result in sustained supply reductions and market shortages. We understand that, due to these supply shortages, surgeries have been delayed or canceled, and we expect that additional surgeries will be delayed or canceled over a period of several weeks or months. This and other aspects of the Recalls could result in reputational harm and loss of customers and sales.

Trends

Within our Pharmaceutical segment, segment profit increased during the six months ended December 31, 2019 compared to the prior-year period due, in part, to performance from our generics program, while for the past two fiscal years, Pharmaceutical segment profit had decreases compared to the prior year due, in part, to performance from our generics program. As is generally the case, the frequency, timing, magnitude and profit impact of generic pharmaceutical customer and manufacturer pricing changes remain uncertain and their impact on Pharmaceutical segment profit and consolidated operating earnings in fiscal 2020 could be more or less than we expect.




	Cardinal Health \| Q2Fiscal 2020 Form 10-Q	6



MD&A	Results of Operations

Results of Operations

Revenue


	Three Months Ended December 31,								Six Months Ended December 31,								Three Months Ended December 31,								Six Months Ended December 31,
(in millions)	2018			2017			Change		2018			2017			Change		2019			2018			Change		2019			2018			Change
Pharmaceutical	$	33,740		$	31,146		8	%	$	65,155		$	60,066		8	%	$	35,714		$	33,740		6	%	$	69,142		$	65,155		6	%
Medical	4,006			4,044			(1	)%	7,807			7,768			1	%	4,023			4,006			—	%	7,940			7,807			2	%
Total segment revenue	37,746			35,190			7	%	72,962			67,834			8	%	39,737			37,746			5	%	77,082			72,962			6	%
Corporate	(6		)	(4		)	50	%	(9		)	(7		)	29	%	(2		)	(6		)	N.M		(6		)	(9		)	N.M
Total revenue	$	37,740		$	35,186		7	%	$	72,953		$	67,827		8	%	$	39,735		$	37,740		5	%	$	77,076		$	72,953		6	%



Notes to Financial Statements

~~customers and the associated refund liabilities for return allowances were not material.~~

Revenue in both segments is primarily related to the distribution of pharmaceutical and medical products, which we recognize at a point in time when title transfers to customers and we have no further obligation to provide services related to such merchandise. Service revenues are recognized over the period that services are provided to the customer. Revenues derived from services are not material for either segment for all periods presented.

We are generally the principal in a transaction, therefore our revenue is primarily recorded on a gross basis. When we are a principal in a transaction, we have determined that we control the ability to direct the use of the product or service prior to transfer to a customer, are primarily responsible for fulfilling the promise to provide the product or service to our customer, have discretion in establishing prices, and ultimately control the transfer of the product or services provided to the customer.

Revenue is recorded net of sales returns and allowances. Revenues are measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, discounts, rebates and other variable consideration. Sales returns are recorded based on estimates using historical data. Shipping and handling costs are primarily included in distribution, selling, general and administrative ("SG&A") expenses in our condensed consolidated statements of earnings and include all delivery expenses as well as all costs to prepare the product for shipment to the end customer. Shipping and handling costs incurred after control has transferred to the customer are treated as fulfillment costs.

We elected the practical expedient to expense costs to obtain a contract when incurred when the amortization period would have been one year or less. Additionally, we elected the practical expedients to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed and for contracts for which the variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a single performance obligation. See ~~Note 14~~ ~~for additional information regarding our disaggregation of revenue.~~

In the first quarter of fiscal 2019, we adopted the following Accounting Standards Updates ("ASU"). ASU 2016-01 Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities; ASU 2018-03 Technical Corrections and Improvements to Financial Instruments; ASU 2016-15 Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments; ASU 2016-16 Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory; and ASU 2017-12 Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities. The adoption of these ASUs did not have a material impact on our condensed consolidated financial statements.

2. ~~Acquisitions~~

~~Patient Recovery Business~~

On July 29, 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. The acquisition further expands our Medical segment's portfolio of self-manufactured products.

Transaction and integration costs associated with the acquisition of the Patient Recovery business were $22 million and $24 million for the three months ended December 31, 2018 and 2017, respectively, and $44 million and $61 million for the six months ended December 31, 2018 and 2017, respectively. These costs are included in amortization and other acquisition-related costs in the condensed consolidated statements of earnings.

~~Fair Value of Assets Acquired and Liabilities Assumed~~

The allocation of the fair value of assets acquired and liabilities assumed for the acquisition of the Patient Recovery Business was finalized during the three months ended September 30, 2018, resulting in goodwill of $3.3 billion. There were no significant adjustments to the allocation of the fair value of assets acquired and liabilities assumed for the Patient Recovery Business acquisition from those disclosed in our fiscal 2018 Form 10-K.

3. Restructuring and Employee Severance

The following table summarizes restructuring and employee severance costs:



	Three Months Ended December 31,
(in millions)	2019		2018
Employee-related costs (1)	$	42	$	12
Facility exit and other costs (2)	14		—
Total restructuring and employee severance	$	56	$	12

Three Months Ended December 31,
(in millions) 2018 2017
Employee-related costs (1) $ 12
$ 15
Facility exit and other costs (2) —
6
Total restructuring and employee severance $ 12
$ 21



	Six Months Ended December 31,
(in millions)	2019		2018
Employee-related costs (1)	$	62	$	41
Facility exit and other costs (2)	24		3
Total restructuring and employee severance	$	86	$	44

Six Months Ended December 31,
(in millions) 2018 2017
Employee-related costs (1) $ 41
$ 19
Facility exit and other costs (2) 3
134
Total restructuring and employee severance $ 44
$ 153


(1)	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.


(2)	Facility exit and other costs primarily consist of product distribution and lease contract termination costs, lease costs associated with vacant facilities, accelerated depreciation, equipment relocation costs, project consulting fees, costs associated with restructuring our delivery of information technology infrastructure services and certain other divestiture-related costs.

~~In early~~During fiscal 2020 and 2019, we ~~began implementing~~implemented certain enterprise-wide cost-saving ~~measures, which we expect~~initiatives affecting various functional and commercial areas intended to ~~reduce~~optimize and simplify our ~~future~~ operating ~~expenses. As a result of these measures, we~~model and cost structure. We incurred ~~pre-tax employee-related severance costs of~~$42 million and $8 million during the three months ended December 31, 2019 and 2018, respectively, and $62 million and $34 million for the six months ended December 31, 2019 and 2018, respectively, in expenses related to these cost savings initiatives, which are reflected in restructuring and employee severance in the condensed consolidated statements of earnings/(loss).

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, 2019	$	64		$	8		$	72
Additions	56			8			64
Payments and other adjustments	(21		)	(3		)	(24		)
Balance at December 31, 2019	$	99		$	13		$	112

3. Goodwill and Other Intangible Assets

Goodwill

The following table summarizes the changes in the carrying amount of goodwill by segment and in total:



(in millions)	Pharmaceutical			Medical			Total
Balance at June 30, 2019	$	2,663		$	5,715		$	8,378
Goodwill acquired, net of purchase price adjustments	(5		)	—			(5		)
Foreign currency translation adjustments and other	—			(17		)	(17		)
Balance at December 31, 2019	$	2,658		$	5,698		$	8,356

Other Intangible Assets

The following tables summarize other intangible assets by class at:



	December 31, 2019
(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible		Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles:
IPR&D, trademarks and other	$	22	$	—	$	22	N/A
Total indefinite-life intangibles	22		—		22		N/A

Definite-life intangibles:
Customer relationships	3,550		1,670		1,880		13
Trademarks, trade names and patents	673		318		355		13
Developed technology and other	1,603		693		910		11
Total definite-life intangibles	5,826		2,681		3,145		12
Total other intangible assets	$	5,848	$	2,681	$	3,167	N/A




23	Cardinal Health \|Q2Fiscal ~~2019~~2020 Form 10-Q	30



Notes to Financial Statements

~~during~~



	June 30, 2019
(in millions)	Gross Intangible		Accumulated Amortization		Net Intangible
Indefinite-life intangibles:
IPR&D, trademarks and other	$	22	$	—	$	22
Total indefinite-life intangibles	22		—		22

Definite-life intangibles:
Customer relationships	3,562		1,517		2,045
Trademarks, trade names and patents	672		295		377
Developed technology and other	1,602		616		986
Total definite-life intangibles	5,836		2,428		3,408
Total other intangible assets	$	5,858	$	2,428	$	3,430

Total amortization of intangible assets was $127 million and $133 million for the three ~~and six~~ months ended December 31, 2019 and 2018, respectively, ~~which are reflected in restructuring~~ and ~~employee severance in~~$256 million and $266 million for the ~~condensed consolidated statements of earnings.~~

In fiscal 2018, we entered into an agreement to transition the distribution of our Medical segment's surgeon gloves in certain international markets from a third-party distribution arrangement to a direct distribution model. The costs associated with this restructuring included $125 million, on a pre-tax basis, in contract termination costs that were paid during fiscal 2018. These costs are reflected in restructuring and employee severance in the condensed consolidated statements of earnings during the six months ended December 31, ~~2017.~~

~~The following table summarizes activity related to liabilities associated with restructuring~~2019 and ~~employee severance:~~

(in millions)
Employee-
Related Costs

Facility Exit
and Other Costs
Total
Balance at June 30, 2018 $ 24
$ 4
$ 28
Additions 34
7
41
Payments and other adjustments (19 ) —
(19 )
Balance at December 31, 2018 $ 39
$ 11
$ 50
2018, respectively. Estimated annual amortization of intangible assets for the remainder of fiscal 2020 through 2024 is as follows: $258 million, $442 million, $408 million, $358 million and $328 million.

4. ~~Divestitures~~Investments

In August 2018, we sold our 98 percent ownership interest in naviHealth Holdings, LLC ("naviHealth") to investor entities controlled by Clayton, Dubilier & Rice in exchange for cash proceeds of $737 million (after adjusting for certain fees and expenses) and a 44 percent equity interest in a partnership that owns 100 percent of the equity interest of naviHealth. We also have certain call rights to reacquire naviHealth. ~~Refer to~~ ~~Note 6~~We are accounting for ~~further discussion regarding~~ this ~~investment.~~investment using the equity method of accounting and on a one-month reporting lag.

During the six months ended December 31, 2018, we recognized a pre-tax gain of $508 million related to this divestiture in impairments and (gain)/loss on disposal of assets in our condensed consolidated ~~statement~~statements of earnings. ~~This gain includes our initial recognition~~

The carrying value of ~~an equity method~~this investment ~~for $358~~was $330 million and $334 million as of December 31, 2019 and June 30, 2019, respectively. During the ~~derecognition~~three and six months ended December 31, 2019, our proportionate share of ~~redeemable noncontrolling interests~~naviHealth’s net loss, which was recorded in other (income)/ expense, net in the condensed consolidated statements of $12 million. The fiscal 2019 tax expense as a result of this transaction will be approximately $130 million. We determined that the sale of the naviHealth business does not meet the criteria to be classified as discontinued operations. The naviHealth business operated within our Medical segment.earnings/(loss), was immaterial.

5. ~~Goodwill~~Leases

We primarily have operating leases for corporate offices, distribution facilities, vehicles, and ~~Other Intangible Assets~~equipment. We determine if an arrangement is a lease at inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

~~Goodwill~~Beginning July 1, 2019, operating lease right-of-use assets and corresponding operating lease liabilities are recognized in our condensed consolidated balance sheet at commencement date based on the present value of lease payments over the lease term. Operating lease expense for operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable.

~~The following table summarizes~~Our lease agreements include leases that contain lease components and non-lease components. For all asset classes, we have elected to account for both of these provisions as a single lease component. We also, from time to time, sublease portions of our real estate property, resulting in sublease income. Sublease income and the ~~changes~~related assets and cash flows are not material to the condensed consolidated financial statements at or for the three and six months ended December 31, 2019.

We also have elected to apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of less than 12 months. Short-term lease expense recognized in the ~~carrying amount~~three and six months ended December 31, 2019 was not material. In addition, we elected the package of ~~goodwill by segment~~three practical expedients permitted under the transition guidance, which include the carry forward of our leases without reassessing 1) whether any contracts are leases or contain leases, 2) lease classification and ~~in total:~~3) initial direct costs.

Our leases have remaining lease terms from less than 1 year up to approximately 23 years. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option.

(in millions) Pharmaceutical Medical Total
Balance at June 30, 2018 $ 2,621
$ 5,695
$ 8,316
Goodwill acquired, net of purchase price adjustments 8
7
15
Foreign currency translation adjustments and other (1 ) (13 ) (14 )
Balance at December 31, 2018 $ 2,628
$ 5,689
$ 8,317

~~Other Intangible Assets~~

~~The following tables summarize other intangible assets by class at:~~

December 31, 2018
(in millions)
Gross
Intangible

Accumulated
Amortization

Net
Intangible
Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles:
IPR&D, trademarks and other $ 59
$ —
$ 59
N/A
Total indefinite-life intangibles 59
—
59
N/A

Definite-life intangibles:
Customer relationships 3,523
1,353
2,170
14
Trademarks, trade names and patents 668
270
398
14
Developed technology and other 1,560
531
1,029
11
Total definite-life intangibles 5,751
2,154
3,597
13
Total other intangible assets $ 5,810
$ 2,154
$ 3,656
N/A




31	Cardinal Health \|Q2Fiscal ~~2019~~2020 Form 10-Q	24



Notes to Financial Statements

The following table summarizes the components of lease cost:

June 30, 2018
(in millions)
Gross
Intangible

Accumulated
Amortization

Net
Intangible
Indefinite-life intangibles:
IPR&D, trademarks and other $ 62
$ —
$ 62
Total indefinite-life intangibles 62
—
62

Definite-life intangibles:
Customer relationships 3,513
1,191
2,322
Trademarks, trade names and patents 667
246
421
Developed technology and other 1,562
454
1,108
Total definite-life intangibles 5,742
1,891
3,851
Total other intangible assets $ 5,804
$ 1,891
$ 3,913



	Three Months Ended December 31,		Six Months Ended December 31,
(in millions)	2019		2019
Operating lease cost	$	30	$	61
Finance lease cost
Amortization of right-of-use assets	4		8
Total finance lease cost	4		8
Variable lease cost⁽¹⁾	11		12
Total lease cost	$	45	$	81


(1)	Primarily includes payments for property taxes, maintenance and insurance.

Total amortization of intangible assets was $133 million and $152 million for the three months ended December 31, 2018 and 2017, respectively, and $266 million and $287 million for the six months ended December 31, 2018 and 2017, respectively. For acquisitions closed on or before December 31, 2018, estimated annual amortization of intangible assets for the remainder of fiscal 2019 through 2023 is as follows: $264 million, $503 million, $435 million, $400 million and $351 million.The following table summarizes supplemental balance sheet information related to leases:



(in millions)	December 31, 2019
Operating Leases
Operating lease right-of-use assets	$	404

Current portion of operating lease liabilities	102
Long-term operating lease liabilities	324
Total operating lease liabilities	426

Finance Leases
Finance lease right-of-use assets	14

Current portion of finance lease liabilities	4
Long-term finance lease liabilities	11
Total finance lease liabilities	$	15

~~6. Investments~~

~~Investments in non-marketable equity securities are accounted for under the fair value, equity or net asset value method of accounting and~~Operating leases are included in other assets, other accrued liabilities, and deferred income taxes and other liabilities in ~~the~~our condensed consolidated balance ~~sheets. For equity securities without a readily determinable fair value, we use the fair value measurement alternative~~sheet. Finance leases are included in property and ~~measure the securities at cost~~equipment, net, current portion of long-term obligations and other short-term borrowings, and long-term obligations, less ~~impairment, if any, including adjustments for observable price changes~~current portion in orderly transactions for an identical or similar investment of the same issuer. For investments in which we can exercise significant influence but do not control, we use the equity method of accounting. Our share of the earnings and losses are recorded in other income, net in the condensed consolidated statements of earnings. We closely monitor our investments for other-than-temporary impairment by considering factors such as the operating performance of the investment and current economic and market conditions.

~~In connection with the naviHealth divestiture discussed in~~ ~~Note 4~~, we obtained a 44 percent equity interest in a partnership that owns 100 percent of the equity interest of naviHealth. We accounted for this investment initially at its fair value using Level 3 unobservable inputs based on expected sales proceeds following a competitive bidding process. Accordingly, we initially recognized a $358 million equity method investment.

We are accounting for our equity interest in naviHealth using the equity method of accounting on a one-month reporting lag. The impact of our proportionate share of naviHealth's results was not material to our condensed consolidated ~~statements of earnings for the six months ended December 31, 2018. Upon the divestiture closing, we received a non-cash distribution of $14 million in the form~~balance sheet.

The following tables summarizes supplemental cash flow information related to leases:



	Six Months Ended December 31,
(in millions)	2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows paid for operating leases	$	61
Financing cash flows paid for finance leases	3
Non-cash right-of-use assets obtained in exchange for lease obligations:
New operating leases	54
New finance leases	17
Amended lease standard adoption impact as of July 1, 2019 ⁽¹⁾	400


(1)	Includes the effect of $22 million from reclassifying deferred rent as an offset to the lease right-of-use asset in accordance with the transition guidance.

Our operating leases had a weighted-average remaining lease term of ~~the partnership's payment for certain~~6.3 years and a weighted-average discount rate of ~~our divestiture transaction costs directly to the applicable third-party. At~~2.9 percent.

Future lease payments under non-cancellable leases as of December 31, ~~2018 the carrying value~~2019 were as follows:



(in millions)	Operating Leases		Finance Leases		Total
Years Ending December 31,
Remainder of 2020	$	59	$	2	$	61
2021	108		6		114
2022	89		4		93
2023	67		4		71
2024	47		1		48
Thereafter	166		—		166
Total future lease payments	536		17		553
Less: leases not yet commenced ⁽¹⁾	61		—		61
Less: imputed interest	49		2		51
Total lease liabilities	$	426	$	15	$	441


(1)	As of December 31, 2019, we had certain leases that were executed but did not have control of the underlying assets; therefore, the lease liabilities and right-of-use assets are not recorded in the condensed consolidated balance sheets.

The future minimum rental payments for operating leases having initial or remaining non-cancelable lease terms in excess of ~~this investment was $343~~one year at June 30, 2019 for fiscal 2020 through 2024 and thereafter were as follows: $126 million, $100 million, $76 million, $54 million, $33 million and $94 million.




	Cardinal Health \| Q2Fiscal 2020 Form 10-Q	32



Notes to Financial Statements

6. Long-Term Obligations and Other Short-Term Borrowings

Long-Term Debt and Other Short-Term Borrowings

At ~~both~~ December 31, ~~2018~~2019 and June 30, ~~2018,~~2019, we had total ~~long term~~long-term obligations, including the current portion and other short-term borrowings, of ~~$9.0 billion.~~ $7.9 billion and 8.0 billion, respectively. All the ~~borrowings~~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 obligations are effectively subordinated to the liabilities of our subsidiaries, including trade payables of ~~$20.6 billion.~~21.5 billion at both December 31, 2019 and June 30, 2019.

In November 2019, we repaid the full principal of the 2.4% Notes due 2019 at maturity for $450 million. During the six months ended December 31, 2019, we early repurchased $207 million of the 2.616% Notes due 2022, $10 million of the 3.2% Notes due 2022, $14 million of the Floating Rate Notes due 2022, $81 million of the 3.41% Notes due 2027, $6 million of the 4.6% Notes due 2043, $2 million of the 4.9% Notes due 2045, and $21 million of the 4.368% Notes due 2047. The repurchases were paid for with available cash and other short-term borrowings. In connection with the early debt repurchases, we recorded a $4 million loss on extinguishment of debt.

The following table summarizes long-term obligations and other short-term borrowings at:



(in millions) (1)	December 31, 2019		June 30, 2019
2.4% Notes due 2019	$	—	$	450
4.625% Notes due 2020	506		508
2.616% Notes due 2022	873		1,079
3.2% Notes due 2022	238		247
Floating Rate Notes due 2022	326		340
3.2% Notes due 2023	553		551
3.079% Notes due 2024	780		781
3.5% Notes due 2024	402		402
3.75% Notes due 2025	497		494
3.41% Notes due 2027	1,238		1,318
4.6% Notes due 2043	340		346
4.5% Notes due 2044	342		342
4.9% Notes due 2045	443		445
4.368% Notes due 2047	574		594
7.0% Debentures due 2026	124		124
Other Obligations (2)	698		10
Total	7,934		8,031
Less: current portion of long-term obligations and other short-term borrowings	1,192		452
Long-term obligations, less current portion	$	6,742	$	7,579


(1)	Maturities are presented on a calendar year basis.


(2)	Includes $458 million outstanding under our commercial paper program and $225 million outstanding under our committed receivables sales facility.

Other Financing Arrangements

In addition to cash and equivalents and operating cash flow, other sources of liquidity 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.

~~On November 6, 2018,~~ At December 31, 2019, we ~~increased the maximum consolidated leverage ratio permitted~~had $458 million outstanding under our commercial paper program, $225 million outstanding under committed receivables sales facility and no amount outstanding under our revolving credit and committed receivables facilities to provide that, as of the end of any calendar quarter, our maximum consolidated leverage ratio may be no more than 4.25-to-1. The maximum ratio will reduce to 4.00-to-1 infacility.

In September 2019, ~~to 3.75-to-1 in March 2020 and to 3.25-to-1 in September 2020. As of December 31, 2018, we were in compliance with our financial covenants.~~

~~In November 2016,~~ we renewed our committed receivables sales facility program through Cardinal Health Funding, LLC (“CHF”) through ~~November 1, 2019.~~September 30, 2022. CHF was organized forthe sole purpose of buying receivables and selling undivided interests in those receivables to third-party purchasers. Although consolidated with Cardinal Health, Inc. in accordance with GAAP, CHF is a separate legal entity from Cardinal Health, Inc. and from our subsidiary that sells receivables to CHF. CHF is designed to be a special purpose, bankruptcy-remote entity whose assets are available solely to satisfy the claims of its creditors.

~~8. Income Taxes~~

~~Fluctuations~~Our revolving credit and committed receivables sales facilities require us to maintain, as of the end of every fiscal quarter through December 2020, a consolidated net leverage ratio of no more than 4.00-to-1. The maximum permitted ratio will reduce to 3.75-to-1 in our provision for/(benefit from) income taxes as a percentage of pretax earnings (“effective tax rate”) are generally due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items.

~~U.S. Tax Cuts and Jobs Act~~

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code that affected fiscal 2018 and will incrementally affect our fiscal year 2019 financial results in several ways. First, the U.S. statutory tax rate in fiscal 2019 is reduced to 21 percent. Second, the Tax Act established new tax provisions thatMarch 2021




2533	Cardinal Health \| Q2Fiscal ~~2019~~2020 Form 10-Q



Notes to Financial Statements

~~affected us beginning July 1, 2018 including, (1) eliminating~~and as of the U.S. manufacturing deduction; (2) establishing new limitations on deductible interest expense and certain executive compensation; (3) eliminating the corporate alternative minimum tax; (4) creating the base erosion anti-abuse tax; (5) creating a new provision designed to tax global intangible low-tax income (“GILTI”) and allow for a deduction related to foreign derived intangible income ("FDII"); (6) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; and (7) changing rules related to uses and limitationsend of ~~net operating loss carryforwards created in tax years beginning after~~ every quarter thereafter.As of December 31, ~~2017.~~

~~Regarding the new GILTI tax rules,~~2019, we ~~elected to treat taxes due on future GILTI inclusions~~were in ~~U.S. taxable income as a current period expense when incurred.~~

~~In accordance~~compliance with SAB 118, we finalized our provisional estimates related to transitional tax benefits (i.e., remeasurement of deferred tax assets and liabilities and the repatriation tax on undistributed foreign earnings) which did not have a significant impact on tax expense during the three and six months ended December 31, 2018. Future adjustments to thethis financial statements may be necessary due to final Section 965 repatriation tax regulations which were issued January 15, 2019 and any additional pending regulatory changes, the impact of which is being currently assessed or will be assessed as final regulations are issued.

~~Effective Tax Rate~~

During the three months ended December 31, 2018 and 2017, the effective tax rate was 31.0 percent and (231.9) percent, respectively. The change in the effective tax rate from fiscal 2018 to fiscal 2019 is primarily due to transitional tax benefits from the enactment of the Tax Act in fiscal 2018.

During the six months ended December 31, 2018 and 2017, the effective tax rate was 23.5 percent and (136.6) percent, respectively. The change in the effective tax rate from fiscal 2018 to fiscal 2019 is primarily due to transitional tax benefits from the enactment of the Tax Act in fiscal 2018. The six months ended December 31, 2018 also included net discrete benefits of $38 million primarily related to international legal entity changes.

The transitional tax benefits from the Tax Act during the three and six months ended December 31, 2017 included a provisional net tax benefit of $935 million related to the remeasurement of our deferred tax assets and liabilities to the new federal statutory rate and a provisional tax expense of $41 million for the one-time repatriation tax applied to our undistributed foreign earnings. Our effective tax rates for the three and six months ended December 31, 2017 also included $57 million of tax expense recognized in connection with the sale of our China distribution business.

~~Unrecognized Tax Benefits~~

At December 31, 2018 and June 30, 2018, we had $496 million and $423 million of unrecognized tax benefits, respectively. The December 31, 2018 and June 30, 2018 balances include $333 million and $262 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate.

At December 31, 2018 and June 30, 2018, we had $116 million and $110 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for/(benefit from) income taxes in the condensed consolidated statements of earnings. 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 $35 million, exclusive of penalties and interest.

~~Other Tax Matters~~

We are a party to a tax matters agreement with CareFusion Corporation ("CareFusion"), which has been acquired by Becton, Dickinson and Company. Under the tax matters agreement, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to our fiscal 2010 spin-off of CareFusion. The indemnification receivable was $156 million and $151 million at December 31, 2018 and June 30, 2018, respectively, and is included in other assets in the condensed consolidated balance sheets.

As a result of the acquisition of the Patient Recovery Business, Medtronic plc is obligated to indemnify us for certain tax exposures and transaction taxes related to periods prior to the acquisition under the purchase agreement. The indemnification receivable was $23 million and $21 million at December 31, 2018 and June 30, 2018, respectively, and is included in other assets in the condensed consolidated balance sheet.covenant.

9.7. Commitments, Contingent Liabilities and Litigation

Commitments

Generic Sourcing Venture with CVS Health Corporation ("CVS Health")

In July 2014, we established Red Oak Sourcing, LLC ("Red Oak Sourcing") is, a U.S.-based generic pharmaceutical sourcing venture with CVS Health for an initial term ~~through June 2024.~~of 10 years. Red Oak Sourcing negotiates generic pharmaceutical supply contracts on behalf of its participants. Due to the achievement of predetermined milestones, we are required to make quarterly payments of $45.6 million to CVS Health for the ~~initial term.~~




	~~Cardinal Health~~ \| Q2~~Fiscal 2019 Form 10-Q~~	26



~~Notes to Financial Statements~~

~~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 licensed to sell or distribute opioids in New York. Under the OSA, each licensed manufacturer and distributor would be required to pay a portionremainder of the ~~assessment based on its ratable share, as determined by the state, of the total morphine milligram equivalents sold or distributed in New York during the applicable calendar year, beginning in 2017.~~

In October, we received notices from the New York Department of Health of our estimated payment amount for calendar year 2017. At September 30, 2018, we recorded an aggregate accrual of $34 million for calendar year 2017 and the first three quarters of calendar 2018 based on the estimated payment amount, which reflected our best estimate of the OSA payments owed through September 30, 2018. In December 2018, the U.S. District Court for the Southern District of New York ruled that the OSA is unconstitutional and enjoined its enforcement (the "Ruling"). In January 2019, the State filed notice of its intent to appeal the Ruling. We accrue for contingencies if it is probable that a liability has been incurred and the amount can be estimated. As a result of the Ruling, in the three-months ended December 31, 2018, we reversed this accrual because we no longer believe it is probable that a liability has been incurred.initial term.

Legal Proceedings

We become involved from time to time in disputes, litigation and regulatory matters.

We ~~may be~~are 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 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~~.government.

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~~have led, and may in the future lead, to the assertion of claims or the commencement of legal proceedings

against us or result in sanctions.

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 potential quality or regulatory issue, we investigate and take appropriate corrective action. Such actions can lead to product recalls, costs to repair or replace affected products, temporary interruptions in product sales, action by regulators and product

liability claims and lawsuits, including class actions. Even absent an identified regulatory or quality issue or product recall, we can become subject to product liability claims and lawsuits.

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. Except as otherwise disclosed in this footnote, it is not possible for us to reasonably estimate the amount of any possible loss or range of possible losses in the matters described below.

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 in our condensed consolidated statements of earnings.

Opioid Lawsuits and Investigations

Pharmaceutical wholesale distributors, including us, have been named as defendants in ~~over 1,500~~approximately 3,000 lawsuits relating to the distribution of prescription opioid pain medications. These lawsuits have been filed in various federal, state, and other courts by a variety of plaintiffs, primarily counties, municipalities and other political subdivisions. Plaintiffs also include 10 state attorneys general, unions and other health and welfare funds, hospital systems and other healthcare providers, as well as individuals. Of these lawsuits, 56 are purported class actions. The lawsuits seek equitable relief and monetary damages based on a variety of legal theories including various common law claims, such as ~~negligence,~~ public nuisance, negligence and unjust enrichment as well as violations of controlled substance laws, the Racketeer Influenced and Corrupt Organizations Act and various other statutes. ~~Many~~These lawsuits also name pharmaceutical manufacturers, retail pharmacy chains and other entities as defendants.

States & Political Subdivisions

Approximately 2,500 of these lawsuits have been filed by counties, municipalities, cities and political subdivisions in various federal, state, and other courts. The vast majority of these lawsuits were filed in U.S. federal court and have been transferred for consolidated pre-trial proceedings in a Multi-District Litigation proceeding in the U.S. District Court for the Northern District of ~~Ohio. The court, among other things, ordered that three lawsuits be set for trial in October 2019.~~ Ohio (the “MDL”).

In December 2018, the court denied distributor defendants' motions to dismiss the complaints associated with those lawsuits. In connection with these proceedings, distributors have continued to engage in preliminary discussions with various parties, includingaddition, 23 state attorneys general ~~regarding possible resolution structures.~~

have filed lawsuits against distributors, including us, in various state courts. A trial in New York for cases brought by the New York Attorney General and Nassau and Suffolk counties is scheduled to begin in March 2020.




27	~~Cardinal Health~~ \| Q2~~Fiscal 2019 Form 10-Q~~



~~Notes to Financial Statements~~

~~In addition, 39~~Additionally, 43 state attorneys general have formed a multi-state task force to investigate the manufacturing, distribution, dispensing and prescribing practices of opioid medications. We have received requests related to ~~this~~the multi-state investigation, as well as separate civil investigative demands, subpoenas or requests for information from these and other state attorneys general ~~offices.~~offices and governmental authorities.

In October 2019, we agreed in principle to a global settlement framework with a leadership group of state attorneys general that is




	Cardinal Health \| Q2Fiscal 2020 Form 10-Q	34



Notes to Financial Statements

designed to resolve all pending and future opioid lawsuits and claims by states and political subdivisions (the "Settlement Framework"). This Settlement Framework is subject to contingencies and uncertainties as to final terms, but is the basis for our negotiation of definitive terms and documentation.

The Settlement Framework includes (1) a cash component, pursuant to which we would pay up to $5.56 billion over eighteen years, (2) development and participation in a program for free or rebated distribution of opioid abuse treatment medications for a period of ten years, and (3) industry-wide changes to be specified to controlled substance anti-diversion programs. Final terms for a settlement pursuant to the Settlement Framework continue to be negotiated, and there is no assurance that the necessary parties will agree to a definitive settlement agreement or that the contingencies to any agreement will be satisfied. In connection with these matters, in the six months ended December 31, 2019, we accrued$5.56 billion, included in deferred income taxes and other liabilities in the condensed consolidated balance sheets, which represents the cash component. We are unable to reasonably estimate the liability associated with the other components of the Settlement Framework, the potential distribution of treatment medications and any incremental costs for changes to our controlled substance anti-diversion program that we may agree to.

In the six months ended December 31, 2019, we along with two other national distributors entered into a $215 million settlement with two Ohio counties, Cuyahoga and Summit, to resolve all claims in the first bellwether trial in the MDL, which had been set for trial for October 2019. In connection with this settlement, we accrued $66 million in the six months ended December 31, 2019. This accrual is included in other accrued liabilities in the condensed consolidated balance sheets.

Private Plaintiffs

The Settlement Framework does not address claims by private plaintiffs, which includes unions and other health and welfare funds, hospital systems and other healthcare providers, businesses and individuals. Private plaintiffs had brought approximately 365 lawsuits as of February 4, 2020. Of these, 105 are purported class actions. The causes of action asserted by these plaintiffs are similar to those asserted by public plaintiffs. We will continue to vigorously defend ourselves in these matters.

Department of Justice Investigations

We have received grand jury subpoenas issued on behalf of the District Courts for the Eastern District of New York and the District of Columbia seeking documents and, in the District of Columbia, testimony, related to our anti-diversion policies and procedures, and our distribution of certain controlled substances. We are cooperating with ~~the offices conducting~~ these ~~investigations.~~requests.

We are vigorously defending ourselves in all of these opioid-related matters. Given the uncertainty surrounding these lawsuits and investigations, we are unable to predict their outcome or estimate a range of reasonably possible losses.

Cordis Product Liability Lawsuits

As of ~~January 31, 2019,~~February 4, 2020, we are named as a defendant in ~~212~~299 product liability lawsuits coordinated in Alameda County Superior Court in California involving claims by approximately ~~2,394~~3,773 plaintiffs that allege personal injuries associated with the use of Cordis OptEase and TrapEase inferior vena cava (IVC) filter products. Another ~~22 similar~~29 lawsuits involving similar claims by approximately 2435 plaintiffs are pending in other jurisdictions. These lawsuits seek a variety of remedies, including unspecified monetary damages. We are vigorously defending ourselves in these lawsuits.

At December 31, ~~2018~~2019, we had a total of ~~$302~~$441 million ~~net of estimated insurance recoveries,~~ accrued for losses and legal defense costs related to the Cordis IVC filter ~~lawsuits which are presented on a gross basis in the condensed consolidated balance sheets.~~lawsuits. We believe there is a range of estimated losses with respect to these matters. Because no amount within the range is a better estimate than any other amount within the range, we have accrued the minimum amount in the range. We estimate the high end of the range to be approximately ~~$519~~$885 million.

Shareholder Securities Litigation

In August 2019, the Louisiana Sheriffs' Pension & Relief Fund filed a purported class action complaint against Cardinal Health and certain current and former officers and employees in the United States District Court for the Southern District of Ohio purportedly on behalf of all purchasers of our common shares between March 2015 and May 2018. The complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by making misrepresentations and omissions related to the integration of the Cordis business and inventory and supply chain problems within the Cordis business, and seeks to recover unspecified damages and equitable relief for the alleged misstatements and omissions. We believe that the claims asserted in this complaint are without merit and intend to vigorously defend against them.

Surgical Gown Recalls

In January, 2020, we issued a voluntary recall for 9.1 million AAMI Level 3 surgical gowns and two voluntary field actions (a recall of some packs and a corrective action allowing overlabeling of other packs) for 2.9 million Presource Procedure Packs containing affected gowns (together, the "Recalls"). These Recalls were necessary because we discovered in December 2019 that one of our FDA-registered suppliers in China had shifted production of some gowns to unapproved sites with uncontrolled environments. Because of this, we could not assure sterility of the gowns.

In connection with these Recalls, in the three months ended December 31, 2019, we recorded a total charge of $96 million, of which $56 million is within cost of products sold and $40 million is




35	Cardinal Health \| Q2Fiscal 2020 Form 10-Q



Notes to Financial Statements

within SG&A in the condensed consolidated statements of earnings. In our condensed consolidated balance sheet at December 31, 2019, we had $38 million reserved within inventories, net, and $58 million included in other accrued liabilities related to this charge. This charge represents our best estimate of ~~estimated insurance recoveries.~~costs for the Recalls and include inventory write-off costs and certain remediation and supply disruption costs, such as costs to replace recalled products. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. The amount of ultimate loss may differ materially from this accrual.

Other Civil Litigation

Generic Pharmaceutical Antitrust Litigation ~~Proceeds~~

~~We received~~In December 2019, pharmaceutical distributors including us were added as defendants in a civil multidistrict litigation consisting of multiple individual and ~~recognized income resulting from settlements of~~ class action lawsuits filed by indirect purchasers of generic drugs, such as hospitals and retail pharmacies. The plaintiffs allege that pharmaceutical distributors encouraged manufacturers to increase prices, provided anti-competitive pricing information to manufacturers and informed manufacturers that they wished to maintain current customer allocations for the purpose of avoiding price erosion. We intend to vigorously defend ourselves in ~~which we were a class member of $47 million~~these matters.

Blood Pressure Medication Recall Litigation

Many participants in the ~~three-months ended~~pharmaceutical supply chain, including manufacturers, repackagers (including us), distributors (including us), and retailers have been named as defendants in Multidistrict Litigation in the U.S. District Court for the District of New Jersey (the “Blood Pressure Medication Recall MDL”), which was created in February 2019. The claims arise out of a series of recalls of generic blood pressure medications due to alleged impurities in active pharmaceutical ingredients. In December ~~31, 2018.~~2019, two additional medications were added to the Blood Pressure Medication Recall MDL. In January 2020, manufacturers recalled another medication and the FDA continues to investigate other drugs for possible recall. We intend to vigorously defend ourselves in these matters.

~~10.~~8. Income Taxes

Fluctuations in our provision for/(benefit from) income taxes as a percentage of pretax earnings (“effective tax rate”) are generally due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items.

Opioid Settlement Framework

In connection with the $5.63 billion pre-tax charge for the opioid litigation, during the six months ended December 31, 2019 we recorded a tax benefit of $487 million, which is net of unrecognized tax benefits of $468 million, 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 since the definitive settlement terms and documentation, including provisions related to deductibility, under the Settlement Framework have not been negotiated and the U.S. tax law governing deductibility was changed by the U.S. Tax Cuts and Jobs Act ("Tax Act"). Further, it is possible that 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 related to uncertain tax positions may differ materially from these estimates. See Note 7 for more information regarding these matters.

Effective Tax Rate

During the three months ended December 31, 2019 and 2018, the effective tax rate was 21.0 percent and 31.0 percent, respectively. The change in the effective tax rate from prior period is primarily due to the favorable impact from changes in jurisdictional mix and discrete items recognized in the second quarter of fiscal 2020, largely driven by changes as a result of tax reform.

During the six months ended December 31, 2019 and 2018, the effective tax rate was 7.2 percent and 23.5 percent, respectively. The change in the effective tax rate from fiscal 2019 to fiscal 2020 is primarily due to the net effects of the Settlement Framework.

Unrecognized Tax Benefits

At December 31, 2019 and June 30, 2019, we had $940 million and $456 million of unrecognized tax benefits, respectively. The December 31, 2019 and June 30, 2019 balances include $791 million and $303 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate.

At December 31, 2019 and June 30, 2019, we had $132 million and $122 million, respectively, accrued for the payment of interest and penalties related to unrecognized tax benefits, which we recognize in the provision for/(benefit 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




	Cardinal Health \| Q2Fiscal 2020 Form 10-Q	36



Notes to Financial Statements

activities of the U.S. Internal Revenue Service ("IRS") or other taxing authorities, possible settlement of IRS and other 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 0 and a net decrease of up to $350 million, exclusive of penalties and interest.

Other Tax Matters

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 2008 through the current fiscal year. Tax laws are complex and subject to varying interpretations. Tax authorities have challenged some of our tax positions, including IRS challenges to our international transfer pricing for the periods from 2008 to 2014, and it is possible that they will challenge others. These challenges may adversely affect our effective tax rate or tax payments.

We are a party to a tax matters agreement with CareFusion Corporation ("CareFusion"), a subsidiary of Becton, Dickinson and Company. Under the tax matters agreement, CareFusion is obligated to indemnify us for certain tax exposures and transaction taxes prior to our fiscal 2010 spin-off of CareFusion. The indemnification receivable was $171 million and $165 million at December 31, 2019 and June 30, 2019, respectively, and is included in other assets in the condensed consolidated balance sheets.

As a result of the acquisition of the Patient Recovery Business, Medtronic plc is obligated to indemnify us for certain tax exposures and transaction taxes related to periods prior to the acquisition under the purchase agreement. The indemnification receivable was $21 million and $22 million at December 31, 2019 and June 30, 2019, respectively, and is included in other assets in the condensed consolidated balance sheet.

Future adjustments to the financial statements may be necessary as final tax regulations related to U.S. Tax Reform are issued. We will assess any impact as additional guidance is issued.

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:


	December 31, 2018										December 31, 2019
(in millions)	Level 1		Level 2			Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents											$	199	$	—	$	—	$	199
Other investments (1)	$	106	$	—		$	—	$	106		116		—		—		116
Liabilities:
Forward contracts (2)	—		(30		)	—		(30		)
Forward Contracts (2)											—		73		—		73



	June 30, 2019
(in millions)	Level 1		Level 2		Level 3		Total
Assets:
Other investments (1)	$	118	$	—	$	—	$	118
Forward Contracts (2)	—		53		—		53

June 30, 2018
(in millions) Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents $ 200
$ —
$ —
$ 200
Other investments (1) 117
—
—
117
Liabilities:
Forward contracts (2) —
(76 ) —
(76 )


(1)	The other investments balance includes investments in mutual funds, which are used to 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~~ commodity 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.

~~11.~~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 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.



Ohio					31-0958666
(State or other jurisdiction of incorporation or organization)					(IRS Employer Identification No.)

7000 Cardinal Place	,	Dublin	,	Ohio	43017
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common shares (without par value)	CAH	New York Stock Exchange



Large accelerated filerþ	☑	Accelerated filero	☐
Non-accelerated filero	☐	Smaller reporting companyo	☐
		Emerging growth companyo	☐
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



	Page
Management's Discussion and Analysis of Financial Condition and Results of Operations	2
Explanation and Reconciliation of Non-GAAP Financial Measures	1416
Quantitative and Qualitative Disclosures about Market Risk	1721
Controls and Procedures	1721
Legal Proceedings	1721
Risk Factors	1721
Unregistered Sales of Equity Securities and Use of Proceeds	1723
Financial ~~Statements and Supplementary Data~~Statements	1824
Exhibits	3443
Form 10-Q Cross Reference Index	3544
Signatures	3645


	Three Months Ended December 31,								Six Months Ended December 31,								Three Months Ended December 31,								Six Months Ended December 31,
($ per share)	2018			2017			Change		2018			2017			Change		2019 ⁽²⁾			2018 ⁽²⁾			Change		2019 ^{(2) (3)}			2018⁽²⁾			Change
GAAP ⁽¹⁾	$	0.93		$	3.33		(72	)%	$	2.88		$	3.68		(22	)%
GAAP diluted EPS ⁽¹⁾																	$	0.75		$	0.93		(19	)%	$	(15.99	)	$	2.88		N.M
Surgical gown recall costs																	0.24			—					0.24			—
State opioid assessment related to prior fiscal years	(0.07		)	—					—			—					—			(0.07		)			0.01			—
Restructuring and employee severance	0.03			0.07					0.11			0.34					0.14			0.03					0.22			0.11
Amortization and other acquisition-related costs	0.40			0.46					0.79			0.85					0.34			0.40					0.67			0.79
Impairments and (gain)/loss on disposal of assets	0.02			0.35					(1.22		)	0.35					0.02			0.02					0.02			(1.22		)
Litigation (recoveries)/charges, net	(0.04		)	0.13					0.01			0.19					0.06			(0.04		)			17.66			0.01
Loss on extinguishment of debt																	0.01			—					0.01			—
Transitional tax benefit, net	0.01			(2.83		)			0.01			(2.82		)			(0.04		)	0.01					(0.04		)	0.01
Non-GAAP ⁽¹⁾	$	1.29		$	1.51		(15	)%	$	2.58		$	2.60		(1	)%
Non-GAAP diluted EPS ⁽¹⁾																	$	1.52		$	1.29		18	%	$	2.80		$	2.58		9	%



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



MD&A	Critical Accounting Policies and Sensitive Accounting Estimates



~~Explanation~~MD&A	Critical Accounting Policies and ~~Reconciliation of Non-GAAP Financial Measures~~	Sensitive Accounting Estimates


•	Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business.


•	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.


•	Loss on 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.



(in millions, except per common share amounts)	SG&A¹		SG&A¹ Growth Rate		Operating Earnings			Operating Earnings Growth Rate		Earnings Before Income Taxes			Provision for Income Taxes			Net Earnings²			Net Earnings² Growth Rate		Diluted EPS²			Diluted EPS² Growth Rate
	Three Months Ended December 31, 2018
GAAP	$	1,064	(6	)%	$	504		26	%	$	407		$	126		$	280		(73	)%	$	0.93		(72	)%
State opioid assessment related to prior fiscal years	29				(29		)			(29		)	(8		)	(21		)			(0.07		)
Restructuring and employee severance	—				12					12			3			9					0.03
Amortization and other acquisition-related costs	—				157					157			39			119					0.40
Impairments and (gain)/loss on disposal of assets, net	—				8					8			1			7					0.02
Litigation (recoveries)/charges, net	—				(15		)			(15		)	(4		)	(11		)			(0.04		)
Transitional tax benefit, net³	—				—					—			(3		)	3					0.01
Non-GAAP	$	1,093	(3	)%	$	637		(13	)%	$	540		$	154		$	385		(19	)%	$	1.29		(15	)%

	Three Months Ended December 31, 2017
GAAP	$	1,131	24	%	$	399		(26	)%	$	317		$	(736	)	$	1,053		225	%	$	3.33		226	%
Restructuring and employee severance	—				21					21			(2		)	23					0.07
Amortization and other acquisition-related costs	—				184					184			41			143					0.46
Impairments and (gain)/loss on disposal of assets, net	—				68					68			(43		)	111					0.35
Litigation (recoveries)/charges, net	—				58					58			17			41					0.13
Transitional tax benefit, net³	—				—					—			894			(894		)			(2.83		)
Non-GAAP	$	1,131	24	%	$	730		4	%	$	648		$	171		$	478		12	%	$	1.51		13	%

	Six Months Ended December 31, 2018
GAAP	$	2,219	1	%	$	1,320		100	%	$	1,143		$	269		$	873		(25	)%	$	2.88		(22	)%
Restructuring and employee severance	—				44					44			11			33					0.11
Amortization and other acquisition-related costs	—				314					314			74			240					0.79
Impairments and (gain)/loss on disposal of assets, net	—				(503		)			(503		)	(133		)	(370		)			(1.22		)
Litigation (recoveries)/charges, net	—				3					3			—			3					0.01
Transitional tax benefit, net³	—				—					—			(3		)	3					0.01
Non-GAAP	$	2,219	1	%	$	1,178		(12	)%	$	1,001		$	218		$	782		(5	)%	$	2.58		(1	)%

	Six Months Ended December 31, 2017
GAAP	$	2,193	20	%	$	661		(39	)%	$	495		$	(675	)	$	1,168		85	%	$	3.68		87	%
Restructuring and employee severance	—				153					153			45			108					0.34
Amortization and other acquisition-related costs	—				368					368			98			270					0.85
Impairments and (gain)/loss on disposal of assets, net	—				68					68			(43		)	111					0.35
Litigation (recoveries)/charges, net	—				90					90			30			60					0.19
Loss on extinguishment of debt	—				—					2			1			1					—
Transitional tax benefit, net³	—				—					—			894			(894		)			(2.82		)
Non-GAAP	$	2,193	20	%	$	1,340		(2	)%	$	1,175		$	350		$	823		—	%	$	2.60		1	��%


¹	~~Distribution, selling, general and administrative expenses.~~


³	Reflects the estimated 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 Condensed Consolidated Financial Statements" for more information on the Tax Act.~~



(in millions, except per common share amounts)	Operating Earnings/(Loss)			Operating Earnings Growth Rate		Earnings/(Loss) Before Income Taxes			Provision for/(Benefit from) Income Taxes			Net Earnings/(Loss)¹			Net Earnings/(Loss)¹ Growth Rate		Diluted EPS^1,2			Diluted EPS¹ Growth Rate
	Three Months Ended December 31, 2019
GAAP	$	334		(34	)%	$	279		$	59		$	220		(21	)%	$	0.75		(19	)%
Surgical gown recall costs	96					96			25			71					0.24
State opioid assessment related to prior fiscal years	(1		)			(1		)	—			(1		)			—
Restructuring and employee severance	56					56			14			42					0.14
Amortization and other acquisition-related costs	133					133			33			100					0.34
Impairments and (gain)/loss on disposal of assets, net	7					7			2			5					0.02
Litigation (recoveries)/charges, net	21					21			3			18					0.06
Loss on extinguishment of debt	—					4			1			3					0.01
Transitional tax benefit, net	—					—			11			(11		)			(0.04		)
Non-GAAP	$	646		1	%	$	596		$	148		$	448		16	%	$	1.52		18	%
	Three Months Ended December 31, 2018
GAAP	$	504		26	%	$	407		$	126		$	280		(73	)%	$	0.93		(72	)%
State opioid assessment related to prior fiscal years	(29		)			(29		)	(8		)	(21		)			(0.07		)
Restructuring and employee severance	12					12			3			9					0.03
Amortization and other acquisition-related costs	157					157			39			119					0.40
Impairments and (gain)/loss on disposal of assets, net	8					8			1			7					0.02
Litigation (recoveries)/charges, net	(15		)			(15		)	(4		)	(11		)			(0.04		)
Transitional tax benefit, net	—					—			(3		)	3					0.01
Non-GAAP	$	637		(13	)%	$	540		$	154		$	385		(19	)%	$	1.29		(15	)%
	Six Months Ended December 31, 2019
GAAP	$	(4,930	)	N.M		$	(5,065	)	$	(364	)	$	(4,702	)	N.M		$	(15.99	)	N.M
Surgical gown recall costs	96					96			25			71					0.24
State opioid assessment related to prior fiscal years	4					4			1			3					0.01
Restructuring and employee severance	86					86			21			65					0.22
Amortization and other acquisition-related costs	265					265			67			198					0.67
Impairments and (gain)/loss on disposal of assets, net	8					8			2			6					0.02
Litigation (recoveries)/charges, net³	5,694					5,694			501			5,193					17.66
Loss on extinguishment of debt	—					4			1			3					0.01
Transitional tax benefit, net	—					—			11			(11		)			(0.04		)
Non-GAAP	$	1,223		4	%	$	1,092		$	265		$	826		6	%	$	2.80		9	%
	Six Months Ended December 31, 2018
GAAP	$	1,320		100	%	$	1,143		$	269		$	873		(25	)%	$	2.88		(22	)%
Restructuring and employee severance	44					44			11			33					0.11
Amortization and other acquisition-related costs	314					314			74			240					0.79
Impairments and (gain)/loss on disposal of assets, net	(503		)			(503		)	(133		)	(370		)			(1.22		)
Litigation (recoveries)/charges, net	3					3			—			3					0.01
Transitional tax benefit, net	—					—			(3		)	3					0.01
Non-GAAP	$	1,178		(12	)%	$	1,001		$	218		$	782		(5	)%	$	2.58		(1	)%


³	Litigation (recoveries)/charges, net includes a pre-tax charge of $5.63 billion ($5.14 billion after tax) recorded in the first quarter of fiscal 2020 related to the opioid litigation.



Period	Total Number of Shares Purchased (1)	Average Price Paid per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Programs (2, 3)	Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (3) (in millions)
October 2018	1,954,662	$	61.40	1,954,392	$	293
November 2018	271	53.00		—	1,293
December 2018	407	49.62		—	1,293
Total	1,955,340	$	61.40	1,954,392	$	1,293


(1)	Reflects ~~270, 271~~1,214, 255 and ~~407~~368 common shares purchased in October, November and December ~~2018,~~2019, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.


(3)	On February 7, 2018, our Board of Directors approved a ~~new~~ $1.0 billion share repurchase program that expires on December 31, 2020. On November 7, 2018, our Board of Directors approved a ~~new~~ $1.0 billion share repurchase program that expires on December 31, ~~2021.~~2021 and as of December 31, 2019, we have $943 million authorized for share repurchases remaining under this program.


(in millions)	December 31, 2018			June 30, 2018			December 31, 2019			June 30, 2019
Assets
Current assets:
Cash and equivalents	$	2,182		$	1,763		$	1,659		$	2,531
Trade receivables, net	7,932			7,800			8,280			8,448
Inventories, net	13,037			12,308			13,799			12,822
Prepaid expenses and other	1,940			1,926			1,998			1,946
Assets held for sale	—			756
Total current assets	25,091			24,553			25,736			25,747

Property and equipment, net	2,376			2,487			2,301			2,356
Goodwill and other intangibles, net	11,973			12,229			11,523			11,808
Other assets	1,022			682			1,482			1,052
Total assets	$	40,462		$	39,951		$	41,042		$	40,963

Liabilities, Redeemable Noncontrolling Interests and Shareholders’ Equity
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	20,610		$	19,677		$	21,459		$	21,535
Current portion of long-term obligations and other short-term borrowings	1,450			1,001			1,192			452
Other accrued liabilities	1,764			2,002			2,239			2,122
Liabilities related to assets held for sale	—			213
Total current liabilities	23,824			22,893			24,890			24,109

Long-term obligations, less current portion	7,599			8,012			6,742			7,579
Deferred income taxes and other liabilities	2,996			2,975			8,408			2,945

Redeemable noncontrolling interests	—			12

Shareholders’ equity:
Preferred shares, without par value:
Authorized—500 thousand shares, Issued—none	—			—			—			—
Common shares, without par value:
Authorized—755 million shares, Issued—327 million shares at December 31, 2018 and June 30, 2018, respectively	2,728			2,730
Authorized—755 million shares, Issued—327 million shares at December 31, 2019 and June 30, 2019, respectively							2,752			2,763
Retained earnings	5,233			4,645			449			5,434
Common shares in treasury, at cost: 29 million shares and 18 million shares at December 31, 2018 and June 30, 2018, respectively	(1,795		)	(1,224		)
Common shares in treasury, at cost: 35 million shares and 28 million shares at December 31, 2019 and June 30, 2019, respectively							(2,099		)	(1,790		)
Accumulated other comprehensive loss	(123		)	(92		)	(103		)	(79		)
Total Cardinal Health, Inc. shareholders' equity							999			6,328
Noncontrolling interests							3			2
Total shareholders’ equity	6,043			6,059			1,002			6,330
Total liabilities, redeemable noncontrolling interests and shareholders’ equity	$	40,462		$	39,951
Total liabilities and shareholders’ equity							$	41,042		$	40,963



	Common Shares						Treasury Shares					Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total Shareholders’ Equity
(in millions)	Shares Issued	Amount		Retained Earnings			Shares		Amount			Accumulated Other Comprehensive Loss			Noncontrolling Interests		Total Shareholders’ Equity
	Three Months Ended December 31, 2019
Balance at September 30, 2019	327	$	2,669	$	371		(34	)	$	(2,039	)	$	(101	)	$	3	$	903
Net earnings				220											—		220
Other comprehensive loss, net of tax												(2		)			(2		)
Employee stock plans activity, net of shares withheld for employee taxes	—	13							10								23
Share repurchase program activity		70					(1	)	(70		)						—
Dividends declared				(143		)											(143		)
Other				1											—		1
Balance at December 31, 2019	327	$	2,752	$	449		(35	)	$	(2,099	)	$	(103	)	$	3	$	1,002



	Three Months Ended December 31, 2018
Balance at September 30, 2018	327	$	2,590	$	5,097		(27	)	$	(1,678	)	$	(96	)	$	—		$	5,913
Net earnings				280											1			281
Other comprehensive loss, net of tax												(27		)				(27		)
Employee stock plans activity, net of shares withheld for employee taxes	—	18							3									21
Share repurchase program activity		120					(2	)	(120		)							—
Dividends declared				(143		)												(143		)
Other				(1		)									(1		)	(2		)
Balance at December 31, 2018	327	$	2,728	$	5,233		(29	)	$	(1,795	)	$	(123	)	$	—		$	6,043



	Six Months Ended December 31, 2018
Balance at June 30, 2018	327	$	2,730		$	4,645		(18	)	$	(1,224	)	$	(92	)	$	—		$	6,059
Net earnings					873											1			874
Other comprehensive loss, net of tax													(31		)				(31		)
Employee stock plans activity, net of shares withheld for employee taxes	—	(2		)						29									27
Share repurchase program activity		—						(11	)	(600		)							(600		)
Dividends declared					(286		)												(286		)
Other					1											(1		)	—
Balance at December 31, 2018	327	$	2,728		$	5,233		(29	)	$	(1,795	)	$	(123	)	$	—		$	6,043



(in millions)	Foreign Currency Translation Adjustments			Unrealized Gain/(Loss) on Derivatives, net of tax			Accumulated Other Comprehensive Loss
Balance at June 30, 2018	$	(113	)	$	21		$	(92	)
Other comprehensive income/(loss), before reclassifications	(29		)	—			(29		)
Amounts reclassified to earnings	—			(2		)	(2		)
Other comprehensive income/(loss), net of tax	(29		)	(2		)	(31		)
Balance at December 31, 2018	$	(142	)	$	19		$	(123	)


(1)	~~Corporate revenue consists of the elimination of inter-segment revenue~~Products and ~~other revenue not allocated~~services offered by our Specialty Solutions division are referred to ~~the segments.~~as “specialty pharmaceutical products and services."


~~(1)~~(2)	~~Our~~Comprised of all Pharmaceutical segment businesses except for Nuclear and Precision Health Solutions ~~division was formerly referred to as our Nuclear Pharmacy Services~~ division.


~~(2)~~(3)	Comprised of all Medical segment businesses except for Cardinal Health ~~At Home~~at-Home Solutions division.


~~(3)~~(4)	Corporate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.



(in millions)	December 31, 2019		June 30, 2019
Pharmaceutical	$	23,143	$	22,446
Medical	15,490		15,284
Corporate	2,409		3,233
Total assets	$	41,042	$	40,963



(in millions)	December 31, 2018		June 30, 2018
Pharmaceutical	$	22,101	$	21,421
Medical	15,697		16,066
Corporate	2,664		2,464
Total assets	$	40,462	$	39,951


(in millions, except per share amounts)	Restricted Share Units		Weighted-Average Grant Date Fair Value per Share		Restricted Share Units		Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2018	2		$	71.58
Nonvested at June 30, 2019					2		$	51.65
Granted	2		50.46		2		42.40
Vested	(1	)	75.19		(1	)	60.37
Canceled and forfeited	—		—		—		—
Nonvested at December 31, 2018	3		$	52.23
Nonvested at December 31, 2019					3		$	46.49



(in millions, except per share amounts)	Stock Options	Weighted-Average Exercise Price per Common Share
Outstanding at June 30, 2018	7	$	64.50
Granted	—	—
Exercised	—	—
Canceled and forfeited	—	—
Outstanding at December 31, 2018	7	$	64.05
Exercisable at December 31, 2018	6	$	62.92



(in years)	December 31, 2018	June 30, 2018
Weighted-average remaining contractual life of outstanding options	6	7
Weighted-average remaining contractual life of exercisable options	6	5