DUBLIN, Ohio — Cardinal Health reported on Thursday second quarter fiscal year 2019 revenues of $37.7 billion, an increase of 7%. The company also reported growth in GAAP operating earnings of 26% to $504 million and a decrease in non-GAAP operating earnings of 13 percent to $637 million. GAAP diluted earnings per share (EPS) were $0.93, a decrease of 72 percent. This decrease reflects $2.83 of transitional tax benefits in the prior-year quarter related to the enactment of U.S. tax reform. Non-GAAP diluted EPS decreased 15% to $1.29.

“Overall, results this quarter came in ahead of our expectations led by the Pharmaceutical segment,” said Mike Kaufmann, chief executive officer of Cardinal Health. “We are making good progress on our strategic initiatives to drive future growth and are well-positioned to exceed our cost-savings targets for the enterprise. As a result, we are raising our guidance for the full fiscal year.”

Q2 FY19 summary

Tax rate

During the second quarters of fiscal 2019 and 2018, GAAP effective tax rates were 31.0%and (231.9)%, respectively, and non-GAAP effective tax rates were 28.5 percent and 26.2 percent, respectively.

The change in the GAAP effective tax rate is primarily attributable to transitional tax benefits of $2.83 per share from the U.S. Tax Cuts and Jobs Act (“Tax Act”) recorded during the second quarter of fiscal 2018. These benefits reflected the re-measurement of the company’s net U.S. deferred tax liabilities and assets at the lower federal rate, partially offset by the required U.S. repatriation tax on undistributed foreign earnings. These transitional tax benefits have been excluded from the company’s reported non-GAAP earnings.

Fiscal year 2019 outlook

The company does not provide GAAP EPS outlook because it is unable to reliably forecast most of the items that are excluded from GAAP EPS to calculate non-GAAP EPS. These items could cause EPS to differ materially from non-GAAP EPS. See “Use of Non-GAAP Measures” following the attached schedules for additional explanation.

The company is raising its fiscal 2019 non-GAAP EPS guidance to the range of $4.97 to $5.17 from the range of $4.90 to $5.15.

Segment results

Pharmaceutical segment

Second quarter revenue for the Pharmaceutical segment increased 8% to $33.7 billion due to sales growth from Pharmaceutical Distribution and Specialty Solutions customers, partially offset by the divestiture of the China distribution business.

Segment profit for the quarter decreased 14 percent to $443 million, which reflects the negative impact from the company’s generics program performance, partially offset by Specialty Solutions performance.

Medical segment

Second quarter revenue for the Medical segment was down one percent due to the divestitures of the China distribution and naviHealth businesses, offset by growth from existing customers.

Medical segment profit decreased 14% to $188 million, which reflects the increased costs related to Cardinal Health Brand products as well as the divestitures of the China distribution and naviHealth businesses. This was partially offset by the beneficial comparison to the prior-year fair value step-up of inventory acquired with the Patient Recovery business.

Additional second quarter and recent highlights

• Cardinal Health board of directors approved a quarterly dividend of $0.4763 per share. The dividend will be payable on April 15, 2019 to shareholders of record at the close of business on April 1, 2019
• Cardinal Health announced Brian Rice as EVP, Chief Information Officer and Customer Support Services
• Cardinal Health board of directors elected J. Michael Losh as an independent director serving as chairman of the Audit Committee
• The Cardinal Health Foundation announced a $530,000 grant to the Ohio Hospital Association (OHA) to identify and deploy best opioid prescribing practices for pain management among OHA member hospitals across the state