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Cardinal Health Q4 2015 Earnings Report

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Q4 FY2015 earnings investor/analyst call July 30, 2015 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Forward-looking statements and GAAP reconciliation Cautions Concerning Forward-Looking Statements This presentation contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health's various lines of business; the ability to achieve the expected benefits from the generic sourcing venture with CVS Health and from our acquisition of The Harvard Drug Group; the frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the ability to successfully complete the acquisition of Cordis on a timely basis and if completed to achieve the anticipated results from the Cordis acquisition; the non-renewal or a default under one or more key customer or supplier arrangements or changes to the terms of or level of purchases under those arrangements; uncertainties due to government health care reform including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; and changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This presentation reflects management's views as of July 30, 2015. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement. In addition, these presentations contain Non-GAAP financial measures. Cardinal Health provides GAAP numbers, definitions and reconciling information in the Financial Appendix at the end of these presentations and on its Investors page at ir.cardinalhealth.com. An audio replay of the conference call will be available on the Investors page at ir.cardinalhealth.com. 2 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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July 30, 2015 CAH FY2015 Accomplishments • Increased revenue by 13% • Increased gross margin dollars by 11% • Expanded non-GAAP operating earnings by 16%1 to a record $2.5B, and improved margin rates by 7 bps • Grew non-GAAP diluted EPS from continuing operations by 14% to $4.38 • Generated $2.5B in operating cash flow • Returned $1.5B in cash to shareholders – Dividend increase of 13%, to an annual dividend per share rate of $1.55 – Repurchased over $1B in shares • Generated market Total Shareholder Return of greater than 24%2 1Please refer to the GAAP and non-GAAP reconciliation slides at the end of this presentation the total return on common shares over a specified period, expressed as a percentage (calculated based on the change in stock price over the relevant measurement period and reinvestment of dividends). Source: Bloomberg 2Represents 3 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 and FY2015 results 4 © Copyright 2015 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 FY2015 Financial summary GAAP Basis ($M) Revenue % change Operating earnings % change Ratio to revenue Earnings from continuing ops % change Ratio to revenue Diluted EPS from continuing ops % change Non-GAAP Basis ($M) Q4 FY15 $27,547 20% $558 44% 2.03% $293 25% 1.06% $0.88 29% Q4 FY15 Q4 FY14 $611 33% 2.22% $333 17% 1.21% $1.00 20% $461 (2)% 2.01% $284 4% 1.24% $0.83 5% Q4 FY14 $22,894 (10)% $387 N.M. 1.69% $234 N.M. 1.02% $0.68 N.M. The sum of the components may not equal the total due to rounding 5 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 FY2015 Pharmaceutical segment business analysis Q4 FY15 ($M) Revenue Q4 FY14 ($M) % Change $24,676 $20,092 23% $535 $377 42% 2.17% 1.88% Segment profit Segment profit margin Highlights: • • • Revenue increased due to growth from existing and new customers. Segment profit increased, driven by strong performance under generics program, which includes the net benefit of Red Oak Sourcing, as well as growth from existing and new customers. Segment profit margin rate increased primarily due to strong performance under generics program, partially offset by customer pricing changes. The sum of the components may not equal the total due to rounding 6 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 FY2015 Medical segment business analysis Q4 FY15 ($M) Q4 FY14 ($M) % Change $2,855 $2,794 2% $103 $96 7% 3.59% 3.43% Revenue Segment profit Segment profit margin Highlights: • • Revenue increased due to contributions from acquisitions and growth in the Cardinal Health at Home platform, partially offset by a decline in Canada. Segment profit and profit margin rate increased due to contributions from the strategic expansion of the company’s portfolio of Cardinal Health brand products and services, which was driven by a combination of acquisitions and organic efforts, coupled with targeted cost reductions, during the past year. The sum of the components may not equal the total due to rounding 7 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 FY2015 GAAP to non-GAAP reconciliation Q4 FY 2015 Operating Earnings ($M) GAAP Restructuring and employee severance Amortization and other acquisition-related costs1 Impairments and (gain)/loss on disposal of assets Litigation (recoveries)/charges, net Non-GAAP 1 Q4 FY 2014 Earnings from Diluted EPS Operating Continuing from Continuing Earnings ($M) Operations ($M) Operations Earnings from Diluted EPS from Continuing Continuing Operations ($M) Operations $558 11 $293 7 $0.88 0.02 $387 6 $234 4 $0.68 0.01 91 60 0.18 63 41 0.12 (49) $611 (27) $333 (0.08) $1.00 4 1 $461 3 1 $284 0.01 $0.83 Amortization of acquisition-related intangible assets included in Amortization and other acquisition-related costs are as follows: Amortization of acquisition-related intangible assets $50 $32 The sum of the components may not equal the total due to rounding 8 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. $0.09 $49 $31 $0.09


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Q4 FY2015 FY2015 financial summary GAAP Basis ($M) Revenue % change Operating earnings % change Ratio to revenue Earnings from continuing ops % change Ratio to revenue Diluted EPS from continuing ops % change FY15 $102,531 13% $2,161 15% 2.11% $1,212 4% 1.18% $3.61 7% FY14 $91,084 (10)% $1,885 89% 2.07% $1,163 247% 1.28% $3.37 247% The sum of the components may not equal the total due to rounding 9 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. Non-GAAP Basis ($M) FY15 FY14 $2,472 16% 2.41% $1,469 11% 1.43% $4.38 14% $2,133 4% 2.34% $1,324 3% 1.45% $3.84 3%


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Q4 FY2015 FY2015 GAAP to non-GAAP reconciliation FY2015 Operating Earnings ($M) GAAP Restructuring and employee severance Amortization and other acquisition-related costs1 Impairments and (gain)/loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Non-GAAP 1 FY2014 Earnings from Diluted EPS Operating Continuing from Continuing Earnings ($M) Operations ($M) Operations Earnings from Diluted EPS Continuing from Continuing Operations ($M) Operations $2,161 44 $1,212 29 $3.61 0.09 $1,885 31 $1,163 20 $3.37 0.06 281 181 0.54 223 144 0.42 (19) 5 $2,472 (9) 19 37 $1,469 (0.03) 0.06 0.11 $4.38 15 (21) $2,133 10 (13) $1,324 0.03 (0.04) $3.84 Amortization of acquisition-related intangible assets included in Amortization and other acquisition-related costs are as follows: Amortization of acquisition-related intangible assets $189 $120 The sum of the components may not equal the total due to rounding 10 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. $0.36 $187 $119 $0.34


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FY2016 outlook 11 © Copyright 2015 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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July 30, 2015 CAH FY2016 financial expectations FY2016 outlook Revenue Low double-digit percentage growth vs. PY $103B Non-GAAP diluted EPS from continuing operations 12 FY2015 actual $4.85 to $5.05 $4.38 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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July 30, 2015 FY16 corporate assumptions FY16 outlook FY15 actual 35.5% – 37.0%1 37.2% 334M - 336M 335M Interest and other, net $195M - $210M $134M Capital expenditures $510M - $540M $300M ~$194M or ~$0.362 $189M or $0.36 Non-GAAP effective tax rate Diluted weighted average shares outstanding Acquisition-related intangible amortization 1May fluctuate quarterly due to unique items affecting periods. 2Includes 13 only acquisitions closed as of June 30, 2015 (does not include Harvard Drug or Cordis). © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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July 30, 2015 Pharmaceutical Segment FY16 assumptions • • Branded drug manufacturer pricing similar to FY15 • Positive Y-o-Y contribution from generics program, including Red Oak Sourcing joint venture, net of payments to CVS Health • Decline Y-o-Y in contribution from generic new item launches • Generic drug manufacturer pricing moderating vs. FY15 • Harvard Drug Group accretion in non-GAAP EPS of >$0.15 in FY16; (FY17 >$0.20; increasingly greater thereafter)1 • Double-digit growth from both Specialty and Cardinal Health China2 • 1 Low double-digit percentage increase in revenue vs. prior year Increased investment in information systems and technologies Net of $0.03-$0.04 per share of annual interest expense 2 Cardinal 14 Health China reports in both segments, but primarily contributes to the Pharmaceutical segment © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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July 30, 2015 Medical Segment FY16 assumptions • Mid- to high-single digit percentage revenue growth vs. prior year • Mid-single digit percentage segment profit growth vs. prior year • Growth back-half weighted • Above market growth in Cardinal Health at Home • Stronger growth in Cardinal Health brand H2FY16 • Cordis financial expectations • Closing assumed Q2FY16 • Impact of inventory fair value step-up anticipated in Q2 and Q3FY16 • FY16 slightly dilutive to non-GAAP EPS1,2 • FY17 accretive by >$0.20, increasingly accretive thereafter2 1Includes impact of inventory fair value step-up between $0.13-$0.15 per share 2Includes $0.07-$0.08 per share of incremental annual financing costs 15 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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© Copyright 2015 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Q4 FY2015 trailing five quarters and GAAP to Non-GAAP reconciliation statements © Copyright 2015 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. 17


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Q4 FY2015 Segment analysis Pharmaceutical segment Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Revenue ($M) 20,092 21,209 22,627 22,605 24,676 Segment Profit ($M) 377 451 542 567 535 Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Revenue ($M) 2,794 2,852 2,914 2,774 2,855 Segment Profit ($M) 96 113 115 102 103 Medical segment 18 © Copyright 2015, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.


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Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation (in millions, except per common share amounts) GAAP Restructuring and employee severance Amortization and other acquisition-related costs Impairments and (gain)/loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Non-GAAP GAAP Restructuring and employee severance Amortization and other acquisition-related costs Impairments and loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Non-GAAP (in millions, except per common share amounts) GAAP Restructuring and employee severance Amortization and other acquisition-related costs Impairments and (gain)/loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Non-GAAP GAAP Restructuring and employee severance Amortization and other acquisition-related costs Impairments and loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Non-GAAP Operating Earnings $ 558 11 91 (49) $ 611 $ $ $ Earnings Before Income Taxes and Discontinued Operations 33 % $ 387 6 63 4 1 461 Operating Earnings $ 2,161 44 281 (19) 5 $ 2,472 $ Operating Earnings Growth Rate 44 % $ N.M. $ 357 6 63 4 1 432 (2)% $ Operating Earnings Growth Rate 15 % $ 1,885 31 223 15 (21) 2,133 16 % $ Fourth Quarter 2015 Provision Earnings for from Income Continuing Taxes Operations 523 $ 230 $ 293 11 4 7 91 31 60 (49) (22) (27) 577 $ 243 $ 333 $ $ Fourth Quarter 2014 123 $ 234 2 4 22 41 1 3 1 148 $ 284 Fiscal Year 2015 Earnings Before Provision Earnings Income Taxes for from and Discontinued Income Continuing Operations Taxes Operations 1,967 $ 755 $ 1,212 44 15 29 281 100 181 (19) (10) (9) 5 (14) 19 60 23 37 2,339 $ 870 $ 1,469 89 % $ 4% $ The sum of the components may not equal the total due to rounding. We apply varying tax rates depending on the item’s nature and tax jurisdiction where it is incurred. 1,798 $ 31 223 15 (21) 2,047 $ Fiscal Year 2014 635 $ 1,163 11 20 79 144 5 10 (8) (13) 722 $ 1,324 Earnings from Diluted EPS Continuing from Operations Continuing Growth Rate Operations 25 % $ 0.88 0.02 0.18 (0.08) 17 % $ 1.00 N.M. $ 4% $ 0.68 0.01 0.12 0.01 0.83 Earnings from Diluted EPS Continuing from Continuing Operations Growth Rate Operations 4% $ 3.61 0.09 0.54 (0.03) 0.06 0.11 11 % $ 4.38 247 % $ 3% $ 3.37 0.06 0.42 0.03 (0.04) 3.84 Diluted EPS from Continuing Operations Growth Rate 29 % 20 % N.M. 5% Diluted EPS from Continuing Operations Growth Rate 7% 14 % 247% 3%


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Cardinal Health, Inc. and Subsidiaries Total Company Business Analysis (in millions) Revenue Amount Growth rate Non-GAAP Fourth Quarter 2015 2014 Fourth Quarter 2015 2014 $ 27,547 20 % $ 22,894 (10)% Operating earnings Amount Growth rate $ 558 44 % $ 387 N.M. $ 611 33 % $ 461 (2)% Earnings from continuing operations Amount Growth rate $ 293 25 % $ 234 N.M. $ 333 17 % $ 284 4% Return on equity 18.7 % 14.5 % 21.3 % 17.6 % Effective tax rate from continuing operations 44.1 % 34.4 % 42.2 % 34.2 % 47 % 38 % 12 % 15 % Debt to total capital Net debt to capital Non-GAAP Fiscal Year Fiscal Year (in millions) Revenue Amount Growth rate1 2014 2015 2014 2015 $ 102,531 13 % $ 91,084 (10)% Operating earnings Amount Growth rate $ 2,161 15 % $ 1,885 89 % $ 2,472 16 % $ 2,133 4% Earnings from continuing operations Amount Growth rate $ 1,212 4% $ 1,163 247 % $ 1,469 11 % $ 1,324 3% Return on equity 18.3 % 23.4 % 20.9 % Effective tax rate from continuing operations 1 19.4 % 38.4 % 35.3 % 37.2 % 35.3 % Revenue from Walgreens was $3.3 billion for the fiscal year ended June 30, 2014. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 revenue growth rate would have been 17 percent. Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.


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Cardinal Health, Inc. and Subsidiaries Segment Business Analysis Fourth Quarter 2015 2014 (in millions) Pharmaceutical Revenue Amount Growth rate Segment profit Amount Growth rate Segment profit margin Fourth Quarter 2015 2014 (in millions) Medical $ 24,676 23 % $ 20,092 (12)% Revenue Amount Growth rate $ 535 42 % 2.17 % $ 377 (5)% 1.88 % Segment profit Amount Growth rate Segment profit margin $ 2,855 2% $ 2,794 4% $ 103 7% 3.59 % $ 96 (8)% 3.43 % Refer to definitions for an explanation of calculations. Total consolidated revenue for the three months ended June 30, 2015 was $27,547 million, which included total segment revenue of $27,531 million and Corporate revenue of $16 million. Total consolidated revenue for the three months ended June 30, 2014 was $22,894 million, which included total segment revenue of $22,886 million and Corporate revenue of $8 million. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments. Total consolidated operating earnings for the three months ended June 30, 2015 were $558 million, which included total segment profit of $638 million and Corporate costs of $(80) million. Total consolidated operating earnings for the three months ended June 30, 2014 were $387 million, which included total segment profit of $473 million and Corporate costs of $(86) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.


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Cardinal Health, Inc. and Subsidiaries Segment Business Analysis Fiscal Year (in millions) Pharmaceutical Revenue Amount Growth rate1 Segment profit Amount Growth rate Segment profit margin 1 Fiscal Year 2014 2015 (in millions) Medical $ 91,116 14 % $ 80,110 (12)% Revenue Amount Growth rate $ 2,094 20 % 2.30 % $ 1,745 1% 2.18 % Segment profit Amount Growth rate Segment profit margin 2014 2015 $ 11,395 4% $ 10,962 9% $ 433 (3)% 3.80 % $ 444 19 % 4.05 % Revenue from Walgreens was $3.3 billion for the fiscal year ended June 30, 2014. Excluding the impact of the Walgreens contract expiration, the fiscal 2015 Pharmaceutical segment revenue growth rate would have been 19 percent. Refer to definitions for an explanation of calculations. Total consolidated revenue for the fiscal year ended June 30, 2015 was $102,531 million, which included total segment revenue of $102,511 million and Corporate revenue of $20 million. Total consolidated revenue for the fiscal year ended June 30, 2014 was $91,084 million, which included total segment revenue of $91,072 million and Corporate revenue of $12 million. Corporate revenue consists primarily of elimination of inter-segment revenue and other revenue not allocated to the segments. Total consolidated operating earnings for the fiscal year ended June 30, 2015 were $2,161 million, which included total segment profit of $2,527 million and Corporate costs of $(366) million. Total consolidated operating earnings for the fiscal year ended June 30, 2014 were $1,885 million, which included total segment profit of $2,189 million and Corporate costs of $(304) million. Corporate includes, among other things, restructuring and employee severance, amortization and other acquisition-related costs, impairments and (gain)/loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.


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Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter (in millions) GAAP return on equity Non-GAAP return on equity Net earnings Restructuring and employee severance, net of tax, in continuing operations Amortization and other acquisition-related costs, net of tax, in continuing operations Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations Litigation (recoveries)/charges, net, net of tax, in continuing operations Adjusted net earnings Annualized Total shareholders' equity Divided by average shareholders' equity Non-GAAP return on equity 2014 14.5 % 2015 18.7 % $ $ $ Fourth Quarter 2015 $ 6,256 $ 6,312 21.3 % We apply varying tax rates depending on the item’s nature and tax jurisdiction where it is incurred. $ 295 7 60 (27) 335 1,340 $ $ Third Quarter 2015 $ 6,369 $ $ 234 4 41 3 1 283 1,132 Fourth Quarter 2014 6,401 6,466 17.6 % Third Quarter 2014 $ 6,532


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Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fiscal Year (in millions) GAAP return on equity Non-GAAP return on equity Net earnings Restructuring and employee severance, net of tax, in continuing operations Amortization and other acquisition-related costs, net of tax, in continuing operations Impairments and (gain)/loss on disposal of assets, net of tax, in continuing operations Litigation (recoveries)/charges, net, net of tax, in continuing operations Loss on extinguishment of debt, net of tax, in continuing operations Adjusted net earnings Total shareholders' equity Divided by average shareholders' equity Non-GAAP return on equity 2014 18.3 % 2015 19.4 % $ $ Fourth Quarter 2015 $ 6,256 $ 6,276 23.4 % We apply varying tax rates depending on the item’s nature and tax jurisdiction where it is incurred. $ 1,215 29 181 (9) 19 37 1,472 $ Third Quarter 2015 $ 6,369 Second Quarter 2015 $ 6,100 First Quarter 2015 $ 6,256 Fourth Quarter 2014 $ 6,401 1,166 20 144 10 (13) 1,327 Fourth Quarter 2014 $ 6,401 $ 6,359 20.9 % Third Quarter 2014 $ 6,532 Second Quarter 2014 $ 6,589 First Quarter 2014 $ 6,297 Fourth Quarter 2013 $ 5,975


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Schedule 8 Cardinal Health, Inc. and Subsidiaries GAAP / Non-GAAP Reconciliation Fourth Quarter 2015 2014 34.4 % 44.1 % (in millions) GAAP effective tax rate from continuing operations Non-GAAP effective tax rate from continuing operations Earnings before income taxes and discontinued operations Restructuring and employee severance Amortization and other acquisition-related costs Impairments and (gain)/loss on disposal of assets Litigation (recoveries)/charges, net Loss on extinguishment of debt Adjusted earnings before income taxes and discontinued operations Provision for income taxes Restructuring and employee severance tax benefit Amortization and other acquisition-related costs tax benefit Impairments and (gain)/loss on disposal of assets tax benefit/(expense) Litigation (recoveries)/charges, net tax expense Loss on extinguishment of debt tax benefit Adjusted provision for income taxes $ $ $ 230 4 31 (22) 243 $ Non-GAAP effective tax rate from continuing operations $ $ $ 357 6 63 4 1 432 $ 123 2 22 1 148 $ 34.2 % 42.2 % Fourth Quarter 2015 2014 38 % 47 % Debt to total capital Net debt to capital Current portion of long-term obligations and other short-term borrowings Long-term obligations, less current portion Debt Cash and equivalents Net debt Total shareholders' equity Capital Net debt to capital 523 11 91 (49) 577 $ $ $ $ $ 281 5,211 5,492 (4,616) 876 6,256 7,132 12 % The sum of the components may not equal the total due to rounding. We apply varying tax rates depending on the item’s nature and tax jurisdiction where it is incurred. $ $ $ $ Fiscal Year 2015 2014 35.3 % 38.4 % 801 3,171 3,972 (2,865) 1,107 6,401 7,508 15 % $ $ 1,967 44 281 (19) 5 60 2,339 $ 755 15 100 (10) (14) 23 870 $ 37.2 % $ $ 1,798 31 223 15 (21) 2,047 635 11 79 5 (8) 722 35.3 %


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Cardinal Health, Inc. and Subsidiaries 5 In fiscal 2015, the Company began excluding last-in, first-out ("LIFO") inventory charges/(credits) from its non-GAAP earnings, for consistency with the presentation by some of its peers. The Company did not record any LIFO charges or credits in fiscal 2015 or 2014, respectively. In the second quarter of fiscal 2015, the Company excluded the loss on extinguishment of debt6 related to the early redemption of debt that ocurred in December 2014 from its non-GAAP earnings. Definitions Debt: long-term obligations plus short-term borrowings. Debt to Total Capital: debt divided by (debt plus total shareholders’ equity). Interest and Other, net: other (income)/expense, net plus interest expense, net. Net Debt: a Non-GAAP measure defined as debt minus (cash and equivalents). Net Debt to Capital: a Non-GAAP measure defined as net debt divided by (net debt plus total shareholders’ equity). Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding. Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) amortization and other acquisition-related costs2, (3) impairments and (gain)/loss on disposal of assets3, (4) litigation (recoveries)/charges, net4, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax. Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt) divided by (earnings before income taxes and discontinued operations adjusted for the same six items). Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net and (5) LIFO charges/(credits). Non-GAAP Operating Earnings Margin Rate: current period non-GAAP operating earnings divided by revenue. Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and (gain)/loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO charges/(credits) and (6) loss on extinguishment of debt, each net of tax) divided by average shareholders’ equity. Return on Equity: annualized current period net earnings divided by average shareholders’ equity. Segment Profit: segment revenue minus (segment cost of products sold and segment distribution, selling, general and administrative expenses). Segment Profit Margin: segment profit divided by segment revenue. 1 Programs by which the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including realignment of the management structure of a business unit in response to changing market conditions). 2 Costs that consist primarily of amortization of acquisition-related intangible assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations. 3 Asset impairments and losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and loss on disposal of assets within the condensed consolidated statements of earnings. 4 Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters. 5 The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market. These charges or credits are included in cost of products sold, and represent changes in the Company's LIFO inventory reserve. 6 Charges related to the make-whole premium on the redemption of notes.


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