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Table of Contents |  |

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

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

For the quarterly period ended December 31, 2021
or

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

For the transition period from ________ to ________
Commission File Number: 1-11373
Cardinal Health, Inc.
(Exact name of registrant as specified in its charter)

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☑ |  | Accelerated filer | ☐ |
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐ |
|  |  | Emerging growth company | ☐ |
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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ
The number of the registrant’s common shares, without par value, outstanding as of January 31, 2022, was the following: 277,061,392.

Cardinal Health Q2 Fiscal 2022 Form 10-Q

Table of Contents

|  | Page
| Management's Discussion and Analysis of Financial Condition and Results of Operations | 2
| Explanation and Reconciliation of Non-GAAP Financial Measures | 17
| Quantitative and Qualitative Disclosures about Market Risk | 21
| Controls and Procedures | 21
| Legal Proceedings | 22
| Risk Factors | 23
| Unregistered Sales of Equity Securities and Use of Proceeds | 25
| Financial Statements | 26
| Exhibits | 45
| Form 10-Q Cross Reference Index | 46
| Signatures | 47

About Cardinal Health

Cardinal Health, Inc. is an Ohio corporation formed in 1979 and is a globally integrated healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. We connect patients, providers, payers, pharmacists and manufacturers for integrated care coordination and better patient management. We manage our business and report our financial results in two segments: Pharmaceutical and Medical. As used in this report, “we,” “our,” “us,” and similar pronouns refer to Cardinal Health, Inc. and its subsidiaries, unless the context requires otherwise. Our fiscal year ends on June 30. References to fiscal 2022 and fiscal 2021 and to FY22 and FY21 are to the fiscal years ending or ended June 30, 2022 and June 30, 2021, respectively.
Forward-Looking Statements

This Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 (this "Form 10-Q") (including information incorporated by reference) includes "forward-looking statements" addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. Many forward-looking statements appear in Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), but there are others in this Form 10-Q, which 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, trends 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 made, projected or implied. The most significant of these risks and uncertainties are described in this Form 10-Q, including Exhibit 99.1, and in "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (our “2021 Form 10-K”). Forward-looking statements in this Form 10-Q speak only as of the date of this document. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.
Non-GAAP Financial Measures

In the "Overview of Consolidated Results" section of MD&A, we use financial measures that are derived from our consolidated financial data but are not presented in our condensed consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These measures are considered "non-GAAP financial measures" under the United States Securities and Exchange Commission ("SEC") rules. The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures are included in the “Explanation and Reconciliation of Non-GAAP Financial Measures” section following MD&A in this Form 10-Q.

1 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

Management's Discussion and Analysis of Financial Condition and Results of Operations
The discussion and analysis presented below is concerned with material changes in financial condition and results of operations between the periods specified in our condensed consolidated balance sheets at December 31, 2021 and June 30, 2021, and in our condensed consolidated statements of earnings for the three and six months ended December 31, 2021 and 2020. All comparisons presented are with respect to the prior-year period, unless stated otherwise. This discussion and analysis should be read in conjunction with the MD&A included in our 2021 Form 10-K.

2 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

Overview of Consolidated Results
Revenue

During the three and six months ended December 31, 2021, revenue increased 9 percent and 11 percent to $45.5 billion and $89.4 billion, respectively, primarily due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers, which largely consisted of branded pharmaceutical sales to large customers.
GAAP and Non-GAAP Operating Earnings/(Loss)

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
GAAP operating earnings/(loss) | $ | (950) |  |  | $ | 461 |  |  | N.M. |  | $ | (535) |  |  | $ | (163) |  |  | N.M.
Surgical gown recall costs/(income) | 1 |  |  | (1) |  |  |  |  | 1 |  |  | (2) |  |  |
State opioid assessment related to prior fiscal years | — |  |  | — |  |  |  |  | — |  |  | 41 |  |  |
Restructuring and employee severance | 7 |  |  | 20 |  |  |  |  | 25 |  |  | 57 |  |  |
Amortization and other acquisition-related costs | 79 |  |  | 116 |  |  |  |  | 158 |  |  | 234 |  |  |
Impairments and (gain)/loss on disposal of assets | 1,295 |  |  | — |  |  |  |  | 1,293 |  |  | 9 |  |  |
Litigation (recoveries)/charges, net | 34 |  |  | 32 |  |  |  |  | 52 |  |  | 1,070 |  |  |
Non-GAAP operating earnings | $ | 467 |  |  | $ | 628 |  |  | (26) | % |  | $ | 994 |  |  | $ | 1,246 |  |  | (20) | %

The sum of the components and certain computations may reflect rounding adjustments.
We had GAAP operating losses of $950 million and $535 million during the three and six months ended December 31, 2021, respectively, due to a $1.3 billion pre-tax non-cash goodwill impairment charge related to the Medical segment. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements" for additional detail.
We had a GAAP operating loss of $163 million during the six months ended December 31, 2020 due to the $1.02 billion pre-tax charge recognized for the estimated liability associated with lawsuits and claims brought against us by states and political subdivisions relating to the distribution of prescription opioid pain medications. See further description of opioid lawsuits and claims in the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements."
Non-GAAP operating earnings during the three and six months ended December 31, 2021 decreased 26 percent and 20 percent, respectively, due to the decrease in Medical segment profit resulting from increased inflationary impacts, primarily related to commodities and transportation, global supply chain constraints, the adverse impact of the net positive impact of PPE in the prior year and the impact of the divestiture of the Cordis business.

3 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

GAAP and Non-GAAP Diluted EPS

| Three Months Ended December 31, |  | Six Months Ended December 31,
($ per share) | 2021 (2) |  | 2020 (2) |  | Change |  | 2021 (2) |  | 2020 (2) |  | Change
GAAP diluted EPS (1) | $ | 0.17 |  |  | $ | 2.13 |  |  | N.M |  | $ | 1.12 |  |  | $ | 1.27 |  |  | (12) | %
State opioid assessment related to prior fiscal years | — |  |  | — |  |  |  |  | — |  |  | 0.10 |  |  |
Restructuring and employee severance | 0.02 |  |  | 0.05 |  |  |  |  | 0.07 |  |  | 0.15 |  |  |
Amortization and other acquisition-related costs | 0.21 |  |  | 0.29 |  |  |  |  | 0.41 |  |  | 0.60 |  |  |
Impairments and (gain)/loss on disposal of assets (3) | 0.77 |  |  | — |  |  |  |  | 0.78 |  |  | (0.02) |  |  |
Litigation (recoveries)/charges, net (4) | 0.10 |  |  | (0.73) |  |  |  |  | 0.15 |  |  | 1.16 |  |  |
Loss on early extinguishment of debt | — |  |  | — |  |  |  |  | 0.03 |  |  | — |  |  |
Non-GAAP diluted EPS (1) | $ | 1.27 |  |  | $ | 1.74 |  |  | (27) | % |  | $ | 2.56 |  |  | $ | 3.26 |  |  | (21) | %

The sum of the components and certain computations may reflect rounding adjustments.
(1)Diluted earnings 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)Impairments and (gain)/loss on disposals of assets, net includes a pre-tax impairment charge of $1.3 billion related to our Medical segment recorded in the second quarter of fiscal 2022. For fiscal 2022, the estimated net tax benefit related to the impairment is $92 million and is included in the annual effective tax rate. As a result, the amount of tax benefit in the current quarter increased by approximately $1.0 billion and is expected to significantly increase the provision for income taxes during the remainder of the fiscal year.
(4)Litigation (recoveries)/charges, net, includes a tax benefit recorded during the three months ended December 31, 2020 related to a net operating loss carryback. Our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, was deducted on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss was carried back and adjusted our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. During the three months ended December 31, 2020, the total benefit from the net operating loss carryback was $420 million; however, for purposes of Non-GAAP financial measures, we allocated $394 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $26 million is included in non-GAAP measures.
During the three and six months ended December 31, 2021, GAAP diluted EPS was adversely impacted by the goodwill impairment charge related to the Medical segment, which had a $(0.77) and $(0.76) per share after-tax impact, respectively. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements" for additional detail. During the six months ended December 31, 2021, GAAP diluted EPS was also adversely impacted by the factors impacting non-GAAP operating earnings.
During the three and six months ended December 31, 2020, GAAP diluted EPS included a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss. Refer to Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional detail. During the six months ended December 31, 2020, GAAP diluted EPS was adversely impacted by the opioid litigation charge 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, which had a $(2.38) per share after-tax impact on GAAP diluted EPS. See the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
During the three and six months ended December 31, 2021, non-GAAP diluted EPS decreased 27 percent and 21 percent to $1.27 and $2.56 per share, respectively. This decrease was primarily due to the factors impacting non-GAAP operating earnings and the prior-year tax benefit from the net operating loss carryback, partially offset by lower share count as a result of share repurchases.
Cash and Equivalents

Our cash and equivalents balance was $3.2 billion at December 31, 2021 compared to $3.4 billion at June 30, 2021. During the six months ended December 31, 2021, net cash provided by operating activities was $549 million, which includes the payment into escrow of the majority of our first annual settlement payment under the Proposed Settlement Agreement related to state and local governmental opioid claims, and we deployed $800 million for share repurchases, $592 million for debt repayment, and $289 million for cash dividends. We also received proceeds of $927 million, net of cash transferred, from the divestiture of the Cordis business.

4 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

Significant Developments in Fiscal 2022 and Trends
Opioid Lawsuits Development

In July 2021, we announced that we and two other national distributors have negotiated a proposed settlement agreement (the “Proposed Settlement Agreement”) and settlement process that, if all conditions are satisfied, would result in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities.
The Proposed Settlement Agreement includes a cash component, pursuant to which we would pay up to approximately $6.37 billion, the majority of which would be paid over 18 years. The exact payment amount will depend on several factors, including the participation rate of states and political subdivisions, the extent to which states take action to foreclose opioid lawsuits by political subdivisions (e.g., laws barring or limiting opioid lawsuits by political subdivisions), and the extent to which political subdivisions in participating states file additional opioid lawsuits against us after the Proposed Settlement Agreement becomes effective.
The Proposed Settlement Agreement also includes injunctive relief terms related to distributors’ controlled substance anti-diversion programs, including with respect to: (1) governance; (2) independence and training of the personnel operating controlled substances monitoring programs; (3) due diligence for new and existing customers; (4) ordering limits for certain products; and (5) suspicious order monitoring. A monitor will be selected to oversee compliance with these provisions for a period of five years. In addition, we and the two other settling distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which distributors will fund for ten years.
In September 2021, the three distributors determined that a sufficient number of states had agreed to participate in the Proposed Settlement Agreement to proceed to the next phase of the settlement process, which was the subdivision sign-on period. The subdivision sign-on period ended January 26, 2022. Each participating state will now make a determination as to whether a sufficient number of its political subdivisions have agreed to the Proposed Settlement Agreement (or otherwise had their claims foreclosed) to proceed with the Proposed Settlement Agreement. Following that determination by participating states, each of the three distributors will independently determine whether a sufficient number of subdivisions, including both those litigating and those that have not sued, have agreed to participate in the Proposed Settlement Agreement (or otherwise had their claims foreclosed) to proceed to execution. This process is currently contemplated to end in February 2022. The Proposed Settlement Agreement remains subject to contingencies. It is possible that a sufficient number of states and subdivisions will not agree to the Proposed Settlement Agreement or that other required contingencies will not be satisfied.
If the required contingencies are satisfied, the Proposed Settlement Agreement is expected to become effective in April 2022. During the period between the satisfaction of contingencies and the effective date, the participating states and the distributors would cooperate to obtain consent judgments embodying the terms of the Proposed Settlement Agreement in each participating state and dismissing lawsuits of participating states and subdivisions.
In connection with the negotiations of the Proposed Settlement Agreement, we and the two other national distributors have entered into a settlement with each of the States of Florida, New York, Ohio and Rhode Island and their participating subdivisions. If the Proposed Settlement Agreement becomes effective, these states and their participating subdivisions will become a part of it.
West Virginia subdivisions and Native American tribes are not a part of this settlement process and we have been involved in separate negotiations with these groups. In September 2021 we announced that we, along with two other national distributors, had reached an agreement with the Cherokee Nation in connection with ongoing negotiations toward a broader agreement with Native American tribes. In January 2022, we, along with two other national distributors, executed a term sheet with the Native American tribes.
A bench trial before a federal judge in West Virginia brought by Cabell County and City of Huntington against us and two other national distributors concluded in July 2021. The judge has not yet issued a decision. In addition, a bench trial in the case brought by the Washington Attorney General against us and the same two other national distributors began in November 2021 in Washington state court. A trial in a case brought by private plaintiffs is scheduled to begin in state court in Georgia in March 2022. Trials are inherently unpredictable and it is possible that the outcome of these trials, either individually or in the aggregate, could materially negatively impact our financial results, cash flows or results of operations.
During the six months ended December 31, 2021, we paid into escrow the majority of our first annual payment under the Proposed Settlement Agreement. We also made certain payments under the separate New York and Ohio settlements. In total, we have $6.68 billion accrued at December 31, 2021, of which $480 million is included in other accrued liabilities, and the remainder is included in deferred income taxes and other liabilities in our condensed consolidated balance sheets. Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. We regularly review these opioid litigation matters to determine whether our accrual is adequate. The amount of ultimate loss may differ

5 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

materially from this accrual, whether as a result of settlement discussions, a judicial decision or verdict or otherwise. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
Inflationary Impacts and Global Supply Chain Constraints, and Medical Goodwill

Medical segment profit was negatively impacted by increased inflationary impacts, primarily related to commodities and transportation (including ocean and domestic freight), and global supply constraints during the three and six months ended December 31, 2021. Due to the risks and uncertainties related to these impacts, we performed interim goodwill impairment testing, which resulted in a pre-tax non-cash goodwill impairment charge of $1.3 billion, included in impairments and (gain)/loss on disposal of assets in our condensed consolidated statements of earnings. See "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements" for additional detail. For fiscal 2022, the estimated net tax benefit related to the impairment is $92 million and is included in the annual effective tax rate. As a result, the amount of tax benefit in the current quarter increased by approximately $1.0 billion and is expected to significantly increase the provision for income taxes during the remainder of the fiscal year. Refer to Note 7 of the "Notes to Condensed Consolidated Financial Statements" for additional detail.
We expect these inflationary impacts and global supply chain constraints to continue to adversely impact Medical segment profit. In order to partially mitigate the impact, we are taking cost-savings measures and intend to implement price increases. If these increased costs and the adverse impact of supply chain disruptions are greater than we expect, continue beyond our expectations, or we are unable to increase prices or achieve the cost-savings measures that we expect, our results of operations will be adversely impacted to a greater extent than we currently anticipate.
We also experienced increased costs in the Pharmaceutical segment, primarily related to transportation and labor, during the three and six months ended December 31, 2021. However, we do not expect the impact to be meaningful to Pharmaceutical segment profit for fiscal 2022.
COVID-19

The COVID-19 pandemic ("COVID-19") had a net negative impact on our consolidated operating earnings during the three and six months ended December 31, 2021.
In the Pharmaceutical segment, volumes within our generics program were lower compared to levels prior to COVID-19, which negatively impacted Pharmaceutical segment profit during the six months ended December 31, 2021. However, volumes within our generics program continued to improve and approximated levels prior to COVID-19 during the three months ended December 31, 2021. On a year-over-year basis, the impact to segment profit was favorable due to improvement in volume during the three and six months ended December 31, 2021.
Medical segment profit was negatively impacted by COVID-19 during the three and six months ended December 31, 2021 and on a year-over-year basis primarily due to the net impact of personal protective equipment ("PPE"), which we expect to improve during the remainder of fiscal 2022. During the three months and six ended December 31, 2021, demand for surgical products related to elective procedures was comparable to levels in the prior year. Higher volumes in our laboratory business continued to positively impact Medical segment profit, but did not have a meaningful impact on a year-over-year basis due to relatively higher volumes in the prior periods.
We currently anticipate that the negative impact of the COVID-19 pandemic on consolidated operating earnings will be less in fiscal 2022 than in the prior year, which included an inventory reserve of $197 million for certain Medical segment PPE during the fourth quarter of fiscal 2021. As a result, we expect the COVID-19 impact for fiscal 2022 will be positive in comparison to prior year. However, we cannot estimate the length or severity of the COVID-19 pandemic or of the related U.S. or global economic consequences on our businesses and results of operations, including whether and when historic economic and operating conditions will resume, or its impact on our business, financial position, results of operations or cash flow. Its impact may be greater or less than we anticipate.
Cordis Divestiture

In August 2021, we sold our Cordis business to Hellman & Friedman for proceeds of $927 million, net of cash transferred, and we retained certain working capital accounts and certain liabilities. The purchase price is subject to adjustments based on working capital requirements as set forth in the agreement. Cardinal Health will retain product liability associated with lawsuits and claims related to inferior vena cava

6 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Overview |

("IVC") filters in the U.S. and Canada, as well as authority for these matters discussed in Note 6 of the "Notes to Condensed Consolidated Financial Statements." In connection with the closing, we entered into a Transition Services Agreement ("TSA") with the buyer to provide support functions for a period of up to twenty-four months following the sale. See Note 2 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
As anticipated, Medical segment revenue and Medical segment profit were adversely impacted during the three and six months ended December 31, 2021 due to the divestiture of the Cordis business. We expect the divestiture will decrease Medical segment revenue by approximately $700 million and adversely impact Medical segment profit by approximately $70 million in fiscal 2022. The divestiture of the Cordis business resulted in a decrease in amortization of acquisition-related intangible assets during the three and six months ended December 31, 2021, which we expect to continue for the remainder of fiscal 2022. The divestiture of the Cordis business is subject to risks and uncertainties that may further adversely impact Medical segment profit. For example, the TSA period may be extended beyond our current expectations or could have unintended consequences, and the costs associated with the exit or disposal activities and stranded costs could be greater than anticipated.

7 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Results of Operations |

Results of Operations
Revenue

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
Pharmaceutical | $ | 41,375 |  |  | $ | 37,236 |  |  | 11 | % |  | $ | 81,197 |  |  | $ | 72,348 |  |  | 12 | %
Medical | 4,085 |  |  | 4,310 |  |  | (5) | % |  | 8,234 |  |  | 8,267 |  |  | — | %
Total segment revenue | 45,460 |  |  | 41,546 |  |  | 9 | % |  | 89,431 |  |  | 80,615 |  |  | 11 | %
Corporate | (3) |  |  | (5) |  |  | N.M |  | (6) |  |  | (9) |  |  | N.M
Total revenue | $ | 45,457 |  |  | $ | 41,541 |  |  | 9 | % |  | $ | 89,425 |  |  | $ | 80,606 |  |  | 11 | %

Pharmaceutical Segment
During the three and six months ended December 31, 2021, revenue increased primarily due to sales growth from pharmaceutical distribution and specialty pharmaceutical customers, which together increased revenue by $4.1 billion and $8.8 billion, respectively, and largely consisted of branded pharmaceutical sales to large customers.
Medical Segment
Medical segment revenue decreased during the three months ended December 31, 2021 primarily due to the impact of the divestiture of the Cordis business.
Medical segment revenue was flat during the six months ended December 31, 2021. The adverse impact of the divestiture of the Cordis business was offset primarily due to the positive impact of PPE within products and distribution and sales growth in at-Home solutions.
Cost of Products Sold

Cost of products sold for the three and six months ended December 31, 2021 increased 10 percent to $43.8 billion and 12 percent to $86.2 billion, respectively, compared to the respective prior-year periods as a result of the factors affecting the changes in revenue and gross margin.

8 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Results of Operations |

Gross Margin

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
Gross margin | $ | 1,616 |  |  | $ | 1,776 |  |  | (9) | % |  | $ | 3,258 |  |  | $ | 3,491 |  |  | (7) | %

Gross margin during the three and six months ended December 31, 2021 was adversely impacted due to the divestiture of the Cordis business and increased costs in the Medical segment due to inflationary impacts and global supply chain constraints.
Gross margin rate declined 72 basis points and 69 basis points during the three and six months ended December 31, 2021, respectively, mainly due to changes in product mix resulting from pharmaceutical distribution branded sales, which have a dilutive impact on our overall gross margin rate. The performance of Medical segment products and distribution, which reflects the divestiture of the Cordis business and increased costs due to inflationary impacts and global supply chain constraints, also had an adverse impact on gross margin rate.
Distribution, Selling, General and Administrative ("SG&A") Expenses

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
SG&A expenses | $ | 1,151 |  |  | $ | 1,147 |  |  | — | % |  | $ | 2,265 |  |  | $ | 2,284 |  |  | (1) | %

During the three and six months ended December 31, 2021, SG&A expenses were flat primarily due to increased expenses related to investments in information technology infrastructure and higher operations expenses, mostly offset by the divestiture of the Cordis business.
During the six months ended December 31, 2021, the year-over-year comparison was also favorably impacted by the prior-year $41 million accrual for our estimated portion of the assessment on prescription opioid medications that were sold or distributed in New York state in calendar year 2017 and 2018, which was recognized during the three months ended September 30, 2020. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information on the New York Opioid Stewardship Act.

9 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Results of Operations |

Segment Profit

We evaluate segment performance based on segment profit, among other measures. See Note 12 of the "Notes to Condensed Consolidated Financial Statements" for additional information on segment profit.

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
Pharmaceutical | $ | 426 |  |  | $ | 413 |  |  | 3 | % |  | $ | 832 |  |  | $ | 815 |  |  | 2 | %
Medical | 50 |  |  | 236 |  |  | (79) | % |  | 173 |  |  | 466 |  |  | (63) | %
Total segment profit | 476 |  |  | 649 |  |  | (27) | % |  | 1,005 |  |  | 1,281 |  |  | (22) | %
Corporate | (1,426) |  |  | (188) |  |  | N.M. |  | (1,540) |  |  | (1,444) |  |  | N.M
Total consolidated operating earnings/(loss) | $ | (950) |  |  | $ | 461 |  |  | N.M. |  | $ | (535) |  |  | $ | (163) |  |  | N.M

Pharmaceutical Segment Profit
During the three and six months ended December 31, 2021, Pharmaceutical segment profit increased primarily due to the performance of our generics program, including an improvement in volumes compared to the prior year, which were adversely impacted by COVID-19. This was partially offset by increased expenses related to investments in information technology infrastructure. During the three months ended December 31, 2021, Pharmaceutical segment profit was also adversely impacted by higher operations expenses.
Pharmaceutical segment profit during the three and six months ended December 31, 2021 was positively impacted by a $16 million judgment for lost profits related to an ordinary course intellectual property rights claim.
Medical Segment Profit
Medical segment profit decreased during the three and six months ended December 31, 2021 largely due to increased inflationary costs, primarily related to commodities and transportation, and the adverse impact of global supply chain constraints. Medical segment profit also reflects an adverse impact related to the prior-year net positive impact of PPE and the impact of the divestiture of the Cordis business.
Corporate
The changes in Corporate during the three and six months ended December 31, 2021 were due to the factors discussed in the Other Components of Consolidated Operating Earnings/(Loss) section that follows.

10 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Results of Operations |

Other Components of Consolidated Operating Earnings/(Loss)

In addition to revenue, gross margin and SG&A expenses discussed previously, consolidated operating earnings/(loss) were impacted by the following:

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2021 |  | 2020
Restructuring and employee severance | $ | 7 |  |  | $ | 20 |  |  | $ | 25 |  |  | $ | 57 |
Amortization and other acquisition-related costs | 79 |  |  | 116 |  |  | 158 |  |  | 234 |
Impairments and (gain)/loss on disposal of assets, net | 1,295 |  |  | — |  |  | 1,293 |  |  | 9 |
Litigation (recoveries)/charges, net | 34 |  |  | 32 |  |  | 52 |  |  | 1,070 |

Restructuring and Employee Severance
Restructuring and employee severance during the three and six months ended December 31, 2021 and 2020 was primarily related to the implementation of certain enterprise-wide cost-saving measures. Restructuring costs during the three and six months ended December 31, 2021 also included costs related to the divestiture of the Cordis business.
Amortization and Other Acquisition-Related Costs
Amortization of acquisition-related intangible assets was $79 million and $113 million for the three months ended December 31, 2021 and 2020, respectively, and $157 million and $228 million for the six months ended December 31, 2021 and 2020, respectively. The decrease in amortization of acquisition-related intangible assets was primarily due to the divestiture of the Cordis business.
Impairments and (Gain)/Loss on Disposal of Assets, Net
During the three and six months ended December 31, 2021, we recognized a $1.3 billion pre-tax non-cash goodwill impairment charge related to our Medical segment, as discussed further in the "Critical Accounting Policies and Sensitive Accounting Estimates" section of this MD&A and Note 4 of the "Notes to Condensed Consolidated Financial Statements."
Litigation (Recoveries)/Charges, Net
During the six months ended December 31, 2020, we recognized a pre-tax charge of $1.02 billion associated with certain opioid matters. See the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
We recognized estimated losses and legal defense costs associated with the IVC filter product liability claims of $13 million and $18 million during the three months ended December 31, 2021 and 2020, respectively, and $39 million and $28 million during the six months ended December 31, 2021 and 2020, respectively. See Note 6 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
During the six months ended December 31, 2021, we recognized income of $17 million for recoveries in class action antitrust lawsuits in which we were a class member.
During the three and six months ended December 31, 2020, we recognized a $13 million charge in connection with a civil investigation by the United States Attorney’s Office for the District of Massachusetts related to discounts and rebates offered or provided to certain Specialty Solutions customers, as described further in Note 6 of the "Notes to Condensed Consolidated Financial Statements."
Earnings/(Loss) Before Income Taxes

In addition to the items discussed above, earnings/(loss) before income taxes were impacted by the following:

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | Change |  | 2021 |  | 2020 |  | Change
Other (income)/expense, net | $ | (13) |  |  | $ | (12) |  |  | N.M |  | $ | (17) |  |  | $ | (19) |  |  | N.M
Interest expense, net | 37 |  |  | 46 |  |  | (20) | % |  | 77 |  |  | 91 |  |  | (15) | %
Loss on early extinguishment of debt | — |  |  | — |  |  | N.M |  | 10 |  |  | 1 |  |  | N.M
(Gain)/Loss on sale of equity interest in naviHealth | (1) |  |  | — |  |  | N.M |  | (1) |  |  | — |  |  | N.M

Interest Expense, Net
The decrease in interest expense during the three and six months ended December 31, 2021 was primarily due to less debt outstanding.

11 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Results of Operations |

Loss on Early Extinguishment of Debt
During six months ended December 31, 2021, we recognized a $10 million loss in connection with the debt redemption as described further in Note 5 of the “Notes to Condensed Consolidated Financial Statements.”
Provision for/(Benefit from) Income Taxes

During the three months ended December 31, 2021 and 2020, the effective tax rate was 105.0 percent and (47.6) percent, respectively. The effective tax rate for the three months ended December 31, 2021 reflects the impact of the tax effect of the goodwill impairment charge being included in our estimated annual effective tax rate. The estimated annual effective tax rate for the three months ended December 31, 2020 included a benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss, partially offset by the treatment of the tax impacts of the opioid litigation accrual.
During the six months ended December 31, 2021 and 2020, the effective tax rate was 153.1 percent and 259.7 percent. The effective tax rate for the six months ended December 31, 2021 reflects the impact of the tax effect of the goodwill impairment charge being included in our estimated annual effective tax rate. The effective tax rate for the six months ended December 31, 2020 included a benefit from a net operating loss carryback primarily related to a self-insurance pre-tax loss and the net tax benefit related to the treatment of the tax impacts of opioid litigation charges.
Tax Effects of Goodwill Impairment Charge
During the six months ended December 31, 2021, we recognized a $1.3 billion pre-tax charge for goodwill impairment related to the Medical Unit. The net tax benefit related to this charge is $92 million for fiscal 2022.
Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings/(loss) before income taxes for the year-to-date period to compute our benefit from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur.
The tax effect of the goodwill impairment charge during the three months ended December 31, 2021 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairment in prior fiscal years. The impact of the non-deductible goodwill significantly increased the estimated annual effective tax rate for fiscal 2022. Applying the higher tax rate to the current quarter loss resulted in recognizing an interim tax benefit of approximately $1.0 billion, which impacted the benefit from income taxes in the condensed consolidated statements of earnings during the three months and six months ended December 31, 2021 and prepaid expenses and other assets in the condensed consolidated balance sheets at December 31, 2021. This interim tax benefit will reverse in future quarters of fiscal 2022.

12 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Liquidity and Capital Resources |

Liquidity and Capital Resources
We currently believe that, based on available capital resources (cash on hand and committed credit facilities) and projected operating cash flow, we have adequate capital resources to fund working capital needs; currently anticipated capital expenditures; currently anticipated business growth and expansion; contractual obligations; tax payments; current and projected debt service requirements, dividends and share repurchases; and opioid litigation settlement payments associated with the Proposed Settlement Agreement, the state agreements and Cherokee Nation and Native American tribes agreements. If we decide to engage in one or more acquisitions, depending on the size and timing of such transactions, we may need to access capital markets for additional financing.
Cash and Equivalents

Our cash and equivalents balance was $3.2 billion at December 31, 2021 compared to $3.4 billion at June 30, 2021. At December 31, 2021, our cash and equivalents were held in cash depository accounts with major banks or invested in high quality, short-term liquid investments.
During the six months ended December 31, 2021, net cash provided by operating activities was $549 million, which includes the payment into escrow of the majority of our first annual settlement payment under the Proposed Settlement Agreement related to state and local governmental opioid claims, and we deployed $800 million for share repurchases, $592 million for debt repayment, and $289 million for cash dividends. We also received proceeds of $927 million, net of cash transferred, from the divestiture of the Cordis business.
Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, and payments to vendors in the regular course of business, as well as fluctuating working capital needs driven by customer and product mix.
The cash and equivalents balance at December 31, 2021 includes $722 million of cash held by subsidiaries outside of the United States.
Other Financing Arrangements and Financial Instruments

Credit Facilities and Commercial Paper
In addition to cash and equivalents and operating cash flow, other sources of liquidity at December 31, 2021 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. At December 31, 2021, we had no amounts outstanding under our commercial paper program, revolving credit facility, or our committed receivables sales facility.
Our revolving credit and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of December 31, 2021, we were in compliance with this financial covenant.
Long-Term Debt and Other Short-Term Borrowings
At December 31, 2021 and June 30, 2021, we had total long-term obligations, including the current portion and other short-term borrowings, of $5.6 billion and $6.2 billion, respectively. During the six months ended December 31, 2021, we redeemed $572 million of the 2.616% Notes due 2022 with available cash. In connection with this redemption, we recorded a $10 million loss on early extinguishment of debt. The early redemption was funded with available cash.

13 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Liquidity and Capital Resources |

Anticipated Capital Resources

Tax Effects of Self-Insurance Pre-tax Loss
In connection with a tax benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss as described further in our 2021 Form 10-K, we have filed for a refund of $974 million, which we expect to receive within 12 months. Accordingly, we have a current asset for this amount on our condensed consolidated balance sheets at both December 31, 2021 and June 30, 2021.
Capital Deployment

Proposed Opioid Litigation Settlement Agreement
We had $6.68 billion accrued at December 31, 2021 related to certain opioid litigation, as further described within the Significant Developments in Fiscal 2022 and Trends section in this MD&A and Note 6 of the "Notes to Condensed Consolidated Financial Statements." We expect the majority of the payment amounts to be spread over 18 years. During the six months ended December 31, 2021, we paid into escrow the majority of our first annual payment under the Proposed Settlement Agreement, which is reflected in prepaid expenses and other assets in our condensed consolidated balance sheets. If the Proposed Settlement Agreement does not become effective, this payment will be returned to us. We also made certain payments under the separate New York and Ohio settlements. We expect to pay the remainder of our first annual payment into escrow in February 2022 and, if the Proposed Settlement Agreement becomes effective, to make subsequent annual payments under the Proposed Settlement Agreement every July for the term of our agreement beginning in July 2022. The amounts of these future payments may differ from the payment made during the six months ended December 31, 2021.
Capital Expenditures
Capital expenditures during the six months ended December 31, 2021 and 2020 were $141 million and $174 million, respectively.
Dividends
On each of May 5, 2021, August 4, 2021, and November 4, 2021 our Board of Directors approved a quarterly dividend of $0.4908 per share, or $1.96 per share on an annualized basis, which were paid on July 15, 2021, October 15, 2021 and January 15, 2022 to shareholders of record on July 1, 2021, October 1, 2021 and January 3, 2022 respectively.
Share Repurchases
During the six months ended December 31, 2021, we repurchased $800 million of our common shares, in the aggregate, under accelerated share repurchase ("ASR") programs. See Note 10 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
On November 4, 2021, our Board of Directors approved a $3.0 billion share repurchase program, which will expire on December 31, 2024. As of January 31, 2022, we had $2.9 billion remaining authorized for share repurchases under this program.

14 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Other Items |

Other Items
The MD&A in our 2021 Form 10-K addresses our contractual obligations and off-balance sheet arrangements, as of and for the fiscal year ended June 30, 2021. There have been no subsequent material changes outside the ordinary course of business to those items.
Critical Accounting Policies and Sensitive Accounting Estimates
The discussion and analysis presented below is a supplemental disclosure to the critical accounting policies and sensitive accounting estimates specified in our consolidated balance sheet at June 30, 2021. This discussion and analysis should be read in conjunction with the Critical Accounting Policies and Sensitive Accounting Estimates included in our 2021 Form 10-K and our Form 10-Q for the quarter ended September 30, 2021.
Critical accounting policies are those accounting policies that (i) can have a significant impact on our financial condition and results of operations and (ii) require the use of complex and subjective estimates based upon past experience and management’s judgment. Other people applying reasonable judgment to the same facts and circumstances could develop different estimates. Because estimates are inherently uncertain, actual results may differ, including due to the risks discussed in "Risk Factors" and other risks discussed in our 2021 Form 10-K and our other filings with the SEC since June 30, 2021.
Inventory

A portion of our inventories are valued at the lower of cost, using the last-in, first-out ("LIFO") method, or market. These are primarily merchandise inventories at the core pharmaceutical distribution facilities within our Pharmaceutical segment (“distribution facilities”).
Our remaining inventory, including inventory in our Medical segment, that is not valued at the lower of LIFO cost or market is stated at the lower of cost, using the first-in, first-out method ("FIFO"), or net realizable value. We reserve for the lower of cost or net realizable value using the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Due to the unprecedented demand for certain PPE as a result of COVID-19, our Medical segment manufactured and sourced inventory at higher costs than
in periods prior to COVID-19. As selling prices and customer demand decreased compared to the peak of COVID-19, we recorded a reserve of $197 million in fiscal 2021, primarily related to certain categories of gloves, to reduce the carrying value of certain PPE to its net realizable value.
We continued to monitor and assess changes in selling prices and customer demand related to PPE during the six months ended December 31, 2021. While we consider that our assumptions continue to be reasonable and appropriate, our estimates for selling prices and demand are inherently uncertain and if our assumptions decline in the future, additional inventory reserves may be required.
Goodwill

Purchased goodwill is tested for impairment annually or when indicators of impairment exist. Goodwill impairment testing involves a comparison of the estimated fair value of reporting units to the respective carrying amount, which may be performed utilizing either a qualitative or quantitative assessment. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If it is determined that it is more likely than not that the fair value does not exceed the carrying amount, then a quantitative test is performed. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount. A reporting unit is defined as an operating segment or one level below an operating segment (also known as a component).
Our reporting units are: Pharmaceutical operating segment (excluding our Nuclear and Precision Health Solutions division);
Nuclear and Precision Health Solutions division; Medical operating segment (excluding our Cardinal Health at-Home Solutions division) (“Medical Unit”); and Cardinal Health at-Home Solutions division.
Goodwill impairment testing involves judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit. Our qualitative evaluation considers the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

15 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

MD&A | Other Items |

Medical Unit Goodwill
During the three months ended December 31, 2021, the Medical Unit continued to experience adverse financial results related to inflationary impacts and global supply chain constraints. Due to the risks and uncertainties related to these impacts, we elected to bypass the qualitative assessment and perform interim goodwill impairment testing for the Medical Unit. We updated our assumptions from prior periods to include the increased magnitude and breadth of the inflationary impacts to supply chain and commodities costs as well as adverse impacts due to supply chain disruptions. In addition, our planned price increases did not impact the second quarter of fiscal 2022 and therefore, we updated our assumptions to reflect a longer duration to implement such actions.
Our determination of the estimated fair value of the Medical Unit is based on a combination of the income-based approach (using a discount rate of 9 percent and a terminal growth rate of 2 percent), and the market-based approach. The carrying amount exceeded the fair value, which resulted in a pre-tax impairment charge of $1.3 billion for the Medical Unit, which was recognized during the three months ended December 31, 2021 and is included in impairments and (gain)/loss on disposal of assets in our condensed consolidated statements of earnings. The carrying value of the Medical Unit at December 31, 2021 after recognizing the impairment charge was $8.1 billion, of which $2.8 billion was goodwill. See Note 4 of the "Notes to Condensed Consolidated Financial Statements" for further discussion.
While we consider these assumptions to be reasonable and appropriate, they are complex and subjective, and additional adverse changes in one key assumption or a combination of key assumptions may significantly affect future estimates. These assumptions include, among other things, a failure to meet expected earnings or other financial plans, or unanticipated events and circumstances, such as changes in assumptions about the duration and magnitude of increased supply chain and commodities costs and our planned efforts to mitigate such impact, including price increases or surcharges; further disruptions in the supply chain; the impact of the Cordis divestiture; the COVID-19 pandemic, including estimated demand and selling prices for PPE; an increase in the discount rate; a decrease in the terminal growth rate; increases in tax rates (including potential tax reform); or a significant change in industry or economic trends. Adverse changes in key assumptions may result in further decline in fair value below the carrying value in the future and therefore, an impairment of our Medical Unit goodwill in future periods, which could adversely affect our results of operations. For example, if we were to increase the discount rate by a hypothetical 0.25 percent or decrease the terminal growth rate by a hypothetical 0.70 percent, the fair value for the Medical Unit would have further decreased by approximately $225 million.

16 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Explanation and Reconciliation of Non-GAAP Financial Measures |  |

Explanation and Reconciliation of Non-GAAP Financial Measures
The "Overview of Consolidated Results" section within MD&A in this Form 10-Q contains financial measures that are not calculated in accordance with GAAP.
In addition to analyzing our business based on financial information prepared in accordance with GAAP, we use these non-GAAP financial measures internally to evaluate our performance, engage in financial and operational planning, and determine incentive compensation because we believe that these measures provide additional perspective on and, in some circumstances are more closely correlated to, the performance of our underlying, ongoing business. We provide these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on our financial and operating results on a year-over-year basis and in comparing our performance to that of our competitors. However, the non-GAAP financial measures that we use may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The non-GAAP financial measures disclosed by us should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth below should be carefully evaluated.
Exclusions from Non-GAAP Financial Measures
Management believes it is useful to exclude the following items from the non-GAAP measures presented in this report for its own and for investors’ assessment of the business for the reasons identified below:
•LIFO charges and credits are excluded because the factors that drive last-in first-out ("LIFO") inventory charges or credits, such as pharmaceutical manufacturer price appreciation or deflation and year-end inventory levels (which can be meaningfully influenced by customer buying behavior immediately preceding our fiscal year-end), are largely out of our control and cannot be accurately predicted. The exclusion of LIFO charges and credits from non-GAAP metrics facilitates comparison of our current financial results to our historical financial results and to our peer group companies’ financial results. We did not recognize any LIFO charges or credits during the periods presented.
•Surgical gown recall costs or income includes inventory write-offs and certain remediation and supply disruption costs, net of related insurance recoveries, arising from the January 2020 recall of select Association for the Advancement of Medical Instrumentation ("AAMI") Level 3 surgical gowns and voluntary field actions (a recall of some packs and a corrective action allowing overlabeling of other packs) for Presource Procedure Packs containing affected gowns. Income from surgical gown recall costs represents insurance recoveries of these certain costs. We have excluded these costs from our non-GAAP metrics to allow investors to better understand the underlying operating results of the business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies’ financial results.
•State opioid assessments related to prior fiscal years is the portion of state assessments for prescription opioid medications that were sold or distributed in periods prior to the period in which the expense is incurred. This portion is excluded from non-GAAP financial measures because it is retrospectively applied to sales in prior fiscal years and inclusion would obscure analysis of the current fiscal year results of our underlying, ongoing business. Additionally, while states' laws may require us to make payments on an ongoing basis, the portion of the assessment related to sales in prior periods are contemplated to be one-time, nonrecurring items. Income from state opioid assessments related to prior fiscal years represents reversals of accruals when the underlying assessments were invalidated by a Court or reimbursed by manufacturers.
•Restructuring and employee severance costs are excluded because they are not part of the ongoing operations of our underlying business.
•Amortization and other acquisition-related costs, which include transaction costs, integration costs, and changes in the fair value of contingent consideration obligations, are excluded because they are not part of the ongoing operations of our underlying business and to facilitate comparison of our current financial results to our historical financial results and to our peer group companies' financial results. Additionally, costs for amortization of acquisition-related intangible assets are non-cash amounts, which are variable in amount and frequency and are significantly impacted by the timing and size of acquisitions, so their exclusion facilitates comparison of historical, current and forecasted financial results. We also exclude other acquisition-related costs, which are directly related to an acquisition but do not meet the criteria to be recognized on the acquired entity’s initial balance sheet as part of the purchase price allocation. These costs are also significantly impacted by the timing, complexity and size of acquisitions.

17 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Explanation and Reconciliation of Non-GAAP Financial Measures |  |

•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. During fiscal 2021, we incurred a tax benefit related to a carryback of a net operating loss. Some pre-tax amounts, which contributed to this loss, relate to litigation charges. As a result, we allocated substantially all of the tax benefit to litigation charges. Additionally, during fiscal 2022 our Pharmaceutical segment profit was positively impacted by a $16 million judgment for lost profits. This judgment was the result of an ordinary course intellectual property rights claim and, therefore, is not adjusted in calculating the litigation recoveries or charges, net adjustment.
•Loss on early 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.
•(Gain)/Loss on sale of equity interest in naviHealth was incurred in connection with the sale of our remaining equity interest in naviHealth in fiscal 2020. The equity interest was retained in connection with the initial sale of our majority interest in naviHealth during fiscal 2019. We exclude this significant gain because gains or losses on investments of this magnitude do not typically occur in the normal course of business and are similar in nature to a gain or loss from a divestiture of a majority interest, which we exclude from non-GAAP results. The gain on the initial sale of our majority interest in naviHealth in fiscal 2019 was also excluded from our non-GAAP measures.
•Transitional tax benefit, net related to the Tax Cuts and Jobs Act is excluded because it results from the one-time impact of a very significant change in the U.S. federal corporate tax rate and, due to the significant size of the benefit, obscures analysis of trends and financial performance. The transitional tax benefit includes the initial estimate and subsequent adjustments for the re-measurement of deferred tax assets and liabilities due to the reduction of the U.S. federal corporate income tax rate and the repatriation tax on undistributed foreign earnings.
The tax effect for each of the items listed above, other than the transitional tax benefit item, is determined using the tax rate and other tax attributes applicable to the item and the jurisdiction(s) in which the item is recorded. The gross, tax and net impact of each item are presented with our GAAP to non-GAAP reconciliations.
Definitions
Growth rate calculation: growth rates in this report are determined by dividing the difference between current-period results and prior-period results by prior-period results.
Non-GAAP operating earnings: operating earnings/(loss) excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, and (7) litigation (recoveries)/charges, net.
Non-GAAP earnings before income taxes: earnings/(loss) before income taxes excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth.
Non-GAAP net earnings attributable to Cardinal Health, Inc.: net earnings attributable to Cardinal Health, Inc. excluding (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth, each net of tax, and (10) transitional tax benefit, net.
Non-GAAP effective tax rate: provision for/(benefit from) income taxes adjusted for (1) LIFO charges/(credits), (2) surgical gown recall costs/(income), (3) state opioid assessment related to prior fiscal years, (4) restructuring and employee severance, (5) amortization and other acquisition-related costs, (6) impairments and (gain)/loss on disposal of assets, (7) litigation (recoveries)/charges, net, (8) loss on early extinguishment of debt and (9) (gain)/loss on sale of equity interest in naviHealth, each net of tax, and (10) transitional tax benefit, net divided by (earnings/(loss) before income taxes adjusted for the first nine items).
Non-GAAP diluted earnings per share attributable to Cardinal Health, Inc.: non-GAAP net earnings attributable to Cardinal Health, Inc. divided by diluted weighted-average shares outstanding.

18 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Explanation and Reconciliation of Non-GAAP Financial Measures |  |

GAAP to Non-GAAP Reconciliation

(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 1 | Net Earnings 1 Growth Rate | Diluted EPS 1 | Diluted EPS 1 Growth Rate
|  |  |  |  | Three Months Ended December 31, 2021
GAAP |  |  |  |  | $ | (950) |  | N.M. | $ | (973) |  | $ | (1,022) |  | $ | 49 |  | N.M. | $ | 0.17 |  | N.M.
Surgical gown recall costs/(income) |  |  |  |  | 1 |  |  | 1 |  | — |  | 1 |  |  | — |  |
Restructuring and employee severance |  |  |  |  | 7 |  |  | 7 |  | 2 |  | 5 |  |  | 0.02 |  |
Amortization and other acquisition-related costs |  |  |  |  | 79 |  |  | 79 |  | 20 |  | 59 |  |  | 0.21 |  |
Impairments and (gain)/loss on disposal of assets, net 2 |  |  |  |  | 1,295 |  |  | 1,295 |  | 1,080 |  | 215 |  |  | 0.77 |  |
Litigation (recoveries)/charges, net 3 |  |  |  |  | 34 |  |  | 34 |  | 6 |  | 28 |  |  | 0.10 |  |
(Gain)/Loss on sale of equity interest in naviHealth |  |  |  |  | — |  |  | (1) |  | — |  | (1) |  |  | — |  |
Non-GAAP |  |  |  |  | $ | 467 |  | (26) | % | $ | 443 |  | $ | 86 |  | $ | 357 |  | (31) | % | $ | 1.27 |  | (27) | %
|  |  |  |  | Three Months Ended December 31, 2020
GAAP |  |  |  |  | $ | 461 |  | 38 | % | $ | 427 |  | $ | (203) |  | $ | 629 |  | N.M | $ | 2.13 |  | N.M
Surgical gown recall costs/(income) |  |  |  |  | (1) |  |  | (1) |  | — |  | (1) |  |  | — |  |
Restructuring and employee severance |  |  |  |  | 20 |  |  | 20 |  | 5 |  | 15 |  |  | 0.05 |  |
Amortization and other acquisition-related costs |  |  |  |  | 116 |  |  | 116 |  | 29 |  | 87 |  |  | 0.29 |  |
Litigation (recoveries)/charges, net 4 |  |  |  |  | 32 |  |  | 32 |  | 248 |  | (216) |  |  | (0.73) |  |
Non-GAAP |  |  |  |  | $ | 628 |  | (3) | % | $ | 594 |  | $ | 79 |  | $ | 514 |  | 15 | % | $ | 1.74 |  | 14 | %
|  |  |  |  | Six Months Ended December 31, 2021
GAAP |  |  |  |  | $ | (535) |  | N.M. | $ | (604) |  | $ | (925) |  | $ | 320 |  | (15) | % | $ | 1.12 |  | (12) | %
Surgical gown recall costs/(income) |  |  |  |  | 1 |  |  | 1 |  | — |  | 1 |  |  | — |  |
Restructuring and employee severance |  |  |  |  | 25 |  |  | 25 |  | 6 |  | 19 |  |  | 0.07 |  |
Amortization and other acquisition-related costs |  |  |  |  | 158 |  |  | 158 |  | 41 |  | 117 |  |  | 0.41 |  |
Impairments and (gain)/loss on disposal of assets, net 2 |  |  |  |  | 1,293 |  |  | 1,293 |  | 1,070 |  | 223 |  |  | 0.78 |  |
Litigation (recoveries)/charges, net 3 |  |  |  |  | 52 |  |  | 52 |  | 10 |  | 42 |  |  | 0.15 |  |
Loss on early extinguishment of debt |  |  |  |  | — |  |  | 10 |  | 3 |  | 7 |  |  | 0.03 |  |
(Gain)/Loss on sale of equity interest in naviHealth |  |  |  |  | — |  |  | (1) |  | — |  | (1) |  |  | — |  |
Non-GAAP |  |  |  |  | $ | 994 |  | (20) | % | $ | 934 |  | $ | 205 |  | $ | 728 |  | (24) | % | $ | 2.56 |  | (21) | %
|  |  |  |  | Six Months Ended December 31, 2020
GAAP |  |  |  |  | $ | (163) |  | N.M. | $ | (236) |  | $ | (613) |  | $ | 376 |  | N.M. | $ | 1.27 |  | N.M.
Surgical gown recall costs/(income) |  |  |  |  | (2) |  |  | (2) |  | (1) |  | (1) |  |  | — |  |
State opioid assessment related to prior fiscal years |  |  |  |  | 41 |  |  | 41 |  | 10 |  | 31 |  |  | 0.10 |  |
Restructuring and employee severance |  |  |  |  | 57 |  |  | 57 |  | 14 |  | 43 |  |  | 0.15 |  |
Amortization and other acquisition-related costs |  |  |  |  | 234 |  |  | 234 |  | 58 |  | 176 |  |  | 0.60 |  |
Impairments and (gain)/loss on disposal of assets, net |  |  |  |  | 9 |  |  | 9 |  | 16 |  | (7) |  |  | (0.02) |  |
Litigation (recoveries)/charges, net 4 |  |  |  |  | 1,070 |  |  | 1,070 |  | 728 |  | 342 |  |  | 1.16 |  |
Loss on early extinguishment of debt |  |  |  |  | — |  |  | 1 |  | — |  | 1 |  |  | — |  |
Non-GAAP |  |  |  |  | $ | 1,246 |  | 2 | % | $ | 1,174 |  | $ | 212 |  | $ | 960 |  | 16 | % | $ | 3.26 |  | 16 | %

19 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Explanation and Reconciliation of Non-GAAP Financial Measures |  |

1 Attributable to Cardinal Health, Inc.
2 Impairments and (gain)/loss on disposals of assets, net includes a pre-tax impairment charge of $1.3 billion related to our Medical segment recorded in the second quarter of fiscal 2022. For fiscal 2022, the estimated net tax benefit related to the impairment is $92 million and is included in the annual effective tax rate. As a result, the amount of tax benefit in the current quarter increased by approximately $1.0 billion and is expected to significantly increase the provision for income taxes during the remainder of the fiscal year.
3 Litigation (recoveries)/charges, net for the second quarter of fiscal 2022 does not include a $16 million judgement for lost profits related to an ordinary course intellectual property claim, which positively impacted Pharmaceutical segment profit in the quarter.
4 Litigation (recoveries)/charges, net includes a pre-tax charge of $1.02 billion recorded in the first quarter of fiscal 2021 related to the opioid litigation. For fiscal 2021, the amount of tax expense increased by approximately $150 million during the three months ended December 31, 2020 while the amount of tax benefit increased by approximately $300 million during the six months ended December 31, 2020 compared to the tax impacts that would have been recognized without the opioid litigation charge. The net tax benefit associated with the opioid litigation charges was $228 million for fiscal 2021.
Litigation(recoveries)/charges, net also includes a tax benefit recorded during the three months ended December 31, 2020 related to a net operating loss carryback. Our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, was deducted on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The net operating loss was carried back and adjusted our taxable income for fiscal 2015, 2016, 2017 and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. During the six months ended December 31, 2020, t he total net benefit was $420 million; however, for purposes of reconciling Non-GAAP financial measures, we allocated $394 million of the benefit to litigation (recoveries)/charges, net, which is excluded from non-GAAP measures, based on the relative amount of the self-insurance pre-tax loss related to opioid litigation claims versus separate tax adjustments. The tax benefit allocated to the separate tax adjustments of $26 million is included in non-GAAP measures.
The sum of the components and certain computations may reflect rounding adjustments.
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

20 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Other |

Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the quantitative and qualitative market risk disclosures included in our 2021 Form 10-K since the end of fiscal 2021 through December 31, 2021.
Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of December 31, 2021. Based on this evaluation, our principal executive officer and principal financial officer have concluded that as of December 31, 2021, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
As explained below, there were changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Pharmaceutical Segment Information Technology Initiative
The Pharmaceutical segment is in a multi-year project to implement a replacement of certain finance and operating information systems. During the three and six months ended December 31, 2021, we transitioned selected processes to the new systems which affected our internal control over financial reporting. It is possible that ongoing transitions to new systems may adversely impact internal control over financial reporting.

21 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Other |  |

Legal Proceedings
In addition to the proceeding described below, the legal proceedings described in Note 6 of the "Notes to Condensed Consolidated Financial Statements" are incorporated in this "Legal Proceedings" section by reference.
In June 2019, Melissa Cohen, a purported shareholder, filed an action on behalf of Cardinal Health, Inc. in the U.S. District Court for the Southern District of Ohio against certain current and former members of our Board of Directors alleging that the defendants breached their fiduciary duties by failing to effectively monitor Cardinal Health's distribution of controlled substances and approving certain payments of executive compensation. In December 2019 and January 2020, similar complaints were filed in the U.S. District Court for the Southern District of Ohio by purported shareholders, Stanley M. Malone and Michael Splaine, respectively. In January, 2020, the court consolidated the derivative cases under the caption In re Cardinal Health, Inc. Derivative Litigation and in March 2020, plaintiffs filed an amended complaint. The amended consolidated derivative complaint seeks, among other things, unspecified money damages against the defendants and an award of attorneys' fees. In February 2021, the court granted in part and denied in part defendants' motion to dismiss. The court dismissed the claim with respect to executive compensation but declined to dismiss the failure to monitor claim.
Subject to definitive documentation and court approval and notice process, the parties have reached an agreement in principle to resolve these lawsuits. Under this agreement, our director and officer's liability insurance carriers, on behalf of the defendants, would pay Cardinal Health $124 million, less any attorneys' fees and expenses awarded by the court to plaintiffs' counsel. This settlement does not include any admission of liability.

22 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Other |

Risk Factors
You should carefully consider the information in this Form 10-Q, including the risk factors below, and the risk factors discussed in "Risk Factors" and other risks discussed in our 2021 Form 10-K and our filings with the SEC since June 30, 2021. These risks could materially and adversely affect our results of operations, financial condition, liquidity, and cash flows. Our business also could be affected by risks that we are not presently aware of or that we currently consider immaterial to our operations.
The public health crisis involving the abuse of prescription opioid pain medication and our efforts to resolve related claims could have additional or unexpected material negative effects on our business.
Our Pharmaceutical segment distributes prescription opioid pain medications. In recent years, the abuse of prescription opioid pain medication has become a public health crisis.
A significant number of states, counties, municipalities and other governmental entities have filed lawsuits against pharmaceutical manufacturers, pharmaceutical wholesale distributors (including us), retail chains and others relating to the manufacturing, marketing or distribution of prescription opioid pain medications. In July 2021, we announced that, as a result of the previously disclosed settlement framework, we and two other national distributors have negotiated a Proposed Settlement Agreement and settlement process that, if all conditions are satisfied (including the approval of the Board of Directors), would result in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities. This Proposed Settlement Agreement is subject to contingencies and there is no assurance that a sufficient number of states and subdivisions will agree to the proposed settlement agreement or that the required contingencies will be satisfied. It is possible that the settlement will not become effective.
West Virginia subdivisions and Native American Tribes are not a part of this settlement process. In September 2021, we announced that we, along with two other national distributors, had reached an agreement with the Cherokee Nation in connection with ongoing negotiations toward a broader agreement with Native American tribes. In January 2022, we, along with two other national distributors, agreed to a term sheet with the Native American tribes. We have had negotiations with the West Virginia subdivisions from time to time. For more information on the proposed settlement and other opioid-related litigation matters, see Note 6 to the Consolidated Financial Statements.
A bench trial before a federal judge in West Virginia brought by Cabell County and City of Huntington against us and two other national distributors concluded in July 2021. The judge has not yet issued a decision. In addition, a bench trial in the case brought by the Washington Attorney General against us and the same two other national distributors began in November 2021 in Washington state court. It is also possible that, even if the Proposed Settlement
Agreement becomes effective, we could have trials for lawsuits brought by other states or subdivisions as well.
In addition to claims brought by governmental entities, we are also being sued by private plaintiffs, such as unions, other health and welfare funds, hospital systems, other healthcare providers and individuals alleging personal injury for the same activities and we could be named as a defendant in additional lawsuits. A trial in Georgia in a lawsuit brought by private plaintiffs against us and two other distributors is scheduled to begin in March 2022. We are vigorously defending ourselves in all of these matters; however, trials are inherently unpredictable and it is possible that the outcome of these trials or any future opioid-related trials, either individually or in the aggregate, could materially negatively impact our financial results, cash flows or results of operations.
We have received federal grand jury subpoenas issued in connection with investigations being conducted by the U.S. Attorney's Office for the Eastern District of New York and the Fraud Section of the U.S. Department of Justice ("DOJ"). We have also received civil requests for information from other DOJ offices. We believe that these investigations concern operation of our anti-diversion program, our anti-diversion policies and procedures, and distribution of certain controlled substances.
The defense and resolution of current and future lawsuits and investigations are subject to uncertainty and could have a material adverse effect on our results of operations, financial condition, cash flows, liquidity, or our ability to pay dividends or repurchase our shares, beyond the amounts accrued. In addition, they could have adverse reputational or operational effects on our business.
Other legislative, regulatory or industry measures related to the public health crisis involving the abuse of prescription opioid pain medication and the distribution of these medications could affect our business in ways that we may not be able to predict. For example, several states have now adopted or proposed taxes or other fees on the sale of opioids. These laws and proposals vary in the tax amounts imposed and the means of calculation. Liabilities for taxes or assessments under any such laws could have an adverse impact on our results of operations unless we are able to mitigate them through operational changes or commercial arrangements where permitted.
Ongoing unfavorable publicity regarding the abuse or misuse of prescription opioid pain medications and the role of wholesale distributors in the supply chain of such prescription medications, as well as the continued proliferation of the opioid lawsuits, investigations, regulations and legislative actions, and unfavorable publicity in relation to those lawsuits could have a material adverse effect on our reputation or results of operations.

23 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Other |

We depend on direct and indirect suppliers to make their products and raw materials available to us and are subject to fluctuations in costs, availability and regulatory risk associated with these products and raw materials.
Our manufacturing businesses use oil-based resins, pulp, cotton, latex and other commodities as raw materials in many products. Prices of oil and gas also affect our distribution and transportation costs. Prices of these commodities are volatile and can fluctuate significantly, causing our costs to produce and distribute our products to fluctuate. Beginning in the fourth quarter of fiscal year 2021, we have experienced higher supply chain costs, primarily related to international freight and commodities, which had a negative impact on Medical segment profit in fiscal 2021 and the first two quarters of fiscal 2022. Supply chain constraints have also had a negative impact on sales within our Medical segment. We expect these cost increases and supply chain constraints to continue to have a negative impact on segment profit, primarily in the Medical segment, in fiscal 2022. Due to competitive dynamics and contractual limitations, we may be unable to pass along cost increases through higher prices. If we continue to have challenges sufficiently offsetting these cost increases through other cost reductions, or recovering these costs through price increases or surcharges, Medical segment profit could be negatively impacted to a greater extent than we currently anticipate.
We depend on others to manufacture some products that we market and distribute. Our operations are also dependent on various components, compounds, raw materials and energy supplied by others. We purchase many of these components, raw materials and energy, and source certain products from numerous suppliers in various countries. In some instances, for reasons of quality assurance, cost effectiveness, or availability, we procure certain components and raw materials from a sole supplier. Our supplier relationships could be interrupted, become less favorable to us or be terminated and the supply of these components, compounds, raw materials or products could be interrupted or become insufficient. These supply interruptions or other disruptions in manufacturing processes could be caused by events beyond our control, including natural disasters, supplier facility shut-downs, defective raw materials, the impact of epidemics or pandemics, such as COVID-19, and actions by U.S. or international governments, including export restrictions or tariffs.
In addition, due to the stringent regulatory requirements regarding the manufacture and sourcing of our products, we may not be able to quickly establish additional or replacement sources for certain components, materials or products. A sustained supply reduction or interruption, and an inability to develop alternative and additional sources for such supply, could result in lost sales, increased cost, damage to our reputation, and may have an adverse effect on our business.
Potential employee attrition due to COVID-19 vaccine mandates or otherwise may have an adverse impact on our business and results of operations.
In August 2021, we announced that we would be requiring certain groups of U.S. and Canadian employees, including salaried and office-based employees and sales teams, to be fully vaccinated against COVID-19 by December 2021.
In September 2021, an executive order was issued requiring all employers with U.S. Government contracts to ensure that their U.S. based employees, contractors and subcontractors that work on or in support of U.S. Government contracts are fully vaccinated against COVID-19. While effectiveness of this executive order has been stayed, if it goes into effect, it would increase the number of our employees who will be required to be vaccinated against COVID-19 and is applicable to certain employees working in distribution centers and manufacturing facilities who would not have otherwise been covered by our company's vaccination requirement. Implementation of these mandates may result in attrition, including attrition of key or critical employees, and difficulty in attracting or securing new employees, which could have an adverse impact on our business, financial condition or results of operations.
Additionally, the global labor market is competitive and it is possible that our ability to attract and retain employees in key functions, including in our distribution centers and manufacturing facilities, could be negatively impacted.
Our goodwill may become further impaired, which could require us to record additional significant charges to earnings in accordance with generally accepted accounting principles.
U.S. GAAP requires us to test our goodwill for impairment on an annual basis, or more frequently if indicators for potential impairment exist. As a result of adverse financial results in our Medical Unit resulting from inflationary impacts and global supply chain constraints, we performed interim goodwill impairment testing for the Medical Unit for the period ended December 31, 2021. As a result of this interim test, we recorded a $1.3 billion impairment to goodwill related to our Medical Unit. This testing involves estimates and significant judgments by management. We believe our assumptions and estimates are reasonable and appropriate; however additional adverse changes in key assumptions, including a failure to meet expected earnings or other financial plans, unanticipated events and circumstances such as changes in assumptions about the duration and magnitude of increased supply chain and commodities costs and our planned efforts to mitigate such impacts, further disruptions in the supply chain, the impact of the Cordis divestiture, estimated demand and selling prices for PPE, an increase in the discount rate, a decrease in the terminal growth rate, increases in tax rates (including potential tax reform) or a significant change in industry or economic trends could affect the accuracy or validity of such estimates and may result in an additional goodwill impairment in our Medical Unit. It is also possible that we may record significant charges related to other reporting units. Any charge or charges could adversely affect our results of operations. See "Critical Accounting Policies and Sensitive Accounting Estimates" in MD&A above for more information regarding goodwill impairment testing.

24 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Other |

Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities

Period | Total Number of Shares Purchased (1) |  | Average Price Paid per Share (2,3) |  | Total Number of Shares Purchased as Part of Publicly Announced Programs (2,3,4) |  | Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (4) (in millions)
October 2021 | 2,023,918 |  |  | $ | 49.45 |  |  | 2,022,057 |  |  | $ | 243 |
November 2021 | 4,771,889 |  |  | 50.30 |  |  | 4,771,372 |  |  | 3,003 |
December 2021 | 256 |  |  | 49.88 |  |  | — |  |  | 3,003 |
Total | 6,796,063 |  |  | $ | 50.05 |  |  | 6,793,429 |  |  | $ | 3,003 |

(1)Reflects 1,861, 517, and 256 common shares purchased in October, November, and December 2021, respectively, through a rabbi trust as investments of participants in our Deferred Compensation Plan.
(2)On August 19, 2021, we entered into an accelerated share repurchase ("ASR") program to purchase common shares for an aggregate purchase price of $500 million and received an initial delivery of 7.8 million common shares using a reference price of $51.53. The program concluded on October 4, 2021 at a volume weighted average price per common share of $51.10 resulting in a final delivery of 2.0 million common shares. See Note 10 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
(3)On November 10, 2021, we entered into an ASR program to purchase common shares for an aggregate purchase price of $300 million and received an initial delivery of 4.8 million common shares using a reference price of $50.30. The program concluded on January 31, 2022 at a volume weighted average price per common share of $49.39 resulting in a final delivery of 1.3 million common shares. See Note 10 of the "Notes to Condensed Consolidated Financial Statements" for additional information.
(4)On November 7, 2018, our Board of Directors approved a $1.0 billion share repurchase program that expired on December 31, 2021. On November 4, 2021, our Board of Directors approved a new $3.0 billion share repurchase program, which will expire on December 31, 2024. The ASR program with an aggregate purchase price of $300 million concluded on January 31, 2022, which reduced the amount remaining under our existing share repurchase authorization to $2.9 billion.

25 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Financial Statements |  |

Condensed Consolidated Statements of Earnings
(Unaudited)

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions, except per common share amounts) | 2021 |  | 2020 |  | 2021 |  | 2020
Revenue | $ | 45,457 |  |  | $ | 41,541 |  |  | $ | 89,425 |  |  | $ | 80,606 |
Cost of products sold | 43,841 |  |  | 39,765 |  |  | 86,167 |  |  | 77,115 |
Gross margin | 1,616 |  |  | 1,776 |  |  | 3,258 |  |  | 3,491 |
Operating expenses: |  |  |  |  |  |  |
Distribution, selling, general and administrative expenses | 1,151 |  |  | 1,147 |  |  | 2,265 |  |  | 2,284 |
Restructuring and employee severance | 7 |  |  | 20 |  |  | 25 |  |  | 57 |
Amortization and other acquisition-related costs | 79 |  |  | 116 |  |  | 158 |  |  | 234 |
Impairments and (gain)/loss on disposal of assets, net | 1,295 |  |  | — |  |  | 1,293 |  |  | 9 |
Litigation (recoveries)/charges, net | 34 |  |  | 32 |  |  | 52 |  |  | 1,070 |
Operating earnings/(loss) | (950) |  |  | 461 |  |  | (535) |  |  | (163) |
Other (income)/expense, net | (13) |  |  | (12) |  |  | (17) |  |  | (19) |
Interest expense, net | 37 |  |  | 46 |  |  | 77 |  |  | 91 |
Loss on early extinguishment of debt | — |  |  | — |  |  | 10 |  |  | 1 |
(Gain)/Loss on sale of equity interest in naviHealth | (1) |  |  | — |  |  | (1) |  |  | — |
Earnings/(loss) before income taxes | (973) |  |  | 427 |  |  | (604) |  |  | (236) |
Benefit from income taxes | (1,022) |  |  | (203) |  |  | (925) |  |  | (613) |
Net earnings | 49 |  |  | 630 |  |  | 321 |  |  | 377 |
Less: Net earnings attributable to noncontrolling interests | — |  |  | (1) |  |  | (1) |  |  | (1) |
Net earnings attributable to Cardinal Health, Inc. | $ | 49 |  |  | $ | 629 |  |  | $ | 320 |  |  | $ | 376 |
Earnings per common share attributable to Cardinal Health, Inc.: |  |  |  |  |  |  |
Basic | $ | 0.17 |  |  | $ | 2.14 |  |  | $ | 1.13 |  |  | $ | 1.28 |
Diluted | 0.17 |  |  | 2.13 |  |  | 1.12 |  |  | 1.27 |
Weighted-average number of common shares outstanding: |  |  |  |  |  |  |
Basic | 279 |  | 294 |  | 283 |  | 293
Diluted | 281 |  | 295 |  | 285 |  | 295
Cash dividends declared per common share | $ | 0.4908 |  |  | $ | 0.4859 |  |  | $ | 0.9816 |  |  | $ | 0.9718 |

See notes to condensed consolidated financial statements.

26 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Financial Statements |  |

Condensed Consolidated Statements of Comprehensive Income
(Unaudited)

| Three Months Ended December 31, |  | Six Months Ended December 31,
(in millions) | 2021 |  | 2020 |  | 2021 |  | 2020
Net earnings | $ | 49 |  |  | $ | 630 |  |  | $ | 321 |  |  | $ | 377 |
Other comprehensive income/(loss): |  |  |  |  |  |  |
Foreign currency translation adjustments and other | (18) |  |  | 21 |  |  | (43) |  |  | 33 |
Net unrealized gain/(loss) on derivative instruments, net of tax | (6) |  |  | 13 |  |  | (8) |  |  | 18 |
Total other comprehensive income/(loss), net of tax | (24) |  |  | 34 |  |  | (51) |  |  | 51 |
Total comprehensive income | 25 |  |  | 664 |  |  | 270 |  |  | 428 |
Less: comprehensive income attributable to noncontrolling interests | — |  |  | (1) |  |  | (1) |  |  | (1) |
Total comprehensive income attributable to Cardinal Health, Inc. | $ | 25 |  |  | $ | 663 |  |  | $ | 269 |  |  | $ | 427 |

See notes to condensed consolidated financial statements.

27 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Financial Statements |  |

Condensed Consolidated Balance Sheets

(in millions) | December 31, 2021 |  | June 30, 2021
| (Unaudited) |  |
Assets |  |  |
Current assets: |  |  |
Cash and equivalents | $ | 3,161 |  |  | $ | 3,407 |
Trade receivables, net | 9,406 |  |  | 9,103 |
Inventories, net | 14,941 |  |  | 14,594 |
Prepaid expenses and other | 4,339 |  |  | 2,843 |
Assets held for sale | — |  |  | 1,101 |
Total current assets | 31,847 |  |  | 31,048 |
Property and equipment, net | 2,321 |  |  | 2,360 |
Goodwill and other intangibles, net | 8,599 |  |  | 10,094 |
Other assets | 913 |  |  | 951 |
Total assets | $ | 43,680 |  |  | $ | 44,453 |
Liabilities and Shareholders’ Equity |  |  |
Current liabilities: |  |  |
Accounts payable | $ | 24,759 |  |  | $ | 23,700 |
Current portion of long-term obligations and other short-term borrowings | 301 |  |  | 871 |
Other accrued liabilities | 2,669 |  |  | 2,957 |
Liabilities related to assets held for sale | — |  |  | 96 |
Total current liabilities | 27,729 |  |  | 27,624 |
Long-term obligations, less current portion | 5,342 |  |  | 5,365 |
Deferred income taxes and other liabilities | 9,607 |  |  | 9,670 |
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, 2021 and June 30, 2021 | 2,721 |  |  | 2,806 |
Retained earnings | 1,245 |  |  | 1,205 |
Common shares in treasury, at cost: 50 million shares and 36 million shares at December 31, 2021 and June 30, 2021, respectively | (2,883) |  |  | (2,186) |
Accumulated other comprehensive loss | (85) |  |  | (34) |
Total Cardinal Health, Inc. shareholders' equity | 998 |  |  | 1,791 |
Noncontrolling interests | 4 |  |  | 3 |
Total shareholders’ equity | 1,002 |  |  | 1,794 |
Total liabilities and shareholders’ equity | $ | 43,680 |  |  | $ | 44,453 |

See notes to condensed consolidated financial statements.

28 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Financial Statements |  |

Condensed Consolidated Statements of Shareholders' Equity
(Unaudited)

| Common Shares |  |  |  | Treasury Shares |  | Accumulated Other Comprehensive Loss |  | Noncontrolling Interests |  | Total Shareholders’ Equity
(in millions) | Shares Issued |  | Amount |  | Retained Earnings |  | Shares |  | Amount |  |  |
| Three Months Ended December 31, 2021
Balance at September 30, 2021 | 327 |  |  | $ | 2,666 |  |  | $ | 1,335 |  |  | (43) |  |  | $ | (2,547) |  |  | $ | (61) |  |  | $ | 3 |  |  | $ | 1,396 |
Net earnings |  |  |  |  | 49 |  |  |  |  |  |  |  |  | — |  |  | 49 |
Other comprehensive loss, net of tax |  |  |  |  |  |  |  |  |  |  | (24) |  |  |  |  | (24) |
Employee stock plans activity, net of shares withheld for employee taxes | — |  |  | 15 |  |  |  |  |  |  | 4 |  |  |  |  |  |  | 19 |
Share repurchase program activity |  |  | 40 |  |  |  |  | (7) |  |  | (340) |  |  |  |  |  |  | (300) |
Dividends declared |  |  |  |  | (139) |  |  |  |  |  |  |  |  |  |  | (139) |
Other |  |  |  |  | — |  |  |  |  |  |  |  |  | 1 |  |  | 1 |
Balance at December 31, 2021 | 327 |  |  | $ | 2,721 |  |  | $ | 1,245 |  |  | (50) |  |  | $ | (2,883) |  |  | $ | (85) |  |  | $ | 4 |  |  | $ | 1,002 |

| Three Months Ended December 31, 2020
Balance at September 30, 2020 | 327 |  |  | $ | 2,760 |  |  | $ | 771 |  |  | (33) |  |  | $ | (2,022) |  |  | $ | (87) |  |  | $ | 3 |  |  | $ | 1,425 |
Net earnings |  |  |  |  | 629 |  |  |  |  |  |  |  |  | 1 |  |  | 630 |
Other comprehensive income, net of tax |  |  |  |  |  |  |  |  |  |  | 34 |  |  |  |  | 34 |
Employee stock plans activity, net of shares withheld for employee taxes | — |  |  | 17 |  |  |  |  | — |  |  | 13 |  |  |  |  |  |  | 30 |
Dividends declared |  |  |  |  | (144) |  |  |  |  |  |  |  |  |  |  | (144) |
Other |  |  | 1 |  |  | (1) |  |  |  |  |  |  |  |  | — |  |  | — |
Balance at December 31, 2020 | 327 |  |  | $ | 2,778 |  |  | $ | 1,255 |  |  | (33) |  |  | $ | (2,009) |  |  | $ | (53) |  |  | $ | 4 |  |  | $ | 1,975 |

| Six Months Ended December 31, 2021
Balance at June 30, 2021 | 327 |  |  | $ | 2,806 |  |  | $ | 1,205 |  |  | (36) |  |  | $ | (2,186) |  |  | $ | (34) |  |  | $ | 3 |  |  | $ | 1,794 |
Net earnings |  |  |  |  | 320 |  |  |  |  |  |  |  |  | 1 |  |  | 321 |
Other comprehensive loss, net of tax |  |  |  |  |  |  |  |  |  |  | (51) |  |  |  |  | (51) |
Employee stock plans activity, net of shares withheld for employee taxes | — |  |  | (25) |  |  |  |  | 1 |  |  | 43 |  |  |  |  |  |  | 18 |
Share repurchase program activity |  |  | (60) |  |  |  |  | (15) |  |  | (740) |  |  |  |  |  |  | (800) |
Dividends declared |  |  |  |  | (280) |  |  |  |  |  |  |  |  |  |  | (280) |
Other |  |  |  |  | — |  |  |  |  |  |  |  |  | — |  |  | — |
Balance at December 31, 2021 | 327 |  |  | $ | 2,721 |  |  | $ | 1,245 |  |  | (50) |  |  | $ | (2,883) |  |  | $ | (85) |  |  | $ | 4 |  |  | $ | 1,002 |

| Six Months Ended December 31, 2020
Balance at June 30, 2020 | 327 |  |  | $ | 2,789 |  |  | $ | 1,170 |  |  | (35) |  |  | $ | (2,066) |  |  | $ | (104) |  |  | $ | 3 |  |  | $ | 1,792 |
Net earnings |  |  |  |  | 376 |  |  |  |  |  |  |  |  | 1 |  |  | 377 |
Other comprehensive income, net of tax |  |  |  |  |  |  |  |  |  |  | 51 |  |  |  |  | 51 |
Employee stock plans activity, net of shares withheld for employee taxes | — |  |  | (11) |  |  |  |  | 2 |  |  | 57 |  |  |  |  |  |  | 46 |
Dividends declared |  |  |  |  | (289) |  |  |  |  |  |  |  |  |  |  | (289) |
Other |  |  |  |  | (2) |  |  |  |  |  |  |  |  | — |  |  | (2) |
Balance at December 31, 2020 | 327 |  |  | $ | 2,778 |  |  | $ | 1,255 |  |  | (33) |  |  | $ | (2,009) |  |  | $ | (53) |  |  | $ | 4 |  |  | $ | 1,975 |

See notes to condensed consolidated financial statements.

29 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Financial Statements |  |

Condensed Consolidated Statements of Cash Flows
(Unaudited)

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Cash flows from operating activities: |  |  |
Net earnings | $ | 321 |  |  | $ | 377 |
Adjustments to reconcile net earnings to net cash provided by operating activities: |  |  |
Depreciation and amortization | 332 |  |  | 404 |
(Gain)/Loss on sale of equity interest in naviHealth | (1) |  |  | — |
Impairments and (gain)/loss on disposal of assets, net | 1,293 |  |  | 9 |
Loss on early extinguishment of debt | 10 |  |  | 1 |
Share-based compensation | 42 |  |  | 51 |
Provision for bad debts | 25 |  |  | 35 |
Change in operating assets and liabilities, net of effects from acquisitions and divestitures: |  |  |
Increase in trade receivables | (329) |  |  | (499) |
Increase in inventories | (361) |  |  | (1,256) |
Increase in accounts payable | 1,059 |  |  | 1,861 |
Other accrued liabilities and operating items, net | (1,842) |  |  | 504 |
Net cash provided by operating activities | 549 |  |  | 1,487 |
Cash flows from investing activities: |  |  |
Proceeds from divestitures, net of cash transferred, and disposal of property and equipment | 938 |  |  | — |
Acquisition of subsidiaries, net of cash acquired | — |  |  | (3) |
Additions to property and equipment | (141) |  |  | (174) |
Purchases of investments | (4) |  |  | (18) |
Proceeds from investments | 22 |  |  | 4 |
Net cash provided by/(used in) investing activities | 815 |  |  | (191) |
Cash flows from financing activities: |  |  |
Reduction of long-term obligations | (592) |  |  | (49) |
Net tax withholdings from share-based compensation | (27) |  |  | (6) |
Dividends on common shares | (289) |  |  | (289) |
Purchase of treasury shares | (800) |  |  | — |
Net cash used in financing activities | (1,708) |  |  | (344) |
Effect of exchange rate changes on cash and equivalents | (11) |  |  | 14 |
Cash reclassified from assets held for sale | 109 |  |  | — |
Net increase/(decrease) in cash and equivalents | (246) |  |  | 966 |
Cash and equivalents at beginning of period | 3,407 |  |  | 2,771 |
Cash and equivalents at end of period | $ | 3,161 |  |  | $ | 3,737 |

See notes to condensed consolidated financial statements.

30 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Notes to Financial Statements |  |

Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
Our condensed consolidated financial statements include the accounts of all majority-owned or controlled subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the condensed consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively.
References to "we," "our," and similar pronouns in this Quarterly Report on Form 10-Q for the quarter ended December 31, 2021 (this "Form 10-Q") refer to Cardinal Health, Inc. and its majority-owned or controlled subsidiaries unless the context requires otherwise.
Our fiscal year ends on June 30. References to fiscal 2022 and 2021 in these condensed consolidated financial statements are to the fiscal years ending or ended June 30, 2022 and June 30, 2021, respectively.
Our condensed consolidated financial statements have been prepared in accordance with the U.S. Securities and Exchange Commission ("SEC") instructions to Quarterly Reports on Form 10-Q and include the information and disclosures required by accounting principles generally accepted in the United States ("GAAP") for interim financial reporting. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect amounts reported in the condensed consolidated financial statements and accompanying notes. Actual amounts may differ from these estimated amounts.
The COVID-19 pandemic ("COVID-19") continues to affect the U.S. and global economies, and as previously disclosed, the pandemic began to materially affect our businesses during the third quarter of fiscal 2020. The length and severity of the pandemic and its impacts on our businesses and results of operations are uncertain.
In our opinion, all adjustments necessary for a fair presentation of the condensed consolidated financial statements have been included. Except as disclosed elsewhere in this Form 10-Q, all such adjustments are of a normal and recurring nature. In addition, financial results presented for this fiscal 2022 interim period are not necessarily indicative of the results that may be expected for the full fiscal year ending June 30, 2022. These condensed consolidated financial statements are unaudited and, accordingly, should be read in conjunction with the audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 (the "2021 Form 10-K").
Recently Issued Financial Accounting Standards
Not Yet Adopted
We assess the adoption impacts of recently issued accounting standards by the Financial Accounting Standards Board ("FASB") on our condensed consolidated financial statements as well as material updates to previous assessments, if any, from our fiscal 2021 Form 10-K. There were no accounting standards issued in fiscal 2022 that will have a material impact on our condensed consolidated financial statements.
Recently Adopted Financial Accounting Standards
There were no new material accounting standards adopted in the six months ended December 31, 2021.
2. Divestitures
In August 2021, we sold the Cordis business to Hellman & Friedman for proceeds of $927 million, net of cash transferred, and we retained certain working capital accounts and certain liabilities. The purchase price is subject to adjustments based on working capital requirements as set forth in the agreement. Cardinal Health will retain product liability associated with lawsuits and claims related to inferior vena cava ("IVC") filters in the U.S. and Canada, as well as authority for these matters discussed in No te 6. The Cordis business operated within our Medical segment.

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Notes to Financial Statements |  |

3. Restructuring and Employee Severance
The following table summarizes restructuring and employee severance:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
Employee-related | $ | 2 |  |  | $ | 8 |
Facility exit and other | 5 |  |  | 12 |
Total restructuring and employee severance | $ | 7 |  |  | $ | 20 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Employee-related | $ | 10 |  |  | $ | 32 |
Facility exit and other | 15 |  |  | 25 |
Total restructuring and employee severance | $ | 25 |  |  | $ | 57 |

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. Facility exit and other costs primarily consist of professional, project management and other service fees to support divestitures, vendor transition fees, accelerated depreciation, lease costs associated with vacant facilities, project consulting fees, and certain other divestiture-related costs.
Restructuring costs during both the three and six months ended December 31, 2021 and 2020 were primarily related to the implementation of certain enterprise-wide cost-savings measures. Restructuring costs during the three and six months ended December 31, 2021 also included costs related to the divestiture of the Cordis business.
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, 2021 | $ | 53 |  |  | $ | 26 |  |  | $ | 79 |
Additions | 16 |  |  | 1 |  |  | 17 |
Payments and other adjustments | (25) |  |  | (9) |  |  | (34) |
Balance at December 31, 2021 | $ | 44 |  |  | $ | 18 |  |  | $ | 62 |

4. 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 (1) |  | Medical (2) |  | Total
Balance at June 30, 2021 | $ | 2,659 |  |  | $ | 5,330 |  |  | $ | 7,989 |
Goodwill acquired, net of purchase price adjustments | — |  |  | — |  |  | — |
Foreign currency translation adjustments and other | — |  |  | (26) |  |  | (26) |
Goodwill impairment | — |  |  | (1,307) |  |  | (1,307) |
Balance at December 31, 2021 | $ | 2,659 |  |  | $ | 3,997 |  |  | $ | 6,656 |

(1)At December 31, 2021 and June 30, 2021, the Pharmaceutical segment accumulated goodwill impairment loss was $829 million.
(2)At December 31, 2021 and June 30, 2021, the Medical segment accumulated goodwill impairment loss was $2.7 billion and $1.4 billion, respectively.
During the three months ended December 31, 2021, the Medical Unit, which is our Medical operating segment excluding our Cardinal Health at-Home Solutions division, continued to experience adverse financial results related to inflationary impacts and global supply chain constraints. Due to the risks and uncertainties related to these impacts, we elected to bypass the qualitative assessment and perform interim goodwill impairment testing for the Medical Unit. This quantitative test resulted in a pre-tax $1.3 billion goodwill impairment charge related to the Medical Unit, which is included in impairments and (gain)/loss on disposal of assets in our condensed consolidated statements of earnings. The goodwill balance of the Medical Unit, after recognizing the impairment, was $2.8 billion at December 31, 2021.
Our determination of estimated fair value of our reporting units is based on a combination of the income-based approach (using a discount rate of 9 percent and a terminal growth rate of 2 percent percent), and the market-based approach. Our fair value estimates utilize significant unobservable inputs and thus represent Level 3 fair value measurements.

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Notes to Financial Statements |  |

Other Intangible Assets
The following tables summarize other intangible assets by class at:

| December 31, 2021
(in millions) | Gross Intangible |  | Accumulated Amortization |  | Net Intangible |  | Weighted- Average Remaining Amortization Period (Years)
Indefinite-life intangibles: |  |  |  |  |  |  |
Trademarks and patents | $ | 12 |  |  | $ | — |  |  | $ | 12 |  |  | N/A
Total indefinite-life intangibles | 12 |  |  | — |  |  | 12 |  |  | N/A
Definite-life intangibles: |  |  |  |  |  |  |
Customer relationships | 3,317 |  |  | 2,089 |  |  | 1,228 |  |  | 11
Trademarks, trade names and patents | 552 |  |  | 344 |  |  | 208 |  |  | 9
Developed technology and other | 1,036 |  |  | 541 |  |  | 495 |  |  | 9
Total definite-life intangibles | 4,905 |  |  | 2,974 |  |  | 1,931 |  |  | 10
Total other intangible assets | $ | 4,917 |  |  | $ | 2,974 |  |  | $ | 1,943 |  |  | N/A

| June 30, 2021
(in millions) | Gross Intangible |  | Accumulated Amortization |  | Net Intangible
Indefinite-life intangibles: |  |  |  |  |
Trademarks and patents | $ | 12 |  |  | $ | — |  |  | $ | 12 |
Total indefinite-life intangibles | 12 |  |  | — |  |  | 12 |
Definite-life intangibles: |  |  |  |  |
Customer relationships | 3,330 |  |  | 1,989 |  |  | 1,341 |
Trademarks, trade names and patents | 551 |  |  | 328 |  |  | 223 |
Developed technology and other | 1,035 |  |  | 506 |  |  | 529 |
Total definite-life intangibles | 4,916 |  |  | 2,823 |  |  | 2,093 |
Total other intangible assets | $ | 4,928 |  |  | $ | 2,823 |  |  | $ | 2,105 |

Total amortization of intangible assets was $79 million and $113 million for the three months ended December 31, 2021 and 2020, respectively, and $157 million and $228 million for the six months ended December 31, 2021 and 2020, respectively. Estimated annual amortization of intangible assets for the remainder of fiscal 2022 through 2026 is as follows: $157 million, $286 million, $262 million, $237 million, and $210 million.
5. Long-Term Obligations and Other Short-Term Borrowings
Long-Term Debt and Other Short-Term Borrowings
We had total long-term obligations, including the current portion and other short-term borrowings, of $5.6 billion and $6.2 billion at December 31, 2021 and June 30, 2021, respectively. All the 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 notes are effectively subordinated to the liabilities of our subsidiaries, including trade payables of $24.8 billion and $23.7 billion at December 31, 2021 and June 30, 2021, respectively.
During the six months ended December 31, 2021, we redeemed all outstanding $572 million principal amount of 2.616% Notes due June 2022 at a redemption price equal to 100% of the principal amount and accrued but unpaid interest, plus the make-whole premium applicable to the notes. In connection with this redemption, we recorded a $10 million loss on early extinguishment of debt. The early redemption was funded with available cash.
During the six months ended December 31, 2020, we early repurchased a total of $40 million of the Floating Rate Notes due 2022 and $2 million of the 2.616% Notes due 2022. The repurchases were funded with available cash. In connection with the early debt repurchases, we recorded a $1 million loss on early extinguishment of debt during the six months ended December 31, 2020.
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. At December 31, 2021, we had no amounts outstanding under our commercial paper program, revolving credit facility, or our committed receivables sales facility.
In September 2019, we renewed our committed receivables sales facility program through Cardinal Health Funding, LLC (“CHF”) through September 30, 2022. CHF was organized for the 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.
Our revolving credit and committed receivables sales facilities require us to maintain a consolidated net leverage ratio of no more than 3.75-to-1. As of December 31, 2021, we were in compliance with this financial covenant.

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Notes to Financial Statements |  |

6. 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"), a U.S.-based generic pharmaceutical sourcing venture with CVS Health for an initial term of 10 years. Red Oak Sourcing negotiates generic pharmaceutical supply contracts on behalf of its participants. In August 2021, we amended our agreement to extend the term through June 2029. We are required to make quarterly payments to CVS Health for the term of the arrangement.
Contingencies
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 portion of the assessment based on its share of the total morphine milligram equivalents sold or distributed in New York during the applicable calendar year, beginning in 2017.
The constitutionality of portions of the OSA has been challenged in court. In December 2018, the OSA was ruled unconstitutional by the U.S. district court for the Southern District of New York. Subsequently, New York passed a new statute that modified the assessment going forward and limited the OSA to two years (2017 and 2018). The U.S. Court of Appeals for the Second Circuit reversed the district court's decision on procedural grounds. In February 2021, the Second Circuit stayed the effect of the ruling pending a petition to the U.S. Supreme Court to review the Second Circuit's opinion. In October 2021, the U.S. Supreme Court declined to review the decision.
We accrue contingencies if it is probable that a liability has been incurred and the amount can be estimated. Because of the Second Circuit ruling, we recorded an aggregate accrual of $41 million for calendar year 2017 and 2018 during the six months ended December 31, 2020 based on the probable estimated payment amount. In the three months ended December 31, 2021, we paid the State of New York $20 million, our portion of the assessment for calendar year 2017. As a result, as of December 31, 2021, we had an accrual of $20 million, which reflects our best estimate of the portion of the assessment that we may owe for sales during calendar year 2018.
Legal Proceedings
We become involved from time to time in disputes, litigation and regulatory matters.
From time to time, we determine that products we source, 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 have led to product recalls, costs to repair or replace affected products, temporary interruptions in product sales, product liability claims and lawsuits and can lead to action by regulators. Even absent an identified regulatory or quality issue or product recall, we can become subject to product liability claims and lawsuits.
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 directly or indirectly lead to the assertion of claims or the commencement of legal proceedings against us or result in sanctions.
We have been 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.
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.
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; however, losses and recoveries of lost profits from disputes that occur in the ordinary course of business are included within segment profit. For

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Notes to Financial Statements |  |

example, in the second quarter of fiscal year 2022, our Pharmaceutical segment profit was positively impacted by a $16 million judgment for lost profits related to an ordinary course intellectual property rights claim.
Opioid Lawsuits and Investigations
Pharmaceutical wholesale distributors, including us, have been named as defendants in approximately 3,400 lawsuits relating to the distribution of prescription opioid pain medications. The lawsuits seek equitable relief and monetary damages based on a variety of legal theories including various common law claims, such as 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. These lawsuits also name pharmaceutical manufacturers, retail pharmacy chains and other entities as defendants.
States & Political Subdivisions
Approximately 2,900 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 “MDL”).
In addition, 25 state attorneys general have filed lawsuits against distributors, including us, in various state courts. We have also received requests, civil investigative demands, subpoenas or requests for information from additional state attorneys general offices and governmental authorities.
In October 2019, we agreed in principle to a global settlement framework with a leadership group of state attorneys general; the framework is designed to resolve pending and future opioid lawsuits and claims by states and political subdivisions, but not private plaintiffs (the "Settlement Framework").
In July 2021, we announced that we and two other national distributors have negotiated a proposed settlement agreement (the “Proposed Settlement Agreement”) and settlement process that, if all conditions are satisfied, would result in the settlement of the vast majority of opioid lawsuits filed by state and local governmental entities. The settlement process does not contemplate participation by any non-governmental or non-political entities or individuals.
The Proposed Settlement Agreement includes a cash component, pursuant to which we would pay up to approximately $6.37 billion, the majority of which would be paid over 18 years. The exact payment amount will depend on several factors, including the participation rate of states and political subdivisions, the extent to which states take action to foreclose opioid lawsuits by political subdivisions (e.g., laws barring or limiting opioid lawsuits by political subdivisions), and the extent to which political subdivisions in participating states file additional opioid lawsuits against us after the Proposed Settlement Agreement becomes effective.
The Proposed Settlement Agreement also includes injunctive relief terms related to distributors’ controlled substance anti-diversion programs, including with respect to: (1) governance; (2) independence and training of the personnel operating controlled substances monitoring programs; (3) due diligence for new and existing customers; (4) ordering limits for certain products; and (5) suspicious order monitoring. A monitor will be selected to oversee compliance with these provisions for a period of five years. In addition, we and the two other settling distributors will engage a third-party vendor to act as a clearinghouse for data aggregation and reporting, which distributors will fund the for ten years.
As contemplated under the Proposed Settlement Agreement, in September 2021, the three distributors determined that a sufficient number of states had agreed to participate in the Proposed Settlement Agreement to proceed to the next phase of the settlement process, which was the subdivision sign-on period. The subdivision sign-on period ended January 26, 2022. Each participating state will now make a determination as to whether a sufficient number of its political subdivisions have agreed to the Proposed Settlement Agreement (or otherwise had their claims foreclosed) to proceed with the Proposed Settlement Agreement. Following that determination by participating states, each of the three distributors will independently determine whether a sufficient number of subdivisions, including both those litigating and those that have not sued, have agreed to participate in the Proposed Settlement Agreement (or otherwise had their claims foreclosed) to proceed to execution. This process is currently contemplated to end in February 2022. The Proposed Settlement Agreement remains subject to contingencies. It is possible that a sufficient number of states and subdivisions will not agree to the Proposed Settlement Agreement or that other required contingencies will not be satisfied.
If the required contingencies are satisfied, the Proposed Settlement Agreement is expected to become effective in April 2022. During the period between the satisfaction of contingencies and the effective date, the participating states and the distributors would cooperate to obtain consent judgments embodying the terms of the Proposed Settlement Agreement in each participating state and dismissing lawsuits of participating states and subdivisions.
In connection with the negotiations of the Proposed Settlement Agreement, we and the two other national distributors have entered into a settlement with each of the states of Florida, New York, Ohio and Rhode Island and their participating subdivisions. If the Proposed Settlement Agreement becomes effective, these states and their participating subdivisions will become a part of it.
West Virginia subdivisions and Native American tribes are not a part of this settlement process and we have been involved in separate negotiations with these groups. In September 2021 we announced that we, along with two other national distributors, had reached an agreement with the Cherokee Nation in connection with ongoing negotiations toward a broader agreement with Native American tribes. In January 2022, we, along with two other

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Notes to Financial Statements |  |

national distributors, entered into a term sheet with the Native American tribes.
A bench trial before a federal judge in West Virginia brought by Cabell County and City of Huntington against us and two other national distributors concluded in July 2021. The judge has not yet issued a decision. In addition, a bench trial in the case brought by the Washington Attorney General against us and the same two other national distributors began in November 2021 in Washington state court. Trials are inherently unpredictable and it is possible that the outcome of these trials, either individually or in the aggregate, could materially negatively impact our financial results, cash flows or results of operations.
During the six months ended December 31, 2021, we paid into escrow the majority of our first annual payment under the Proposed Settlement Agreement, which is reflected in prepaid expenses and other assets in our condensed consolidated balance sheets. We also made certain payments under the separate New York and Ohio settlements. In total, we have $6.68 billion accrued at December 31, 2021, of which $480 million is included in other accrued liabilities and the remainder is included in deferred income taxes and other liabilities in our condensed consolidated balance sheets. During the six months ended December 31, 2020, we recorded total pre-tax charges of $1.02 billion in litigation (recoveries)/charges, net in our condensed consolidated statements of earnings.
Because loss contingencies are inherently unpredictable and unfavorable developments or resolutions can occur, the assessment is highly subjective and requires judgments about future events. We regularly review these opioid litigation matters to determine whether our accrual is adequate. The amount of ultimate loss may differ materially from this accrual, whether as a result of settlement discussions, a judicial decision or verdict or otherwise, but we are not able to estimate a range of reasonably possible additional losses for these matters. We continue to strongly dispute the allegations made in these lawsuits and reaching an agreement in principle on a global settlement framework is not an admission of liability or wrongdoing.
Department of Justice Investigations
We have received federal grand jury subpoenas issued in connection with investigations being conducted by the U.S. Attorney's Office for the Eastern District of New York and the Fraud Section of the U.S. Department of Justice ("DOJ"). We have also received civil requests for information from other DOJ offices. We believe that these investigations concern operation of our anti-diversion program, our anti-diversion policies and procedures, and distribution of certain controlled substances. We are cooperating with these investigations. We are unable to predict the outcome of any of these investigations.
Private Plaintiffs
The Proposed Settlement Agreement does not address claims by private parties, which includes unions and other health and welfare funds, hospital systems and other healthcare providers,
businesses and individuals alleging personal injury. Private parties had brought approximately 464 lawsuits as of January 25, 2022. Of these, 147 are purported class actions. The causes of action asserted by these plaintiffs are similar to those asserted by public plaintiffs.
A trial in a case involving 21 plaintiffs is scheduled to begin in state court in Georgia in March 2022. We are vigorously defending ourselves in all of these matters; however, trials are inherently unpredictable and it is possible that an unfavorable outcome in these matters, individually or in the aggregate, could have a negative impact on our financial results.
Insurance Litigation
We are involved in legal proceedings with two insurers related to the availability of insurance coverage for the lawsuits described above. In October 2020, we filed a complaint for declaratory judgment against National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) seeking a declaration that National Union is obligated to reimburse us for defense costs incurred in connection with the lawsuits described above. In January 2021, Swiss Re International SE commenced an arbitration in London seeking a determination that it does not have an obligation to reimburse us for defense and indemnity expenses incurred in connection with the lawsuits described above. We have not recorded a receivable for any recoveries related to these insurance litigation matters as of December 31, 2021.
Cordis IVC Filter Matters
Product Liability Lawsuits
As of January 25, 2022, we are named as a defendant in 443 product liability lawsuits coordinated in Alameda County Superior Court in California involving claims by approximately 5,750 plaintiffs that allege personal injuries associated with the use of Cordis OptEase and TrapEase inferior vena cava ("IVC") filter products. Another 32 lawsuits involving similar claims by approximately 36 plaintiffs are pending in other jurisdictions. These lawsuits seek a variety of remedies, including unspecified monetary damages. In July 2021, we entered into an agreement to settle approximately 1,300 claims. This agreement is subject to certain contingencies. We continue to vigorously defend ourselves in these lawsuits and are engaged in ongoing resolution discussions with certain plaintiffs.
At December 31, 2021, we had a total of $554 million net of estimated insurance recoveries, accrued for losses and legal defense costs, related to the Cordis IVC filter lawsuits in our condensed consolidated balance sheets. 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 $1.09 billion, net of estimated insurance recoveries. The sale of the Cordis disposal group does not include product liability related to the IVC filters in the U.S. and Canada, which we retained.

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New Mexico Attorney General Action
In August 2021, the Attorney General for the State of New Mexico filed an action against certain IVC filter manufacturers, including us, alleging claims under New Mexico's Unfair Practices Act, Medicaid Fraud Act and Fraud Against Taxpayers Act. The allegations made are similar to those made in the product liability lawsuits, described above. We intend to vigorously defend ourselves against these claims.
SEC Investigation
In February 2021, we received a subpoena from the U.S. Securities and Exchange Commission requesting the production of documents from 2015 through 2019 relating to inventory in the Cordis business, analysis of goodwill of the Medical segment and other matters. We are cooperating with this inquiry and related requests and cannot predict the outcome or duration of the investigation.
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. In June 2020, the court appointed 1199 SEIU Health Care Employees Pension Fund as lead plaintiff and a consolidated amended complaint was filed in September 2020. The amended complaint alleges that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misrepresentations and omissions related to the acquisition and 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. The complaint also alleges that one of the individual defendants violated Section 20A of the Exchange Act because he sold shares of Cardinal Health stock during the time period. In September 2021, the court denied our motion to dismiss. We believe that the claims asserted in this complaint are without merit and intend to vigorously defend against them.
Specialty Solutions DOJ Investigation
In November 2018, the United States Attorney’s Office for the District of Massachusetts (the "USAO") commenced an investigation of Cardinal Health regarding possible violations of the U.S. healthcare fraud and abuse laws. The USAO sought, among other things, documents and information relating to discounts and rebates offered or provided to certain Specialty Solutions customers. In January 2022, without admitting liability, we settled this matter with the DOJ for approximately $13 million, which was recorded as expense within litigation (recoveries)/charges net in our consolidated statement of earnings during the fiscal year ended June 30, 2021. Additionally, our Specialty Pharmaceutical Distribution business entered into a five-year corporate integrity agreement with the Department of Health and Human Services, Office of Inspector General, under which it agreed to certain remedial measures, including no longer offering term-based up-front discounts.
Other Civil Litigation
Generic Pharmaceutical Pricing Antitrust Litigation
In December 2019, pharmaceutical distributors including us were added as defendants in a civil class action lawsuit filed by indirect purchasers of generic drugs, such as hospitals and retail pharmacies. The indirect purchaser case is part of a multidistrict litigation consisting of multiple individual class action matters consolidated in the Eastern District of Pennsylvania. The indirect purchaser plaintiffs allege that pharmaceutical distributors encouraged manufacturers to increase prices, provided anti-competitive pricing information to manufacturers and improperly engaged in customer allocation. We have filed a motion to dismiss the complaints and we intend to vigorously defend ourselves.
Active Pharmaceutical Ingredient Impurity Litigation
Many participants in the pharmaceutical supply chain, including active pharmaceutical ingredient ("API") manufacturers, finished dose manufacturers, repackagers, distributors, and retailers have been named as defendants in lawsuits arising out of recalls of certain medications due to alleged impurities in the active pharmaceutical ingredients or finished product.
In February 2019, a Multidistrict Litigation was created in the U.S. District Court for the District of New Jersey (the “Sartan MDL”) alleging API impurities in certain generic blood pressure medications. We have been named as a defendant in the Sartan MDL. We are vigorously defending ourselves in this matter.

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Notes to Financial Statements |  |

7. Income Taxes
Fluctuations in our benefit from income taxes as a percentage of pretax earnings/(loss) (“effective tax rate”) are due to changes in international and U.S. state effective tax rates resulting from our business mix and discrete items.
Tax Effects of Goodwill Impairment Charge
During the six months ended December 31, 2021, we recognized a $1.3 billion pre-tax charge for goodwill impairment related to the Medical Unit. The net tax benefit related to this charge is $92 million for fiscal 2022.
Unless an item is considered discrete because it is unusual or infrequent, the tax impact of the item is included in our estimated annual effective tax rate. When items are recognized through our estimated annual effective tax rate, we apply our estimated annual effective tax rate to the earnings/(loss) before income taxes for the year-to-date period to compute our benefit from income taxes for the current quarter and year-to-date period. The tax impacts of discrete items are recognized in their entirety in the period in which they occur.
The tax effect of the goodwill impairment charge during the three months ended December 31, 2021 was included in our estimated annual effective tax rate because it was not considered unusual or infrequent, given that we recorded goodwill impairment in prior fiscal years. The impact of the non-deductible goodwill significantly increased the estimated annual effective tax rate for fiscal 2022. Applying the higher tax rate to the current quarter loss resulted in recognizing an interim tax benefit of approximately $1.0 billion, which impacted the benefit from income taxes in the condensed consolidated statements of earnings during the three months and six months ended December 31, 2021 and prepaid expenses and other assets in the condensed consolidated balance sheets at December 31, 2021. This interim tax benefit will reverse in future quarters of fiscal 2022.
Cordis Divestiture
During the six months ended December 31, 2021, we completed the divestiture of the Cordis business. In connection with the closing, we recorded net tax expense of $10 million and $19 million during the three and six months ended December 31, 2021, respectively. The tax effects of these matters during the six months ended December 31, 2021 were included in our full year effective tax rate forecast. We currently estimate the tax expense associated with this matter for the full fiscal 2022 will be $38 million.
Tax Effects of Self-Insurance Pre-tax Loss
During the three months ended December 31, 2020, our wholly-owned insurance subsidiary recorded a self-insurance pre-tax loss in its fiscal 2020 statutory financial statements primarily related to opioid litigation. This self-insurance pre-tax loss, which did not impact our pre-tax consolidated results, is currently deductible on our fiscal 2020 consolidated federal income tax return and contributed to a significant net operating loss for tax purposes. The
net operating loss is being carried back and applied to adjust our taxable income for fiscal 2015, 2016, 2017, and 2018 as permitted under the Coronavirus Aid, Relief and Economic Security ("CARES") Act enacted by the United States Congress in March 2020.
Accordingly, our provision for income taxes during the three months ended December 31, 2020 included a $420 million benefit from the net operating loss carryback primarily to reflect the difference between the federal statutory income tax rate during the fiscal years from 2015 to 2018 (35 percent for fiscal 2015, 2016, and 2017 and 28 percent for fiscal 2018) and the current federal statutory income tax rate of 21 percent.
We have filed for a U.S. federal income tax refund of $974 million as a result of the net operating loss carryback under the CARES Act, which we expect to receive within 12 months, and accordingly have a current asset on our condensed consolidated balance sheets at December 31, 2021. We also increased our non-current deferred tax liability by approximately $700 million during the six months ended December 31, 2020 related to this matter.
We have made reasonable estimates and recorded amounts based on management's judgment and our current understanding of tax law; however, it is possible that the tax authorities could challenge these tax benefits. The actual amount of the tax benefit may differ materially from these estimates.
Tax Effects of Opioid Litigation Charges
In connection with the $1.02 billion pre-tax charges for the opioid litigation recorded during the six months ended December 31, 2020, the net tax benefits were approximately $300 million for the six months ended December 31, 2020 and $228 million for fiscal 2021. Our tax benefits are estimates, which reflect our current assessment of the estimated future deductibility of the amount that may be paid under the accrual taken in connection with the opioid litigation and are net of unrecognized tax benefits of $34 million during the six months ended December 31, 2020, and $219 million for fiscal 2021. We have recognized no tax benefit associated with Opioid accruals made in fiscal 2022.
We have made reasonable estimates and recorded amounts based on management's judgment and our current understanding of the U.S. Tax Cuts and Jobs Act ("Tax Act"); however, these estimates require significant judgment since the U.S. tax law governing deductibility was changed by the Tax Act. Further, it is possible Congress or 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 may differ materially from these estimates.
Effective Tax Rate
During the three months ended December 31, 2021 and 2020, the effective tax rate was 105.0 percent and (47.6) percent, respectively. The effective tax rate for the three months ended December 31, 2021 reflects the impact of the tax effect of the goodwill impairment charge being included in our estimated annual

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Notes to Financial Statements |  |

effective tax rate. The estimated annual effective tax rate for the three months ended December 31, 2020 included the benefit from the net operating loss carryback primarily related to a self-insurance pre-tax loss, partially offset by the treatment of the tax impacts of the opioid litigation accrual recorded in the prior year.
During the six months ended December 31, 2021 and 2020, the effective tax rate was 153.1 percent and 259.7 percent. The effective tax rate for the six months ended December 31, 2021 reflects the impact of the tax effect of the goodwill impairment charge being included in our estimated annual effective tax rate. The effective tax rate for the six months ended December 31, 2020 included the benefit from a net operating loss carryback primarily related to a self-insurance pre-tax loss and net tax benefit related to the treatment of the tax impacts of opioid litigation charges.
Unrecognized Tax Benefits
We had $937 million and $932 million of unrecognized tax benefits, at December 31, 2021 and June 30, 2021 respectively. The December 31, 2021 and June 30, 2021 balances include $854 million and $849 million of unrecognized tax benefits, respectively, that if recognized, would have an impact on the effective tax rate.
At December 31, 2021 and June 30, 2021, we had $45 million and $49 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 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 zero and a net decrease of up to $20 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 2015 through 2020.
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 $72 million at both December 31, 2021 and June 30, 2021, 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 $3 million at December 31, 2021 and $12 million at June 30, 2021, respectively, and is included in other assets in the condensed consolidated balance sheets.
8. Fair Value Measurements
The following tables present the fair values for assets and (liabilities) measured on a recurring basis at:

| December 31, 2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash equivalents | $ | 1,077 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,077 |
Other investments (1) | 125 |  |  | — |  |  | — |  |  | 125 |
Forward contracts (2) | — |  |  | 62 |  |  | — |  |  | 62 |

| June 30, 2021
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets: |  |  |  |  |  |  |
Cash equivalents | $ | 1,883 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,883 |
Other investments (1) | 126 |  |  | — |  |  | — |  |  | 126 |
Forward contracts (2) | — |  |  | 42 |  |  | — |  |  | 42 |

(1)The other investments balance includes investments in mutual funds, which 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 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.
9. 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 current 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

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Notes to Financial Statements |  |

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.
Interest Rate Risk Management
We are exposed to the impact of interest rate changes. Our objective is to manage the impact of interest rate changes on cash flows and the market value of our borrowings. We utilize a mix of debt maturities along with both fixed-rate and variable-rate debt to manage changes in interest rates. In addition, we enter into interest rate swaps to further manage our exposure to interest rate variations related to our borrowings and to lower our overall borrowing costs.
Currency Exchange Risk Management
We conduct business in several major international currencies and are subject to risks associated with changing foreign exchange rates. Our objective is to reduce earnings and cash flow volatility associated with foreign exchange rate changes to allow management to focus its attention on business operations. Accordingly, we enter into various contracts that change in value as foreign exchange rates change to protect the value of existing foreign currency assets and liabilities, commitments and anticipated foreign currency revenue and expenses.
Commodity Price Risk Management
We are exposed to changes in the price of certain commodities. Our objective is to reduce earnings and cash flow volatility associated with forecasted purchases of these commodities to allow management to focus its attention on business operations. Accordingly, we enter into derivative contracts when possible to manage the price risk associated with certain forecasted purchases.
Fair Value Hedges
We enter into pay-floating interest rate swaps to hedge the changes in the fair value of fixed-rate debt resulting from fluctuations in interest rates. These contracts are designated and qualify as fair value hedges. Accordingly, the gain or loss recorded on the pay-floating interest rate swaps is directly offset by the change in fair value of the underlying debt. Both the derivative instrument and the underlying debt are adjusted to market value at the end of each period with any resulting gain or loss recorded in interest expense, net in the condensed consolidated statements of earnings. For the three and six months ended December 31, 2021 and 2020, there was no gain or loss recorded to interest expense as changes in the market value of our derivative instruments offset changes in the market value of the underlying debt.
During the six months ended December 31, 2021, we entered into pay-floating interest rate swaps with notional amounts of $100 million and $200 million. These swaps have been designated as fair value hedges of our fixed rate debt and are included in deferred income taxes and other liabilities in the condensed consolidated balance sheets.
Cash Flow Hedges
We enter into derivative instruments to hedge our exposure to changes in cash flows attributable to interest rate, foreign currency and commodity price fluctuations associated with certain forecasted transactions. These derivative instruments are designated and qualify as cash flow hedges. Accordingly, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss and reclassified into earnings in the same line item associated with the forecasted transaction and in the same period during which the hedged transaction affects earnings.
Pre-tax gains recognized in other comprehensive income/(loss) were $1 million and $8 million for the three months ended December 31, 2021 and 2020, respectively, and $3 million and $7 million for the six months ended December 31, 2021 and 2020, respectively. Gains and losses recognized in accumulated other comprehensive loss and reclassified into earnings were immaterial for the three and six months ended December 31, 2021 and 2020. All gains and losses currently included within accumulated other comprehensive loss associated with our cash flow hedges to be reclassified into net earnings within the next 12 months are immaterial.
Net Investment Hedges
We hedge the foreign currency risk associated with certain net investment positions in foreign subsidiaries. To accomplish this, we enter into cross-currency swaps that are designated as hedges of net investments.
Cross-currency swaps designated as net investment hedges are marked to market using the current spot exchange rate as of the end of the period, with gains and losses included in the foreign currency translation component of accumulated other comprehensive loss until the sale or substantial liquidation of the underlying net investments. To the extent the cross-currency swaps designated as net investment hedges are not highly effective, changes in carrying value attributable to the change in spot rates are recorded in earnings.
Pre-tax gain and loss from net investment hedges recorded in the foreign currency translation component of accumulated other comprehensive loss was a $17 million gain and a $27 million loss during the three months ended December 31, 2021 and 2020, respectively, and a $22 million gain and a $52 million loss during the six months ended December 31, 2021 and 2020, respectively. Gains recognized in interest expense, net in the condensed consolidated statements of earnings for the portion of the net investment hedges excluded from the assessment of hedge effectiveness were $5 million during both the three months ended December 31, 2021 and 2020 and $11 million and $10 million during the six months ended December 31, 2021 and 2020, respectively.
Economic (Non-Designated) Hedges
We enter into foreign currency contracts to manage our foreign exchange exposure related to sales transactions, intercompany financing transactions and other balance sheet items subject to revaluation that do not meet the requirements for hedge

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Notes to Financial Statements |  |

accounting treatment. Accordingly, these derivative instruments are adjusted to current market value at the end of each period through earnings. The gain or loss recorded on these instruments is substantially offset by the remeasurement adjustment on the foreign currency denominated asset or liability. The settlement of the derivative instrument and the remeasurement adjustment on the foreign currency denominated asset or liability are both recorded in other (income)/expense, net. We recorded a $2 million gain and a $4 million loss during the three months ended December 31, 2021 and 2020, respectively, and a $4 million gain and $5 million loss during the six months ended December 31, 2021 and 2020, respectively. The principal currencies managed through foreign currency contracts are Euro, Chinese renminbi, Canadian dollar.
Fair Value of Financial Instruments
The carrying amounts of cash and equivalents, trade receivables, accounts payable, and other accrued liabilities at December 31, 2021 and June 30, 2021 approximate fair value due to their short-term maturities.
The following table summarizes the estimated fair value of our long-term obligations and other short-term borrowings compared to the respective carrying amounts at:

(in millions) | December 31, 2021 |  | June 30, 2021
Estimated fair value | $ | 6,074 |  |  | $ | 6,751 |
Carrying amount | 5,643 |  |  | 6,236 |

The fair value of our long-term obligations and other short-term borrowings is estimated based on either the quoted market prices for the same or similar issues or other inputs derived from available market information, which represents a Level 2 measurement.
10. Shareholders' Equity
We repurchased $800 million of our common shares, in the aggregate, through share repurchase programs during the six months ended December 31, 2021. We funded the repurchases with available cash. The common shares repurchased are held in treasury to be used for general corporate purposes.
During the three months ended December 31, 2021, we entered into an accelerated share repurchase ("ASR") program to repurchase common shares for an aggregate purchase price of $300 million. We received an initial delivery of 4.8 million common shares using a reference price of $50.30. The program concluded on January 31, 2022 at a volume weighted average price per common share of $49.39 resulting in a final delivery of 1.3 million common shares.
During the three months ended September 30, 2021, we entered into an ASR program to repurchase common shares for an aggregate purchase price of $500 million. We received an initial delivery of 7.8 million common shares using a reference price of $51.53. The program concluded on October 4, 2021 at a volume
weighted average price per common share of $51.10 resulting in a final delivery of 2.0 million common shares.
Accumulated Other Comprehensive Loss
The following table summarizes the changes in the balance of accumulated other comprehensive loss by component and in total:

(in millions) | Foreign Currency Translation Adjustments |  | Unrealized Gain/(Loss) on Derivatives, net of tax |  | Accumulated Other Comprehensive Loss
Balance at June 30, 2021 | $ | (46) |  |  | $ | 12 |  |  | $ | (34) |
Other comprehensive loss, before reclassifications | (43) |  |  | (5) |  |  | (48) |
Amounts reclassified to earnings | — |  |  | (3) |  |  | (3) |
Total other comprehensive loss attributable to Cardinal Health, Inc. net of tax | (43) |  |  | (8) |  |  | (51) |
Balance at December 31, 2021 | $ | (89) |  |  | $ | 4 |  |  | $ | (85) |

11. Earnings Per Share Attributable to Cardinal Health, Inc.
The following table reconciles the number of common shares used to compute basic and diluted earnings per share attributable to Cardinal Health, Inc.:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
Weighted-average common shares–basic | 279 |  |  | 294 |
Effect of dilutive securities: |  |  |
Employee stock options, restricted share units and performance share units | 2 |  |  | 1 |
Weighted-average common shares–diluted | 281 |  |  | 295 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Weighted-average common shares–basic | 283 |  |  | 293 |
Effect of dilutive securities: |  |  |
Employee stock options, restricted share units and performance share units | 2 |  |  | 2 |
Weighted-average common shares–diluted | 285 |  |  | 295 |

The potentially dilutive employee stock options, restricted share units, and performance share units that were antidilutive were 5 million during both the three and six months ended December 31, 2021 and 4 million during both the three months and the six months ended December 31, 2020.

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Notes to Financial Statements |  |

12. Segment Information
Our operations are principally managed on a products and services basis and are comprised of two operating segments, which are the same as our reportable segments: Pharmaceutical and Medical. The factors for determining the reportable segments include the manner in which management evaluates performance for purposes of allocating resources and assessing performance combined with the nature of the individual business activities.
Our Pharmaceutical segment distributes branded and generic pharmaceutical, specialty pharmaceutical and over-the-counter healthcare and consumer products in the United States. This segment also provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products; operates nuclear pharmacies and radiopharmaceutical manufacturing facilities; provides pharmacy management services to hospitals as well as medication therapy management and patient outcomes services to hospitals, other healthcare providers and payers; and repackages generic pharmaceuticals and over-the-counter healthcare products.
Our Medical segment manufactures, sources and distributes Cardinal Health branded medical, surgical and laboratory products, which are sold in the United States, Canada, Europe, Asia and other markets. In addition to distributing Cardinal Health branded products, this segment also distributes a broad range of national brand products and provides supply chain services and solutions to hospitals, ambulatory surgery centers, clinical laboratories and other healthcare providers in the United States and Canada. This segment also distributes medical products to patients' homes in the United States through our Cardinal Health at-Home Solutions division.
Revenue
The following tables present revenue for each reportable segment and disaggregated revenue within our two reportable segments and Corporate:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
Pharmaceutical Distribution and Specialty Solutions (1) (2) | $ | 41,164 |  |  | $ | 37,040 |
Nuclear and Precision Health Solutions | 211 |  |  | 196 |
Pharmaceutical segment revenue | 41,375 |  |  | 37,236 |
Medical distribution and products (3) | 3,446 |  |  | 3,729 |
Cardinal Health at-Home Solutions | 639 |  |  | 581 |
Medical segment revenue | 4,085 |  |  | 4,310 |
Total segment revenue | 45,460 |  |  | 41,546 |
Corporate (4) | (3) |  |  | (5) |
Total revenue | $ | 45,457 |  |  | $ | 41,541 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Pharmaceutical Distribution and Specialty Solutions (1) (2) | $ | 80,778 |  |  | $ | 71,956 |
Nuclear and Precision Health Solutions | 419 |  |  | 392 |
Pharmaceutical segment revenue | 81,197 |  |  | 72,348 |
Medical distribution and products (3) | 7,013 |  |  | 7,167 |
Cardinal Health at-Home Solutions | 1,221 |  |  | 1,100 |
Medical segment revenue | 8,234 |  |  | 8,267 |
Total segment revenue | 89,431 |  |  | 80,615 |
Corporate (4) | (6) |  |  | (9) |
Total revenue | $ | 89,425 |  |  | $ | 80,606 |

(1)Products and services offered by our Specialty Solutions division are referred to as “specialty pharmaceutical products and services."
(2)Comprised of all Pharmaceutical segment businesses except for Nuclear and Precision Health Solutions division.
(3)Comprised of all Medical segment businesses except for Cardinal Health at-Home Solutions division.
(4)Corporate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.
The following tables present revenue by geographic area:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
United States | $ | 44,382 |  |  | $ | 40,360 |
International | 1,078 |  |  | 1,186 |
Total segment revenue | 45,460 |  |  | 41,546 |
Corporate (1) | (3) |  |  | (5) |
Total revenue | $ | 45,457 |  |  | $ | 41,541 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
United States | $ | 87,223 |  |  | $ | 78,336 |
International | 2,208 |  |  | 2,279 |
Total segment revenue | 89,431 |  |  | 80,615 |
Corporate (1) | (6) |  |  | (9) |
Total revenue | $ | 89,425 |  |  | $ | 80,606 |

(1)Corporate revenue consists of the elimination of inter-segment revenue and other revenue not allocated to the segments.
Segment Profit
We evaluate segment performance based on segment profit, among other measures. Segment profit is segment revenue, less segment cost of products sold, less segment distribution, selling, general and administrative ("SG&A") expenses. Segment SG&A expenses include share-based compensation expense as well as allocated corporate expenses for shared functions, including corporate management, corporate finance, financial and customer care shared services, human resources, information technology, and legal and compliance, including certain litigation defense costs. Corporate expenses are allocated to the segments based on headcount, level of benefit provided and other ratable allocation

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Notes to Financial Statements |  |

methodologies. The results attributable to noncontrolling interests are recorded within segment profit.
We do not allocate the following items to our segments:
•last-in first-out, or ("LIFO"), inventory charges/(credits);
•surgical gown recall costs/(income);
•restructuring and employee severance;
•amortization and other acquisition-related costs;
•impairments and (gain)/loss on disposal of assets;
•litigation (recoveries)/charges, net;
•state opioid assessment related to prior fiscal years;
•other (income)/expense, net;
•interest expense, net;
•loss on early extinguishment of debt;
•(gain)/loss on sale of equity interest in naviHealth; or
•provision for income taxes
In addition, certain investment spending, certain portions of enterprise-wide incentive compensation and other spending are not allocated to the segments. Investment spending generally includes the first-year spend for certain projects that require incremental investments in the form of additional operating expenses. Because approval for these projects is dependent on executive management, we retain these expenses at Corporate. Investment spending within Corporate was $11 million and $6 million for the three months ended December 31, 2021 and 2020, and $18 million and $11 million for the six months ended December 31, 2021 and 2020, respectively.
In connection with the interim goodwill impairment testing for the Medical Unit as discussed further in Note 4, we recognized a $1.3 billion goodwill impairment charge during the three and six months ended December 31, 2021 which was retained at Corporate.
In connection with the opioid litigation as discussed further in Note 6, we recognized a pre-tax charge of $1.02 billion during the six months ended December 31, 2020 which was retained at Corporate.
The following tables present segment profit by reportable segment and Corporate:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
Pharmaceutical (1) | $ | 426 |  |  | $ | 413 |
Medical | 50 |  |  | 236 |
Total segment profit | 476 |  |  | 649 |
Corporate | (1,426) |  |  | (188) |
Total operating earnings/(loss) | $ | (950) |  |  | $ | 461 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Pharmaceutical (1) | $ | 832 |  |  | $ | 815 |
Medical | 173 |  |  | 466 |
Total segment profit | 1,005 |  |  | 1,281 |
Corporate | (1,540) |  |  | (1,444) |
Total operating loss | $ | (535) |  |  | $ | (163) |

(1)Pharmaceutical segment profit during the three and six months ended December 31, 2021 was positively impacted by a $16 million judgment for lost profits related to an ordinary course intellectual property rights claim.
The following table presents total assets for each reportable segment and Corporate at:

(in millions) | December 31, 2021 |  | June 30, 2021
Pharmaceutical | $ | 24,427 |  |  | $ | 23,624 |
Medical (1) (2) | 12,737 |  |  | 15,408 |
Corporate | 6,516 |  |  | 5,421 |
Total assets | $ | 43,680 |  |  | $ | 44,453 |

(1)Assets of $1.1 billion classified as held for sale related to the Cordis divestiture were included within Medical at June 30, 2021.
(2)Medical reflects a $1.3 billion goodwill impairment charge recorded in connection with the interim goodwill impairment testing for the Medical Unit at December 31, 2021.
13. Share-Based Compensation
We maintain stock incentive plans (collectively, the “Plans”) for the benefit of certain of our officers, directors and employees.
The following table provides total share-based compensation expense by type of award:

| Three Months Ended December 31,
(in millions) | 2021 |  | 2020
Restricted share unit expense | $ | 17 |  |  | $ | 17 |
Performance share unit expense | 1 |  |  | 6 |
Total share-based compensation | $ | 18 |  |  | $ | 23 |

| Six Months Ended December 31,
(in millions) | 2021 |  | 2020
Restricted share unit expense | $ | 35 |  |  | $ | 36 |
Performance share unit expense | 7 |  |  | 15 |
Total share-based compensation | $ | 42 |  |  | $ | 51 |

The total tax benefit related to share-based compensation was $2 million and $3 million for the three months ended December 31, 2021 and 2020, and $6 million and $7 million for the six months ended December 31, 2021 and 2020, respectively.
Restricted share units granted under the Plans generally vest in equal annual installments over three years. Restricted share units accrue cash dividend equivalents that are payable upon vesting of the awards.

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Notes to Financial Statements |  |

The following table summarizes all transactions related to restricted share units under the Plans:

(in millions, except per share amounts) | Restricted Share Units |  | Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2021 | 3 |  |  | $ | 49.05 |
Granted | 2 |  |  | 51.62 |
Vested | (2) |  |  | 49.47 |
Canceled and forfeited | — |  |  | — |
Nonvested at December 31, 2021 | 3 |  |  | $ | 45.66 |

At December 31, 2021, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested restricted share units not yet recognized was $103 million, which is expected to be recognized over a weighted-average period of two years.
Stock Options
Employee stock options granted under the Plans generally vest in equal annual installments over three years and are exercisable for ten years from the grant date. All stock options are exercisable at a price equal to the market value of the common shares underlying the option on the grant date.
The following table summarizes all stock option transactions under the Plans:

(in millions, except per share amounts) | Stock Options |  | Weighted-Average Exercise Price per Common Share
Outstanding at June 30, 2021 | 4 |  |  | $ | 68.46 |
Granted | — |  |  | — |
Exercised | — |  |  | — |
Canceled and forfeited | — |  |  | — |
Outstanding at December 31, 2021 | 4 |  |  | $ | 69.24 |
Exercisable at December 31, 2021 | 4 |  |  | $ | 69.41 |

At December 31, 2021, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested stock options not yet recognized was $0.2 million, which is expected to be recognized over a weighted-average period of two years.
The following tables provide additional detail related to stock options:

(in millions) | December 31, 2021 |  | June 30, 2021
Aggregate intrinsic value of outstanding options at period end | $ | 3 |  |  | $ | 11 |
Aggregate intrinsic value of exercisable options at period end | 3 |  |  | 11 |

(in years) | December 31, 2021 |  | June 30, 2021
Weighted-average remaining contractual life of outstanding options | 4 |  | 4
Weighted-average remaining contractual life of exercisable options | 4 |  | 4

Performance Share Units
Performance share units vest over a 3-year performance period based on achievement of specific performance goals. Based on the extent to which the targets are achieved, vested shares may range from zero to 240 percent of the target award amount for the fiscal 2020 and 2021 grants and zero to 234 percent for the fiscal 2022 grant. Performance share units accrue cash dividend equivalents that are payable upon vesting of the awards.
The following table summarizes all transactions related to performance share units under the Plans (based on target award amounts):

(in millions, except per share amounts) | Performance Share Units |  | Weighted-Average Grant Date Fair Value per Share
Nonvested at June 30, 2021 | 1.2 |  |  | $ | 54.89 |
Granted | 0.4 |  |  | 51.91 |
Vested | (0.3) |  |  | 52.36 |
Canceled and forfeited | (0.1) |  |  | 52.84 |
Nonvested at December 31, 2021 | 1.2 |  |  | $ | 52.99 |

At December 31, 2021, the total pre-tax compensation cost, net of estimated forfeitures, related to nonvested performance share units not yet recognized was $28 million, which is expected to be recognized over a weighted-average period of two years if performance goals are achieved.

44 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Exhibits |  |

Exhibits

Exhibit Number | Exhibit Description
3.1 | Amended and Restated Articles of Incorporation of Cardinal Health, Inc., as amended (incorporated by reference to Exhibit 3.1 to Cardinal Health’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 1-11373)
3.2 | Cardinal Health, Inc. Restated Code of Regulations, as amended (incorporated by reference to Exhibit 3.2 to Cardinal Health’s Quarterly Report on Form 10-Q filed on November 9, 2021, File No. 1-11373)
10.1 | Cardinal Health, Inc. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.2.1 | Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.2.2 | Form of Restricted Share Units Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan
10.3.1 | Form of Performance Share Units Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.3.2 | Form of Performance Share Units Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan
10.4.1 | Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.4.2 | Form of Nonqualified Stock Option Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan
10.5 | Form of Directors' Restricted Share Units Agreement under the Cardinal Health, Inc. 2021 Long-Term Incentive Plan ( incorporated by reference to Exhibit 10.5 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.6 | Cardinal Health, Inc. Management Incentive Plan (incorporated by reference to Exhibit 10.6 to Cardinal Health's Current Report on Form 8-K filed on November 9, 2021, File No. 1-11373)
10.7 | Aircraft Time Sharing Agreement, effective as of January 1, 2022, by and between Cardinal Health, Inc. and Michael C. Kaufmann
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 | Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1 | Statement Regarding Forward-Looking Information
101.INS | Inline XBRL Instance Document
101.SCH | Inline XBRL Taxonomy Extension Schema Document
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF | Inline XBRL Taxonomy Definition Linkbase Document
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 | Cover Page Interactive Data File - formatted in Inline XBRL (included as Exhibit 101)

Cardinal Health Website
Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, financial information, earnings and analyst presentations and information about upcoming presentations and events is routinely posted and accessible at ir.cardinalhealth.com. In addition, the website allows investors and other interested persons to sign up automatically to receive e-mail alerts when we post news releases, SEC filings and certain other information on its website.

45 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Form 10-Q Cross Reference Index |  |

Form 10-Q Cross Reference Index

Item Number |  | Page
| Part I. Financial Information |
Item 1 | Financial Statements | 26
Item 2 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 2
Item 3 | Quantitative and Qualitative Disclosures about Market Risk | 21
Item 4 | Controls and Procedures | 21
| Part II. Other Information |
Item 1 | Legal Proceedings | 22
Item 1A | Risk Factors | 23
Item 2 | Unregistered Sales of Equity Securities and Use of Proceeds | 25
Item 3 | Defaults Upon Senior Securities | N/A
Item 4 | Mine Safety Disclosures | N/A
Item 5 | Other Information | N/A
Item 6 | Exhibits | 45
| Signatures | 47

N/A | Not applicable |

46 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |

Additional Information |  |

Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | Cardinal Health, Inc.
Date: | February 3, 2022 | /s/ MICHAEL C. KAUFMANN
|  | Michael C. Kaufmann
|  | Chief Executive Officer
|  | /s/ JASON M. HOLLAR
|  | Jason M. Hollar
|  | Chief Financial Officer

47 | Cardinal Health | Q2 Fiscal 2022 Form 10-Q |