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Cardinal Health Q2 2020 Earnings Report
Cardinal Health announced voluntary field actions for select procedure packs containing affected surgical gowns.
Key Takeaways
Cardinal Health initiated two voluntary field actions for select Cardinal Health Presource® Procedure Packs containing gowns due to concerns over sterility from an unapproved supplier. The company expects to record a $96 million charge in the second quarter of fiscal year 2020 related to these recalls.
Initiated voluntary correction of 374,794 procedure packs with components separated from the affected gown.
Initiated a voluntary recall of 2,518,653 procedure packs containing gowns with components not separated from the affected gown.
Terminated relationship with Siyang Holymed due to shifted production to unapproved sites.
Expects to record a $96 million charge in the second quarter of fiscal year 2020 related to the recalls.
Forward Guidance
Cardinal Health expects to record a $96 million charge in the second quarter of fiscal year 2020 related to surgical gown-related recalls.
Positive Outlook
- Increasing its manufacturing production of similar and replacement products.
- Offering more protective AAMI Level 4 gowns to help bridge the supply gap.
- Working to identify alternatives - including in many cases working with industry partners who offer comparable products.
- Mobilizing employees from all parts of the company to work directly with health care providers to replace gowns and procedure packs.
Challenges Ahead
- Current and future costs associated with the recalls of surgical gowns and related kits could have a material negative impact on financial results.
- Risk of losing sales and customers due to the recalls.
- Recalls could lead to actions by regulators or other governmental entities.
- May receive claims and lawsuits by customers and patients, including class action product liability lawsuits.
Historical Earnings Impact
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Avg. Return Before/After Earnings
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