Cardinal Health Inc.

Company Overview

Business Model: Cardinal Health, Inc. is a global healthcare services and products company that provides customized solutions to a broad range of healthcare providers, including hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home. The company's core value proposition involves providing pharmaceuticals and medical products, alongside cost-effective services and solutions, to enhance the efficiency of the healthcare system and supply chain. It connects patients, providers, payers, pharmacists, and manufacturers to facilitate integrated care coordination.

Market Position: Cardinal Health, Inc. operates in highly competitive markets for the distribution of pharmaceuticals, consumer healthcare products, and the manufacturing and distribution of medical devices and surgical products. Competition is based on factors such as price, service offerings, support services, customer service, breadth of product lines, and product quality and efficacy. The company's largest customer, CVS Health, accounted for 30% of its fiscal 2025 revenue, and its five largest customers collectively accounted for 43% of fiscal 2025 revenue. Sales to members of its two largest Group Purchasing Organizations (GPOs), Vizient, Inc. and Premier, Inc., collectively accounted for 27% of fiscal 2025 revenue.

Recent Strategic Developments: In fiscal 2025, Cardinal Health, Inc. completed several significant acquisitions to expand its specialty offerings and managed services organization (MSO) platforms:

• Advanced Diabetes Supply Group (ADS): Acquired on April 1, 2025, for approximately $1.1 billion in cash. ADS is a diabetic medical supplies provider serving approximately 500,000 patients annually. Its results are reported in the Other segment.
• The Specialty Alliance (GI Alliance and Urology America): Acquired a 73% ownership interest in GI Alliance (GIA), a gastroenterology MSO, on January 30, 2025, for approximately $2.8 billion in cash. GIA provides services to over 900 physicians across 345 practice locations in 20 states. Through GIA, Cardinal Health, Inc. also acquired Urology America, a urology MSO, on May 30, 2025, for $360 million in cash and GIA equity. These businesses are consolidated within the Pharmaceutical and Specialty Solutions segment.
• Integrated Oncology Network (ION): Acquired on December 2, 2024, for $1.1 billion in cash. ION is a physician-led independent community oncology network supporting over 100 providers across more than 50 practice sites in 10 states, integrated into Navista, Cardinal Health, Inc.'s oncology MSO. Its results are reported within the Pharmaceutical and Specialty Solutions segment. These acquisitions have positively impacted respective segment revenue and profit, while increasing amortization and acquisition-related costs.

Geographic Footprint: Cardinal Health, Inc. is a global company with operations in the United States, Canada, Europe, Asia, Latin America, and other markets. In fiscal 2025, 99.25% of its total segment revenue was generated in the United States, with 0.75% from international markets. The company operates manufacturing facilities in Canada, Costa Rica, the Dominican Republic, Germany, Ireland, Japan, Malaysia, Malta, Mexico, Puerto Rico, and Thailand, in addition to its extensive U.S. network of distribution centers, manufacturing facilities, and pharmacies. Its principal executive offices are located in Dublin, Ohio.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 3.67%
• Operating Margin: 1.02%
• Net Margin: 0.70%

Investment in Growth:

• R&D Expenditure: Not explicitly disclosed as a separate line item.
• Capital Expenditures: $547 million
• Strategic Investments: $5.3 billion deployed for acquisitions in fiscal 2025, including Advanced Diabetes Supply Group ($1.1 billion), GI Alliance ($2.8 billion), Urology America ($360 million), and Integrated Oncology Network ($1.1 billion).

Business Segment Analysis

Pharmaceutical and Specialty Solutions

Financial Performance:

• Revenue: $204.6 billion (-2.6% YoY)
• Operating Margin: 1.10%
• Key Growth Drivers: Increased contribution from branded and specialty pharmaceutical products, BioPharma Solutions, and MSO platforms acquisitions (GI Alliance and Integrated Oncology Network). This growth was partially offset by the expiration of the OptumRx contracts.

Product Portfolio:

• Distributes branded and generic pharmaceutical, specialty pharmaceutical, and over-the-counter healthcare and consumer products in the United States.
• Provides services to pharmaceutical manufacturers and healthcare providers for specialty pharmaceutical products, including Specialty Networks, third-party logistics (3PL), group purchasing organizations (GPOs), Sonexus patient access and support programs, regulatory and clinical consulting, and real world data and evidence.
• Provides pharmacy management services to hospitals and operates a limited number of pharmacies.
• Repackages generic pharmaceuticals and over-the-counter healthcare products.
• Includes managed services organization platforms for specialty physician offices (Navista & Integrated Oncology Network, GI Alliance).

Market Dynamics:

• Experienced increased demand for GLP-1 pharmaceuticals, positively impacting revenue, though not meaningfully contributing to segment profit due to supply shortages and unpredictable future demand/reimbursement.
• Generics program performance positively impacted segment profit, influenced by product launches, customer volumes, pricing changes, and the Red Oak Sourcing, LLC venture with CVS Health.
• MSO platforms (GI Alliance and Integrated Oncology Network acquisitions) positively impacted segment profit.

Global Medical Products and Distribution

Financial Performance:

• Revenue: $12.6 billion (+2.1% YoY)
• Operating Margin: 1.07%
• Key Growth Drivers: Higher volumes from existing customers and beneficial impact of cost optimization initiatives, partially offset by higher manufacturing costs.

Product Portfolio:

• Manufactures, sources, and distributes Cardinal Health brand medical, surgical, and laboratory products (e.g., exam and surgical gloves, wound care, single-use surgical drapes, urology products).
• Distributes a broad range of national brand medical, surgical, and laboratory products.
• Assembles and sells sterile and non-sterile procedure kits.
• Provides supply chain services and solutions, including the Wavemark automated technology platform for inventory management.

Market Dynamics:

• Cardinal Health brand medical products sales grew in fiscal 2025, with further growth expected.
• The segment faces competitive pressures from diversified healthcare companies, national and regional medical product distributors, and companies focused on specific product categories.

Other

Financial Performance:

• Revenue: $5.4 billion (+19.3% YoY)
• Operating Margin: 9.59%
• Key Growth Drivers: Growth across at-Home Solutions (including the acquisition of Advanced Diabetes Supply Group), Nuclear and Precision Health Solutions, and OptiFreight Logistics.

Product Portfolio:

• Nuclear and Precision Health Solutions: Operates nuclear pharmacies and manufacturing facilities, producing and delivering radiopharmaceuticals for nuclear imaging and theranostics. Contract manufactures Xofigo and holds North American rights for Lymphoseek.
• at-Home Solutions: Includes Edgepark (with Advanced Diabetes Supply Group), directly providing medical supplies to patients with chronic conditions in the home, and at-Home, a business-to-business distribution service for home medical equipment providers, home health and hospice agencies, and e-commerce providers.
• OptiFreight Logistics: Supports shipping and logistics needs of healthcare providers by optimizing direct shipments through integrated technology solutions.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $765 million (6.4 million common shares)
• Dividend Payments: $494 million ($2.02 per share)
• Dividend Yield: 0.55% (based on $2.02 dividend per share and June 30, 2025 closing price of $367.25)
• Future Capital Return Commitments: $2.7 billion remaining under existing share repurchase authorization as of June 30, 2025.

Balance Sheet Position:

• Cash and Equivalents: $3.9 billion
• Total Debt: $8.5 billion
• Net Cash Position: -$4.6 billion (Net Debt)
• Credit Rating: Not explicitly disclosed in the provided text.
• Debt Maturity Profile: Maturities of existing long-term obligations and other short-term borrowings for fiscal 2026 through 2030 and thereafter are $553 million, $1.9 billion, $834 million, $670 million, $764 million, and $3.9 billion, respectively.

Cash Flow Generation:

• Operating Cash Flow: $2.4 billion
• Free Cash Flow: $1.9 billion
• Cash Conversion Metrics: Net cash provided by operating activities in fiscal 2025 includes the impact of unwinding negative net working capital associated with the OptumRx contracts and normal timing of vendor payments, partially offset by onboarding new customers. Payments totaling $798 million related to opioid litigation also impacted operating cash flow.

Operational Excellence

Production & Service Model: Cardinal Health, Inc. provides a range of services including pharmaceutical and medical product distribution, manufacturing, sourcing, inventory management, data reporting, new product launch support, chargeback administration, pharmacy management, repackaging, and physician practice support and management services. The company leverages prime vendor relationships to streamline purchasing and enhance supply chain efficiency.

Supply Chain Architecture: The company relies on numerous direct and indirect suppliers for products, components, compounds, raw materials (e.g., oil-based resins, nitrile, cotton, diesel fuel, latex), and energy. It procures certain items from sole suppliers for quality, cost, or availability reasons. The supply chain is subject to volatility in commodity prices and potential disruptions from natural disasters, labor disputes, facility shutdowns, defective materials, epidemics, and governmental actions like import/export restrictions or tariffs.

Key Suppliers & Partners:

• Sourcing Venture: Red Oak Sourcing, LLC, a generic pharmaceutical sourcing venture with CVS Health Corporation, negotiates generic pharmaceutical supply contracts.
• Top Suppliers: The five largest suppliers accounted for an aggregate of 37% of fiscal 2025 revenue, with the largest supplier accounting for approximately 9%.

Facility Network:

• Manufacturing: Operates manufacturing facilities in the United States, Canada, Costa Rica, the Dominican Republic, Germany, Ireland, Japan, Malaysia, Malta, Mexico, Puerto Rico, and Thailand.
• Research & Development: Not explicitly detailed as separate facilities, but R&D is implied through innovation and technology leadership.
• Distribution: Operates one national logistics center and numerous primary pharmaceutical and specialty distribution facilities in the United States, along with medical-surgical distribution facilities in the U.S. and Canada. Other operating segments also have facilities throughout the United States.

Operational Metrics: The filing mentions that data quality impacts customer ordering, order fulfillment, and higher order processing, but no specific quantitative operational metrics (e.g., capacity utilization, efficiency measures) are disclosed.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Distributes products directly to hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and patients in the home.
• Channel Partners: Engages with Group Purchasing Organizations (GPOs) like Vizient, Inc. and Premier, Inc., which negotiate vendor contracts on behalf of their members.
• Digital Platforms: Utilizes integrated technology solutions for optimizing direct shipments through OptiFreight Logistics and provides medical supplies directly to patients in the home through at-Home Solutions (Edgepark, Advanced Diabetes Supply Group).

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: CVS Health Corporation is the largest customer, accounting for 30% of fiscal 2025 revenue and 26% of gross trade receivables.
• Strategic Partnerships: The five largest customers collectively accounted for 43% of fiscal 2025 revenue. Sales to members of Vizient, Inc. and Premier, Inc. GPOs collectively accounted for 27% of fiscal 2025 revenue.
• Customer Concentration: Significant sales and credit concentration with CVS Health Corporation. The expiration of OptumRx contracts (17% of consolidated revenue in fiscal 2024) impacted fiscal 2025 results.

Geographic Revenue Distribution:

• United States: $220.993 billion (99.25% of total segment revenue)
• International: $1.669 billion (0.75% of total segment revenue)
• Growth Markets: Not specifically detailed, but international operations span Europe, Asia, and Latin America.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The U.S. healthcare industry has undergone significant changes to increase access to care, improve safety, contain costs, and increase efficiencies, including declining Medicare and Medicaid reimbursement, efforts by insurers to reduce payments, and a shift from fee-for-service to value-based payments. Consolidation among industry participants (distributors, manufacturers, providers, insurers, pharmacies) is a continuing trend, creating larger entities with greater negotiating power.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Pharmaceutical and Specialty Solutions Segment: McKesson Corporation, Cencora, Inc. (national wholesale distributors), regional wholesale distributors, self-warehousing chains, specialty distributors, third-party logistics companies, and companies providing specialty pharmaceutical services and managed services to specialty physicians.
• Global Medical Products and Distribution Segment: Medline Industries, Inc., Owens & Minor, Inc. (diversified healthcare companies and national medical product distributors), regional medical product distributors, and companies focused on specific product categories.
• Other Operating Segments: Companies operating nuclear radiopharmacies and manufacturing facilities, distributors of medical products to patients' homes, and third-party logistics companies.

Emerging Competitive Threats: New business models, new entrants, new regulations, changes in enforcement priorities, changes in consumer demand, and general competitive dynamics. New entrants or disruptive technologies, including alternative solutions, could pose threats.

Competitive Response Strategy: The company aims to offset margin reductions through sourcing and cost control measures, additional service offerings, and sales of higher-margin products. It also focuses on strategic acquisitions to expand specialty offerings and MSO platforms.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Healthcare Industry Changes: Ongoing changes in U.S. healthcare legislation and regulations (e.g., prescription pharmaceutical pricing, U.S.-based medical product manufacturing, mandated benefits, transparency efforts, drug shortages, governmental funding reductions) could adversely affect demand for products and services and financial results. The "Delivering Most-Favored Nation Prescription Drug Pricing to American Patients" Executive Order may impact branded pharmaceutical sales or profitability.
• Technology Disruption: Dependence on access to and interpretation of data, including systems incorporating artificial intelligence and machine learning. Failure to effectively implement data governance or protect data integrity could lead to competitive disadvantage.
• Customer Concentration: Significant reliance on CVS Health Corporation (30% of fiscal 2025 revenue) and top five customers (43% of fiscal 2025 revenue). Loss of a major customer or GPO agreement could adversely affect business.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on many suppliers, with the top five accounting for 37% of fiscal 2025 revenue. Sole suppliers for certain components/raw materials create risk. Interruptions due to natural disasters, labor disputes, facility shutdowns, defective materials, epidemics, or governmental actions (e.g., import/export restrictions, tariffs) could lead to supply shortages, increased costs, and lost sales.
• Geographic Concentration: Global operations expose the company to local economic environments, inflation, recession, and divergent regulatory systems. U.S. tariffs and retaliatory actions could increase sourcing costs, require price increases, or cause supply disruptions.
• Capacity Constraints: Manufacturing disruptions can occur due to regulatory action, quality deviations, safety issues, raw material shortages, or planned shifts in production sites.
• Information Systems & Cybersecurity: Business depends on proper functioning and security of information systems and critical facilities. Cybersecurity incidents, ransomware, or other attacks could lead to loss/misuse of information, disruption of operations, and financial losses, including class action lawsuits. Recently acquired MSO businesses introduce incremental cybersecurity risks.
• Integration of Acquisitions: Risks associated with integrating acquired businesses (e.g., diversion of management attention, failure to retain key personnel, difficulties in combining operations/systems, unforeseen liabilities, customer retention challenges, internal control/regulatory issues). State legislation limiting corporate ownership of physician practices could impact MSO strategy.
• Business Process Execution: Failure to effectively or efficiently complete or manage critical business processes, including ERP implementations and supply chain optimization, could negatively impact business and financial results.

Financial & Regulatory Risks

Market & Financial Risks:

• Commodity Price Volatility: Direct exposure to market price changes for oil-based resins, nitrile, cotton, diesel fuel, and latex, impacting production and distribution costs. Inability to offset cost increases through price adjustments could negatively impact GMPD segment profit.
• Foreign Exchange: Exposure to cash flow and earnings fluctuations from foreign exchange rate variations (e.g., Canadian dollar, euro, Thai baht, Mexican peso, Chinese renminbi). Potential maximum loss in earnings from transactional exposure estimated at $13 million, and from translational exposure at $3 million, based on a one-year horizon and 95% confidence level.
• Interest Rate: Exposure to changes in interest rates from borrowing and investing activities. A hypothetical 50 basis point increase/decrease in interest rates would result in a $12 million increase/decrease in interest expense and a $14 million increase/decrease in interest income.
• Tax Law Changes: Proposals in the U.S. and other jurisdictions could adversely affect tax positions, effective tax rate, or tax payments (e.g., increases in corporate income tax rates, repeal of LIFO, state-level gross revenue taxation). The One Big Beautiful Bill Act (OBBBA) signed in July 2025 includes tax reform provisions under evaluation.
• Opioid Litigation: Ongoing legal proceedings and the National Opioid Settlement Agreement (NOSA) could have additional or unexpected negative effects, including unforeseen costs or operational challenges from compliance with anti-diversion programs. Private plaintiff lawsuits and insurance litigation add further uncertainty.
• Product Liability: Risk of product liability claims and lawsuits (e.g., Cordis IVC filter products), which may not be fully covered by insurance.

Regulatory & Compliance Risks:

• Rigorous Regulatory Requirements: Products and operations are subject to extensive federal, state, and foreign regulations (FDA, DEA, NRC, EPA, FTC, HIPAA, GDPR). Noncompliance can lead to sanctions, recalls, and adverse financial impacts.
• Healthcare Fraud and Abuse Laws: Subject to federal and state anti-kickback and false claims laws. Investigations (e.g., Department of Justice CID regarding Anti-Kickback Statute and False Claims Act) could result in civil/criminal sanctions or loss of program participation.
• Privacy and Data Protection: Subject to evolving privacy laws (HIPAA, GDPR, state laws) due to handling patient-identifiable health information and other sensitive data. Compliance is costly, and violations could lead to penalties, lawsuits, and reputational harm.
• Environmental Regulations: Reliance on ethylene oxide (EtO) and PFA compounds for sterilization exposes the company to regulatory actions to reduce emissions, potentially increasing costs, causing supply shortages, or impacting demand. Lawsuits alleging personal injury from EtO emissions are ongoing.
• Product Tracing and Supply Chain Integrity: Compliance with the Drug Supply Chain Security Act (DSCSA) and unique device identifier regulations for medical devices requires significant effort and investment.
• Foreign Trade and Operations Laws: Compliance with U.S. and foreign import/export controls, trade embargoes, customs laws, and anti-bribery laws (FCPA, U.K. Bribery Act). Violations could lead to investigations or sanctions.

Geopolitical & External Risks

Geopolitical Exposure: Global operations are affected by geopolitical events, civil unrest, trade sanctions, tariffs, armed conflicts, or terrorism, which can disrupt operations, hinder manufacturing/transportation, increase costs, shift demand, or negatively impact capital markets. Trade Relations: U.S. tariffs and retaliatory actions by other countries could increase sourcing costs, require price increases, or cause supply disruptions. The Uyghur Forced Labor Prevention Act has already caused supply constraints. Sanctions & Export Controls: Compliance with export control and trade embargo laws, including country-specific limitations and licensing requirements.

Innovation & Technology Leadership

Research & Development Focus: Core Technology Areas: The company invests in technology for distribution and logistics systems, production and distribution of nuclear pharmacy products, and other service offerings. It also focuses on technology-enabled solutions for physician practices and inventory management. Innovation Pipeline: Not explicitly detailed, but the company's strategic acquisitions in MSO platforms and specialty offerings suggest an ongoing focus on expanding capabilities and services.

Intellectual Property Portfolio:

• Patent Strategy: Relies on patent protection globally for medical/surgical products, distribution/logistics systems, nuclear pharmacy products, and service offerings.
• Licensing Programs: Operates under licenses for proprietary technologies and licenses its technologies to third parties.
• IP Litigation: Subject to third-party infringement claims and potential litigation.

Technology Partnerships: Not explicitly detailed, but the company uses global professional services firms for certain business processes (finance, IT, HR) and third parties to assist with cybersecurity.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Human Resources and Compensation Committee of the Board of Directors oversees management succession planning for senior executives. Board Composition: The Board of Directors assesses and monitors corporate culture. The Audit Committee has primary responsibility for overseeing cybersecurity and other major technology-related risks. The Risk Oversight Committee monitors compliance with legal and regulatory requirements, including data privacy and security.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 57,700 globally as of June 30, 2025.
• Geographic Distribution: Approximately 18,500 employees are based outside the United States.
• Skill Mix: 92% are full-time employees. Approximately 35,000 work in distribution centers, manufacturing facilities, pharmacies, or are non-provider employees of MSO platforms. Approximately 21,000 work in other functions (finance, IT, HR, sales). Approximately 1,900 are healthcare providers.

Talent Management: Acquisition & Retention: The company's talent management strategy focuses on building capabilities, skills, and competencies of leaders and employees. It monitors turnover data monthly and benchmarks against industry data. Employee Value Proposition: Offers comprehensive and competitive wages and benefits, including annual bonuses, stock awards, 401(k) plans, health care and insurance, paid time off, flexible work schedules, and family leave.

Diversity & Development:

• Development Programs: Includes broad-based employee skill development, learning, and manager development.
• Culture & Engagement: Culture is rooted in values and behaviors, aligned to the strategic framework. A culture scorecard is shared annually with the Board. Employee feedback is solicited through engagement surveys.

Worker Health & Safety: Prioritizes employee and contractor health, safety, and security through systems to monitor facilities and work environments, specialized training, and routine assessments of security and safety standards.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Industry participants, including Cardinal Health, Inc., rely on ethylene oxide (EtO) and per- and polyfluoroalkyl (PFA) compounds for sterilizing medical products. Regulatory actions to reduce emissions of these compounds could increase compliance costs or lead to supply shortages. Supply Chain Sustainability: Not explicitly detailed, but the company is subject to environmental laws regulating hazardous substances and safe working conditions.

Social Impact Initiatives:

• Community Investment: Not explicitly detailed in the provided text.
• Product Impact: Not explicitly detailed in the provided text.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Not explicitly detailed in the provided text.
• Economic Sensitivity: The U.S. healthcare industry is subject to changes designed to contain costs and increase efficiencies, which can impact demand.
• Industry Cycles: The company's businesses are affected by broader industry trends and competitive dynamics.

Planning & Forecasting: The company's LIFO inventory valuation is influenced by pharmaceutical manufacturer price appreciation or deflation and fiscal year-end inventory levels, which can be affected by customer buying behavior. Demand forecasting and inventory management are implied through business operations but not explicitly detailed as a strategy.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Cardinal Health, Inc. is highly regulated by federal, state, and foreign government entities, including the U.S. Drug Enforcement Administration (DEA), U.S. Food and Drug Administration (FDA), Centers for Medicare and Medicaid Services, U.S. Nuclear Regulatory Commission (NRC), U.S. Environmental Protection Agency (EPA), and U.S. Federal Trade Commission (FTC). Regulations cover marketing, purchase, storage, distribution of products, manufacturing practices, quality systems, labeling, promotion, and post-market surveillance. International Compliance: Subject to regulations in Canada, Europe, Asia, and other markets, including CE Mark Certification in the EU and the new Medical Device Regulation (MDR).

Trade & Export Controls:

• Export Restrictions: Subject to U.S. and foreign laws regarding import/export of goods, raw materials, and information. Compliance with export control and trade embargo laws, including licensing requirements.
• Sanctions Compliance: Compliance with sanctioned entity restrictions and monitoring. The Uyghur Forced Labor Prevention Act has caused supply constraints.

Legal Proceedings:

• Opioid Lawsuits and Investigations: Accrued $4.9 billion as of June 30, 2025, for opioid-related settlements, including the National Opioid Settlement Agreement (NOSA) with states and political subdivisions, and agreements with third-party payors and acute care hospitals. Compliance with injunctive relief terms of the NOSA is overseen by a monitor until 2027. Private plaintiff lawsuits are ongoing.
• Department of Justice Civil Investigative Demand (CID): Received a CID in November 2023 regarding potential Anti-Kickback Statute and False Claims Act violations related to a 2022 acquisition of a GPO and a minority interest in a rheumatology MSO.
• Cordis IVC Filter Matters: Involved in product liability lawsuits related to IVC filter products, with the vast majority of claims resolved through settlement agreements totaling $275 million. $56 million is accrued for remaining losses and legal defense costs.
• Generic Pharmaceutical Pricing Antitrust Litigation: Dismissal of a civil class action lawsuit by indirect purchasers of generic drugs was granted in February 2025.
• Antitrust Litigation Proceeds: Recognized income for net recoveries in class action antitrust lawsuits of $171 million in fiscal 2025.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: 25.3% in fiscal 2025, compared to 28.9% in fiscal 2024.
• Geographic Tax Planning: Operates in a complex multinational tax environment, subject to tax treaty arrangements and transfer pricing guidelines. Foreign earnings of approximately $1.0 billion are considered indefinitely reinvested.
• Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA) was signed into law in July 2025, including tax reform provisions that are being evaluated for their impact on consolidated financial statements.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Self-insures through a wholly-owned insurance subsidiary for employee healthcare, certain product liability matters, auto liability, property, and workers' compensation, and maintains insurance for losses exceeding certain limits.
• Risk Transfer Mechanisms: Utilizes derivative financial instruments to manage exposure to foreign exchange, interest rate, and commodity price-related changes. Enters into interest rate swaps, foreign currency contracts, and cross-currency swaps (for net investment hedges).
• Opioid-related insurance recoveries of $25 million were received in fiscal 2025. Insurance for cyber-attacks is becoming more costly and limited.