Edgar Filing: CARDINAL HEALTH INC

15Q4_11K_12.31.14_Form 11-K_Savings Plan Puerto Rico



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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 11-K



þ	ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2014



o	TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 1-11373



A.	Full title of the plan and the address of the plan, if different from that of the issuer named below:
	Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico



B.	Name of the issuer of the securities held pursuant to the plan and the address of its principal executive office:
	Cardinal Health, Inc.
	7000 Cardinal Place
	Dublin, Ohio 43017

Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Financial Statements and Supplemental Information

Years Ended December 31, 2014 and 2013

Table of Contents



		Page
	Report of Independent Registered Public Accounting Firm	1

	Financial Statements:
	Statements of Net Assets Available for Benefits	2
	Statements of Changes in Net Assets Available for Benefits	3
	Notes to Financial Statements	4

	Supplemental Schedules*:
	Schedule H, Line 4a on Form 5500: Schedule of Delinquent Participant Contributions	17
	Schedule H, Line 4i on Form 5500: Schedule of Assets (Held at End of Year)	18

	Signature	19

	Exhibit:
	Consent of Independent Registered Public Accounting Firm	Exhibit 23.01

*	All other financial schedules required by Section 2520.103-10 of the U.S. Department of Labor’s Annual Reporting and Disclosure Requirements under the Employee Retirement Income Security Act of 1974, as amended have been omitted because they are not applicable.



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Report of Independent Registered Public Accounting Firm

Financial Benefit Plans Committee of the Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

We have audited the accompanying statements of net assets available for benefits of Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico as of December 31, 2014 and 2013, and the related statement of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico as of December 31, 2014 and 2013, and the changes in its net assets available for benefits for the years then ended, in conformity with U.S. generally accepted accounting principles.

The accompanying supplemental schedules of assets (held at end of year) as of December 31, 2014, and delinquent participant contributions for the year then ended, have been subjected to audit procedures performed in conjunction with the audit of Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico's financial statements. The information in the supplemental schedules is the responsibility of the Plan’s management. Our audit procedures included determining whether the information reconciles to the financial statements or the underlying accounting and other records, as applicable and performing procedures to test the completeness and accuracy of the information presented in the supplemental schedules. In forming our opinion on the information, we evaluated whether such information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ Ernst & Young LLP

Columbus, Ohio

June 25, 2015



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Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Statements of Net Assets Available for Benefits

December 31, 2014 and 2013



	December 31
	2014			2013
Assets
Plan’s interest in Stable Value Master Trust's assets at fair value	$	2,167,649		$	1,936,443
Investments at fair value	14,163,074			11,343,863
Notes receivable from participants	882,668			548,722
Accrued income	12,279			9,959
Receivable for Company contributions	4,374			—
Cash	278			—
Total assets	17,230,322			13,838,987

Liabilities
Accrued fees	15,256			12,271
Pending trades payable	31			—
Total liabilities	15,287			12,271

Net assets reflecting investments at fair value	17,215,035			13,826,716
Adjustment from fair value to contract value for fully benefit-responsive investment contracts	(42,416		)	(24,928		)
Net assets available for benefits	$	17,172,619		$	13,801,788

The accompanying notes are an integral part of these financial statements.



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Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Statements of Changes in Net Assets Available for Benefits

For the Years Ended December 31, 2014 and 2013



	2014		2013
Additions to net assets attributed to:
Investment income:
Interest and dividend income	$	254,407	$	150,764
Net appreciation in the fair value of investments	812,496		1,988,672
Plan's interest in Stable Value Master Trust's net investment income	36,747		41,453
Total investment income	1,103,650		2,180,889

Interest income on notes receivable from participants	31,035		17,213

Contributions:
Company	1,547,412		1,308,113
Participant	1,225,563		1,104,628
Rollovers	29,056		428,032
Total contributions	2,802,031		2,840,773
Total additions	3,936,716		5,038,875

Deductions from net assets attributed to:
Benefits paid to participants	507,211		304,861
Administrative expenses	58,674		61,178
Total deductions	565,885		366,039
Net increase	3,370,831		4,672,836

Net assets available for benefits:
Beginning of year	13,801,788		9,128,952
End of year	$	17,172,619	$	13,801,788

The accompanying notes are an integral part of these financial statements.



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Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Notes to Financial Statements

December 31, 2014 and 2013

1. Description of Plan

General

The Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico (the “Plan”) is a defined contribution plan covering substantially all employees of Cardinal Health, Inc. (the “Company”) and certain of its subsidiaries residing in Puerto Rico. Employees who are covered by a collective bargaining agreement are not eligible to participate unless the agreement provides for participation. Eligible employees participate upon their date of hire. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

A trust with a Puerto Rico bank was established for the Plan. In addition, certain assets of the Plan are held within the Cardinal Health Stable Value Fund (the “Stable Value Master Trust”), which was established for the Plan and certain other plans of the Company. See Note 4 for more information regarding the Stable Value Master Trust.

Effective January 1, 2011, the Plan was amended and restated in compliance with the Internal Revenue Code for a New Puerto Rico (2011) (the “Code”), as amended. The Plan was most recently amended on November 27, 2012.

The following description of the Plan provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

Administration

The Company is the Plan administrator, and the Company’s Financial Benefit Plans Committee (the “Committee”) is responsible for the general operation and administration of the Plan.

Banco Popular de Puerto Rico is the trustee of the Plan. Wells Fargo Bank, N.A. (“Wells Fargo”) serves as the Plan record keeper and asset custodian.



Table of Contents
Notes to Financial Statements (continued)

1. Description of Plan (continued)

Contributions

Contributions to the Plan may consist of participant elective contributions, rollover contributions, and Company matching, discretionary employer, and discretionary special contributions.

Participants may elect to contribute a percentage of their eligible compensation (subject to certain limitations), as defined by the Plan. Participants who have or will attain at least age 50 by the end of the Plan year may elect to contribute up to an additional $1,500, as a catch-up contribution. Participants may also roll over amounts representing distributions from other qualified plans.

The Company will match 100% of the first 3% of participant elective deferrals, and 50% of the next 2% of pretax contributions. In addition, the Company may elect to make discretionary employer contributions and/or discretionary special contributions.

Discretionary employer contributions are allocated to participants based on their proportionate share of total eligible compensation and eligible compensation above the Social Security taxable wage base amount for the year of allocation.

The Plan’s discretionary employer contribution is known as the Company Performance Contribution (“CPC”), and is contingent upon the Company’s financial performance. To be eligible for the CPC, participants generally must be employed on the last day of the Company’s fiscal year, June 30. If financial performance goals are met, the CPC is calculated on eligible compensation earned during the Company’s fiscal year and contributed in lump sum to participant accounts. The CPC is recognized by the Plan in the year the contribution is made to the Plan. For the Company’s fiscal years ended June 30, 2014 and 2013, the CPC was $769,820 and $577,076, respectively, and was deposited into participant accounts in September 2014 and 2013, respectively.

The discretionary special contributions, if any, are allocated to the participants in the eligible group ratably based on their proportionate share of the total eligible compensation in that group. No discretionary special contributions were made for the Plan Years ending December 31, 2014 and December 31, 2013, respectively.

Participants direct the investment of their contributions into various investment options offered by the Plan. The Company’s matching, discretionary employer and discretionary special contributions, if any, are also invested as directed by participants.

Participant Accounts

Each participant’s account is credited with the participant’s elective contributions, any rollover contributions made by the participant and allocations of the Company’s contributions and Plan earnings. A participant is entitled to the benefit provided from the participant’s vested account balance.

Vesting

Participants are vested immediately in their elective deferral, safe harbor and qualified matching contributions, plus actual earnings thereon. A participant is 100% vested in the Company’s discretionary employer, discretionary special and any other non-safe harbor contributions after three years of vesting service, or if the participant dies, becomes totally disabled, or reaches retirement age, as defined in the Plan document, while employed by the Company. The Plan provides for the partial vesting of the Company contributions to participants with more than one year, but less than three years of vesting service, who were terminated as part of a designated reduction in workforce, as defined in the Plan document.



Table of Contents
Notes to Financial Statements (continued)

1. Description of Plan (continued)

Forfeitures

Non-vested account balances are generally forfeited either upon full distribution of vested balances or completion of five consecutive one-year breaks in service, as defined in the Plan document. Forfeitures are either used to reduce Company contributions to the Plan or to pay reasonable expenses of the Plan pursuant to guidelines determined by the Committee.

Forfeitures used to reduce Company contributions and to pay reasonable expenses were $64,660 and $160,935 during 2014 and 2013, respectively. At December 31, 2014 and 2013, forfeited non-vested accounts were $43,135 and $85,863, respectively.

Administrative Expenses

Administrative expenses are paid by the Company or the Plan, except for fees for loans, withdrawals and Qualified Domestic Relations Orders, which are paid from the account of the participant incurring the expense.

Revenue sharing and sub-transfer agent fee income received by the Plan are credited to an administrative account and can be used to reduce administrative expenses. During 2014 and 2013, the Plan earned $12,248 and $8,976, respectively, in revenue sharing and sub-transfer agent fee income.

Participant Loans

Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 less the highest outstanding loan balance during the prior 12 months or 50% of their vested account balance. Loan terms primarily range from 1 to 5 years or up to 15 years for the purchase of a primary residence. Participant loans are secured by 50% of the vested balance in the participant’s account as of the date of the loan and bear interest at a reasonable rate, as established by the Committee, currently Prime plus 1%, which is set for the life of the loan. Interest rates for new loans are subject to change on a monthly basis. Loan repayments, including interest and applicable loan fees, are generally repaid through payroll deductions.

Payment of Benefits

Upon termination of employment, death, retirement or total disability, distributions are generally made in the form of a lump-sum payment. In addition, the Plan includes a provision for participants to make withdrawals from their account under certain hardship circumstances or after attaining age 59 1/2, as defined in the Plan document. Required qualified joint and survivor annuity payment options are preserved for the portion of participant accounts transferred to the Plan from a money purchase pension plan, if any.



Table of Contents
Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements of the Plan are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”).

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates that affect the reported amounts in the financial statements and accompanying notes and supplemental schedules. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncement

In May 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“ASU 2015-07”). ASU 2015-07 amended Accounting Standards Codification (“ASC”) 820 to remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset per share practical expedient as well as to remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. The amendments are to be applied retrospectively and are effective for years beginning after December 15, 2015. The Company plans to adopt ASU 2015-07 in the 2015 financial statements of the Plan.

Investment Valuation and Income Recognition

In accordance with FASB authoritative guidance included in ASC Subtopic 962, Defined Contribution Pension Plans, the Statements of Net Assets Available for Benefits present certain investment contracts at fair value as well as an additional line item showing the adjustment of fully benefit-responsive contracts from fair value to contract value. The Statements of Changes in Net Assets Available for Benefits are prepared on a contract value basis for the fully benefit-responsive investment contracts. Contract value represents contributions plus earnings, less participant withdrawals and administrative expenses.

Certain Plan investments are in the Stable Value Master Trust, while others are held in custody by Wells Fargo under an agreement with the trustee for the Puerto Rico trust. Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 5 for discussion of fair value measurements.

The Committee is responsible for determining the Plan’s valuation policies and analyzing information provided by the investment custodians and issuers that is used to determine the fair value of the Plan’s investments. The Committee is comprised of management level employees from the benefits, treasury and finance departments and reports to the Human Resources and Compensation Committee of the Board of Directors of the Company.

For instruments within Level 3 of the fair value hierarchy, the Committee, in determining the reasonableness of the methodology, evaluates a variety of factors including a review of existing contracts, economic conditions, industry and market developments, and overall credit ratings.

Purchases and sales of securities are recorded on a trade-date basis using fair market value, except for those investments in investment contracts that are transacted at contract value. Dividends are recorded on the ex-dividend date. Interest is recorded on the accrual basis.



Table of Contents
Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Adjustment from Fair Value to Contract Value for Fully Benefit-Responsive Investment Contracts

This amount represents the difference between fair value and contract value of investment contracts that are considered fully benefit-responsive issued by insurance companies and banks.

Notes Receivable from Participants

Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. If a participant ceases to make loan repayments and the Plan Sponsor deems the participant loan to be a distribution, the participant loan balance is retained as a defaulted loan amount until a distributable event occurs, at which time the loan amount is offset from the value of the account.

Payment of Benefits

Benefit payments are recorded when paid.



Table of Contents
Notes to Financial Statements (continued)

3. Investments

The fair values of individual assets held outside of the Stable Value Master Trust that represent 5% or more of the Plan’s net assets available for benefits were as follows:



	December 31
	2014			2013
Mutual funds:
PIMCO Total Return Fund	$	2,693,163		$	2,223,657
Fidelity Growth Company Fund	1,905,915			1,440,224
Dodge & Cox Stock Fund	1,597,603			1,286,422
Fidelity Diversified International Fund	1,354,039			1,168,200
Vanguard Institutional Index Fund	1,146,240			896,546
Columbia Acorn USA Fund Z	1,071,878			933,127
CRM Mid Cap Value Fund	831,687		*	709,533
Cardinal Health, Inc. common shares	2,125,702			1,598,229


*	Shown for comparative purposes.

Net appreciation in the fair value of investments held outside of the Stable Value Master Trust was as follows for the years ended December 31:



	2014		2013
Mutual funds	$	467,875	$	1,439,449
Cardinal Health, Inc. common shares	344,621		549,223
Total net appreciation in the fair value of investments	$	812,496	$	1,988,672



Table of Contents
Notes to Financial Statements (continued)

4. Assets Held in the Stable Value Master Trust

Certain of the Plan’s investments are held in the Stable Value Master Trust which was established for the investment of assets of the Plan and other Company sponsored retirement plans. Each participating plan’s interest in the investment funds (i.e., separate accounts) of the Stable Value Master Trust is based on account balances of the participants and their elected investment funds. The Stable Value Master Trust’s assets are allocated among the participating plans by assigning to each plan those transactions (primarily contributions, benefit payments, and plan specific expenses) that can be specifically identified and by allocating among all plans, in proportion to the fair value of the assets assigned to each plan, income and expenses resulting from the collective investment of the assets of the Stable Value Master Trust. The Plan’s interest in the Stable Value Master Trust’s net investment income (loss) presented in the Statements of Changes in Net Assets Available for Benefits consists of the unrealized and realized gains (losses) and the earnings on those investments.

The Stable Value Master Trust invests in guaranteed investment contracts (“GICs”) and actively managed, structured or synthetic investment contracts (“SICs”). The GICs are promises by an insurance company to repay principal plus a fixed rate of return through contract maturity. SICs differ from GICs in that there are specific assets supporting the SICs, and these assets are owned by the Plan. The bank or insurance company issues a wrapper contract that allows participant-directed transactions to be made at contract value. The assets supporting the SICs are invested in Wells Fargo fixed income collective trust funds comprised of government agency bonds, corporate bonds, asset-backed securities and collateralized mortgage obligations. The major credit ratings of the issuer or wrapper providers for the GICs and SICs are investment grade.

Interest crediting rates on the GICs in the Stable Value Master Trust are determined at the time of purchase. Interest crediting rates on the SICs are set at the time of purchase and reset periodically, normally quarterly, based on the market value, duration and yield to maturity of the underlying assets. The crediting interest rate is based on a formula agreed upon with the contract issuer, but may not be less than zero. The crediting interest rates for GICs and SICs ranged from 1.12% to 3.02% and 1.20% to 5.30% at December 31, 2014 and 2013, respectively. To the extent that the underlying portfolio of a security-backed contract has unrealized and/or realized losses that are accounted for, under contract value accounting, through a positive adjustment to contract value, the future crediting rate may be lower over time than then-current market rates. Similarly, if the underlying portfolio generates unrealized and/or realized gains, reflected in a negative adjustment to contract value under contract value accounting, the future crediting rate may be higher than then-current market rates.

For the years ended December 31, 2014 and 2013, the average yield for the investment contracts based on actual earnings was 1.59% and 1.78%, respectively.

For the years ended December 31, 2014 and 2013, the average yield adjusted to reflect the actual interest rate credited to participants was 1.98% and 2.19%, respectively.

Events that may limit the ability of the Plan to transact at contract value are events or conditions the occurrence of which are considered outside the normal operations of the Plan, which the contract issuer reasonably determines to have a material adverse financial effect on the issuer’s interests such as: 1) Plan disqualification under the Code, 2) establishment of a defined contribution plan by the Company that competes for participant contributions, 3) material amendments to the Plan or administration as to investment options, transfer procedures or withdrawals, 4) Company’s inducement to participant to withdraw or transfer funds from the contract, 5) termination or partial termination of the Plan, 6) group termination, layoff, early retirement incentive program or other downsizing by the Company, 7) merger or consolidation of the Plan with another plan or spin-off of any portion of the Plan’s assets to another plan, and 8) any changes in law, regulation, ruling or administrative or judicial position that, in the issuer’s reasonable determination, could result in substantial disbursements from the contract. The Committee does not consider that these events are probable in the future.



Table of Contents
Notes to Financial Statements (continued)

4. Assets Held in the Stable Value Master Trust (continued)

Events that would allow the issuer to terminate the investment contract are: 1) the investment manager or trustee breaches any of its material obligations under the agreement, 2) any representation of the investment manager is or becomes untrue in any material respect, 3) the investment manager with respect to the contract is terminated, unless a qualified professional manager is duly appointed and is agreed to by the issuer, 4) the issuer determines that the execution, delivery or performance of the contract constitutes or will constitute a prohibited transaction, 5) failure to pay amounts due to the issuer, and 6) termination of the Plan or disqualification of the trust.

Each investment contract is subject to early termination penalties that may be significant. There are no reserves against contract value for credit risk of the contract issuers or other matters.

The assets held in the Stable Value Master Trust were as follows:



	December 31
	2014			2013
Common collective trusts	$	324,516,134		$	323,065,650
Guaranteed investment contracts	—			12,669,063
Cash and pending activity	(180,765		)	627,630
Total net assets in Master Trust at fair value	324,335,369			336,362,343
Bank wrappers at fair value	58,047			59,918
Adjustment from fair value to contract value	(6,347,636		)	(4,330,733		)
Total net assets in Master Trust	$	318,045,780		$	332,091,528

Plan’s ownership percentage in:
Master Trust	Less than 1%			Less than 1%
Each investment held of the Master Trust:
Common collective trusts	Less than 1%			Less than 1%
Other	Less than 1%			Less than 1%

The investment income of the Stable Value Master Trust was as follows for the years ended December 31:



	2014		2013
Dividend and interest income	$	5,613,401	$	6,916,975

Net appreciation in the fair value of investments as determined by:
Estimated fair value:
Common collective trusts	397,614		388,384
Total investment income	$	6,011,015	$	7,305,359

Plan’s investment income percentage	Less than 1%		Less than 1%



Table of Contents
Notes to Financial Statements (continued)

5. Fair Value Measurements

ASC 820, Fair Value Measurement, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described as follows:


Level 1:	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access.


Level 2:	Inputs to the valuation methodology include:


•	quoted prices for similar assets or liabilities in active markets;


•	quoted prices for identical or similar assets or liabilities in inactive markets;


•	inputs other than quoted prices that are observable for the asset or liability; and


•	inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.


Level 3:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation techniques and inputs used for each major class of assets measured at fair value. There have been no changes in the methodologies used at December 31, 2014 and 2013.

Mutual funds and common shares fair values are determined by applying the “market approach” and utilizing quoted market prices reported on the active market on which they are traded.

The common collective trusts (“CCTs”) are designed to deliver safety and stability by preserving principal and accumulating earnings. The CCTs are valued by applying the “market approach” and utilizing the respective net asset values (“NAV”) as reported by such trusts, which are reported at fair value. The fair value has been determined by the trustee sponsoring the CCT by dividing the trust’s net assets at fair value by its units outstanding at the valuation dates. The trustee sponsoring the CCTs has estimated the fair value of those CCTs investing in investment contracts with insurance companies and banks. There are no restrictions as to the redemption of these investments nor does the Plan have any contractual obligations to further invest in any of these CCTs.

The fair values of investment contracts and contract wrappers issued by insurance companies and banks are estimated by applying the “income approach” and are based on discounting the related cash flows. See Note 4 for more information.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.



Table of Contents
Notes to Financial Statements (continued)

5. Fair Value Measurements (continued)

The following tables set forth by level, within the fair value hierarchy, the assets held in the Stable Value Master Trust at fair value as of December 31, 2014 and 2013. The following tables do not include the Plan's interest in assets held outside of the Stable Value Master Trust because that information is disclosed separately below:



	December 31, 2014
	Level 1		Level 2			Level 3		Total
Common collective trusts:
Fixed income (a)	$	—	$	299,760,601		$	—	$	299,760,601
Stable value (b)	—		24,755,533			—		24,755,533
Total common collective trusts	—		324,516,134			—		324,516,134

Bank wrappers	—		—			58,047		58,047
Cash and pending activity	—		(180,765		)	—		(180,765		)
Total assets at fair value	$	—	$	324,335,369		$	58,047	$	324,393,416



	December 31, 2013
	Level 1		Level 2		Level 3		Total
Common collective trusts:
Fixed income (a)	$	—	$	301,361,693	$	—	$	301,361,693
Stable value (b)	—		21,703,957		—		21,703,957
Total common collective trusts	—		323,065,650		—		323,065,650

Guaranteed investment contracts	—		12,669,063		—		12,669,063
Bank wrappers	—		—		59,918		59,918
Cash and pending activity	—		627,630		—		627,630
Total assets at fair value	$	—	$	336,362,343	$	59,918	$	336,422,261


(a)	This category includes investments in U.S. government and agency securities, municipal bonds, and corporate notes and bonds.


(b)	This category primarily invests in investment contracts, including traditional GICs and security-backed contracts issued by insurance companies and other financial institutions.



Table of Contents
Notes to Financial Statements (continued)

5. Fair Value Measurements (continued)

The following tables set forth by level, within the fair value hierarchy, the fair value of the Plan’s assets held outside of the Stable Value Master Trust as of December 31, 2014 and 2013:



	December 31, 2014
	Level 1		Level 2		Level 3		Total
Mutual funds:
Large cap	$	5,121,988	$	—	$	—	$	5,121,988
Income	2,693,931		—		—		2,693,931
International	2,288,801		—		—		2,288,801
Small cap	1,071,878		—		—		1,071,878
Mid-cap	831,687		—		—		831,687
Total mutual funds	12,008,285		—		—		12,008,285

Common collective trusts:
Fixed income (a)	—		29,087		—		29,087

Cardinal Health, Inc. common shares	2,125,702		—		—		2,125,702
Total assets at fair value	$	14,133,987	$	29,087	$	—	$	14,163,074



	December 31, 2013
	Level 1		Level 2		Level 3		Total
Mutual funds:
Large cap	$	3,916,505	$	—	$	—	$	3,916,505
Income	2,223,657		—		—		2,223,657
International	1,930,724		—		—		1,930,724
Small cap	933,127		—		—		933,127
Mid-cap	709,533		—		—		709,533
Total mutual funds	9,713,546		—		—		9,713,546

Common collective trusts:
Fixed income (a)	—		32,088		—		32,088

Cardinal Health, Inc. common shares	1,598,229		—		—		1,598,229
Total assets at fair value	$	11,311,775	$	32,088	$	—	$	11,343,863


(a)	This category includes investments in U.S. government and agency securities, municipal bonds, and corporate notes and bonds.



Table of Contents
Notes to Financial Statements (continued)

5. Fair Value Measurements (continued)

The following tables set forth a summary of changes in the fair value of the Stable Value Master Trust’s Level 3 assets (bank wrappers) for the years ended December 31, 2014 and 2013:



	2014
	Bank Wrappers
Balance, beginning of year	$	59,918
Unrealized loss relating to wrappers still held at the reporting date	(1,871		)
Balance, end of year	$	58,047



	2013
	Bank Wrappers
Balance, beginning of year	$	140,800
Realized loss related to wrappers disposed of during the year	(70,778		)
Unrealized gain relating to wrappers still held at the reporting date	(10,104		)
Balance, end of year	$	59,918

6. Income Tax Status

The Plan has received a determination letter from the Commonwealth of Puerto Rico’s Department of Treasury (“Treasury”) dated April 20, 2012, stating that the Plan is qualified under Section 1081.01 of the Code and therefore, the related trust is exempt from taxation. Subsequent to the determination by the Treasury, the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification.

Accounting principles generally accepted in the United States of America require plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the Treasury. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions.



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Notes to Financial Statements (continued)

7. Risks and Uncertainties

The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

8. Plan Termination

Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts.

9. Parties-in-Interest

Certain of the Plan's investments at December 31, 2014 and 2013 were units of common collective trusts managed by Wells Fargo. Wells Fargo serves as the record keeper of the Plan, and, therefore, transactions involving these investments are considered party-in-interest transactions.

The Plan held $2,125,702 and $1,598,229 of Cardinal Health, Inc. common shares at December 31, 2014 and 2013, respectively.

10. Reconciliation of Financial Statements to Form 5500

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500:



	December 31
	2014		2013
Net assets available for benefits per the financial statements	$	17,172,619	$	13,801,788
Adjustment from fair value to contract value for certain fully benefit-responsive investment contracts	42,416		24,928
Net assets available for benefits per Form 5500	$	17,215,035	$	13,826,716

The following is a reconciliation of the net increase in net assets available for benefits per the financial statements to the Form 5500:



	2014
Net increase in assets per the financial statements	$	3,370,831
Net investment income difference between fair value and contract value	17,488
Net income per Form 5500	$	3,388,319



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Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Schedule H, Line 4a on Form 5500: Schedule of Delinquent Participant Contributions

For the Year Ended December 31, 2014

EIN: 31-0958666 Plan Number: 062



Participant Contributions Transferred Late to Plan		Total That Constitute Nonexempt Prohibited Transactions							Total Fully Corrected Under Voluntary Fiduciary Correction Program (VFCP) and Prohibited Transaction Exemption 2002-51



					$	48
Check Here if Late Participant Loan Repayments are included:¨		Contributions Not Corrected			Contributions Corrected Outside VFCP		Corrections Pending Correction in VFCP		$	—

		$	48	(1)	$	—	$	—

(1)	Represents delinquent participant contributions from 2014 payroll periods. The Company transmitted the contributions to the Plan in 2014 and intends to transmit lost earnings to the Plan in 2015.



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Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Schedule H, Line 4i on Form 5500: Schedule of Assets (Held at End of Year)*

December 31, 2014

EIN: 31-0958666 Plan Number: 062



(a)	(b)	(c)	(e)
	Identity of issuer, borrower, lessor or similar party	Description of investment including maturity date, rate of interest, maturity or par value	Current value
	Mutual funds:
	PIMCO Total Return Fund	252,642 shares	$	2,693,163
	Fidelity Growth Company Fund	14,451 shares	1,905,915
	Dodge & Cox Stock Fund	8,830 shares	1,597,603
	Fidelity Diversified International Fund	39,304 shares	1,354,039
	Vanguard Institutional Index Fund	6,075 shares	1,146,240
	Columbia Acorn USA Fund Z	34,543 shares	1,071,878
	CRM Mid Cap Value Fund	29,409 shares	831,687
	Vanguard Total Stock Market Index Fund	9,152 shares	472,230
	BlackRock Global Allocation Fund	17,799 shares	353,669
	PIMCO All Asset Fund	29,564 shares	342,947
	Vanguard Total International Stock Index Fund	2,290 shares	238,146
	Vanguard Total Bond Market Index Fund	71 shares	768

	Common collective trusts:
**	Wells Fargo Short Term Investment Fund S	29,087 units	29,087

	Common shares:
**	Cardinal Health, Inc.	26,331 shares	2,125,702

	Loans:
**	Participant loans	Interest rates ranging from 4.25% to 6.00%	882,668
	Total		$	15,045,742

*	Other columns required by the U.S. Department of Labor’s Annual Reporting and Disclosure Requirements under the Employee Retirement Income Security Act of 1974, as amended have been omitted because they are not applicable.
**	Denotes party-in-interest.



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Signature

The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the members of the Plan Committee have duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized.



		Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico

Date:	June 25, 2015	/s/ KENDELL SHERRER
		Kendell Sherrer
		Financial Benefit Plans Committee Member