Trish English
Interim Chief Financial Officer at Cardinal Health
Thanks, Jason, and good morning, everyone. It's great to speak with you all. Today, I'll share details on three areas of focus. Our consolidated first quarter results, the key drivers underlying our segment's performance and our updated fiscal '23 outlook before turning it back to Jason for final remarks.
First quarter total company revenue increased 13%, driven by Pharma segment sales growth. Gross margin decreased 2% to $1.6 billion, due to net inflationary impact in Medical and one-month impact of the Cordis divestiture, partially offset by our Pharma Generics program performance. Consolidated SG&A increased 7%, reflecting inflationary supply chain costs and other operating expenses such as higher costs to support Pharma sales growth. This increase was partially offset by the Cordis divestiture and benefits from enterprise-wide cost savings initiatives. Operating earnings decreased 20% to $423 million, reflecting the decline in Medical segment profit, primarily due to net inflationary impact, and partially offset by growth in Pharma segment profit.
Now moving below the line. Interest and Other decreased 25% to $27 million, primarily driven by increased interest income from cash and equivalents. As a reminder, our debt is largely fixed rate, resulting in a net benefit from rising interest rates. Our first quarter effective tax rate finished at 16.9%, approximately 7 percentage points lower than prior year due to certain favorable discrete items. Diluted weighted average shares were $273 million, 6% lower than a year ago due to share repurchases. We are focused on balanced disciplined and shareholder-friendly capital deployment and in mid-September, we initiated a $1 billion accelerated share repurchase program that we expect to complete in the second quarter. The net result for the quarter was earnings per share of $1.20.
Now, turning to the balance sheet. We generated first quarter operating cash flow of approximately $25 million. This includes total litigation payments of approximately $390 million, primarily consisting of the second payment under the national opioid settlement. Adjusted free cash flow in our first quarter was $342 million. We ended the period with a cash position of $3.5 billion, with no outstanding borrowings on our credit facility.
Now turning to the segments, beginning with Pharma on Slide 5. First quarter revenue increased 15% to $46 billion, driven by branded pharmaceutical sales growth from existing and net new Pharmaceutical Distribution and Specialty customers. Pharma segment profit increased 6% to $431 million, driven by Generic program performance and a higher contribution from Brand and Specialty products, partially offset by inflationary supply chain costs.
During the quarter, we were pleased to see strong execution and continued consistent market dynamic in our generic program including Red Oak. As we previously note, inflation continue to impact supply chain cost across the industry, particularly within transportation and labor. We saw an approximate $20 million year-over-year headwind from these areas, which was consistent with our expectations. This headwind was effectively offset by year-over-year tailwind on from our completed ERP technology enhancements and lower opioid-related legal costs. Okay.
Turning to Medical on Slide 6. First quarter revenue decreased 9% to $3.8 billion, driven by lower products and distribution sales, primarily due to PPE pricing and volumes, and to a lesser extent, the Cordis divestiture. Continued strong growth in our at-Home Solutions business offset some of this revenue decline. Medical segment loss of $8 million was due to net inflationary impact in products and distribution, as well as a lower contribution from PPE, both of which I will discuss in more detail. Importantly, these results reflect approximately $20 million in total inventory charges related to our previously announced simplification actions. This includes the sale of our gloves portfolio that is primarily utilized in non-healthcare industries.
As a reminder, this non-core product line has been a source of volatility and distraction in recent years. These actions, despite the one-time costs are an example of our ongoing commitment to strengthening the medical product and distribution business through simplification. During the quarter, the growth impact incremental inflation in our products and distribution business was in line with our expectations of approximately $150 million, and we successfully achieved our inflation mitigation target of 25%. Our mitigation efforts have continued to accelerate, most notably with the implementation of the second wave of product pricing actions in July. Jason will elaborate on our plans for further mitigation shortly.
Now, a quick update on the overall utilization environment. We've previously noticed some overall volume softness in our products and distribution business, including a lower demand for PPE, which we believe primarily reflects customers' higher inventory levels. In the first quarter, we saw generally consistent overall products and distribution volumes sequentially, including with PPE. While we do anticipate gradual improvement in volumes relative to these recent lows, we continue to expect choppiness in demand levels going forward.
Now, for our fiscal '23 outlook, beginning on Slide 8. We are reiterating our EPS guidance of $5.05 to $5.40. This includes our updated Medical segment outlook, which has been adjusted for the impact of simplification actions in the first quarter and a few below-the-line improvement. Based on the first quarter performance, we are confident in lowering the top end of the ranges for interest and other, our effective tax rate and diluted weighted average shares for the fiscal year. We now expect I&O in the range of $140 million to $160 million, an ETR between 23% and 24% and diluted shares between $262 million to $264 million. Our expectations for the remaining items listed on Slide 8 remain unchanged.
We are also reiterating our fiscal '23 outlook for the Pharma segment seen on Slide 9. We continue to expect revenue growth in the range of 10% to 14% and segment profit growth in the range of 2% to 5%. Before transitioning to Medical, two key call-outs on the Pharma cadence. First, with stronger start to the year, we now expect more balanced year-over-year profit growth between the first and second half of fiscal '23. And specifically, for the second quarter, we expect segment profit dollars to be similar to the first quarter.
Now turning to Medical. We expect segment profit ranging from flat to a decline of 20%, which, as I indicated, reflects the impact of the simplification actions in the first quarter. With respect to inflation and our mitigation actions, there is no change to our expectation of a net impact of approximately $300 million in fiscal '23 or a minimal year-over-year impact. The macroeconomic environment remains dynamic. And while we've seen some decreases in spot rates of certain cost drivers, such as international freight, other areas such as commodity costs remain significantly elevated.
As a reminder, these product costs are capitalized into inventory. And in the current environment of elongated supply chain reflected in our P&L results on an approximate two-quarter delay. While we now expect growth inflation in the second quarter to be similar to what was seen in Q1, we are implementing additional actions and working proactively to mitigate these pressures. It's important to note that, we continue to expect that as we exit the year, the run rate of our mitigation actions will offset at least 50% of the growth impact from inflation.
On Medical's quarterly cadence, in Q2, we expect similar segment profit dollars since the first quarter, excluding the impact of the first quarter simplification actions. As we have noted before, we continue to expect a substantial majority of segment profit to come in the second half of fiscal '23 and particularly in the fourth quarter. This sequencing primarily reflects our assumptions around inflation, inflation mitigation and PPE.
With that, I'll now turn it over to Jason.