DUBLIN, Ohio, April 29, 2010 /PRNewswire-FirstCall/ — Cardinal Health today reported fiscal third-quarter revenue of $24.3 billion and non-GAAP diluted earnings per share (EPS) from continuing operations(1) of $0.61.
The quarter was highlighted by a 7 percent increase in Pharmaceutical segment profit and strong operating cash flow of $879 million for the quarter.
GAAP operating earnings declined 4 percent to $366 million, or 7 percent to $385 million on a non-GAAP basis. SG&A expense was higher sequentially and year over year due to performance-based employee compensation that reflects the company's expected fiscal 2010 results.
Third-quarter GAAP earnings from continuing operations were $225 million or $0.62 per share. GAAP results include a positive $0.01 per share net after-tax contribution, primarily from the gain on the sale of CareFusion stock and partially offset by the after-tax impact from impairments and loss on the sale of assets.
"We are pleased with our third-quarter performance and our continued momentum for the year," said George Barrett, chairman and CEO of Cardinal Health. "We had strong performance from our Pharmaceutical segment, which was better than we anticipated. As expected, our Medical segment declined versus the same period last year, but grew sequentially from the prior quarter. We were particularly encouraged by the year-over-year growth in our gross margin rate, and another strong quarter of operating cash flow and working capital improvements."
Q3 FY10 SUMMARY
Q3 FY10 Q3 FY09 Y/Y
------- ------- ---
Revenue $24.3 billion $24.1 billion 1%
------- ------------- ------------- ---
Operating Earnings $366 million $381 million (4)%
------------------ ------------ ------------ ---
Non-GAAP Operating Earnings(2) $385 million $415 million (7)%
------------------------------ ------------ ------------ ---
Earnings from Continuing
Operations $225 million $215 million 5%
------------------------ ------------ ------------ ---
Non-GAAP Earnings from
Continuing $222 million $237 million (6)%
---------------------- ------------ ------------ ---
Operations(3)
-------------
Diluted EPS from Continuing
Operations $0.62 $0.60 3%
--------------------------- ----- ----- ---
Non-GAAP Diluted EPS from
Continuing $0.61 $0.66 (8)%
------------------------- ----- ----- ---
Operations
----------
THIRD-QUARTER SEGMENT RESULTS
Pharmaceutical Segment
Revenue for the Pharmaceutical segment increased to $22.2 billion. Sales to non-bulk customers increased 0.5 percent to $11.3 billion and sales to bulk customers increased 0.5 percent to $10.9 billion. Segment profit increased 7 percent to $307 million primarily driven by solid performance from branded manufacturer agreements, positive margin contribution from the company's generic programs and disciplined expense management. The increase in segment profit was partially offset by previously disclosed contract repricings and the Medicine Shoppe International transition. The company continues to actively manage supply disruptions of medical isotopes for its nuclear pharmacy business. These shortages are now expected to continue through at least the first quarter of next fiscal year.
In addition, the company completed the sale of its SpecialtyScripts business during the third quarter and recently entered into a definitive agreement to sell its Martindale generic injectible manufacturing business, which it expects to close before the end of the fiscal year.
Q3 FY10 Q3 FY09 Y/Y
------- ------- ---
Revenue $22.2 billion $22.1 billion 0.5%
------- ------------- ------------- ---
Segment
Profit $307 million $286 million 7%
------- ------------ ------------ ---
Medical Segment
Revenue for the Medical segment increased 7 percent to $2.1 billion, primarily from sales growth with existing domestic customers and strong revenue growth from the Canadian business. As expected, segment profit declined 16 percent year over year to $108 million, primarily due to an unusual year-over-year comparison in the cost of goods sold, the aforementioned impact of performance-based employee compensation and increased investment spend associated with the Medical Business Transformation. The decline in segment profit was partially offset by the positive profit impact from revenue growth within the lab and ambulatory businesses and preferred products. Segment profit increased sequentially from the second quarter as anticipated and is expected to return to year-over-year growth for the fourth quarter.
Q3 FY10 Q3 FY09 Y/Y
------- ------- ---
Revenue $2.1 billion $2.0 billion 7%
------- ------------ ------------ ---
Segment
Profit $108 million $128 million (16)%
------- ------------ ------------ ----
FISCAL Q4 AND FISCAL 2011 OUTLOOK
"With the first nine months of the fiscal year behind us, we are trending slightly better than our previous expectations, and we now anticipate non-GAAP diluted EPS from continuing operations for fiscal 2010 will be in the range of $2.15 to $2.20," Barrett said.
"Although we don't typically provide annual guidance at the end of the third quarter, this has been a year of transitions for Cardinal Health, and we wanted to provide an early look at fiscal 2011. Based on the progress we've made year-to-date, our preliminary view of fiscal 2011 non-GAAP diluted EPS from continuing operations is in the range of $2.35 to $2.45. We expect to provide more specifics for fiscal 2011 when we report fourth-quarter and full-year results."
CONFERENCE CALL
Cardinal Health will host a conference call and webcast today at 8:30 a.m. EDT to discuss third-quarter results. To access the call and corresponding slide presentation, go to the Investors page at cardinalhealth.com/investors or dial 617.213.4850, passcode 26885216. Presentation slides and an audio replay will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. on May 6 by dialing 617.801.6888, passcode 70784421.
UPCOMING EVENTS
Cardinal Health will be participating in the following New York-based health care investor conferences:
At these events, company executives will discuss Cardinal Health's diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks, go to the Investors page at cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE:CAH) is a $96 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 60,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #17 on the Fortune 500, Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com.
1 Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.
2 Non-GAAP operating earnings: Operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, and (4) Other Spinoff Costs (as defined at the end of the attached tables) included within distribution, selling, general and administrative expenses.
3 Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spinoff Costs, and (5) gain on sale of CareFusion stock, each net of tax.
A reconciliation of the differences between these non-GAAP financial measures and their most directly comparable GAAP financial measures is provided in the attached tables and at cardinalhealth.com.
Cardinal Health uses its Web site as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at cardinalhealth.com.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding: the effect of the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds realized from future sales of CareFusion stock; uncertainties due to government health care reform including the recently enacted federal health care reform legislation; competitive pressures in Cardinal Health's various lines of business; the loss of one or more key customer or supplier relationships or changes to the terms of those relationships; disruptions in the supply of medical isotopes for the nuclear pharmacy business; the timing of generic and branded pharmaceutical introductions and the frequency or rate of branded pharmaceutical price appreciation or generic pharmaceutical price deflation; changes in the distribution patterns or reimbursement rates for health care products and/or services; the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal or administrative proceedings; the effects of disruptions in the financial markets, including uncertainties related to the availability and/or cost of credit on Cardinal Health's customers and vendors; and conditions in the pharmaceutical market and general economic and market conditions. In addition, Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and exhibits to those reports. This news release reflects management's views as of April 29, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Third Quarter
-------------
(in millions, except per Common
Share amounts) 2010 2009 % Change
---- ----
Revenue $24,342.8 $24,089.3 1 %
Cost of products sold 23,332.7 23,102.4 1 %
-------- --------
Gross margin 1,010.1 986.9 2 %
Operating expenses
Distribution, selling, general
and administrative expenses 628.6 573.0 10 %
Restructuring and employee
severance 13.9 31.7 N.M.
Impairments and loss on sale of
assets 4.2 0.7 N.M.
Litigation (credits)/charges, net (2.9) 0.6 N.M.
---- ---
Operating earnings 366.3 380.9 (4)%
Other (income)/expense, net (1) (1.4) 6.5 N.M.
Interest expense, net 27.7 30.3 (9)%
Gain on sale of CareFusion common
stock (1) (23.2) - N.M.
----- ---
Earnings before income taxes and
discontinued operations 363.2 344.1 6 %
Provision for income taxes 138.4 129.0 7 %
----- -----
Earnings from continuing
operations 224.8 215.1 5 %
Earnings/(loss) from
discontinued operations (net of
tax benefit/(expense) of $(7.0)
million and $6.0 million for the
third quarter of fiscal 2010 and
2009, respectively) (2.4) 97.8 N.M.
Net earnings $222.4 $312.9 (29)%
------ ------
Basic earnings/(loss) per Common
Share:
Continuing operations $0.63 $0.60 5 %
Discontinued operations (0.01) 0.28 N.M.
----- ----
Net basic earnings per Common
Share $0.62 $0.88 (30)%
===== =====
Diluted earnings/(loss) per
Common Share:
Continuing operations $0.62 $0.60 3 %
Discontinued operations (0.01) 0.27 N.M.
----- ----
Net diluted earnings per Common
Share $0.61 $0.87 (30)%
===== =====
Weighted average number of Common
Shares outstanding:
Basic 358.7 358.1
Diluted 361.8 360.9
(1) During the third quarter of fiscal 2010, the Company began
presenting the gain on sale of CareFusion common stock separately on
its condensed consolidated statements of earnings. This amount had
previously been included in other (income)/expense, net. Prior
periods have been changed to conform with this new presentation.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Year-to-Date
------------
(in millions, except per Common
Share amounts) 2010 2009 % Change
---- ----
Revenue $74,043.2 $71,644.3 3 %
Cost of products sold 71,166.6 68,841.0 3 %
-------- --------
Gross margin 2,876.6 2,803.3 3 %
Operating expenses
Distribution, selling, general and
administrative expenses 1,819.8 1,741.8 4 %
Restructuring and employee
severance 84.4 69.3 N.M.
Impairments and loss on sale of
assets 28.2 11.2 N.M.
Litigation (credits)/charges, net (28.8) 0.3 N.M.
----- ---
Operating earnings 973.0 980.7 (1)%
Other (income)/expense, net (1) (15.7) 28.7 N.M.
Interest expense, net 88.9 81.9 9 %
Loss on extinguishment of debt 39.9 - N.M.
Gain on sale of CareFusion common
stock (1) (43.3) - N.M.
----- ---
Earnings before income taxes and
discontinued operations 903.2 870.1 4 %
Provision for income taxes 510.0 313.9 N.M.
----- -----
Earnings from continuing operations 393.2 556.2 (29)%
Earnings from discontinued
operations (net of tax expense of
$35.5 million and $82.7 million
for fiscal 2010 and 2009 year-to-
date, respectively) 25.5 322.2 N.M.
Net earnings $418.7 $878.4 (52)%
------ ------
Basic earnings per Common Share:
Continuing operations $1.10 $1.56 (29)%
Discontinued operations 0.07 0.90 N.M.
---- ----
Net basic earnings per Common Share $1.17 $2.46 (52)%
===== =====
Diluted earnings per Common Share:
Continuing operations $1.09 $1.54 (29)%
Discontinued operations 0.07 0.89 N.M.
---- ----
Net diluted earnings per Common
Share $1.16 $2.43 (52)%
===== =====
Weighted average number of Common
Shares outstanding:
Basic 359.0 357.3
Diluted 361.2 361.0
(1) During the third quarter of fiscal 2010, the Company began
presenting the gain on sale of CareFusion common stock separately on
its condensed consolidated statements of earnings. This amount had
previously been included in other (income)/expense, net. Prior
periods have been changed to conform with this new presentation.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, June 30,
(in millions) 2010 2009
---- ----
(UNAUDITED)
Assets
Cash and equivalents $2,638.8 $1,221.6
Trade receivables, net 5,550.2 5,214.9
Inventories 7,214.9 6,832.8
Prepaid expenses and other 534.5 523.0
Assets from businesses held for sale and
discontinued operations 138.9 7,189.4
----- -------
Total current assets 16,077.3 20,981.7
-------- --------
Property and equipment, net 1,406.1 1,464.5
Investment in CareFusion 805.2 -
Goodwill and other intangibles, net 2,261.8 2,266.9
Other assets 719.8 405.7
----- -----
Total assets $21,270.2 $25,118.8
========= =========
Liabilities and Shareholders' Equity
Current portion of long-term obligations and
other short-term borrowings $232.6 $366.2
Accounts payable 10,766.6 9,041.9
Other accrued liabilities 1,712.9 1,496.2
Liabilities from businesses held for sale and
discontinued operations 35.3 1,370.9
---- -------
Total current liabilities 12,747.4 12,275.2
-------- --------
Long-term obligations, less current portion and
other short-term borrowings 1,875.6 3,271.6
Deferred income taxes and other liabilities 1,286.3 847.3
Total shareholders' equity 5,360.9 8,724.7
Total liabilities and shareholders' equity $21,270.2 $25,118.8
========= =========
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Third Quarter Year-to-Date
------------- ------------
(in millions) 2010 2009 2010 2009
---- ---- ---- ----
Cash Flows From
Operating
Activities:
Net earnings $222.4 $312.9 $418.7 $878.4
(Earnings)/loss
from
discontinued
operations 2.4 (97.8) (25.5) (322.2)
--- ----- ----- ------
Earnings from
continuing
operations 224.8 215.1 393.2 556.2
Adjustments to
reconcile
earnings from
continuing
operations
to net cash
provided by
operating
activities:
Depreciation
and
amortization 68.6 52.7 194.4 168.8
Loss on debt
extinguishment - - 39.9 -
Gain on sale of
CareFusion
common stock (23.2) - (43.3) -
Impairments and
loss on sale
of assets 4.2 0.7 28.2 11.2
Share-based
payment
compensation 21.7 32.4 79.0 82.6
Provision for
bad debts 11.8 23.5 33.2 45.2
Change in
operating
assets and
liabilities,
net of
effects from
acquisitions:
Increase in
trade
receivables (634.5) (743.8) (365.4) (982.4)
Decrease/
(increase) in
inventories 746.1 476.5 (381.1) (1,343.7)
Increase in
accounts
payable 223.5 335.5 1,722.7 1,634.6
Other accrued
liabilities
and operating
items, net 235.3 318.4 (38.8) 32.0
----- ----- ----- ----
Net cash
provided by
operating
activities -
continuing
operations 878.3 711.0 1,662.0 204.5
Net cash
provided by/
(used in)
operating
activities -
discontinued
operations 1.1 (93.2) 147.9 624.4
--- ----- ----- -----
Net cash
provided by
operating
activities 879.4 617.8 1,809.9 828.9
----- ----- ------- -----
Cash Flows From
Investing
Activities:
Acquisition of
subsidiaries,
net of
divestitures
and cash
acquired 12.8 (12.3) (19.2) (18.5)
Proceeds from
sale of
property and
equipment 1.5 0.2 5.8 12.6
Additions to
property and
equipment (61.9) (61.1) (141.8) (191.6)
Proceeds from
sale of
CareFusion
common stock 135.7 - 270.7 -
----- --- ----- ---
Net cash
provided by/
(used in)
investing
activities -
continuing
operations 88.1 (73.2) 115.5 (197.5)
Net cash used
in investing
activities -
discontinued
operations - (19.9) (9.9) (71.5)
--- ----- ---- -----
Net cash
provided by/
(used in)
investing
activities 88.1 (93.1) 105.6 (269.0)
---- ----- ----- ------
Cash Flows From
Financing
Activities:
Net change in
commercial
paper and
short-term
borrowings - (101.1) - -
Reduction of
long-term
obligations (0.3) (2.6) (1,485.2) (307.1)
Proceeds from
long-term
obligations,
net of
issuance costs - 3.1 - 24.5
Issuance of
Common Shares (3.4) 18.0 24.5 38.7
Tax expense
from stock
options (8.8) (2.5) (14.8) (0.2)
Payment of
premiums for
debt
extinguishment - - (66.4) -
Dividends on
Common Shares (63.0) (50.1) (190.2) (150.1)
Purchase of
treasury
shares - - (50.0) -
--- --- ----- ---
Net cash used
in financing
activities -
continuing
operations (75.5) (135.2) (1,782.1) (394.2)
Net cash
provided by/
(used in)
financing
activities -
discontinued
operations - (0.3) 1,283.8 (2.7)
--- ---- ------- ----
Net cash used
in financing
activities (75.5) (135.5) (498.3) (396.9)
----- ------ ------ ------
Net increase in
cash and
equivalents 892.0 389.2 1,417.2 163.0
Cash and
equivalents at
beginning of
period 1,746.8 582.6 1,221.6 808.8
------- ----- ------- -----
Cash and
equivalents at
end of period $2,638.8 $971.8 $2,638.8 $971.8
======== ====== ======== ======
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Non-GAAP
Third Quarter Third Quarter
------------- -------------
(in millions) 2010 2009 2010 2009
---- ---- ---- ----
Revenue
Amount $24,343 $24,089
Growth Rate 1 % 10 %
Operating Earnings
Amount $366 $381 $385 $415
Growth Rate (4)% - (7)% 2 %
Earnings from Continuing
Operations
Amount $225 $215 $222 $237
Growth Rate 5 % (9)% (6)% (7)%
--- ---
Non-GAAP
Year-to-Date Year-to-Date
------------ ------------
2010 2009 2010 2009
---- ---- ---- ----
Revenue
Amount $74,043 $71,644
Growth Rate 3 % 9 %
Operating Earnings
Amount $973 $981 $1,066 $1,062
Growth Rate (1)% (7)% - (3)%
Earnings from Continuing
Operations
Amount $393 $556 $622 $587
Growth Rate (29)% (16)% 6 % (15)%
--- ----
Refer to the GAAP /Non-GAAP Reconciliation for definitions and
calculations supporting the non-GAAP balances.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Third Quarter Third Quarter
------------- -------------
(in millions) 2010 2009 (in millions) 2010 2009
---- ---- ---- ----
PHARMACEUTICAL MEDICAL
Revenue Revenue
Amount $22,226 $22,118 Amount $2,123 $1,976
Growth Rate 0.5 % 11 % Growth Rate 7 % (2)%
Mix 91 % 92 % Mix 9 % 8 %
Segment Profit Segment Profit
Amount $307 $286 Amount $108 $128
Growth Rate 7 % 2 % Growth Rate (16)% 1 %
Mix 74 % 69 % Mix 26 % 31 %
Segment Profit Segment Profit
Margin 1.38 % 1.29 % Margin 5.08 % 6.49 %
-------------- ----- ----- -------------- ----- -----
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended March 31, 2010
was $24,343 million, which included total segment revenue of $24,349
million and Corporate revenue of $(6) million. Total consolidated
revenue for the three months ended March 31, 2009 was $24,089
million, which included total segment revenue of $24,094 million and
Corporate revenue of $(5) million. Corporate revenue consists
primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the three months ended
March 31, 2010 were $366 million, which included total segment
profit of $415 million and Corporate loss of $49 million. Total
consolidated operating earnings for the three months ended March 31,
2009 were $381 million, which included total segment profit of $414
million and Corporate loss of $33 million. Corporate includes,
among other things, restructuring and employee severance,
impairments and loss on sale of assets, litigation
(credits)/charges, net and certain investment spending that are not
allocated to the segments.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Year-to-Date Year-to-Date
------------ ------------
(in millions) 2010 2009 (in millions) 2010 2009
---- ---- ---- ----
PHARMACEUTICAL MEDICAL
Revenue Revenue
Amount $67,483 $65,600 Amount $6,592 $6,070
Growth Rate 3 % 10 % Growth Rate 9 % 3 %
Mix 91 % 92 % Mix 9 % 8 %
Segment Profit Segment Profit
Amount $775 $762 Amount $325 $301
Growth Rate 2 % (5)% Growth Rate 8 % -
Mix 70 % 72 % Mix 30 % 28 %
Segment Profit Segment Profit
Margin 1.15 % 1.16 % Margin 4.93 % 4.95 %
-------------- ----- ----- -------------- ----- -----
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the nine months ended March 31, 2010
was $74,043 million, which included total segment revenue of $74,075
million and Corporate revenue of $(32) million. Total consolidated
revenue for the nine months ended March 31, 2009 was $71,644
million, which included total segment revenue of $71,670 million and
Corporate revenue of $(26) million. Corporate revenue consists
primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the nine months ended March
31, 2010 were $973 million, which included total segment profit of
$1,100 million and Corporate loss of $127 million. Total
consolidated operating earnings for the nine months ended March 31,
2009 were $981 million, which included total segment profit of
$1,063 million and Corporate loss of $82 million. Corporate
includes, among other things, restructuring and employee severance,
impairments and loss on sale of assets, litigation
(credits)/charges, net and certain investment spending that are not
allocated to the segments.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
Third Quarter Year-to-Date
------------- ------------
(in millions, except per
Common Share amounts) 2010 2009 2010 2009
---- ---- ---- ----
Restructuring and Employee
Severance
Restructuring and employee
severance $(13.9) $(31.7) $(84.4) $(69.3)
Tax benefit 10.0 4.9 30.1 19.0
---- --- ---- ----
Restructuring and employee
severance, net of tax $(3.9) $(26.8) $(54.3) $(50.3)
===== ====== ====== ======
Decrease to diluted EPS
from continuing operations $(0.01) $(0.08) $(0.15) $(0.14)
====== ====== ====== ======
Impairments and Loss on
Sale of Assets
Impairments and loss on
sale of assets $(4.2) $(0.7) $(28.2) $(11.2)
Tax benefit/(expense) (11.5) 6.7 (3.3) 30.9
----- --- ---- ----
Impairments and loss on
sale of asset, net of tax $(15.7) $6.0 $(31.5) $19.7
====== ==== ====== =====
Increase/(decrease) to
diluted EPS from
continuing operations $(0.04) $0.02 $(0.09) $0.05
====== ===== ====== =====
Litigation Credits/
(Charges), Net
Litigation credits/
(charges), net $2.9 $(0.6) $28.8 $(0.3)
Tax benefit/(expense) (1.1) 0.2 (10.9) 0.1
---- --- ----- ---
Litigation credits/
(charges), net, net of tax $1.8 $(0.4) $17.9 $(0.2)
==== ===== ===== =====
Increase to diluted EPS
from continuing operations $0.01 $- $0.05 $-
===== === ===== ===
Other Spin-Off Costs
Other spin-off costs (1) $(3.7) $(0.7) $(51.5) $(0.7)
Tax benefit/(expense) (2) 1.2 0.3 (153.2) 0.3
--- --- ------ ---
Other spin-off costs, net
of tax $(2.5) $(0.4) $(204.7) $(0.4)
===== ===== ======= =====
Decrease to diluted EPS
from continuing operations $(0.01) $- $(0.56) $-
====== === ====== ===
Gain on Sale of CareFusion
Stock
Gain on sale of CareFusion
stock $23.2 $- $43.3 $-
Tax expense - - - -
--- ---
Gain on sale of CareFusion
stock, net of tax $23.2 $- $43.3 $-
===== === ===== ===
Increase to diluted EPS
from continuing operations $0.06 $- $0.12 $-
===== === ===== ===
Weighted Average Number of
Diluted Shares Outstanding 361.8 360.9 361.2 361.0
(1) Other spin-off costs included in other (income)/expense, net
for the three and nine months ended March 31, 2010 were $(0.2)
million and $2.4 million, respectively. Other spin-off costs also
include the $39.9 million loss on extinguishment of debt for the
nine months ended March 31, 2010. The remaining other spin-off
costs are included within distribution, selling, general and
administrative expenses for all periods presented.
(2) The fiscal 2010 year-to-date tax expense associated with the
other spin-off costs includes $171.9 million related to the
anticipated repatriation of a portion of cash loaned to the
Company's entities within the United States.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
Third Quarter Year-To-Date
------------- ------------
2010 2009 2010 2009
---- ---- ---- ----
Receivable Days 18.9 19.5
Days Inventory on Hand 25 27
Debt to Total Capital 28 % 30 %
Net Debt to Capital (11)% 24 %
Return on Equity 16.8 % 15.1% 9.2% 14.5%
Non-GAAP Return on Equity 16.9% 20.9% 16.5% 18.3%
Effective Tax Rate from Continuing
Operations 38.1% 37.5 % 56.5% 36.1%
Non-GAAP Effective Tax Rate from
Continuing Operations 38.2% 37.3 % 37.5% 38.3%
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Quarter 2010
------------------
Litigation
Restructuring Impairments and (Credits)/
(in millions, except per and Employee Loss on Sale Charges,
Common Share amounts) GAAP Severance of Assets Net
Operating Earnings
Amount $366 $14 $4 ($3)
Growth Rate (4)%
Earnings Before Income
Taxes and Discontinued
Operations $363 $14 $4 ($3)
Provision for Income
Taxes (1) $138 $10 ($12) ($1)
Earnings from Continuing
Operations
Amount $225 $4 $16 ($2)
Growth Rate 5 %
Diluted EPS from
Continuing Operations
Amount $0.62 $0.01 $0.04 ($0.01)
Growth Rate 3 %
Third Quarter 2010
------------------
Gain on Sale
of
(in millions, except per Common Other Spin- CareFusion
Share amounts) Off Costs Stock Non-GAAP
Operating Earnings
Amount $4 - $385
Growth Rate (7)%
Earnings Before Income Taxes and
Discontinued Operations $4 ($23) $359
Provision for Income Taxes (1) $1 - $137
Earnings from Continuing
Operations
Amount $3 ($23) $222
Growth Rate (6)%
Diluted EPS from Continuing
Operations
Amount $0.01 ($0.06) $0.61
Growth Rate (8)%
The sum of the components may not equal the total due to rounding.
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-Date 2010
-----------------
Impairments Litigation
Restructuring and Loss on (Credits)/
(in millions, except per and Employee Sale of Charges,
Common Share amounts) GAAP Severance Assets Net
Operating Earnings
Amount $973 $84 $28 ($29)
Growth Rate (1)%
Earnings Before Income
Taxes and Discontinued
Operations $903 $84 $28 ($29)
Provision for Income Taxes
(1) $510 $30 ($3) ($11)
Earnings from Continuing
Operations
Amount $393 $54 $32 ($18)
Growth Rate (29)%
Diluted EPS from Continuing
Operations
Amount $1.09 $0.15 $0.09 ($0.05)
Growth Rate (29)%
Year-To-Date 2010
-----------------
Gain on Sale
of
(in millions, except per Common Other Spin- CareFusion
Share amounts) Off Costs Stock Non-GAAP
Operating Earnings
Amount $9 - $1,066
Growth Rate -
Earnings Before Income Taxes and
Discontinued Operations $52 ($43) $995
Provision for Income Taxes (1) ($153) - $373
Earnings from Continuing
Operations
Amount $205 ($43) $622
Growth Rate 6 %
Diluted EPS from Continuing
Operations
Amount $0.56 ($0.12) $1.72
Growth Rate 6 %
The sum of the components may not equal the total due to rounding.
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Quarter 2009
------------------
Litigation
Restructuring Impairments and (Credits)/
and Employee Loss on Sale Charges,
GAAP Severance of Assets Net
Operating Earnings
Amount $381 $32 $1 $1
Growth Rate -
Earnings Before Income
Taxes and Discontinued
Operations $344 $32 $1 $1
Provision for Income
Taxes (1) $129 $5 $7 -
Earnings from Continuing
Operations
Amount $215 $27 ($6) -
Growth Rate (9)%
Diluted EPS from
Continuing Operations
Amount $0.60 $0.08 ($0.02) -
Growth Rate (9)%
Third Quarter 2009
------------------
Gain on Sale
of
Other Spin- CareFusion
Off Costs Stock Non-GAAP
Operating Earnings
Amount $1 - $415
Growth Rate 2 %
Earnings Before Income Taxes and
Discontinued Operations $1 - $378
Provision for Income Taxes (1) - - $141
Earnings from Continuing
Operations
Amount - - $237
Growth Rate (7)%
Diluted EPS from Continuing
Operations
Amount - - $0.66
Growth Rate (7)%
The sum of the components may not equal the total due to rounding.
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-Date 2009
-----------------
Impairments Litigation
Restructuring and Loss on (Credits)/
and Employee Sale of Charges,
GAAP Severance Assets Net
Operating Earnings
Amount $981 $69 $11 -
Growth Rate (7)%
Earnings Before Income
Taxes and Discontinued
Operations $870 $69 $11 -
Provision for Income Taxes
(1) $314 $19 $31 -
Earnings from Continuing
Operations
Amount $556 $50 ($20) -
Growth Rate (16)%
Diluted EPS from
Continuing Operations
Amount $1.54 $0.14 ($0.05) -
Growth Rate (15)%
Year-To-Date 2009
-----------------
Gain on Sale
of
Other Spin- CareFusion
Off Costs Stock Non-GAAP
Operating Earnings
Amount $1 - $1,062
Growth Rate (3)%
Earnings Before Income Taxes and
Discontinued Operations $1 - $951
Provision for Income Taxes (1) - - $364
Earnings from Continuing Operations
Amount $1 - $587
Growth Rate (15)%
Diluted EPS from Continuing
Operations
Amount - - $1.63
Growth Rate (14)%
The sum of the components may not equal the total due to rounding.
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Third
Quarter Quarter
------- -------
(in millions) 2010 2009
---- ----
GAAP Return on Equity 16.8 % 15.1%
Non-GAAP Return on Equity
Net earnings $222.4 $312.9
Restructuring and employee
severance, net of tax, in
continuing operations(1) 3.9 26.8
Impairments and loss on
sale of assets, net of
tax, in continuing
operations(1) 15.7 (6.0)
Litigation
(credits)/charges, net,
net of tax, in continuing
operations(1) (1.8) 0.4
Other spin-off costs, net
of tax(1) 2.5 0.4
Gain on sale of CareFusion
stock, net of tax(1) (23.2) -
CareFusion net earnings in
discontinued operations,
net of tax(1, 2) 4.7 (98.0)
--- -----
Adjusted net earnings $224.2 $236.5
Annualized $896.8 $946.0
Third Second Third Second
Quarter Quarter Quarter Quarter
------- -------- -------
2010 2010 2009 2009
---- ---- ---- ----
Non-GAAP Shareholders'
Equity
Total shareholders' equity $5,360.9 $5,226.1 $8,434.5 $8,127.9
Non-cash dividend related
to CareFusion spin-off - - (3,758.0) (3,758.0)
Non-GAAP shareholders'
equity $5,360.9 $5,226.1 $4,676.5 $4,369.9
-------- -------- -------- --------
Divided by average
shareholders' equity 5,293.5 4,523.2
Non-GAAP return on equity 16.9% 20.9%
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
(2) To properly reflect the impact of the spin-off, on a non-GAAP
basis, CareFusion net earnings included in discontinued operations
are excluded from adjusted net earnings for all periods presented.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-Date
------------
(in millions) 2010
----
GAAP Return on Equity 9.2 %
Non-GAAP Return on
Equity
Net earnings $418.7
Restructuring and
employee severance, net
of tax, in continuing
operations(1) 54.3
Impairments and loss on
sale of assets, net of
tax, in continuing
operations(1) 31.5
Litigation
(credits)/charges, net,
net of tax, in
continuing
operations(1) (17.9)
Other spin-off costs,
net of tax(1) 204.7
Gain on sale of
CareFusion stock, net
of tax(1) (43.3)
CareFusion net earnings
in discontinued
operations, net of
tax(1, 2) (15.4)
-----
Adjusted net earnings $632.6
Annualized $843.5
Third Second First Fourth
Quarter Quarter Quarter Quarter
-------- ------- -------- -------
2010 2010 2010 2009
---- ---- ---- ----
Non-GAAP Shareholders'
Equity
Total shareholders'
equity $5,360.9 $5,226.1 $4,941.2 $8,724.7
Non-cash dividend
related to CareFusion
spin-off - - - (3,758.0)
Non-GAAP shareholders'
equity $5,360.9 $5,226.1 $4,941.2 $4,966.7
-------- -------- -------- --------
Divided by average
shareholders' equity 5,123.7
Non-GAAP return on
equity 16.5%
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
(2) To properly reflect the impact of the spin-off, on a non-GAAP
basis, CareFusion net earnings included in discontinued operations
are excluded from adjusted net earnings for all periods presented.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-
Date
--------
(in millions) 2009
----
GAAP Return on
Equity 14.5%
Non-GAAP Return on
Equity
Net earnings $878.4
Restructuring and
employee severance,
net of tax, in
continuing
operations(1) 50.3
Impairments and loss
on sale of assets,
net of tax, in
continuing
operations(1) (19.7)
Litigation
(credits)/charges,
net, net of tax, in
continuing
operations(1) 0.2
Other spin-off
costs, net of
tax(1) 0.4
Gain on sale of
CareFusion stock,
net of tax(1) -
CareFusion net
earnings in
discontinued
operations, net of
tax(1, 2) (319.1)
------
Adjusted net
earnings $590.5
Annualized $787.3
Third First Fourth
Quarter Second Quarter Quarter Quarter
-------- -------------- -------- -------
2009 2009 2009 2008
---- ---- ---- ----
Non-GAAP
Shareholders'
Equity
Total shareholders'
equity $8,434.5 $8,127.9 $7,918.1 $7,747.5
Non-cash dividend
related to
CareFusion spin-
off (3,758.0) (3,758.0) (3,758.0) (3,758.0)
Non-GAAP
shareholders'
equity $4,676.5 $4,369.9 $4,160.1 $3,989.5
-------- -------- -------- --------
Divided by average
shareholders'
equity 4,299.0
Non-GAAP return on
equity 18.3%
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
(2) To properly reflect the impact of the spin-off, on a non-GAAP
basis, CareFusion net earnings included in discontinued operations
are excluded from adjusted net earnings for all periods presented.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Quarter Year-to-Date
------------- ------------
(in millions) 2010 2009 2010 2009
---- ---- ---- ----
GAAP Effective Tax
Rate from Continuing
Operations 38.1 % 37.5 % 56.5 % 36.1 %
Non-GAAP Effective
Tax Rate from
Continuing Operations
Earnings before income
taxes and
discontinued
operations $363.2 $344.1 $903.2 $870.1
Restructuring and
employee severance 13.9 31.7 84.4 69.3
Impairments and loss
on sale of assets 4.2 0.7 28.2 11.2
Litigation
(credits)/charges,
net (2.9) 0.6 (28.8) 0.3
Other spin-off costs 3.7 0.7 51.5 0.7
Gain on sale of
CareFusion stock (23.2) - (43.3) -
----- --- ----- ---
Adjusted earnings
before income taxes
and discontinued
operations $358.9 $377.8 $995.2 $951.6
Provision for income
taxes(1) $138.4 $129.0 $510.0 $313.9
Restructuring and
employee severance
tax benefit(1) 10.0 4.9 30.1 19.0
Impairments and loss
on sale of assets,
tax benefit/
(expense)(1) (11.5) 6.7 (3.3) 30.9
Litigation (credits)/
charges, net tax
benefit/(expense)(1) (1.1) 0.2 (10.9) 0.1
Other spin-off costs
tax benefit/
(expense)(1) 1.2 0.3 (153.2) 0.3
Gain on sale of
CareFusion stock tax
expense(1) - - - -
--- --- --- ---
Adjusted provision for
income taxes $137.0 $141.1 $372.7 $364.2
Non-GAAP effective
tax rate from
continuing operations 38.2% 37.3% 37.5% 38.3%
Third Quarter
-------------
2010 2009
---- ----
Debt to Total Capital 28% 30%
Net Debt to Capital
Current portion of
long-term
obligations and other
short-term
borrowings $232.6 $359.8
Long-term
obligations, less
current portion and
other short-term
borrowings 1,875.6 3,300.6
------- -------
Debt $2,108.2 $3,660.4
Cash and equivalents (2,638.8) (971.8)
-------- ------
Net debt $(530.6) $2,688.6
Total shareholders'
equity $5,360.9 $8,434.5
Capital $4,830.3 $11,123.1
Net Debt to Capital (11)% 24%
(1) The Company applies varying tax rates depending upon the tax
jurisdiction where the items are incurred.
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP earnings from continuing operations
and non-GAAP effective tax rate from continuing operations (and
presentations derived from these financial measures, including per
share calculations) on a forward-looking basis. The most directly
comparable forward-looking GAAP measures are earnings from
continuing operations and effective tax rate from continuing
operations. The Company is unable to provide a quantitative
reconciliation of these forward-looking non-GAAP measures to the
most directly comparable forward-looking GAAP measures because the
Company cannot reliably forecast restructuring and employee
severance, impairments and loss on sale of assets, litigation
(credits)/charges, net, other spin-off costs and gains or losses on
sale of CareFusion stock, which are difficult to predict and
estimate and are primarily dependent on future events. Please note
that the unavailable reconciling items could significantly impact
the Company's future financial results.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
Third Quarter
-------------
(in millions) 2010 2009
---- ----
Days Inventory on Hand
Inventories $7,214.9 $7,748.0
Cost of products sold $23,332.7 $23,102.4
Chargeback billings 3,053.2 2,981.5
------- -------
Adjusted cost of products sold $26,385.9 $26,083.9
Adjusted cost of products sold divided
by 90 days $293.2 $289.8
Days inventory on hand 25 27
Days Inventory on Hand: inventory divided by ((quarterly costs of
products sold plus chargeback billings) divided by 90 days).
Chargeback billings are the difference between a product's wholesale
acquisition cost and the contract price established between
pharmaceutical manufacturers and the end customer.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
DEFINITIONS
GAAP
Debt: long-term obligations plus short-term borrowings
Debt to Total Capital: debt divided by (debt plus total
shareholders' equity)
Diluted EPS from Continuing Operations: earnings from continuing
operations divided by diluted weighted average shares outstanding
Effective Tax Rate from Continuing Operations: provision for income
taxes divided by earnings before income taxes and discontinued
operations
Gain on Sale of CareFusion Stock: realized gains and losses from the
sale of the Company's ownership of CareFusion common stock retained
in connection with the spin-off
Other Spin-Off Costs: costs and tax charges incurred in connection
with the Company's spin-off of CareFusion that are not included in
restructuring and employee severance, impairments and loss on sale
of assets and litigation (credits)/charges, net. Other spin-off
costs include, among other things, the loss on extinguishment of
debt and the income tax charge related to the anticipated
repatriation of a portion of cash loaned to the Company's entities
within the United States
Receivable Days: trade receivables, net divided by (monthly revenue
divided by 30 days)
Segment Profit: segment revenue minus (segment cost of products sold
and segment distribution, selling, general and administrative
expenses)
Segment Profit Margin: segment profit divided by segment revenue
Segment Profit Mix: segment profit divided by total segment profit
for all segments
Return on Equity: annualized net earnings divided by average
shareholders' equity
Revenue Mix: segment revenue divided by total segment revenue for
all segments
NON-GAAP
Net Debt to Capital: net debt divided by (net debt plus total
shareholders' equity)
Net Debt: debt minus (cash and equivalents)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings
from continuing operations divided by diluted weighted average
shares outstanding
Non-GAAP Diluted EPS from Continuing Operations Growth Rate:
(current period non-GAAP diluted EPS from continuing operations
minus prior period non-GAAP diluted EPS from continuing operations)
divided by prior period non-GAAP diluted EPS from continuing
operations
Non-GAAP Earnings from Continuing Operations: earnings from
continuing operations excluding (1) restructuring and employee
severance, (2) impairments and loss on sale of assets, (3)
litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5)
gain on sale of CareFusion stock, each net of tax
Non-GAAP Earnings from Continuing Operations Growth Rate: (current
period non-GAAP earnings from continuing operations minus prior
period non-GAAP earnings from continuing operations) divided by
prior period non-GAAP earnings from continuing operations
Non-GAAP Effective Tax Rate from Continuing Operations: (provision
for income taxes adjusted for (1) restructuring and employee
severance, (2) impairments and loss on sale of assets, (3)
litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5)
gain on sale of CareFusion stock) divided by (earnings before income
taxes and discontinued operations adjusted for (1) restructuring and
employee severance, (2) impairments and loss on sale of assets, (3)
litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5)
gain on sale of CareFusion stock)
Non-GAAP Operating Earnings: operating earnings excluding (1)
restructuring and employee severance, (2) impairments and loss on
sale of assets, (3) litigation credits/(charges), net and (4) Other
Spin-Off Costs included within distribution, selling, general and
administrative expenses
Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP
operating earnings minus prior period non-GAAP operating earnings)
divided by prior period non-GAAP operating earnings
Non-GAAP Return on Equity: (annualized current period net earnings
excluding (1) restructuring and employee severance, (2) impairments
and loss on sale of assets, (3) litigation (credits)/charges, net,
(4) Other Spin-Off Costs, (5) CareFusion net earnings in
discontinued operations and (6) gain on sale of CareFusion stock,
each net of tax) divided by average shareholders' equity adjusted
for the $3.8 billion non-cash dividend issued in connection with
the spin-off
Source: Cardinal Health, Inc.
CONTACT: Media: Troy Kirkpatrick, +1-614-757-6225,
troy.kirkpatrick@cardinalhealth.com; Investors: Sally Curley, +1-614-757-7115,
sally.curley@cardinalhealth.com
Web Site: www.cardinalhealth.com/
