DUBLIN, Ohio, Feb. 5 /PRNewswire-FirstCall/ -- Cardinal Health, a global
provider of products and services that improve the safety and productivity of
health care, today reported solid fiscal second quarter results driven by top-
and bottom-line growth from its supply chain and medical product segments.
For the quarter ended Dec. 31, 2008, revenue grew 8 percent to $25
billion, and non-GAAP earnings from continuing operations(1) increased 2
percent to $335 million. GAAP diluted earnings per share (EPS) from continuing
operations declined 1 percent to $0.88. The impact of special items,
impairments and other costs associated with the proposed spinoff of Clinical
and Medical Products (CMP) totaled $16 million after tax or $0.05 per share,
bringing non-GAAP diluted EPS from continuing operations(2) to $0.93, a 3
percent increase over the prior-year period.
"Despite a very challenging economic climate, we had solid growth from
both of our primary operating segments," said R. Kerry Clark, chairman and
chief executive officer of Cardinal Health. "HSCS returned to year over year
segment profit growth in the second quarter, and we expect to remain on track
with positive growth for the second half of the fiscal year. CMP continued its
track record of double-digit segment profit growth, though we continue to see
the deferral in hospital spending affecting its performance for the remainder
of the fiscal year. We are reaffirming our full-year guidance, adjusted on
Jan. 8, of non-GAAP EPS of $3.50 to $3.60. In addition, we remain on track to
spin off the CMP businesses later this year and intend to file the Form 10
registration statement with the Securities and Exchange Commission during our
fiscal third quarter."
Q2 FY09 SUMMARY
Q2 FY09 Q2 FY08 Y/Y
Revenue $25.1 billion $23.3 billion 8%
GAAP Operating Earnings $538 million $519 million 4%
Non-GAAP Operating
Earnings(3) $565 million $526 million 7%
GAAP Earnings from
Continuing Operations $319 million $325 million (2)%
Non-GAAP Earnings from
Continuing Operations $335 million $329 million 2%
GAAP Diluted EPS from
Continuing Operations $0.88 $0.89 (1)%
Non-GAAP Diluted EPS from
Continuing Operations $0.93 $0.90 3%
SECOND-QUARTER SEGMENT RESULTS
Healthcare Supply Chain Services
Healthcare Supply Chain Services increased revenue by 8 percent to $24.1
billion, driven by higher sales to existing pharmaceutical and medical supply
chain customers. Sales to bulk pharmaceutical customers(4) increased 15
percent to $11 billion and sales to non-bulk pharmaceutical customers(5)
increased 2 percent to $11 billion. Segment profit grew 6 percent to $333
million, primarily from an increased contribution from generic sales,
inflation from branded pharmaceuticals, the increase in total segment sales
volume and growth from nuclear pharmacy services. Segment profit growth was
partially dampened by previously reported pharmaceutical contract re-pricings
and continued disruption from anti-diversion efforts for pharmaceutical supply
chain customers. During the quarter, the company resumed shipments of
controlled substances from all distribution centers.
"We built upon the momentum from the first quarter and returned the
segment to growth during the quarter, with solid contributions from both the
pharmaceutical and medical supply chain businesses," said George Barrett,
Cardinal Health vice chairman and chief executive officer of Healthcare Supply
Chain Services. "In addition to the pharmaceutical distribution business, our
nuclear pharmacy services and hospital supply businesses performed very well
in the quarter with strong profit growth. We remain on track to achieve our
goals for fiscal 2009."
Healthcare Supply Chain Services Q2 FY09 Q2 FY08 Y/Y
Revenue $24.1 billion $22.3 billion 8%
Segment Profit $333 million $315 million 6%
Clinical and Medical Products
Revenue for Clinical and Medical Products increased 7 percent to $1.2
billion, primarily driven by organic growth from the dispensing, infusion and
infection prevention businesses and the Enturia acquisition. Segment revenue
was dampened by 3 percentage points due to foreign exchange rates during the
quarter. Segment profit increased 16 percent to $198 million, driven by
revenue growth, the Enturia acquisition and disciplined expense control.
Segment profit was significantly dampened by foreign exchange rates and
increased raw material costs.
"We continue to see remarkable growth from the Enturia acquisition, and
continued top- and bottom-line growth in infusion and dispensing during the
quarter," said David Schlotterbeck, Cardinal Health vice chairman and chief
executive officer of Clinical and Medical Products. "Despite a strong second
quarter, we continue to expect full-year segment profit to be flat or better
because of the delay in hospital capital spending that is expected to impact
the second half of our fiscal year."
Clinical and Medical Products Q2 FY09 Q2 FY08 Y/Y
Revenue $1.2 billion $1.1 billion 7%
Segment Profit $198 million $171 million 16%
ADDITIONAL SECOND QUARTER AND RECENT HIGHLIGHTS:
-- Nuclear Pharmacy Services signed new, long-term supply agreements with
Lantheus Medical Imaging and GE Healthcare to ensure continued and broadened
access to their portfolio of products including Cardiolite(R), Myoview(TM) and
other proprietary products.
-- Announced a five-year supply and co-marketing agreement with SRI
Surgical(R) to offer surgical kits that include disposable health care
products from Cardinal Health and reusable health care products from SRI
Surgical(R).
-- Awarded one of the largest infusion contracts in company history that
will provide 8,000 IV channels to Sutter Health, a leading not-for-profit
network of community-based health care providers in Northern California.
-- Launched the Pyxis(R) MedStation(R) 4000 automated medication
dispensing system that offers new features to help hospitals increase the
security of high-alert medications and reduce medication errors.
-- Introduced an industry-first Performance Analytics Service that
provides hospitals with customized, actionable recommendations to help improve
medication safety.
CONFERENCE CALL
Cardinal Health will host a conference call and webcast today at 8:30 a.m.
EST to discuss second quarter results. To access the call and corresponding
slide presentation, visit the investor page at cardinalhealth.com or dial
617.213.4845, passcode 86908096. Presentation slides, an audio replay and a
transcript will be archived on the Web site after the conclusion of the
meeting. The audio replay will also be available until 11 p.m. EST on Feb. 7
by dialing 617.801.6888, passcode 38752008.
UPCOMING EVENTS
George Barrett, Cardinal Health vice chairman and chief executive officer
of Healthcare Supply Chain Services, will address investors at the UBS Global
Healthcare Services Conference in New York on Feb. 9 at 10 a.m. EST. Barrett
will also address investors at the Barclays Capital Global Healthcare
Conference in Miami on March 11. He will discuss Cardinal Health's diverse
products and services, company performance and strategies for growth at both
conferences. For more details or to access the live webcasts or transcripts of
his remarks, go to the investors page at cardinalhealth.com.
On June 2, Cardinal Health will be hosting its annual analyst and investor
day. This year's format will feature two separate sessions, one dedicated to
Cardinal Health and the second covering the businesses included in the
proposed spinoff of Clinical and Medical Products. More information,
including webcast details, will be posted on the investor page at
cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $91
billion, global company serving the health care industry with products and
services that help hospitals, physician offices and pharmacies reduce costs,
improve safety, productivity and profitability, and deliver better care to
patients. With a focus on making supply chains more efficient, reducing
hospital-acquired infections and breaking the cycle of harmful medication
errors, Cardinal Health develops market-leading technologies, including
Alaris(R) IV pumps, Pyxis(R) automated dispensing systems, MedMined(TM)
electronic infection surveillance service, VIASYS(R) respiratory care products
and the CareFusion(TM) patient identification system. The company also
manufactures medical and surgical products and is one of the largest
distributors of pharmaceuticals and medical supplies worldwide. Ranked No. 19
on the Fortune 500, Cardinal Health employs more than 40,000 people on five
continents. More information about the company may be found at
www.cardinalhealth.com.
(1) Non-GAAP earnings from continuing operations: Earnings from
continuing operations excluding (1) special items, (2) impairments,
(gain)/loss on sale of assets and other, net and (3) spin-off costs not
included in special items or impairments, (gain)/loss on sale of assets and
other, net, each net of tax.
(2) Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings
from continuing operations divided by diluted weighted average shares
outstanding.
(3) Non-GAAP operating earnings: Operating earnings excluding (1) special
items, (2) impairments, (gain)/loss on sale of assets and other, net and (3)
spin-off costs not included in special items or impairments, (gain)/loss on
sale of assets and other, net.
(4) Bulk pharmaceutical customers consist of Healthcare Supply Chain
Services customers to which the segment distributes pharmaceutical,
radiopharmaceutical and over-the-counter health care products to the
customers' centralized warehouse operations and mail order businesses.
(5) Non-bulk pharmaceutical customers consist of all Healthcare Supply
Chain Services customers to which the segment distributes pharmaceutical,
radiopharmaceutical and over-the-counter health care products other than bulk
customers.
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 www.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 investor page at
www.cardinalhealth.com.
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. The most significant of these
uncertainties are 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, and include (but are not limited to) the following: uncertainties
related to the deferral in hospital capital spending affecting Cardinal
Health's Clinical and Medical Products segment and difficulties in forecasting
the exact duration and potential long-term changes in hospital spending
patterns; uncertainties regarding the planned spinoff of the clinical and
medical products businesses as a new stand-alone entity, including the timing
and terms of any such spinoff and whether such spinoff will be completed, and
uncertainties regarding the impact of the planned spinoff on Cardinal Health,
the new clinical and medical products company and the potential market for
their respective securities; 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; uncertainties
relating to 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; future
actions of regulatory bodies or government authorities relating to Cardinal
Health's manufacturing or sale of products and other costs or claims that
could arise from its manufacturing, compounding or repackaging operations or
from its other services; the costs, difficulties and uncertainties related to
the integration of acquired businesses; uncertainties related to the recent
disruptions in the financial markets, including uncertainties related to the
availability and/or cost of credit for Cardinal Health; the potential impact
on Cardinal Health's customers and vendors of declining economic conditions,
which could impact Cardinal Health's earnings and cash flow; and conditions in
the pharmaceutical market and general economic and market conditions. This
news release reflects management's views as of Feb. 5, 2009. 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)
Second Quarter
(in millions, except per Common
Share amounts) 2009 2008 % Change
Revenue $25,099.5 $23,282.7 8 %
Cost of products sold 23,683.1 21,928.1 8 %
Gross margin 1,416.4 1,354.6 5 %
Selling, general and administrative
expenses 851.9 828.9 3 %
Impairments, (gain)/loss on sale of
assets and other, net 6.9 (23.0) N.M.
Special items:
Restructuring charges 14.2 31.5 N.M.
Acquisition integration charges 5.8 10.0 N.M.
Litigation and other (0.3) (12.0) N.M.
Operating earnings 537.9 519.2 4 %
Interest expense and other 62.4 50.0 25 %
Earnings before income taxes and
discontinued operations 475.5 469.2 1 %
Provision for income taxes 156.6 144.1 9 %
Earnings from continuing operations 318.9 325.1 (2)%
Loss from discontinued operations (net of
tax expense of $2.4 and $0.7 for the
second quarter of fiscal 2009 and
2008, respectively) (2.4) (0.4) N.M.
Net earnings $316.5 $324.7 (3)%
Basic earnings per Common Share:
Continuing operations $0.89 $0.91 (2)%
Discontinued operations - - N.M.
Net basic earnings per Common Share $0.89 $0.91 (2)%
Diluted earnings per Common Share:
Continuing operations $0.88 $0.89 (1)%
Discontinued operations - - N.M.
Net diluted earnings per Common
Share $0.88 $0.89 (1)%
Weighted average number of Common
Shares outstanding:
Basic 357.3 358.7
Diluted 360.3 364.6
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Year-to-Date
(in millions, except per Common
Share amounts) 2009 2008 % Change
Revenue $49,446.7 $45,256.1 9 %
Cost of products sold 46,665.8 42,559.3 10 %
Gross margin 2,780.9 2,696.8 3 %
Selling, general and administrative
expenses 1,734.1 1,659.0 5 %
Impairments, (gain)/loss on sale of
assets and other, net 10.5 (23.2) N.M.
Special items:
Restructuring charges 63.9 46.2 N.M.
Acquisition integration charges 8.2 15.5 N.M.
Litigation and other - (9.7) N.M.
Operating earnings 964.2 1,009.0 (4)%
Interest expense and other 124.8 92.9 34 %
Earnings before income taxes and
discontinued operations 839.4 916.1 (8)%
Provision for income taxes 270.7 287.8 (6)%
Earnings from continuing operations 568.7 628.3 (9)%
Loss from discontinued operations (net of
tax expense of $3.0 and $2.7 for fiscal
2009 and 2008 year-to-date, respectively) (3.1) (1.8) N.M.
Net earnings $565.6 $626.5 (10)%
Basic earnings / (loss) per Common
Share:
Continuing operations $1.59 $1.74 (9)%
Discontinued operations (0.01) - N.M.
Net basic earnings per Common Share $1.58 $1.74 (9)%
Diluted earnings / (loss) per Common
Share:
Continuing operations $1.57 $1.71 (8)%
Discontinued operations - (0.01) N.M.
Net diluted earnings per Common
Share $1.57 $1.70 (8)%
Weighted average number of Common
Shares outstanding:
Basic 357.0 360.8
Diluted 361.2 367.8
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, June 30,
(in millions) 2008 2008
Assets
Cash and equivalents $772.6 $1,291.3
Trade receivables, net 5,215.3 5,006.9
Current portion of net investment in
sales-type leases 388.8 383.7
Inventories 8,535.8 6,768.8
Prepaid expenses and other 624.1 593.1
Assets held for sale - 140.4
Total current assets 15,536.6 14,184.2
Property and equipment, net 1,729.6 1,737.2
Net investment in sales-type leases,
less current portion 946.6 916.8
Goodwill and other intangibles, net 6,183.0 6,225.9
Other assets 619.0 384.1
Total assets $25,014.8 $23,448.2
Liabilities and Shareholders' Equity
Current portion of long-term
obligations and other short-term
borrowings $467.4 $159.0
Accounts payable 9,666.2 8,311.8
Other accrued liabilities 1,503.0 1,889.7
Liabilities from businesses held for
sale and discontinued operations 2.4 15.4
Total current liabilities 11,639.0 10,375.9
Long-term obligations, less current
portion and other short-term borrowings 3,389.2 3,687.4
Deferred income taxes and other liabilities 1,858.7 1,637.4
Total shareholders' equity 8,127.9 7,747.5
Total liabilities and shareholders'
equity $25,014.8 $23,448.2
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Second Quarter Year-to-Date
(in millions) 2009 2008 2009 2008
Cash Flows From Operating
Activities:
Net earnings $316.5 $324.7 $565.6 $626.5
Loss from discontinued operations 2.4 0.4 3.1 1.8
Earnings from continuing
operations 318.9 325.1 568.7 628.3
Adjustments to reconcile earnings
from continuing operations to net
cash provided by / (used in)
operating activities:
Depreciation and amortization 99.5 97.0 200.5 191.9
Asset impairments and (gain)/loss
on sale of assets, net 6.9 (23.0) 10.5 (23.2)
Equity compensation 34.8 28.4 59.2 54.5
Provision for bad debts 14.2 5.3 26.8 10.4
Change in operating assets and
liabilities, net of effects from
acquisitions:
(Increase) / decrease in trade
receivables 628.9 41.3 (153.5) (150.6)
Increase in inventories (844.5) (486.0) (1,718.2) (253.6)
Increase in net investment in
sales-type leases (14.8) (34.5) (35.0) (58.6)
Increase / (decrease) in accounts
payable 312.9 (116.7) 1,295.5 (179.9)
Other accrued liabilities and
operating items, net (282.9) 139.0 (332.6) 195.9
Net cash provided by / (used in)
operating activities -
continuing operations 273.9 (24.1) (78.1) 415.1
Net cash used in operating
activities - discontinued
operations (2.4) (2.0) (3.2) (32.5)
Net cash provided by / (used in)
operating activities 271.5 (26.1) (81.3) 382.6
Cash Flows From Investing
Activities:
Acquisition of subsidiaries, net of
divestitures and cash acquired - 48.9 (6.2) (39.2)
Proceeds from sale of property and
equipment 11.3 4.9 12.3 7.4
Additions to property and equipment (92.6) (80.6) (182.2) (172.1)
Sale of investment securities
available for sale, net - - - 131.9
Net cash used in investing
activities - continuing
operations (81.3) (26.8) (176.1) (72.0)
Net cash used in investing
activities - discontinued
operations - - - -
Net cash used in investing
activities (81.3) (26.8) (176.1) (72.0)
Cash Flows From Financing
Activities:
Net change in commercial paper and
short-term borrowings 100.0 287.4 101.1 519.4
Reduction of long-term obligations (154.5) (1.2) (307.1) (14.1)
Proceeds from long-term
obligations, net of issuance costs 13.2 1.0 21.7 1.0
Proceeds from issuance of Common
Shares 2.8 58.9 20.7 164.4
Tax benefits from exercises of
stock options (1.1) 2.4 2.3 14.0
Dividends on Common Shares (50.2) (43.5) (100.0) (87.7)
Purchase of Common Shares in
treasury - (357.3) - (1,032.0)
Net cash used in financing
activities - continuing
operations (89.8) (52.3) (261.3) (435.0)
Net cash used in financing
activities - discontinued
operations - - - -
Net cash used in financing
activities (89.8) (52.3) (261.3) (435.0)
Net increase / (decrease) in cash
and equivalents 100.4 (105.2) (518.7) (124.4)
Cash and equivalents at beginning
of period 672.2 1,289.6 1,291.3 1,308.8
Cash and equivalents at end of
period $772.6 $1,184.4 $772.6 $1,184.4
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Non-GAAP
Second Quarter Second Quarter (1)
(in millions) 2009 2008 2009 2008
Revenue
Amount $25,100 $23,283
Growth Rate 8 % 7 %
Operating Earnings
Amount $538 $519 $565 $526
Growth Rate 4 % 1 % 7 % (3)%
Earnings from Continuing Operations
Amount $319 $325 $335 $329
Growth Rate (2)% 3 % 2 % (3)%
Non-GAAP
Year-to-Date Year-to-Date (1)
2009 2008 2009 2008
Revenue
Amount $49,447 $45,256
Growth Rate 9 % 6 %
Operating Earnings
Amount $964 $1,009 $1,047 $1,038
Growth Rate (4)% 5 % 1 % 2 %
Earnings from Continuing Operations
Amount $569 $628 $603 $647
Growth Rate (9)% 4 % (7)% -
Refer to the GAAP / Non-GAAP Reconciliation for definitions and
calculations supporting the non-GAAP balances.
(1) See definitions for explanation of a change in the method of
calculating these financial measures from prior quarters.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Second Quarter Second Quarter
(in millions) 2009 2008 (in millions) 2009 2008
HEALTHCARE SUPPLY
CHAIN SERVICES CLINICAL AND MEDICAL PRODUCTS
Revenue (1) Revenue (1)
Amount $24,096 $22,346 Amount $1,215 $1,133
Growth Rate 8 % 6 % Growth Rate 7 % 31 %
Mix 94 % 94 % Mix 5 % 5 %
Segment Profit (2) Segment Profit (2)
Amount $333 $315 Amount $198 $171
Growth Rate 6 % (20)% Growth Rate 16 % 35 %
Mix 59 % 62 % Mix 35 % 33 %
Segment Profit Segment Profit
Margin 1.38 % 1.41 % Margin 16.33 % 15.06 %
Second Quarter
(in millions) 2009 2008
ALL OTHER
Revenue (1)
Amount $265 $301
Growth Rate (12)% 2%
Mix 1% 1%
Segment Profit (2)
Amount $31 $25
Growth Rate 25% (10)%
Mix 6% 5%
Segment Profit
Margin 11.61% 8.19%
Refer to definitions for an explanation of calculations.
(1) Total consolidated revenue for the three months ended December 31,
2008 was $25.1 billion, which included total segment revenue of $25.6 billion
and Corporate revenue of $(0.5) billion. Total consolidated revenue for the
three months ended December 31, 2007 was $23.3 billion, which included total
segment revenue of $23.8 billion and Corporate revenue of $(0.5) billion.
Corporate consists primarily of elimination of inter-segment revenue.
(2) Total consolidated operating earnings for the three months ended
December 31, 2008 were $538 million, which included total segment profit of
$562 million and Corporate loss of $(24) million. Total consolidated
operating earnings for the three months ended December 31, 2007 were $519
million, which included total segment profit of $511 million and Corporate
profit of $8 million. Corporate includes, among other things, special items
and impairments, (gain)/loss on sale of assets and other, net.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Year-to-Date Year-to-Date
(in millions) 2009 2008 (in millions) 2009 2008
HEALTHCARE SUPPLY
CHAIN SERVICES CLINICAL AND MEDICAL PRODUCTS
Revenue (1) Revenue (1)
Amount $47,515 $43,439 Amount $2,369 $2,165
Growth Rate 9% 5% Growth Rate 9% 32%
Mix 94% 94% Mix 5% 5%
Segment Profit (2) Segment Profit (2)
Amount $625 $662 Amount $365 $316
Growth Rate (6)% (9)% Growth Rate 16% 49%
Mix 60% 65% Mix 35% 31%
Segment Profit Segment Profit
Margin 1.32% 1.52% Margin 15.40% 14.58%
Year-to-Date
(in millions) 2009 2008
ALL OTHER
Revenue (1)
Amount $538 $595
Growth Rate (10)% 3%
Mix 1% 1%
Segment Profit (2)
Amount $55 $47
Growth Rate 16% (16)%
Mix 5% 4%
Segment Profit
Margin 10.16% 7.91%
Refer to definitions for an explanation of calculations.
(1) Total consolidated revenue for the six months ended December 31, 2008
was $49.4 billion, which included total segment revenue of $50.4 billion and
Corporate revenue of $(1.0) billion. Total consolidated revenue for the six
months ended December 31, 2007 was $45.3 billion, which included total segment
revenue of $46.2 billion and Corporate revenue of $(0.9) billion. Corporate
consists primarily of elimination of inter-segment revenue.
(2) Total consolidated operating earnings for the six months ended
December 31, 2008 were $964 million, which included total segment profit of
$1,045 million and Corporate loss of $(81) million. Total consolidated
operating earnings for the six months ended December 31, 2007 were $1,009
million, which included total segment profit of $1,025 million and Corporate
loss of $(16) million. Corporate includes, among other things, special items
and impairments, (gain)/loss on sale of assets and other, net.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
Second Quarter Year-to-Date
(in millions, except per Common
Share amounts) 2009 2008 2009 2008
Special Items
Restructuring charges $(14.2) $(31.5) $(63.9) $(46.2)
Acquisition integration charges (5.8) (10.0) (8.2) (15.5)
Litigation and other 0.3 12.0 - 9.7
Total special items (19.7) (29.5) (72.1) (52.0)
Tax benefit 7.2 11.2 24.4 18.9
Special items, net of tax $(12.5) $(18.3) $(47.7) $(33.1)
Decrease to diluted EPS from
continuing operations $(0.04) $(0.05) $(0.13) $(0.09)
Other Spin-Off Costs
Other Spin-Off Costs $(0.4) $ - $ (0.4) $ -
Tax benefit 0.2 - 0.2 -
Other Spin-Off Costs, net of tax $(0.2) $ - $ (0.2) $ -
Increase to diluted EPS from
continuing operations $ - $ - $ - $ -
Impairments, Gain/(Loss) on Sale
of Assets and Other, Net
Impairments, gain/(loss) on sale
of assets and other, net $(6.9) $23.0 $(10.5) $ 23.2
Tax benefit / (expense) 3.4 (8.8) 24.2 (8.9)
Impairments, gain/(loss) on sale
of assets and other, net, net of
tax $(3.5) $14.2 $13.7 $14.3
Increase / (decrease) to diluted
EPS from continuing operations $(0.01) $0.04 $0.03 $0.04
Weighted Average Number of Diluted
Shares Outstanding 360.3 364.6 361.2 367.8
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
Second Quarter Year-to-Date
2009 2008 2009 2008
Receivable Days 18.7 20.2
Days Inventory on Hand 29 28
Debt to Total Capital 32% 36%
Net Debt to Capital 28% 29%
Return on Equity 15.8% 18.3% 14.3% 17.4%
Non-GAAP Return on Equity (1) 16.6% 18.6% 15.1% 18.0%
Return on Invested Capital 7.36% 7.70% 6.69% 7.42%
Non-GAAP Return on Invested
Capital 1 7.69% 7.79% 7.04% 7.63%
Effective Tax Rate from Continuing
Operations 33.0% 30.7% 32.3% 31.4%
Non-GAAP Effective Tax Rate from
Continuing Operations (1) 33.3% 30.8% 34.6% 31.5%
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
(1) See definitions for explanation of a change in the method of
calculating these financial measures from prior quarters.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter 2009
Impairments,
(Gain)/Loss
on Sale
Other of Assets
(in millions, except per Special Spin-Off and Other,
Common Share amounts) GAAP Items Costs Net Non-GAAP(1)
Operating Earnings
Amount $538 $20 - $7 $565
Growth Rate 4% 7%
Provision for Income Taxes $157 $7 - $3 $167
Earnings from Continuing
Operations
Amount $319 $13 - $4 $335
Growth Rate (2)% 2%
Diluted EPS from
Continuing Operations
Amount $0.88 $0.04 - $0.01 $0.93
Growth Rate (1)% 3%
Year-to-Date 2009
Impairments,
(Gain)/Loss
on Sale
Other of Assets
(in millions, except per Special Spin-Off and Other,
Common Share amounts) GAAP Items Costs Net Non-GAAP(1)
Operating Earnings
Amount $964 $72 - $10 $1,047
Growth Rate (4)% 1%
Provision for Income
Taxes 271 $24 - $24 $320
Earnings from Continuing
Operations
Amount $569 $48 - ($14) $603
Growth Rate (9)% (7)%
Diluted EPS from
Continuing Operations
Amount $1.57 $0.13 - ($0.03) $1.67
Growth Rate (8)% (5)%
Second Quarter 2008
Impairments,
(Gain)/Loss
on Sale
Other of Assets
(in millions, except per Special Spin-Off and Other,
Common Share amounts) GAAP Items Costs Net Non-GAAP(1)
Operating Earnings
Amount $519 $30 - ($23) $526
Growth Rate 1% (3)%
Provision for Income Taxes $144 $11 - ($9) $147
Earnings from Continuing
Operations
Amount $325 $18 - ($14) $329
Growth Rate 3% (3)%
Diluted EPS from
Continuing Operations
Amount $0.89 $0.05 - $0.04) $0.90
Growth Rate 16% 8%
Year-to-Date 2008
Impairments,
(Gain)/Loss
on Sale
Other of Assets
(in millions, except per Special Spin-Off and Other,
Common Share amounts) GAAP Items Costs Net Non-GAAP(1)
Operating Earnings
Amount $1,009 $52 - ($23) $1,038
Growth Rate 5 % 2 %
Provisions for Income Taxes $288 $19 - ($9) $298
Earnings from Continuing
Operations
Amount $628 $33 - ($14) $647
Growth Rate 4 % -
Diluted EPS from
Continuing Operations
Amount $1.71 $0.09 - ($0.04) $1.76
Growth Rate 16% 12%
The sum of the components may not equal the total due to rounding
(1) See definitions for explanation of a change in the method of
calculating these financial measures from prior quarters.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2009 2008 2009 2008
GAAP Return on Equity 15.8% 18.3% 14.3% 17.4%
Non-GAAP Return on
Equity
Net earnings $316.5 $324.7 $565.6 $626.5
Special items, net of
tax, in continuing
operations 12.5 18.3 47.7 33.1
Other Spin-Off Costs,
net of tax 0.2 - 0.2 -
Impairments, (gain)/loss
on sale of assets and
other, net, net of
tax, in continuing
operations 3.5 (14.2) (13.8) (14.3)
Adjusted net earnings $332.7 $328.8 $599.7 $645.3
Annualized $1,330.8 $1,315.2 $1,199.4 $1,290.6
Divided by average
shareholders'
equity (1) $8,023.0 $7,088.2 $7,931.2 $7,184.4
Non-GAAP return on
equity (2) 16.6% 18.6% 15.1% 18.0%
Second Quarter Year-to-Date
2009 2008 2009 2008
GAAP Return on Invested
Capital 7.36% 7.70% 6.69% 7.42%
Non-GAAP Return on
Invested Capital
Net earnings $316.5 $324.7 $565.6 $626.5
Special items, net of
tax, in continuing
operations 12.5 18.3 47.7 33.1
Other Spin-Off Costs,
net of tax 0.2 - 0.2 -
Impairments, (gain)/loss
on sale of assets and
other, net, net of
tax, in continuing
operations 3.5 (14.2) (13.8) (14.3)
Interest expense and
other, net of tax 39.9 32.0 79.8 59.4
Adjusted net earnings $372.6 $360.8 $679.5 $704.7
Annualized $1,490.4 $1,443.2 $1,359.0 $1,409.4
Divided by average total
invested capital (3) $19,372.5 $18,529.9 $19,292.8 $18,483.2
Non-GAAP return on
invested capital (2) 7.69% 7.79% 7.04% 7.63%
(1) The average shareholders' equity shown above is calculated using the
average of the prior and current quarters except for year-to-date which is
calculated as the average of shareholders' equity at the end of the prior
years' fourth quarter plus each of the current year quarters.
(2) See definitions for explanation of a change in the method of
calculating these financial measures from prior quarters.
(3) Total invested capital is calculated as the sum of the current portion
of long-term obligations and other short-term borrowings, long-term
obligations, total shareholders' equity and unrecorded goodwill. The average
total invested capital is calculated using the average of total invested
capital at the end of the prior and current quarters except for year-to-date
which is calculated as the average of the prior years' fourth quarter plus
each of the current year quarters. Unrecorded goodwill is $7.5 billion for all
periods presented.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2009 2008 2009 2008
GAAP Effective Tax Rate from
Continuing Operations 33.0% 30.7% 32.3% 31.4%
Non-GAAP Effective Tax Rate from
Continuing Operations
Earnings before income taxes and
discontinued operations $475.5 $469.2 $839.4 $916.1
Special items 19.7 29.5 72.1 52.0
Other Spin-Off Costs 0.4 - 0.4 -
Impairments, (gain)/loss on sale of
assets and other, net 6.9 (23.0) 10.5 (23.2)
Adjusted earnings before income
taxes and discontinued
operations $502.5 $475.7 $922.4 $944.9
Provision for income taxes $156.6 $144.1 $270.7 $287.8
Special items tax benefit 7.2 11.2 24.4 18.9
Other Spin-Off Costs tax benefit 0.2 - 0.2 -
Impairments, (gain)/loss on sale of
assets and other, net, tax impact 3.4 (8.8) 24.3 (8.9)
Adjusted provision for income
taxes $167.4 $146.5 $319.6 $297.8
Non-GAAP effective tax rate from
continuing operations (1) 33.3% 30.8% 34.6% 31.5%
Second Quarter
2009 2008
Debt to Total Capital 32% 36%
Net Debt to Capital
Current portion of long-term
obligations and other short-term
borrowings $467.4 $673.6
Long-term obligations, less current
portion and other short-term
borrowings 3,389.2 3,396.5
Debt $3,856.6 $4,070.1
Cash and equivalents (772.6) (1,184.4)
Net debt $3,084.0 $2,885.7
Total shareholders' equity $8,127.9 $7,108.1
Capital $11,211.9 $9,993.8
Net debt to capital 28% 29%
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) 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 comparable forward-looking GAAP measures because the
Company cannot reliably forecast special items, impairments, (gain)/loss on
sale of assets and other, net and Other Spin-Off Costs, 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.
(1) See definitions for explanation of a change in the method of
calculating this financial measure from prior quarters.
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
Operating Cash Flow: net cash provided by / (used in) operating
activities from continuing operations
Other Spin-Off Costs: costs incurred in connection with the Company's
plans to spin off most of its clinical and medical products businesses that
are not included in special items or impairments, (gain)/loss on sale of
assets and other, net
Segment Profit: segment revenue minus (segment cost of products sold and
segment 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
Return on Invested Capital: annualized net earnings plus interest expense
and other divided by (average total shareholders' equity plus debt plus
unrecorded goodwill)
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 and short-term investments
available for sale)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from
continuing operations divided by diluted weighted average shares outstanding
(1)
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 (1)
Non-GAAP Earnings from Continuing Operations: earnings from continuing
operations excluding (1) special items, (2) impairments, (gain)/loss on sale
of assets and other, net and (3) Other Spin-Off Costs, each net of tax (1)
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 (1)
Non-GAAP Effective Tax Rate from Continuing Operations: (provision for
income taxes adjusted for (1) special items, (2) impairments, (gain)/loss on
sale of assets and other, net and (3) Other Spin-Off Costs) divided by
(earnings before income taxes and discontinued operations adjusted for (1)
special items, (2) impairments, (gain)/loss on sale of assets and other, net
and (3) Other Spin-Off Costs) (1)
Non-GAAP Operating Earnings: operating earnings excluding (1) special
items, (2) impairments, (gain)/loss on sale of assets and other, net and (3)
Other Spin-Off Costs (1)
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 (1)
Non-GAAP Return on Equity: (annualized current period net earnings
excluding (1) special items, (2) impairments, (gain)/loss on sale of assets
and other, net and (3) Other Spin-Off Costs, each net of tax) divided by
average shareholders' equity (1)
Non-GAAP Return on Invested Capital: (annualized net earnings excluding
(1) special items, (2) impairments, (gain)/loss on sale of assets and other,
net, (3) Other Spin-Off Costs and (4) interest expense and other, each net of
tax) divided by (average total shareholders' equity plus debt plus unrecorded
goodwill) (1)
(1) During the second quarter of fiscal 2009, the Company began to exclude
Other Spin-Off Costs from the calculation of this non-GAAP financial measure.
Prior year results have been recast to reflect the new calculation
methodology.
