-- Revenue increases 7 percent to $23 billion
-- Diluted earnings per share from continuing operations increase 16
percent to $0.89 per share; Non-GAAP diluted EPS from continuing operations
increase 8 percent to $0.90 per share
-- Full year Non-GAAP EPS now expected to be $3.75 to $3.85
-- Renews three-year, multi-billon-dollar Walgreens contract
DUBLIN, Ohio, Jan. 29 /PRNewswire-FirstCall/ -- Cardinal Health, a
global provider of products and services that improve the safety and
productivity of health care, today reported a revenue increase of 7 percent
to $23 billion during its second quarter, with earnings per share (EPS)
rising 16 percent to $0.89. On a non-GAAP basis, EPS for the quarter ended
Dec. 31 grew 8 percent to $0.90(1).
The company also announced a revision to its full year EPS outlook
based on several factors affecting its largest operating segment in the
second half of the year. Cardinal Health now expects non-GAAP EPS to be in
a range of $3.75 to $3.85 for the year, an increase of 10 percent to 13
percent over the prior year.
"We have three of our four operating segments performing on track,
showing favorable revenue growth, expanding margins and segment profit that
is at or above our guidance for the current year," said R. Kerry Clark,
chairman and chief executive officer of Cardinal Health. "Within our supply
chain pharmaceutical segment, we have revised our forecast to account for
the impact of anti-diversion measures for controlled substances, changes in
our expectations for branded price increases and the generics market, and
the effect of contract repricings. We still expect double-digit EPS growth
for the year and are resolved to strengthen the business as we fix the
issues that have hampered our performance.
"We continue to engage in discussions with the DEA to resolve matters
affecting three of our pharmaceutical distribution centers regarding the
diversion of controlled substances," Clark added. "More broadly, in the
past 45 days we have been working to put in place an enhanced system of
controls across our network to address the security threat that diversion
poses to the pharmaceutical supply chain. The impact of these issues may
cost more than $30 million for this fiscal year, but the safety and
security of the pharmaceutical supply chain is core to our business and its
protection is an important public policy priority for all of us."
Q2 and FY08 Year-to-Date Summary
Q2 FY08 Q2 FY07 Y/Y FY08 YTD Y/Y
Revenue $23.3 billion $21.8 billion 7% $45.3 billion 6%
Operating
Earnings $519 million $512 million 1% $1.0 billion 5%
Non-GAAP Operating
Earnings(2) $526 million $544 million (3%) $1.0 billion 2%
Earnings from
Continuing
Operations $325 million $316 million 3% $628 million 4%
Non-GAAP Earnings
from Continuing
Operations(3) $329 million $341 million (3%) $647 million -
Diluted EPS from
Continuing
Operations $0.89 $0.77 16% $1.71 16%
Non-GAAP Diluted EPS
from Continuing
Operations $0.90 $0.83 8% $1.76 12%
Second quarter segment results
Healthcare Supply Chain Services Sector
Revenue in the Healthcare Supply Chain Services-Pharmaceutical segment
grew 6 percent during the quarter to $20.4 billion, with sales to non-bulk
customers increasing 1 percent to $10.7 billion and sales to bulk customers
increasing 12 percent to $9.7 billion. Segment profit declined 21 percent
to $258 million, driven by the timing of branded price increases,
conditions in the market for generic pharmaceuticals, and the repricing of
several large contracts. Results were also dampened by the impact of
suspensions to distribute controlled substances from three facilities and
enhancements to anti-diversion programs being implemented across the
company's entire distribution network. The company continues to expect
segment profit to improve in the second half of the fiscal year. Following
the close of the quarter, Cardinal Health also completed an early renewal
of a three-year, multi-billion-dollar agreement with Walgreens to
distribute pharmaceuticals to more than 6,000 drug stores nationwide.
The Healthcare Supply Chain Services-Medical segment saw revenue growth
of 8 percent to $2 billion, with increased sales momentum from the prior
quarter to hospital, laboratory and ambulatory care customers. Segment
profit declined 13 percent to $72 million, primarily driven by a previously
disclosed change in corporate cost allocation that reduced segment profit
by 7 percentage points and softness in the surgical kitting business. The
company continues to expect the segment to return to year-over-year profit
growth in the second half of the year from strength in the hospital and
laboratory supply businesses.
Clinical and Medical Products Sector
"This quarter, the Clinical and Medical Products (CMP) sector was again
an exceptional value driver by accounting for 36 percent of our total
segment profit," Clark said. "CMP continues to play a substantial role in
our overall results with leading products in the areas of patient safety
and infection prevention, both essential and rapidly growing segments of
health care."
Revenue for the Medical Products and Technology segment grew 47 percent
to $667 million driven by strong sales of infection prevention products and
surgical instruments, and the addition of VIASYS Healthcare, which the
company acquired last June. Segment profit increased 46 percent to $69
million and benefited from the VIASYS acquisition, which remains ahead of
schedule in delivering synergies of $85 million to $100 million per year by
fiscal 2010.
The Clinical Technologies and Services segment grew revenue 8 percent
to $715 million for the quarter, with strong demand for Pyxis(R) dispensing
and supply technologies and strength in Alaris(R) infusion products.
Segment profit increased 26 percent to $115 million from favorable product
mix and improved operating leverage. Segment profit was negatively affected
by a $10
million charge for the Alaris(R) Pump module voluntary recall, bringing
the total charges associated with the recall to $14 million.
Additional second quarter and recent highlights include:
-- George S. Barrett joining the company on Jan. 28 as vice chairman and
CEO of the company's Healthcare Supply Chain Services sector. Barrett
was previously the CEO of North America for Teva Pharmaceuticals.
David L. Schlotterbeck, CEO of Cardinal Health's Clinical and Medical
Products sector, was also named vice chairman.
-- Controlled commercial release of the Med Care Safety Solution, which
enables clinicians to more easily monitor patient orders, pre-populate
parameters for continuous IV infusions, verify the accuracy of
medications administered and document to the hospital's IT systems.
The Lahey Clinic Medical Center in Boston will pilot this new solution
that links the workflow across Cardinal Health's Care Fusion(R),
Pyxis(R) and Alaris(R) products.
-- Rollout of an $80 million agreement with a large health system to
provide medical and surgical supplies to more than 100 affiliated
hospitals nationwide.
-- Signing agreements with two group-purchasing organizations for
Presource(R) surgical kits. The agreements allow Cardinal Health to
compete for kitting business at more than 60,000 health care sites.
-- Repurchasing approximately $350 million of Cardinal Health shares
during the quarter, bringing first and second quarter purchases to
more than $940 million.
Outlook
Cardinal Health lowered and narrowed the range it expects for fiscal
2008 non-GAAP diluted EPS to $3.75 to $3.85. It previously expected
non-GAAP EPS in a range of $3.95 to $4.15. In making the change, Cardinal
Health cited several factors that are having an impact on its Healthcare
Supply Chain Services- Pharmaceutical segment, including the timing of new
launches and deflationary environment for generic pharmaceuticals;
expectations for branded price increases; the repricing of some large
customer contracts; and the impact of anti-diversion enhancements.
Conference Call
Cardinal Health will host a conference call and webcast at 8:30 a.m.
EST to discuss the results. To access the call and corresponding slide
presentation, go to the Investor page at http://www.cardinalhealth.com. The
conference call may also be accessed by calling 617-213-4852, passcode
75450455. An audio replay will be available until 11:30 p.m. EST on Jan. 31
at 617-801-6888, passcode 63030220. A transcript and audio replay will also
be available at http://www.cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is an
$87 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) infection surveillance services 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 and No. 1 in
its sector on Fortune's ranking of Most Admired firms, Cardinal Health
employs more than 40,000 people on five continents. More information about
the company may be found at http://www.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 special
items and impairment charges and other.
(3) Non-GAAP earnings from continuing operations: Earnings from
continuing operations excluding special items and impairment charges
and other, both 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 http://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:
competitive pressures in its 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
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 our manufacturing or sale of products
and other costs or claims that could arise from our manufacturing,
compounding or repackaging operations or from other services; the costs,
difficulties and uncertainties related to the integration of acquired
businesses; and general economic and market conditions. This news release
reflects management's views as of Jan. 29, 2008. 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) 2008 2007 % Change
Revenue $23,282.7 $21,784.6 7%
Cost of products sold 21,928.1 20,484.7 7%
Gross margin $1,354.6 $1,299.9 4%
Selling, general and administrative
expenses 828.9 755.8 10%
Impairment charges and other (23.0) 12.6 N.M.
Special items:
Restructuring charges 31.5 10.0 N.M.
Acquisition integration charges 10.0 9.1 N.M.
Litigation and other (12.0) 0.5 N.M.
Operating earnings $519.2 $511.9 1%
Interest expense and other 50.0 32.4 54%
Earnings before income taxes and
discontinued operations $469.2 $479.5 (2)%
Provision for income taxes 144.1 164.0 (12)%
Earnings from continuing operations $325.1 $315.5 3%
Earnings / (loss) from discontinued
operations (net of tax (expense) /
benefit of ($0.7) and $416.1 for
the second quarter of fiscal 2008
and 2007, respectively) (0.4) 423.8 N.M.
Net earnings $324.7 $739.3 (56)%
Basic earnings per Common Share:
Continuing operations $0.91 $0.78 17%
Discontinued operations - 1.06 N.M.
Net basic earnings per Common Share $0.91 $1.84 (51)%
Diluted earnings per Common Share:
Continuing operations $0.89 $0.77 16%
Discontinued operations - 1.03 N.M.
Net diluted earnings per Common Share $0.89 $1.80 (51)%
Weighted average number of Common
Shares outstanding:
Basic 358.7 402.2
Diluted 364.6 410.6
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Year-to-Date
(in millions, except per Common Share
amounts) 2008 2007 % Change
Revenue $45,256.1 $42,722.1 6%
Cost of products sold 42,559.3 40,221.7 6%
Gross margin 2,696.8 2,500.4 8%
Selling, general and administrative
expenses 1,659.0 1,481.3 12%
Impairment charges and other (23.2) 14.3 N.M.
Special items:
Restructuring charges 46.2 21.8 N.M.
Acquisition integration charges 15.5 11.1 N.M.
Litigation and other (9.7) 8.9 N.M.
Operating earnings 1,009.0 963.0 5%
Interest expense and other 92.9 70.1 33%
Earnings before income taxes and
discontinued operations 916.1 892.9 3%
Provision for income taxes 287.8 286.0 1%
Earnings from continuing operations 628.3 606.9 4%
Earnings / (loss) from discontinued
operations (net of tax (expense) /
benefit of ($2.7) and $435.9 for
fiscal 2008 and 2007 year-to-date,
respectively) (1.8) 403.1 N.M.
Net earnings $626.5 $1,010.0 (38)%
Basic earnings per Common Share:
Continuing operations $1.74 $1.50 16%
Discontinued operations - 1.00 N.M.
Net basic earnings per Common Share $1.74 $2.50 (30)%
Diluted earnings per Common Share:
Continuing operations $1.71 $1.47 16%
Discontinued operations (0.01) 0.98 N.M.
Net diluted earnings per Common
Share $1.70 $2.45 (31)%
Weighted average number of Common
Shares outstanding:
Basic 360.8 403.4
Diluted 367.8 412.0
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, June 30,
(in millions) 2007 2007
Assets
Cash and equivalents $1,184.4 $1,308.8
Short-term investments available for sale - 132.0
Trade receivables, net 4,854.6 4,714.4
Current portion of net investment in
sales-type leases 378.3 354.8
Inventories 7,636.8 7,383.2
Prepaid expenses and other 667.7 651.3
Total current assets $14,721.8 $14,544.5
Property and equipment, net 1,680.7 1,647.0
Net investment in sales-type leases,
less current portion 855.9 820.7
Goodwill and other intangibles, net 5,813.1 5,860.9
Other assets 395.3 280.7
Total assets $23,466.8 $23,153.8
Liabilities and Shareholders' Equity
Current portion of long-term
obligations and other short-term borrowings $673.6 $16.0
Accounts payable 8,982.3 9,162.2
Other accrued liabilities 1,751.0 2,247.3
Liabilities from businesses held for
sale and discontinued operations 3.6 34.2
Total current liabilities $11,410.5 $11,459.7
Long-term obligations, less current
portion and other short-term borrowings 3,396.5 3,457.3
Deferred income taxes and other liabilities 1,551.7 859.9
Total shareholders' equity 7,108.1 7,376.9
Total liabilities and shareholders' equity $23,466.8 $23,153.8
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Second Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
Cash Flows From Operating
Activities:
Net earnings $324.7 $739.3 $626.5 $1,010.0
(Earnings) / loss from
discontinued operations 0.4 (423.8) 1.8 (403.1)
Earnings from continuing
operations $325.1 $315.5 $628.3 $606.9
Adjustments to reconcile earnings
from continuing operations
to net cash provided by/(used in)
operating activities:
Depreciation and amortization 97.0 77.0 191.9 155.4
Asset impairments and other (23.0) 12.7 (23.2) 14.4
Equity compensation 28.4 32.9 54.5 70.3
Provision for bad debts 5.3 2.4 10.4 7.8
Change in operating assets and
liabilities, net of effects from
acquisitions:
(Increase) / decrease in trade
receivables 41.3 (699.1) (150.6) (592.1)
(Increase) / decrease in
inventories (486.0) 64.3 (253.6) 184.1
Increase in net investment in
sales-type leases (34.5) (23.5) (58.6) (44.4)
Increase / (decrease) in
accounts payable (116.7) 207.6 (179.9) 76.1
Increase / (decrease) in other
accrued liabilities and
operating items, net 139.0 (42.2) 195.9 139.7
Net cash provided by / (used
in) operating activities -
continuing operations $(24.1) $(52.4) $415.1 $618.2
Net cash provided by / (used
in) operating activities -
discontinued operations (2.0) 5.5 (32.5) 21.6
Net cash provided by / (used in)
operating activities $(26.1) $(46.9) $382.6 $639.8
Cash Flows From Investing
Activities:
Acquisition of subsidiaries, net
of divestitures and cash acquired $48.9 $(56.5) $(39.2) $(121.0)
Proceeds from sale of property
and equipment 4.9 9.7 7.4 13.3
Additions to property and
equipment (80.6) (85.4) (172.1) (154.1)
Sale / (purchase) of investment
securities available for sale, net - (10.6) 131.9 31.3
Net cash used in investing
activities - continuing
operations $(26.8) $(142.8) $(72.0) $(230.5)
Net cash used in investing
activities - discontinued
operations - (11.5) - (7.9)
Net cash used in investing
activities $(26.8) $(154.3) $(72.0) $(238.4)
Cash Flows From Financing
Activities:
Net change in commercial paper
and short-term borrowings $287.4 $(101.7) $519.4 $3.7
Reduction of long-term
obligations (1.2) (661.4) (14.1) (689.2)
Proceeds from long-term
obligations, net of issuance
costs 1.0 850.0 1.0 851.7
Proceeds from issuance of Common
Shares 58.9 18.1 164.4 75.4
Tax benefits from exercises of
stock options 2.4 4.6 14.0 17.1
Dividends on Common Shares (43.5) (36.4) (87.7) (73.4)
Purchase of Common Shares
in treasury (357.3) (300.0) (1,032.0) (745.3)
Net cash used in financing
activities - continuing
operations $(52.3) $(226.8) $(435.0) $(560.0)
Net cash used in financing
activities - discontinued
operations - (11.5) - (24.0)
Net cash used in financing
activities $(52.3) $(238.3) $(435.0) $(584.0)
Net decrease in cash and
equivalents (105.2) (439.5) (124.4) (182.6)
Cash and equivalents at
beginning of period $1,289.6 $1,444.2 $1,308.8 $1,187.3
Cash and equivalents at
end of period $1,184.4 $1,004.7 $1,184.4 $1,004.7
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Non-GAAP
Second Quarter Second Quarter
(in millions) 2008 2007 2008 2007
Revenue
Amount $23,283 $21,785
Growth Rate 7 % 13 %
Operating Earnings
Amount $519 $512 $526 $544
Growth Rate 1 % 12 % (3)% 16 %
Earnings from Continuing Operations
Amount $325 $316 $329 $341
Growth Rate 3 % 11 % (3)% 15 %
Non-GAAP
Year-to-Date Year-to-Date
(in millions) 2008 2007 2008 2007
Revenue
Amount $45,256 $42,722
Growth Rate 6 % 12 %
Operating Earnings
Amount $1,009 $963 $1,038 $1,019
Growth Rate 5 % 17 % 2 % 19 %
Earnings from Continuing Operations
Amount $628 $607 $647 $649
Growth Rate 4 % 17 % (0)% 19 %
Refer to the GAAP / Non-GAAP Reconciliation for definitions and
calculations supporting the non-GAAP balances.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
HEALTHCARE SUPPLY CHAIN SERVICES CLINICAL AND MEDICAL PRODUCTS
Second Quarter Second Quarter
(in millions) 2008 2007 (in millions) 2008 2007
PHARMACEUTICAL CLINICAL TECHNOLOGIES AND SERVICES
Revenue Revenue
Amount $20,351 $19,238 Amount $715 $662
Growth Rate 6 % 13 % Growth Rate 8 % 10 %
Mix 86 % 87 % Mix 3 % 3 %
Segment Profit (1) Segment Profit (1)
Amount $258 $328 Amount $115 $92
Growth Rate (21)% 19 % Growth Rate 26 % 16 %
Mix 50 % 60 % Mix 23 % 17 %
Segment Profit Segment Profit
Margin 1.27 % 1.71 % Margin 16.16 % 13.87 %
MEDICAL MEDICAL PRODUCTS AND TECHNOLOGIES
Revenue Revenue
Amount $2,015 $1,872 Amount $667 $455
Growth Rate 8 % 6 % Growth Rate 47 % 15 %
Mix 8 % 8 % Mix 3 % 2 %
Segment Profit (1,2) Segment Profit (1,2)
Amount $72 $82 Amount $69 $47
Growth Rate (13)% 15 % Growth Rate 46 % 17 %
Mix 14 % 15 % Mix 13 % 8 %
Segment Profit Segment Profit
Margin 3.55 % 4.38 % Margin 10.31 % 10.32 %
(1) Refer to definitions for an explanation of the segment profit
calculation.
(2) During the third quarter of fiscal 2007, the Company revised the
method used to allocate certain shared costs between the Healthcare
Supply Chain Services - Medical segment and the Medical Products and
Technologies segment to better align costs with the segment that
receives the related benefits. Prior period information has been
reclassified to conform to this new presentation.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
HEALTHCARE SUPPLY CHAIN SERVICES CLINICAL AND MEDICAL PRODUCTS
Year-to-Date Year-to-Date
(in millions) 2008 2007 (in millions) 2008 2007
PHARMACEUTICAL CLINICAL TECHNOLOGIES AND SERVICES
Revenue Revenue
Amount $39,572 $37,770 Amount $1,363 $1,257
Growth Rate 5 % 13 % Growth Rate 8 % 7 %
Mix 86 % 87 % Mix 3 % 3 %
Segment Profit (1) Segment Profit (1)
Amount $563 $617 Amount $214 $143
Growth Rate (9)% 23 % Growth Rate 49 % 5 %
Mix 55 % 62 % Mix 21 % 14 %
Segment Profit Segment Profit
Margin 1.42 % 1.63 % Margin 15.68 % 11.40 %
MEDICAL MEDICAL PRODUCTS AND TECHNOLOGIES
Revenue Revenue
Amount $3,936 $3,679 Amount $1,290 $879
Growth Rate 7 % 4 % Growth Rate 47 % 13 %
Mix 8 % 8 % Mix 3 % 2 %
Segment Profit (1,2) Segment Profit (1,2)
Amount $129 $146 Amount $126 $93
Growth Rate (12)% 7 % Growth Rate 35 % 26 %
Mix 12 % 15 % Mix 12 % 9 %
Segment Profit Segment Profit
Margin 3.28 % 3.97 % Margin 9.74 % 10.58 %
(1) Refer to the definitions for an explanation of how the Company
calculates segment profit.
(2) During the third quarter of fiscal 2007, the Company revised the
method used to allocate certain shared costs between the Healthcare
Supply Chain Services - Medical segment and the Medical Products and
Technologies segment to better align costs with the segment that
receives the related benefits. Prior period information has been
reclassified to conform to this new presentation.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
Second Quarter Year-to-Date
2008 2007 2008 2007
Receivable Days 20.2 19.2
Days Inventory on Hand 28 28
Debt to Total Capital 36 % 25 %
Net Debt to Capital 29 % 15 %
Return on Equity 18.3% 34.1% 17.4% 23.5%
Non-GAAP Return on Equity 19.4% 15.2% 18.4% 14.3%
Return on Invested Capital 7.01% 13.85% 6.78% 9.51%
Non-GAAP Return on Invested Capital 8.09% 6.53% 7.78% 6.22%
Effective Tax Rate from Continuing
Operations 30.7% 34.2% 31.4% 32.0%
Non-GAAP Effective Tax Rate from
Continuing Operations 31.1% 34.3% 31.7% 32.0%
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
Second Quarter Year-to-Date
(in millions, except per Common
Share amounts) 2008 2007 2008 2007
Special Items
Restructuring charges $(31.5) $(10.0) $(46.2) $(21.8)
Acquisition integration charges (10.0) (9.1) (15.5) (11.1)
Litigation and other 12.0 (0.5) 9.7 (8.9)
Total special items $(29.5) $(19.6) (52.0) (41.8)
Tax benefit/(expense) 11.2 7.1 18.9 13.1
Special items, net of tax $(18.3) $(12.5) $(33.1) $(28.7)
Increase/(decrease) to diluted
EPS from continuing operations $(0.05) $(0.03) $(0.09) $(0.07)
Impairment Charges and Other
Impairment charges and other $23.0 $(12.6) $23.2 $(14.3)
Tax benefit / (expense) (8.8) 0.1 (8.9) 0.6
Net impairment charges and other,
net of tax $14.2 $(12.5) $14.3 $(13.7)
Increase / (decrease) to diluted
EPS from continuing operations $0.04 $(0.03) $0.04 $(0.03)
Weighted Average Number of Diluted
Shares Outstanding 364.6 410.6 367.8 412.0
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter 2008
Impairment
(in millions, except per Common Special Charges
Share amounts) GAAP Items and Other Non-GAAP
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 %
Second Quarter 2007
Impairment
Special Charges
GAAP Items and Other Non-GAAP
Operating Earnings
Amount $512 $20 $13 $544
Growth Rate 12 % 16 %
Provision for Income Taxes $164 $7 - $171
Earnings from Continuing Operations
Amount $316 $13 $13 $341
Growth Rate 11 % 15 %
Diluted EPS from Continuing Operations
Amount $0.77 $0.03 $0.03 $0.83
Growth Rate 17 % 20 %
Year-to-Date 2008
Impairment
(in millions, except per Common Special Charges
Share amounts) GAAP Items and Other Non-GAAP
Operating Earnings
Amount $1,009 $52 ($23) $1,038
Growth Rate 5 % 2 %
Provision for Income Taxes $288 $19 ($9) $298
Earnings from Continuing Operations
Amount $628 $33 ($14) $647
Growth Rate 4 % (0)%
Diluted EPS from Continuing Operations
Amount $1.71 $0.09 ($0.04) $1.76
Growth Rate 16 % 12 %
Year-to-Date 2007
Impairment
Special Charges
GAAP Items and Other Non-GAAP
Operating Earnings
Amount $963 $42 $14 $1,019
Growth Rate 17 % 19 %
Provision for Income Taxes $286 $13 $1 $300
Earnings from Continuing Operations
Amount $607 $29 $14 $649
Growth Rate 17 % 19 %
Diluted EPS from Continuing Operations
Amount $1.47 $0.07 $0.03 $1.57
Growth Rate 23 % 25 %
The sum of the components may not equal the total due to rounding
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Return on Equity 18.3% 34.1% 17.4% 23.5%
Non-GAAP Return on Equity
Net earnings $324.7 $739.3 $626.5 $1,010.0
Special items, net of tax,
in continuing operations 18.3 12.5 33.1 28.7
Special items, net of tax,
in discontinued operations - 1.7 - 3.1
Income tax benefit related
to PTS discontinued operations - (425.0) - (425.0)
Adjusted net earnings $343.0 $328.5 $659.6 $616.8
Annualized $1,372.0 $1,314.0 1,319.2 1,233.6
Divided by average
shareholders' equity (1) $7,088.2 $8,664.5 $7,184.4 $8,606.5
Non-GAAP return on equity 19.4% 15.2% 18.4% 14.3%
Second Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Return on Invested Capital 7.01% 13.85% 6.78% 9.51%
Non-GAAP Return on Invested Capital
Net earnings $324.7 $739.3 $626.5 $1,010.0
Special items, net of tax,
in continuing operations 18.3 12.5 33.1 28.7
Special items, net of tax,
in discontinued operations - 1.7 - 3.1
Interest expense and other,
net of tax 32.0 20.2 59.4 43.8
Income tax benefit related
to PTS discontinued operations - (425.0) - (425.0)
Adjusted net earnings $375.0 $348.7 $719.0 $660.6
Annualized 1,500.0 1,394.8 1,438.0 1,321.2
Divided by average total
invested capital (2) $18,529.9 $21,349.1 $18,483.2 $21,245.3
Non-GAAP return on invested
capital 8.09% 6.53% 7.78% 6.22%
(1) The average shareholders' equity shown above is calculated using the
average of shareholders' equity 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.
(2) Total invested capital is calculated as the sum of the current
portion of long-term obligations and other short-term borrowings,
long-term obligations, current portion of long-term obligations and
other short-term borrowings in discontinued operations, long-term
obligations in discontinued operations, 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 and $9.7 billion, respectively, for the December 31, 2007 and
2006 calculations. Current portion of long-term obligations and
other short-term borrowings in discontinued operations, and long-term
obligations in discontinued operations were $59.2 million, $46.6
million and $41.3 million at June 30, 2006, September 30, 2006, and
December 31, 2006, respectively.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Effective Tax Rate from
Continuing Operations 30.7% 34.2% 31.4% 32.0%
Non-GAAP Effective Tax Rate from
Continuing Operations
Earnings before income taxes and
discontinued operations $469.2 $479.5 $916.1 $892.9
Special items 29.5 19.6 52.0 41.8
Adjusted earnings before
income taxes and
discontinued operations $498.7 $499.1 $968.1 $934.7
Provision for income taxes $144.1 $164.0 $287.8 $286.0
Special items tax benefit 11.2 7.1 18.9 13.1
Adjusted provision for
income taxes $155.3 $171.1 $306.7 $299.1
Non-GAAP effective tax rate from
continuing operations 31.1% 34.3% 31.7% 32.0%
Second Quarter
2008 2007
Debt to Total Capital 36% 25%
Net Debt to Capital
Current portion of long-term
obligations and other short-term
borrowings $673.6 $48.9
Long-term obligations, less
current portion and other
short-term borrowings 3,396.5 2,935.8
Debt $4,070.1 $2,984.7
Cash and equivalents (1,184.4) (1,004.8)
Short-term investments available
for sale - (467.1)
Net debt $2,885.7 $1,512.8
Total shareholders' equity $7,108.1 $8,907.8
Capital $9,993.8 $10,420.6
Net debt to capital 29% 15%
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP earnings from continuing operations, non
GAAP return on equity, 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, return on equity 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 and impairment charges and
other, 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
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
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 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
Economic Profit: segment net operating earnings, after-tax minus
(tangible capital multiplied by weighted average cost of capital);
Tangible Capital is the quarterly average calculated as total assets
allocated to the segment less (total liabilities allocated to the
segment, goodwill and intangibles, cash and equivalents and short term
investments available for sale)
Economic Profit Margin: economic profit divided by revenue
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
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 special items and impairment charges and other, both
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 special items) divided by earnings before
income taxes and discontinued operations adjusted for special items)
Non-GAAP Operating Earnings: operating earnings excluding special items
and impairment charges and other
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 Operating Margin: non-GAAP operating earnings divided by revenue
Non-GAAP Return on Equity: (annualized current period net earnings plus
special items minus special items tax benefit) divided by average
shareholders' equity (1)
Non-GAAP Return on Invested Capital: (annualized net earnings plus
special items minus special items tax benefit plus interest expense and
other) divided by (average total shareholders' equity plus debt plus
unrecorded goodwill) (1)
(1) For the three and six months ended December 31, 2006, the numerator
in calculating this non-GAAP financial measure also excludes a $425
million income tax benefit related to PTS discontinued operations
recorded in the second quarter of fiscal 2007.
SOURCE Cardinal Health, Inc.
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Related links:
http://www.cardinalhealth.com
CONTACT:
Media, Jim Mazzola, +1-614-757-3690,
jim.mazzola@cardinalhealth.com; Investors, Bob Reflogal,
+1-614-757-7542, bob.reflogal@cardinalhealth.com, both of
Cardinal Health, Inc.
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