- Revenue increases 5 percent to $22.9 billion
- GAAP earnings from continuing operations reach $366 million from a loss
of $5 million in the prior-year period
- GAAP diluted earnings per share from continuing operations rise to $1.02
from a loss of $0.01 in prior-year period
- Non-GAAP diluted EPS from continuing operations increases 13 percent to
$1.08
DUBLIN, Ohio, May 1 /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 5 percent for its
third quarter to nearly $23 billion, with GAAP earnings per share (EPS)
reaching $1.02 from a $0.01 loss in the prior-year period.
Special items related to acquisition integration, litigation and
restructuring, and impairment charges and other items had a $0.06 dilutive
impact on GAAP earnings for the quarter, bringing non-GAAP EPS to $1.08(1),
an increase of 13 percent from the prior-year period.
Chairman and Chief Executive Officer R. Kerry Clark said, "Our
consolidated business and three of our four operating segments are
performing to our expectations. We saw a healthy revenue increase in our
clinical and medical products sector, with excellent leverage to the profit
line. And our supply chain medical segment continued the turnaround we
began earlier this year with a strong quarter of profitable growth.
"Within our supply chain pharmaceutical segment, we are managing the
same issues we outlined last quarter, including the re-pricing of large
retail accounts and the impact of our controlled substance anti-diversion
efforts. However, we have renewed all of our major contracts through fiscal
2009 and, with respect to our anti-diversion efforts, we are putting in
place new systems that we believe will return us to a strong position in
managing this important industry issue."
Q3 and FY08 Year-to-Date Summary
Q3 FY08 Q3 FY07 Y/Y FY08 YTD Y/Y
Revenue $22.9 billion $21.9 billion 5% $68.2 billion 6%
GAAP Operating $577 million $(10) million n.m. $1.6 billion 66%
Earnings
Non-GAAP Operating
Earnings(2) $613 million $606 million 1% $1.7 billion 2%
GAAP Earnings from
Continuing
Operations $366 million $(5) million n.m. $1 billion 65%
Non-GAAP Earnings
from Continuing
Operations(3) $390 million $390 million - $1 billion -
GAAP Diluted EPS
from Continuing
Operations $1.02 $(0.01) n.m. $2.72 85%
Non-GAAP Diluted EPS
from Continuing
Operations $1.08 $0.96 13% $2.83 11%
Third quarter segment results
Healthcare Supply Chain Services Sector
The Healthcare Supply Chain Services - Pharmaceutical segment reported
a 3 percent increase in revenue to $19.9 billion. Sales to bulk customers
increased 8 percent to $9.1 billion, while sales to non-bulk customers were
even with the prior year at $10.8 billion. Revenue growth was dampened by
several factors, including customer disruption as the company enhances
anti-diversion controls and strengthens its offerings, and by slower
overall market growth. Segment profit declined 21 percent to $300 million,
primarily from the continued impact of re-pricing several large contracts
and the impact of anti-diversion initiatives.
Revenue for the Healthcare Supply Chain Services - Medical segment grew
8 percent to $2.1 billion, with increased sales penetration and growth of
existing hospital, lab and ambulatory customers. As expected, the segment
returned to positive profit growth during the quarter, with profit
increasing 5 percent to $93 million, driven by increased sales volume.
Segment profit growth was dampened by a previously disclosed change in
corporate cost allocation and by continued softness in the surgical kitting
business.
Clinical and Medical Products Sector
"Our Clinical and Medical products sector continued to deliver strong
year-over-year growth, reflecting our leadership positions in medication
dispensing, infusion, respiratory and infection prevention products," Clark
said. "We will continue to invest in these businesses to strengthen our
offerings for the future."
The Medical Products and Technologies segment grew revenue by 48
percent to $679 million, driven by the acquisition of VIASYS Healthcare and
strong growth within the core infection prevention and medical specialty
businesses. Segment profit grew 72 percent to $80 million on the VIASYS
addition, strong organic growth and the benefit of foreign exchange. The
VIASYS integration remains on schedule to deliver $85 million to $100
million in synergies by fiscal 2010.
Revenue for the Clinical Technologies and Services segment increased by
11 percent to $747 million, driven by continued growth in customer
installations for medication and supply dispensing products and infusion
pumps. Segment profit increased by 29 percent to $127 million from a
favorable product mix and improved operating leverage from expense
management initiatives. Segment profit for the quarter was partially offset
by a $6.5 million reserve for a recall of integrated circuits and
connectors on certain Alaris(R) System modules. The company believes it is
fully reserved for remediation efforts on all Alaris product recalls and
expects to complete them by the end of the calendar year.
Additional third quarter and recent highlights
-- Reached a definitive agreement to acquire the assets of privately held
Enturia Inc. for $490 million. The cash transaction includes Enturia's
leading line of infection prevention products sold under the
ChloraPrep(R) brand name. The acquisition, which is subject to
regulatory approvals, is expected to close in Cardinal Health's fourth
quarter and be $0.01 to $0.02 dilutive to earnings in fiscal 2008 and
accretive in fiscal 2009.
-- Introduced several new products and services, including Rxe-view(TM), a
new service for small hospitals to improve medication safety and
clinician productivity through Web-based medication order management
and a clinical intervention tool; a new surgical gown made from a
unique and proprietary fabric that is softer than other surgical gowns,
improving comfort for clinicians; and an agreement with ClearCount
Medical Solutions to distribute the first system cleared by the Food
and Drug Administration using radio-frequency identification to count
and detect sponges during surgeries.
-- Appointed Michael C. Kaufmann and Craig S. Morford to key executive
posts. Kaufmann, 45, was named group president of the Healthcare
Supply Chain Services - Pharmaceutical segment after most recently
being responsible for Cardinal Health's medical supply chain business.
Morford, 49, was formerly acting deputy U.S. attorney general and will
join the company on May 5 as chief compliance officer.
-- Repurchased $150 million of Cardinal Health shares during the quarter,
bringing total repurchases for the first nine months of fiscal 2008 to
$1.1 billion.
-- Announced recipients of Cardinal Health's Patient Safety Grants
totaling $1 million for new and innovative programs at 34 hospitals,
health systems and community health clinics across the country. More
than 10 percent of the nation's hospitals applied for the grants in the
largest and first-of-its-kind program by a health care company.
Outlook
The company reaffirmed its non-GAAP EPS range of $3.75 to $3.85 for
fiscal 2008. Clark stated, "As the remainder of the year unfolds, we expect
full-year, non-GAAP EPS to be about in the middle of the range, excluding
the potential dilutive impact of the Enturia acquisition of 1 to 2 cents."
Conference Call
Cardinal Health will host a conference call and webcast at 8:30 a.m.
EDT 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 617-213-4853, passcode
66621966. An audio replay will be available until 11:30 p.m. EDT on May 3
at 617-801-6888, passcode 39214175. 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, 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/(loss) excluding
special items and impairment charges and other.
(3) Non-GAAP earnings from continuing operations: Earnings/(loss) 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 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; and conditions in the
pharmaceutical market and general economic and market conditions. This news
release reflects management's views as of May 1, 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)
(in millions, except per Common Third Quarter
Share amounts) 2008 2007 % Change
Revenue $22,909.6 $21,867.1 5%
Cost of products sold 21,441.8 20,479.6 5%
Gross margin 1,467.8 1,387.5 6%
Selling, general and administrative
expenses 854.5 781.7 9%
Impairment charges and other 1.2 3.6 N.M.
Special items:
Restructuring charges 8.5 6.6 N.M.
Acquisition integration charges 4.4 2.9 N.M.
Litigation and other 22.7 602.5 N.M.
Operating earnings / (loss) 576.5 (9.8) N.M.
Interest expense and other 31.1 32.2 (3)%
Earnings / (loss) before income
taxes and discontinued operations 545.4 (42.0) N.M.
Provision for income taxes 179.5 (37.1) N.M.
Earnings / (loss) from continuing
operations 365.9 (4.9) N.M.
Earnings / (loss) from discontinued
operations (net of tax expense
of $26.3 and $8.1 for the third
quarter of fiscal 2008 and 2007,
respectively) (9.9) 23.9 N.M.
Net earnings $356.0 $19.0 N.M.
Basic earnings / (loss) per Common Share:
Continuing operations $1.03 $(0.01) N.M.
Discontinued operations (0.03) 0.06 N.M.
Net basic earnings per Common Share $1.00 $0.05 N.M.
Diluted earnings / (loss) per Common Share:
Continuing operations $1.02 $(0.01) N.M.
Discontinued operations (0.03) 0.06 N.M.
Net diluted earnings per Common Share $0.99 $0.05 N.M.
Weighted average number of Common
Shares outstanding:
Basic 355.5 394.6
Diluted (1) 360.2 394.6
(1) Due to the loss from continuing operations during the third quarter of
fiscal 2007, potential dilutive Common Shares have not been included
in the denominator of the dilutive per share computation due to their
antidilutive effect.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(in millions, except per Common Share Year-to-Date
amounts) 2008 2007 % Change
Revenue $68,165.8 $64,589.1 6%
Cost of products sold 64,001.1 60,701.3 5%
Gross margin 4,164.7 3,887.8 7%
Selling, general and administrative
expenses 2,513.5 2,263.0 11%
Impairment charges and other (22.0) 17.9 N.M.
Special items:
Restructuring charges 54.7 28.4 N.M.
Acquisition integration charges 19.9 14.0 N.M.
Litigation and other 13.1 611.4 N.M.
Operating earnings 1,585.5 953.1 66%
Interest expense and other 124.0 102.2 21%
Earnings before income taxes and
discontinued operations 1,461.5 850.9 72%
Provision for income taxes 467.2 248.9 88%
Earnings from continuing operations 994.3 602.0 65%
Earnings / (loss) from discontinued
operations (net of tax (expense) /
benefit of ($29.1) and $427.8 for fiscal
2008 and 2007 year-to-date, respectively) (11.7) 426.9 N.M.
Net earnings $982.6 $1,028.9 (5)%
Basic earnings / (loss) per Common Share:
Continuing operations $2.77 $1.50 85%
Discontinued operations (0.03) 1.07 N.M.
Net basic earnings per Common Share $2.74 $2.57 7%
Diluted earnings / (loss) per Common Share:
Continuing operations $2.72 $1.47 85%
Discontinued operations (0.03) 1.04 N.M.
Net diluted earnings per Common Share $2.69 $2.51 7%
Weighted average number of Common
Shares outstanding:
Basic 359.1 400.5
Diluted 365.7 409.5
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, June 30,
(in millions) 2008 2007
Assets
Cash and equivalents $1,529.0 $1,308.8
Short-term investments available for sale - 132.0
Trade receivables, net 4,974.3 4,714.4
Current portion of net investment in
sales-type leases 381.2 354.8
Inventories 7,256.7 7,383.2
Prepaid expenses and other 578.0 651.3
Assets held for sale 187.9 -
Total current assets 14,907.1 14,544.5
Property and equipment, net 1,679.5 1,647.0
Net investment in sales-type leases,
less current portion 878.2 820.7
Goodwill and other intangibles, net 5,681.0 5,860.9
Other assets 457.6 280.7
Total assets $23,603.4 $23,153.8
Liabilities and Shareholders' Equity
Current portion of long-term
obligations and other short-term borrowings $355.3 $16.0
Accounts payable 8,987.9 9,162.2
Other accrued liabilities 1,778.2 2,247.3
Liabilities from businesses held for
sale and discontinued operations 20.6 34.2
Total current liabilities 11,142.0 11,459.7
Long-term obligations, less current
portion and other short-term borrowings 3,450.1 3,457.3
Deferred income taxes and other liabilities 1,618.1 859.9
Total shareholders' equity 7,393.2 7,376.9
Total liabilities and shareholders' equity $23,603.4 $23,153.8
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Third Quarter Year-to-date
(in millions) 2008 2007 2008 2007
Cash Flows From Operating
Activities:
Net earnings $356.0 $19.0 $982.6 $1,028.9
(Earnings) / loss from discontinued
operations 9.9 (23.9) 11.7 (426.9)
Earnings from continuing
operations 365.9 (4.9) 994.3 602.0
Adjustments to reconcile earnings
from continuing operations to net
cash provided by operating
activities:
Depreciation and amortization 93.1 81.7 284.9 237.1
Asset impairments and other 2.4 3.6 (20.8) 18.0
Equity compensation 32.2 39.0 86.7 109.3
Provision for bad debts 11.9 9.2 22.3 17.0
Change in operating assets and
liabilities, net of effects from
acquisitions:
Increase in trade receivables (144.2) (227.6) (294.8) (819.6)
(Increase) / decrease in
inventories 367.3 (172.7) 113.7 11.4
Increase in net investment in
sales-type leases (25.2) (32.6) (83.8) (77.0)
Increase / (decrease) in accounts
payable (37.4) 417.0 (217.2) 493.1
Increase in other accrued
liabilities and operating
items, net 231.2 563.6 427.0 703.3
Net cash provided by operating
activities - continuing
operations 897.2 676.3 1,312.3 1,294.6
Net cash provided by / (used in)
operating activities -
discontinued operations (10.0) 93.7 (42.5) 115.2
Net cash provided by operating
activities 887.2 770.0 1,269.8 1,409.8
Cash Flows From Investing
Activities:
Acquisition of subsidiaries, net of
divestitures and cash acquired 0.2 (28.0) (39.0) (149.0)
Proceeds from sale of property and
equipment 2.9 (9.6) 10.3 3.7
Additions to property and equipment (79.6) (89.1) (251.6) (243.1)
Sale of investment securities
available for sale, net - 167.2 131.9 198.4
Net cash provided by / (used in)
investing activities -
continuing operations (76.5) 40.5 (148.4) (190.0)
Net cash used in investing
activities - discontinued
operations - (72.2) - (80.1)
Net cash used in investing
activities (76.5) (31.7) (148.4) (270.1)
Cash Flows From Financing
Activities:
Net change in commercial paper
and short-term borrowings (317.2) 250.8 202.2 254.5
Reduction of long-term obligations (2.7) (43.6) (15.9) (732.9)
Proceeds from long-term
obligations, net of issuance costs - - - 851.7
Proceeds from issuance of Common
Shares 44.8 243.5 209.2 318.8
Tax benefits from exercises of
stock options 1.3 11.6 15.3 28.7
Dividends on Common Shares (42.7) (36.1) (130.4) (109.5)
Purchase of Common Shares in
treasury (149.6) (1,280.0) (1,181.6) (2,025.2)
Net cash used in financing
activities - continuing
operations (466.1) (853.8) (901.2) (1,413.9)
Net cash used in financing
activities - discontinued
operations - (22.7) - (46.6)
Net cash used in financing
activities (466.1) (876.5) (901.2) (1,460.5)
Net increase / (decrease) in cash
and equivalents 344.6 (138.2) 220.2 (320.8)
Cash and equivalents at beginning
of period 1,184.4 1,004.7 1,308.8 1,187.3
Cash and equivalents at end of
period $1,529.0 $866.5 $1,529.0 $866.5
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Non-GAAP
Third Quarter Third Quarter
(in millions) 2008 2007 2008 2007
Revenue
Amount $22,910 $21,867
Growth Rate 5% 8%
Operating Earnings / (Loss)
Amount $577 ($10) $613 $606
Growth Rate N.M. (102)% 1% 9%
Earnings / (Loss) from Continuing
Operations
Amount $366 ($5) $390 $390
Growth Rate N.M. (101)% - 10%
Non-GAAP
Year-to-Date Year-to-Date
(in millions) 2008 2007 2008 2007
Revenue
Amount $68,166 $64,589
Growth Rate 6% 11%
Operating Earnings
Amount $1,586 $953 $1,651 $1,625
Growth Rate 66% (30)% 2% 15%
Earnings from Continuing Operations
Amount $994 $602 $1,037 $1,039
Growth Rate 65% (30)% - 16%
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
Third Quarter Third Quarter
(in millions) 2008 2007 (in millions) 2008 2007
PHARMACEUTICAL CLINICAL TECHNOLOGIES AND SERVICES
Revenue Revenue
Amount $19,894 $19,246 Amount $747 $674
Growth Rate 3% 8% Growth Rate 11% 12%
Mix 85% 86% Mix 3% 3%
Segment Profit Segment Profit
Amount $300 $380 Amount $127 $98
Growth Rate (21)% 15% Growth Rate 29% 12%
Mix 50% 62% Mix 21% 16%
Segment Profit Segment Profit
Margin 1.51% 1.97% Margin 16.98% 14.58%
MEDICAL MEDICAL PRODUCTS AND TECHNOLOGIES
Revenue Revenue
Amount $2,066 $1,907 Amount $679 $458
Growth Rate 8% 4% Growth Rate 48% 11%
Mix 9% 9% Mix 3% 2%
Segment Profit Segment Profit
Amount $93 $89 Amount $80 $47
Growth Rate 5% (5)% Growth Rate 72% 4%
Mix 16% 14% Mix 13% 8%
Segment Profit Segment Profit
Margin 4.51% 4.65% Margin 11.80% 10.20%
Refer to definitions for an explanation of calculations.
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 $59,465 $57,017 Amount $2,110 $1,931
Growth Rate 4% 11% Growth Rate 9% 8%
Mix 85% 87% Mix 3% 3%
Segment Profit Segment Profit
Amount $863 $996 Amount $341 $242
Growth Rate (13)% 20% Growth Rate 41% 8%
Mix 53% 62% Mix 21% 15%
Segment Profit Segment Profit
Margin 1.45% 1.75% Margin 16.14% 12.51%
MEDICAL MEDICAL PRODUCTS AND TECHNOLOGIES
Revenue Revenue
Amount $6,001 $5,585 Amount $1,969 $1,336
Growth Rate 7% 4% Growth Rate 47% 12%
Mix 9% 8% Mix 3% 2%
Segment Profit Segment Profit
Amount $222 $235 Amount $206 $140
Growth Rate (5)% 2% Growth Rate 47% 17%
Mix 14% 14% Mix 12% 9%
Segment Profit Segment Profit
Margin 3.70% 4.20% Margin 10.45% 10.45%
Refer to the definitions for an explanation of calculations.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
Third Quarter Year-to-Date
2008 2007 2008 2007
Receivable Days 20.4 18.9
Days Inventory on Hand 27 29
Debt to Total Capital 34% 29%
Net Debt to Capital 24% 21%
Return on Equity 19.6% 0.9% 18.1% 16.3%
Non-GAAP Return on Equity 21.3% 20.9% 19.3% 16.8%
Return on Invested Capital 7.60% 0.36% 7.06% 6.49%
Non-GAAP Return on Invested Capital 8.68% 8.63% 8.09% 7.11%
Effective Tax Rate from Continuing
Operations 32.9% 88.2% 32.0% 29.3%
Non-GAAP Effective Tax Rate from
Continuing Operations 33.1% 32.0% 32.2% 32.0%
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
(in millions, except per Common Share Third Quarter Year-to-Date
amounts) 2008 2007 2008 2007
Special Items
Restructuring charges $(8.5) $(6.6) $(54.7) $(28.4)
Acquisition integration charges (4.4) (2.9) (19.9) (14.0)
Litigation and other (22.7) (602.5) (13.1) (611.4)
Total special items (35.6) (612.0) (87.7) (653.8)
Tax benefit 12.9 219.7 31.8 232.7
Special items, net of tax $(22.7) $(392.3) $(55.9) $(421.1)
Decrease to diluted EPS from
continuing operations $(0.06) $(0.96) $(0.15) $(1.03)
Impairment Charges and Other
Impairment charges and other $(1.2) $(3.6) $22.0 $(17.9)
Tax benefit / (expense) 0.4 1.2 (8.5) 1.8
Impairment charges and other, net
of tax $(0.8) $(2.4) $13.5 $(16.1)
Increase / (decrease) to diluted
EPS from continuing operations $- $(0.01) $0.04 $(0.04)
Weighted Average Number of Shares
Outstanding
Weighted average number of diluted
shares outstanding 360.2 394.6 365.7 409.5
Antidilutive effect due to loss from
continuing operations - 10.5 - -
Weighted average number of diluted
shares outstanding for non-GAAP
calculations 360.2 405.1 365.7 409.5
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
(in millions, except per Common Third Quarter 2008
Share amounts) Impairment
Charges
Special and
GAAP Items Other Non-GAAP
Operating Earnings
Amount $577 $36 $1 $613
Growth Rate N.M. 1%
Provision for Income Taxes $180 $13 - $192
Earnings from Continuing Operations
Amount $366 $23 $1 $390
Growth Rate N.M. -
Diluted EPS from Continuing
Operations
Amount $1.02 $0.06 - $1.08
Growth Rate N.M. 13%
Third Quarter 2007
Impairment
Charges
Special and
GAAP Items Other Non-GAAP
Operating Earnings
Amount ($10) $612 $4 $606
Growth Rate (102)% 9%
Provision for Income Taxes ($37) $220 $2 $184
Earnings from Continuing Operations
Amount ($5) $392 $2 $390
Growth Rate (101)% 10%
Diluted EPS from Continuing
Operations
Amount ($0.01) $0.96 $0.01 $0.96
Growth Rate (101)% 16%
(in millions, except per Common Year-to-Date 2008
Share amounts) Impairment
Charges
Special and
GAAP Items Other Non-GAAP
Operating Earnings
Amount $1,586 $88 ($22) $1,651
Growth Rate 66% 2%
Provision for Income Taxes $467 $32 ($9) $491
Earnings from Continuing Operations
Amount $994 $56 ($14) $1,037
Growth Rate 65% -
Diluted EPS from Continuing Operations
Amount $2.72 $0.15 ($0.04) $2.83
Growth Rate 85% 11%
Year-to-Date 2007
Impairment
Charges
Special and
GAAP Items Other Non-GAAP
Operating Earnings
Amount $953 $654 $18 $1,625
Growth Rate (30)% 15%
Provision for Income Taxes $249 $233 $2 $483
Earnings from Continuing Operations
Amount $602 $421 $16 $1,039
Growth Rate (30)% 16%
Diluted EPS from Continuing Operations
Amount $1.47 $1.03 $0.04 $2.54
Growth Rate (27)% 22%
The sum of the components may not equal the total due to rounding
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Return on Equity 19.6% 0.9% 18.1% 16.3%
Non-GAAP Return on Equity
Net earnings $356.0 $19.0 $982.6 $1,028.9
Special items, net of tax, in
continuing operations 22.7 392.3 55.9 421.1
Special items, net of tax, in
discontinued operations - 1.3 - 4.4
(Gain)/loss on sale of PTS, net
of tax, in discontinued
operations (3) 7.6 24.7 7.6 (392.9)
Adjusted net earnings $386.3 $437.3 $1,046.1 $1,061.5
Annualized $1,545.2 $1,749.2 $1,394.8 $1,415.3
Divided by average shareholders'
equity (1) $7,250.7 $8,388.6 $7,236.6 $8,422.3
Non-GAAP return on equity 21.3% 20.9% 19.3% 16.8%
Third Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Return on Invested Capital 7.60% 0.36% 7.06% 6.49%
Non-GAAP Return on Invested
Capital
Net earnings $356.0 $19.0 $982.6 $1,028.9
Special items, net of tax, in
continuing operations 22.7 392.3 55.9 421.1
Special items, net of tax, in
discontinued operations - 1.3 - 4.4
Interest expense and other, net
of tax 19.9 20.6 79.4 65.4
(Gain)/loss on sale of PTS, net
of tax, in discontinued
operations (3) 7.6 24.7 7.6 (392.9)
Adjusted net earnings $406.2 $457.9 $1,125.5 $1,126.9
Annualized $1,624.8 $1,831.6 $1,500.7 $1,502.5
Divided by average total
invested capital (2) $18,727.9 $21,206.0 $18,546.9 $21,128.5
Non-GAAP return on invested
capital 8.68% 8.63% 8.09% 7.11%
(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) 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 at
the end 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 March 31, 2008 and 2007 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, $41.3 million and $12.3
million at June 30, 2006, September 30, 2006, December 31, 2006 and
March 31, 2007, respectively.
(3) The amounts previously reported for the three and nine months ended
March 31, 2007, have been adjusted by $24.7 million and $32.1 million,
respectively, to include additional amounts identified as direct costs
associated with the disposition of the PTS Business.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Third Quarter Year-to-Date
(in millions) 2008 2007 2008 2007
GAAP Effective Tax Rate from
Continuing Operations 32.9% 88.2% 32.0% 29.3%
Non-GAAP Effective Tax Rate from
Continuing Operations
Earnings before income taxes and
discontinued operations $545.4 $(42.0) $1,461.5 $850.9
Special items 35.6 612.0 87.7 653.8
Adjusted earnings before income
taxes and discontinued operations $581.0 $570.0 $1,549.2 $1,504.7
Provision for income taxes $179.5 $(37.1) $467.2 $248.9
Special items tax benefit 12.9 219.7 31.8 232.7
Adjusted provision for income
taxes $192.4 $182.6 $499.0 $481.6
Non-GAAP effective tax rate from
continuing operations 33.1% 32.0% 32.2% 32.0%
Third Quarter
2008 2007
Debt to Total Capital 34% 29%
Net Debt to Capital
Current portion of long-term
obligations and other
short-term borrowings $355.3 $296.9
Long-term obligations, less
current portion and other
short-term borrowings 3,450.1 2,899.0
Debt $3,805.4 $3,195.9
Cash and equivalents (1,529.0) (866.5)
Short-term investments available
for sale - (300.0)
Net debt $2,276.4 $2,029.4
Total shareholders' equity $7,393.2 $7,869.5
Capital $9,669.6 $9,898.9
Net debt to capital 24% 21%
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 / (loss) from
continuing operations divided by diluted weighted average shares
outstanding
Effective Tax Rate from Continuing Operations: provision for income
taxes divided by earnings / (loss) 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
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 / (loss) 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 / (loss)
before income taxes and discontinued operations adjusted for special items)
Non-GAAP Operating Earnings: operating earnings / (loss) 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 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 months ended March 31, 2008 and 2007, the numerator in
calculating this non-GAAP financial measure also excludes the
respective $7.6 million and $24.7 million (gain) / loss, net of tax,
on the sale of PTS recorded in discontinued operations. For the nine
months ended March 31, 2008 and 2007, the numerator in calculating
this non-GAAP financial measure also excludes the respective $7.6
million and $(392.9) million (gain) / loss, net of tax, on the sale of
PTS recorded in discontinued operations.
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; or Investors: Sally Curley,
+1-614-757-7115, sally.curley@cardinalhealth.com, both of
Cardinal Health, Inc.
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