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Cardinal Health Reports First Quarter Results
  • Revenue up 6 percent to $24.8 billion
  • One-time spinoff-related costs result in first-quarter loss from continuing operations of $62 million or $0.17 per share
  • Non-GAAP diluted earnings per share from continuing operations increase 15 percent to $0.54

DUBLIN, Ohio, Nov. 5, 2009 /PRNewswire-FirstCall/ — Cardinal Health today reported fiscal 2010 first-quarter revenue increased 6 percent to $24.8 billion and non-GAAP diluted earnings per share from continuing operations(1) increased 15 percent to $0.54.

The net after-tax dilutive impact from restructuring, impairments and other costs associated with the spinoff of CareFusion Corp. totaled $0.71 per share. These items resulted in a GAAP loss from continuing operations of $62 million for the quarter, or $0.17 per share. Notable one-time items include a $172 million tax charge related to the portion of non-U.S. earnings that will no longer be indefinitely invested offshore due to the company's reduced international footprint following the spinoff and a $26 million after-tax loss associated with the early retirement of more than $1.1 billion of long-term debt.

The quarter was highlighted by 17 percent profit growth from the company's Medical segment, a lower-than-anticipated segment profit decline of 2 percent from its Pharmaceutical segment and disciplined expense management across the company. First-quarter non-GAAP results also benefited from an expected lower tax rate versus the prior-year period.

"We're off to a solid start to fiscal 2010, with our core businesses performing well and our key initiatives on track to deliver long-term value," said George Barrett, chairman and chief executive officer of Cardinal Health. "Our first-quarter operating numbers were enhanced by an accelerated revenue recognition item in our Medical segment related to the spinoff and some earlier-than-expected brand price inflation in the Pharmaceutical segment. Based on the data available to us at this stage of the year, we expect that our full-year performance will likely be toward the higher end of our guidance of $1.90 to $2.00 for non-GAAP diluted EPS from continuing operations."

Q1 FY10 SUMMARY 

                                 Q1 FY10         Q1 FY09          Y/Y
                                 -------         -------         -----
    Revenue                   $24.8 billion    $23.4 billion        6%

    Operating Earnings         $240 million     $287 million      (16)%
    Non-GAAP Operating
     Earnings(2)               $323 million     $311 million        4%

    Earnings/(Loss) from
     Continuing Operations     ($62) million    $172 million       N.M.
    Non-GAAP Earnings
     from Continuing
     Operations(3)              $194 million    $168 million       15%

    Diluted EPS from
     Continuing Operations        ($0.17)           $0.48          N.M.
    Non-GAAP Diluted EPS
     from Continuing
     Operations                    $0.54            $0.47          15%


FIRST-QUARTER SEGMENT RESULTS

Pharmaceutical Segment

The Pharmaceutical segment increased revenue by 5 percent to $22.6 billion, primarily driven by increased sales to existing pharmaceutical distribution customers. Sales to bulk customers increased 6 percent to $11.3 billion and sales to non-bulk customers increased 5 percent to $11.2 billion. Segment profit decreased 2 percent to $208 million as a result of the expected impact from fewer significant generic product launches and deflation versus the prior year period, the effect of customer contract repricings within the pharmaceutical distribution business and the decrease in franchise fees from the Medicine Shoppe International franchisee contract transition. The decline in segment profit was partially offset by strong, double-digit profit growth from the Nuclear Pharmacy Services business.

 "The Pharmaceutical segment continued its progress coming out of fiscal 2009 and performed somewhat ahead of our expectations," Barrett said. "We are also seeing good early traction with our new generic programs on both the sourcing and customer sides. Our Nuclear Pharmacy Services business continues to perform well in an unusual environment, but we are closely monitoring the supply disruptions of radioisotopes."

                                       Q1 FY10        Q1 FY09        Y/Y
                                       -------        -------       -----
    Revenue                         $22.6 billion  $21.4 billion      5%

    Segment Profit                   $208 million   $213 million     (2)%

Medical Segment

Revenue for the Medical segment increased 10 percent to $2.2 billion, primarily from sales growth with existing customers. Additionally, the spinoff triggered immediate revenue recognition from international sales to CareFusion, which contributed approximately $51 million to the quarterly revenue growth. Segment profit grew 17 percent to $115 million, driven by decreased cost of raw materials, the $14 million profit impact from the accelerated international sales to CareFusion, pandemic flu orders and the overall increase in volume for the quarter. Segment profit was partially dampened from investments associated with the Medical Transformation project.

 "Our Medical segment had a strong quarter with particularly robust performance from our ambulatory and lab supply businesses, and progress is being made in our efforts to transform our medical businesses for long-term growth," Barrett said. "The segment's underlying operations are performing well, and the segment is on track for strong profit growth for the full year."

                                       Q1 FY10        Q1 FY09        Y/Y
                                       -------        -------       -----
    Revenue                         $2.2 billion     $2 billion      10%

    Segment Profit                  $115 million    $98 million      17%

ADDITIONAL FIRST QUARTER AND RECENT HIGHLIGHTS:

  • Completed the spinoff of CareFusion Corp. through a pro rata distribution to Cardinal Health shareholders of approximately 81 percent of the shares of CareFusion common stock, effectively launching it as an independent, publicly traded company.
  • Awarded a five-year, sole-source laboratory products supply agreement with Novation, one of the nation's largest group purchasing organizations.
  • Purchased approximately $1.1 billion in aggregate principal amount of the company's long-term debt securities.
  • Named to iSixSigma's 2009 Best Places to Work Top Ten List.
  • Hired Mark Blake as executive vice president of strategy and corporate development.

CONFERENCE CALL

Cardinal Health will host a conference call and webcast today at 8:30 a.m. EST to discuss first quarter results. To access the call and corresponding slide presentation, go to the Investor page at cardinalhealth.com or dial 617.213.4863, passcode 29086482. Presentation slides, an audio replay and transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. EST on Nov. 8 by dialing 617.801.6888, passcode 83452415.

UPCOMING EVENTS

Cardinal Health will be participating in the following health care investor conferences:

  • Credit Suisse Healthcare Conference on Nov. 12 at Noon EST
  • Lazard Capital Markets Healthcare Conference on Nov. 17 at 9:55 a.m. EST

At these events, company executives will discuss Cardinal Health's diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks or a transcript, go to the Investors page at cardinalhealth.com.


About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a Fortune 18 health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. As one of the largest health care companies in the world, Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 40,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com.



(1) Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.

(2) Non-GAAP operating earnings: Operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) spinoff costs not included in items 1 through 3 above.

(3) Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) spinoff costs and tax charges not included in items 1 through 3 above, each net of tax.

A reconciliation of the differences between these non-GAAP financial measures and their most directly comparable GAAP financial measures is provided in the attached tables and at cardinalhealth.com.

Cardinal Health uses its Web site as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the investor page at cardinalhealth.com.

Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds realized from future sales of CareFusion stock; 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; the timing of generic and branded pharmaceutical introductions and the frequency or rate of branded pharmaceutical price appreciation or generic pharmaceutical price deflation; changes in the distribution patterns or reimbursement rates for health care products and/or services; the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal or administrative proceedings; the effects of disruptions in the financial markets, including uncertainties related to the availability and/or cost of credit on Cardinal Health's customers and vendors; the ultimate features of government health care reform initiatives and their enactment and implementation; and conditions in the pharmaceutical market and general economic and market conditions. In addition, Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and exhibits to those reports. This news release reflects management's views as of Nov. 5, 2009. Except to the extent required by applicable law, Cardinal Health does not undertake an obligation to update or revise any forward-looking statement.

                  CARDINAL HEALTH, INC. AND SUBSIDIARIES
        CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)


                                         First Quarter
                                         -------------
    (in millions, except per
     Common Share amounts)               2010(1)    2009(1)  % Change
                                         -------    -------

    Revenue                           $24,780.7  $23,437.1        6%
    Cost of products sold              23,871.9   22,535.9        6%
                                       --------   --------
    Gross margin                          908.8      901.2        1%
    Operating expenses
      Distribution, selling, general
       and administrative expenses        586.1      590.3       (1)%
      Restructuring and employee
       severance                           59.7       20.7       N.M.
      Impairments and loss on sale
       of assets                           23.6        3.6       N.M.
      Litigation (credits)/charges,
       net                                 (0.5)         -       N.M.
                                           ----        ---
    Operating earnings                    239.9      286.6      (16)%

    Other (income)/expense, net            (8.9)       2.5       N.M.
    Interest expense, net                  33.9       29.3       16%
    Loss on extinguishment of debt         39.9          -
                                           ----        ---
    Earnings before income taxes and
     discontinued operations              175.0      254.8      (31)%

    Provision for income taxes            236.8       82.6       N.M.
                                          -----       ----
    Earnings/(loss) from continuing
     operations                           (61.8)     172.2       N.M.

    Earnings from discontinued operations
     (net of tax expense of $26.0 million
     and $32.0 million for the first
     quarter of fiscal 2010 and 2009,
     respectively)                         23.6       76.9       N.M.
                                           ----       ----

    Net earnings/(loss)                  $(38.2)    $249.1       N.M.
                                         ------     ------

    Basic earnings/(loss) per
     Common Share:
    Continuing operations                $(0.17)     $0.48       N.M.
    Discontinued operations                0.06       0.22       N.M.
                                           ----       ----
      Net basic earnings/(loss) per
       Common Share                      $(0.11)     $0.70       N.M.
                                         ======      =====

    Diluted earnings/(loss) per
     Common Share:
    Continuing operations                $(0.17)     $0.48       N.M.
    Discontinued operations                0.06       0.21       N.M.
                                           ----       ----
      Net diluted earnings/(loss)
       per Common Share                  $(0.11)     $0.69       N.M.
                                         ======      =====

    Weighted average number of
     Common Shares outstanding:
    Basic                                 359.1      356.7
    Diluted(2)                            359.1      361.1


    (1) During the first quarter of fiscal 2010, the Company changed
        the presentation of certain items on its condensed consolidated
        statements of earnings.  Prior year balances have been
        reclassified to conform with the new presentation.

    (2) Due to the loss from continuing operations and the net loss
        during the first quarter of fiscal 2010, dilutive potential
        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 BALANCE SHEETS (UNAUDITED)


                                                   September 30,  June 30,
    (in millions)                                          2009      2009
                                                           ----      ----

    Assets
    Cash and equivalents                               $1,584.8  $1,221.6
    Trade receivables, net                              5,921.9   5,214.9
    Inventories                                         6,861.9   6,832.8
    Prepaid expenses and other                            557.8     523.0
    Assets from businesses held for sale and
     discontinued operations                              162.6   7,189.4
                                                          -----   -------
      Total current assets                             15,089.0  20,981.7
                                                       --------  --------

    Property and equipment, net                         1,438.6   1,464.5
    Investment in CareFusion                              902.4         -
    Goodwill and other intangibles, net                 2,269.3   2,266.9
    Other assets                                          735.4     405.7
                                                          -----     -----
      Total assets                                    $20,434.7 $25,118.8
                                                      ========= =========


    Liabilities and Shareholders' Equity
    Current portion of long-term obligations and
     other short-term borrowings                         $362.3    $366.2
    Accounts payable                                   10,047.1   9,041.9
    Other accrued liabilities                           1,701.7   1,496.2
    Liabilities from businesses held for sale
     and discontinued operations                           35.6   1,370.9
                                                           ----   -------
      Total current liabilities                        12,146.7  12,275.2
                                                       --------  --------

    Long-term obligations, less current portion
     and other short-term borrowings                    2,103.5   3,271.6
    Deferred income taxes and other liabilities         1,243.3     847.3
      Total shareholders' equity                        4,941.2   8,724.7
                                                        -------   -------
      Total liabilities and shareholders' equity      $20,434.7 $25,118.8
                                                      ========= =========



                 CARDINAL HEALTH, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF
                        CASH FLOWS (UNAUDITED)

                                                          First Quarter
                                                          -------------
      (in millions)                                        2010    2009
                                                           ----    ----

      Cash Flows From Operating Activities:
      Net earnings/(loss)                                $(38.2) $249.1
      Earnings from discontinued operations               (23.6)  (76.9)
                                                          -----   -----
        Earnings/(loss) from continuing
         operations                                       (61.8)  172.2
      Adjustments to reconcile earnings from
       continuing operations to net cash provided
       by operating activities:
        Depreciation and amortization                      66.3    47.4
        Loss on debt extinguishment                        39.9       -
        Impairments and loss on sale of assets             23.6     3.6
        Equity compensation                                22.0    21.0
        Provision for bad debts                            12.3    12.4
      Change in operating assets and liabilities,
        net of effects from acquisitions:
        Increase in trade receivables                    (716.1) (858.2)
        Increase in inventories                           (28.1) (864.1)
        Increase in accounts payable                    1,003.1   978.1
        Other accrued liabilities and
         operating items, net                             (99.6)   (4.4)
                                                         ------    ----
          Net cash provided/(used in) by
           operating activities - continuing
           operations                                     261.6  (492.0)
          Net cash provided by operating
           activities - discontinued operations           144.4   336.8
                                                          -----   -----
      Net cash provided by/(used in)
       operating activities                               406.0  (155.2)
                                                          -----  ------

      Cash Flows From Investing Activities:
      Acquisition of subsidiaries, net of
       divestitures and cash acquired                     (32.0)   (6.2)
      Proceeds from sale of property and
       equipment                                            4.8     0.7
      Additions to property and equipment                 (37.0)  (57.4)
                                                           ----   -----
          Net cash used in investing
           activities - continuing operations             (64.2)  (62.9)
          Net cash used in investing
           activities - discontinued operations            (9.9)  (31.8)
                                                           ----   -----
      Net cash used in investing activities               (74.1)  (94.7)
                                                          -----   -----

      Cash Flows From Financing Activities:
      Net change in commercial paper and
       short-term borrowings                                  -     1.2
      Reduction of long-term obligations               (1,134.4) (150.7)
      Proceeds from long-term obligations,
       net of issuance costs                                  -     8.1
      Proceeds from issuance of Common Shares              18.7    17.9
      Tax benefit/(expense) from stock options             (6.2)    3.3
      Payment of premiums for debt
       extinguishment                                     (66.4)      -
      Dividends on Common Shares                          (64.2)  (49.7)
                                                          -----   -----
          Net cash used in financing activities -
           continuing operations                       (1,252.5) (169.9)
          Net cash provided by/(used in) financing
           activities - discontinued operations         1,283.8    (1.6)
                                                        -------    ----
      Net cash provided by/(used in)
       financing activities                                31.3  (171.5)
                                                          -----  ------

      Net increase/(decrease) in cash
       and equivalents                                    363.2  (421.4)

      Cash and equivalents at beginning of period       1,221.6   808.8
                                                        -------   -----

      Cash and equivalents at end of period            $1,584.8  $387.4
                                                       ========  ======



                    CARDINAL HEALTH, INC. AND SUBSIDIARIES
                               BUSINESS ANALYSIS

                                 TOTAL COMPANY


                                                               Non-GAAP
                                           First Quarter     First Quarter
                                           -------------     ------------
      (in millions)                        2010      2009    2010    2009
                                           ----      ----    ----    ----

      Revenue
      Amount                            $24,781   $23,437
      Growth Rate                             6%       11%

      Operating Earnings
      Amount                               $240      $287    $323    $311
      Growth Rate                           (16)%     (15)%     4%    (13)%

      Earnings/(Loss) from Continuing
       Operations
      Amount                               ($62)     $172    $194    $168
      Growth Rate                         N.M.        (19)%    15%    (24)%



       --------------------------------
      Refer to the GAAP / Non-GAAP Reconciliation for definitions and
      calculations supporting the non-GAAP balances and for an
      explanation of the change in presentation of adjustments for
      non-GAAP balances.



                     CARDINAL HEALTH, INC. AND SUBSIDIARIES
                            SEGMENT BUSINESS ANALYSIS


                         First Quarter                      First Quarter
                         -------------                      -------------
      (in millions)       2010      2009   (in millions)     2010    2009
                          ----      ----                     ----    ----

      PHARMACEUTICAL                       MEDICAL

      Revenue                              Revenue
      Amount           $22,562   $21,404   Amount          $2,237  $2,037
      Growth Rate            5%       11%  Growth Rate         10%      8%
      Mix                   91%       91%  Mix                  9%      9%

      Segment Profit                       Segment Profit
      Amount              $208      $213   Amount            $115     $98
      Growth Rate           (2)%     (24)% Growth Rate         17%     29%
      Mix                   64%       69%  Mix                 36%     31%
      Segment Profit                       Segment Profit
      Margin              0.92%     1.00%  Margin            5.13%   4.81%


      --------------------------------------------------------
      Refer to definitions for an explanation of calculations.

       Total consolidated revenue for the three months ended September 30,
       2009 was $24,781 million, which included total segment revenue of
       $24,799 million and Corporate revenue of $(18) million.  Total
       consolidated revenue for the three months ended September 30, 2008
       was $23,437 million, which included total segment revenue of
       $23,441 million and Corporate revenue of $(4) million.  Corporate
       revenue consists primarily of elimination of inter-segment revenue.

       Total consolidated operating earnings for the three months ended
       September 30, 2009 were $240 million, which included total segment
       profit of $323 million and Corporate loss of $83 million.  Total
       consolidated operating earnings for the three months ended
       September 30, 2008 were $287 million, which included total segment
       profit of $311 million and Corporate loss of $24 million.
       Corporate includes, among other things, restructuring and employee
       severance, impairments and loss on sale of assets and litigation
       (credits)/charges, net.



                      CARDINAL HEALTH, INC. AND SUBSIDIARIES
                             SCHEDULE OF NOTABLE ITEMS


                                                              First Quarter
                                                              -------------
      (in millions, except per Common Share amounts)          2010      2009
                                                              ----      ----


      Restructuring and Employee Severance
      Restructuring and employee severance                  $(59.7)   $(20.7)
        Tax benefit                                           17.4       7.4
                                                              ----       ---
        Restructuring and employee severance, net of tax    $(42.3)   $(13.3)
                                                            ======    ======

        Decrease to diluted EPS from continuing operations  $(0.12)   $(0.04)
                                                            ======    ======

      Impairments and Loss on Sale of Assets
      Impairments and loss on sale of assets                $(23.6)    $(3.6)
        Tax benefit                                            8.1      20.9
                                                               ---      ----
        Impairments and loss on sale of asset, net of tax   $(15.5)    $17.3
                                                            ======     =====

        (Decrease)/increase to diluted EPS from
         continuing operations                              $(0.04)    $0.05
                                                            ======     =====

      Litigation (Charges)/Credits, Net
      Litigation (charges)/credits, net                       $0.5        $-
        Tax expense                                           (0.2)        -
                                                              ----         -
        Litigation (charges)/credits, net, net of tax         $0.3        $-
                                                              ====        ==

        Increase to diluted EPS from continuing operations      $-        $-
                                                               ===       ===

      Other Spin-Off Costs
      Other spin-off costs (1)                              $(42.3)       $-
        Tax expense (2)                                     (155.9)        -
                                                            ------       ---
        Other spin-off costs, net of tax                   $(198.2)       $-
                                                           =======       ===

        Decrease to diluted EPS from continuing
         operations                                         $(0.55)       $-
                                                            ======       ===


      Weighted Average Number of Diluted Shares
       Outstanding
      Weighted average number of diluted shares
       outstanding                                           359.1     361.1
      Antidutive effect due to loss from
       continuing operations and net loss                      1.9         -
                                                               ---       ---
        Weighted average number of diluted shares
         outstanding for non-GAAP calculations               361.0     361.1

    (1) Other spin-off costs included in other (income)/expense, net for the
        three months ended September 30, 2009 were $2.4 million. Other
        spin-off costs also include the $39.9 million loss on extinguishment
        of debt for the three months ended September 30, 2009.

    (2) The tax expense associated with the other spin-off costs includes
        $171.9 million related to the anticipated repatriation of a portion
        of cash loaned to the Company's entities within the United States.



                      CARDINAL HEALTH, INC. AND SUBSIDIARIES
                            ASSET MANAGEMENT ANALYSIS


                                                              First Quarter
                                                              -------------
                                                               2010   2009
                                                               ----   ----


      Receivable Days                                          20.1   20.5
      Days Inventory on Hand                                     23     26

      Debt to Total Capital                                      33%    32%
      Net Debt to Capital                                        15%    30%


      Return on Equity                                         (2.2)% 12.7%
      Non-GAAP Return on Equity                                15.9%  16.8%


      Return on Invested Capital                              (0.55)% 5.62%
      Non-GAAP Return on Invested Capital                      6.27%  5.73%


      Effective Tax Rate from Continuing Operations           135.3%  32.4%
      Non-GAAP Effective Tax Rate from Continuing Operations   35.4%  39.8%



      ------------------------------------------------------
      Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations
      and for an explanation of the change in presentation of adjustments
      for non-GAAP numbers.



                       CARDINAL HEALTH, INC. AND SUBSIDIARIES
                          GAAP / NON-GAAP RECONCILIATION

                                       First Quarter 2010
                         ----------------------------------------------------
                                       Impairments
                            Restructuring  and
                                and       Loss  Litigation
     (in millions, except     Employee     on    (Credits)/  Other
      per Common Share         Sever-    Sale of  Charges, Spin-Off
      amounts)            GAAP  ance(1)  Assets   Net(1)     Costs   Non-GAAP

    Operating Earnings
    Amount                $240    $60      $24       -         -      $323
    Growth Rate           (16)%                                         4%

    Earnings Before
     Income Taxes and
     Discontinued
     Operations           $175    $60      $24       -       $42      $300

    Provision for Income
     Taxes                $237    $17       $8       -     ($156)     $106

    Earnings/(Loss) from
     Continuing Operations
    Amount                ($62)   $42      $16       -      $198      $194
    Growth Rate            N.M.                                        15%

    Diluted EPS from
     Continuing Operations
    Amount(2)           ($0.17) $0.12    $0.04       -     $0.55     $0.54
    Growth Rate            N.M.                                        15%


                                        First Quarter 2009
                          ----------------------------------------------------
                                       Impairments
                            Restructuring  and
                                and       Loss  Litigation
     (in millions, except     Employee     on    (Credits)/  Other
      per Common Share         Sever-    Sale of  Charges, Spin-Off
      amounts)            GAAP  ance(1)  Assets   Net(1)     Costs   Non-GAAP

    Operating Earnings
    Amount                $287    $21       $4        -         -     $311
    Growth Rate            (15)%                                      (13)%

    Earnings Before
    Income Taxes and
    Discontinued
    Operations           $255    $21        $4        -         -     $279

    Provision for
    Income Taxes          $83     $7       $21        -         -     $111

    Earnings from
     Continuing Operations
    Amount                $172    $13      ($17)       -         -     $168
    Growth Rate           (19)%                                       (24)%

    Diluted EPS from
     Continuing Operations
    Amount               $0.48  $0.04    ($0.05)       -         -    $0.47
    Growth Rate          (16)%                                         (23)%

    ------------------------------------------------------------------
    The sum of the components may not equal the total due to rounding.

    (1) Beginning with the first quarter of fiscal 2010, the Company
        eliminated the category of special items on its condensed
        consolidated statements of earnings and began to use
        "restructuring and employee severance" and "litigation
        (credits)/charges, net."  Prior periods have been reclassified to
        conform with this new presentation.

    (2) The weighted average number of shares used in the non-GAAP
        calculation includes the dilutive potential Common Shares as
        there is income from continuing operations on a non-GAAP basis.



                      CARDINAL HEALTH, INC. AND SUBSIDIARIES
                          GAAP / NON-GAAP RECONCILIATION


                                                          First Quarter
                                                          -------------
      (in millions)                                     2010          2009
                                                        ----          ----


      GAAP Return on Equity                             (2.2)%        12.7%

      Non-GAAP Return on Equity
      Net earnings/(loss)                             $(38.2)       $249.1
      Restructuring and employee severance, net
       of tax, in continuing operations                 42.3          13.3
      Impairments and loss on sale of assets,
       net of tax, in continuing operations             15.5         (17.3)
      Litigation (credits)/charges, net, net
       of tax, in continuing operations                 (0.3)            -
      Other spin-off costs, net of tax                 198.2             -
      CareFusion net earnings in
       discontinued operations(1)                      (20.1)        (74.0)
                                                       -----         -----
        Adjusted net earnings                         $197.4        $171.1

        Annualized                                    $789.6        $684.4

        Divided by average shareholders' equity(2)  $4,956.7      $4,080.4

      Non-GAAP return on equity                         15.9%         16.8%



                                                          First Quarter
                                                          -------------
                                                        2010          2009
                                                        ----          ----


      GAAP Return on Invested Capital                  (0.55)%        5.62%

      Non-GAAP Return on Invested Capital
      Net earnings/(loss)                             $(38.2)       $249.1
      Restructuring and employee severance, net of
       tax, in continuing operations                    42.3          13.3
      Impairments and loss on sale of assets, net
       of tax, in continuing operations                 15.5         (17.3)
      Litigation (credits)/charges, net, net of
       tax, in continuing operations                    (0.3)            -
      Other spin-off costs, net of tax                 198.2             -
      Other (income)/expense, net, net of tax(3)        (7.1)          1.6
      Interest expense, net, net of tax(3)              21.1          18.7
      CareFusion net earnings in
       discontinued operations(1)                      (20.1)        (74.0)
                                                       -----         -----
        Adjusted net earnings                         $211.4        $191.4

        Annualized                                    $845.6        $765.6

        Divided by average total invested
         Capital(4)                                $13,496.3     $13,367.2


      Non-GAAP return on invested capital               6.27%         5.73%



    (1) To properly reflect the impact of the spin-off on a non-GAAP basis,
        CareFusion net earnings included in discontinued operations is
        excluded from adjusted net earnings for all periods presented.

    (2) 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.  Average shareholders' equity on a non-GAAP basis reflects
        the $3.7 billion non-cash dividend to remove CareFusion equity for
        all periods presented.

    (3) Beginning with the first quarter of fiscal 2010, the Company
        eliminated the category of interest expense and other on its
        condensed consolidated statements of earnings and began to use
        "other (income)/expense, net" and "interest expense, net."  Prior
        periods have been reclassifed to conform with this change in
        presentation.  For the three months ended September 30, 2009 other
        (income)/expense, net excludes the $2.4 million included in other
        spin-off costs.

    (4) 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
        $5.5 billion and $7.5 billion on a GAAP basis for the three months
        ended September 30, 2009 and 2008, respectively.  At September 30,
        2008, $2.0 billion of the unrecorded goodwill relates to CareFusion.
        On a non-GAAP basis, unrecorded goodwill is $5.5 billion for all
        periods presented.  In addition, on a non-GAAP basis, average
        invested capital excludes the $3.7 billion non-cash dividend to
        remove CareFusion equity for all periods presented.  Current portion
        of long-term obligations and other short-term borrowings in
        discontinued operations, and long-term obligations in discontinued
        operations were $11.0 million at September 30, 2008.



                      CARDINAL HEALTH, INC. AND SUBSIDIARIES
                          GAAP / NON-GAAP RECONCILIATION


                                                            First Quarter
                                                            -------------
    (in millions)                                          2010       2009
                                                           ----       ----


    GAAP Effective Tax Rate from Continuing
     Operations                                           135.3%      32.4%

    Non-GAAP Effective Tax Rate from  Continuing
     Operations
    Earnings before income taxes and discontinued
     operations                                          $175.0     $254.8
    Restructuring and employee severance                   59.7       20.7
    Impairments and loss on sale of assets                 23.6        3.6
    Litigation (credits)/charges, net                      (0.5)         -
    Other spin-off costs                                   42.3          -
                                                           ----        ---
      Adjusted earnings before income taxes
       and discontinued operations                       $300.1     $279.1

    Provision for income taxes                           $236.8      $82.6
    Restructuring and employee severance
     tax benefit                                           17.4        7.4
    Impairments and loss on sale of assets
     tax benefit                                            8.1       20.9
    Litigation (credits)/ charges, net tax expense         (0.2)         -
    Other spin-off costs tax expense                     (155.9)         -
                                                         ------        ---
      Adjusted provision for income taxes                $106.2     $110.9

    Non-GAAP effective tax rate from
     continuing operations                                 35.4%      39.8%


                                                            First Quarter
                                                            -------------
                                                           2010       2009
                                                           ----       ----


    Debt to Total Capital                                    33%        32%

    Net Debt to Capital
    Current portion of long-term obligations
     and other short-term borrowings                     $362.3     $158.0
    Long-term obligations, less current portion and
     other short-term borrowings                        2,103.5    3,593.3
                                                        -------    -------
      Debt                                             $2,465.8   $3,751.3
    Cash and equivalents                               (1,584.8)    (387.5)
                                                       --------     ------
      Net debt                                           $881.0   $3,363.8
    Total shareholders' equity                         $4,941.2   $7,918.1
    Capital                                            $5,822.2  $11,281.9
      Net Debt to Capital                                    15%        30%


    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 restructuring and employee
    severance, impairments and loss on sale of assets, litigation (credits)/
    charges, 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.

 

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

Other Spin-Off Costs: costs and tax charges incurred in connection with the Company's spin-off of CareFusion that are not included in restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net. Other spin-off costs include, among other things, the loss on extinguishment of debt and the income tax charge related to the anticipated repatriation of a portion of cash loaned to the Company's entities within the United States for the three months ended September 30, 2009.

Segment Profit: segment revenue minus (segment cost of products sold and segment distribution, selling, general and administrative expenses)

Segment Profit Margin: segment profit divided by segment revenue

Segment Profit Mix: segment profit divided by total segment profit for all segments

Return on Equity: annualized net earnings divided by average shareholders' equity

Return on Invested Capital: annualized net earnings plus other (income)/expense, net plus interest expense, net 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)

Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding

Non-GAAP Diluted EPS from Continuing Operations Growth Rate: (current period non-GAAP diluted EPS from continuing operations minus prior period non-GAAP diluted EPS from continuing operations) divided by prior period non-GAAP diluted EPS from continuing operations

Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs, each net of tax

Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period non-GAAP earnings from continuing operations

Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs) divided by (earnings before income taxes and discontinued operations adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs)

Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (charges)/credits and (4) Other Spin-Off Costs included within distribution, selling, general and administrative expenses.

Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP operating earnings minus prior period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings

Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) CareFusion net earnings in discontinued operations, each net of tax) divided by average shareholders' equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off

Non-GAAP Return on Invested Capital: (annualized net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) other (income)/expense, net, (6) interest expense, net and (7) CareFusion net earnings in discontinued operations, each net of tax) divided by (average total shareholders' equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off plus debt plus unrecorded goodwill excluding unrecorded goodwill attributed to CareFusion)

SOURCE: Cardinal Health, Inc.
Website: cardinalhealth.com


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