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þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OHIO (State or other jurisdiction of incorporation or organization) | 31-0958666 (I.R.S. Employer Identification No.) | |
7000 CARDINAL PLACE, DUBLIN, OHIO (Address of principal executive offices) | 43017 (Zip Code) |
Registrant’s telephone number, including area code
COMMON SHARES (WITHOUT PAR VALUE) (Title of Class) | NEW YORK STOCK EXCHANGE (Name of each exchange on which registered) |
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• | appointing a new Chief Financial Officer with substantial public company business management, governance and financial experience; | ||
• | creating an Office of Chief Ethics and Compliance Officer (“CECO”) and appointing a CECO to help ensure that the Company is following best practices with respect to regulatory and compliance matters; | ||
• | appointing a new Chief Accounting Officer and Controller, who is primarily responsible for keeping the Company apprised of contemporary accounting issues; | ||
• | appointing a new Treasurer; | ||
• | enhancing the Company’s internal audit function by increasing the number of internal audit staff and recruiting additional seasoned audit professionals; | ||
• | adopting additional governance processes relating to operation of the Company’s Disclosure Committee and increasing the membership on the Committee; | ||
• | developing written procedures for, among other items, reviewing unusual financial statement adjustments and allocating costs to the Company’s segments; | ||
• | adopting process improvements concerning the Company’s financial statement close process; | ||
• | adopting policy, procedure and oversight improvements concerning the timing of revenue recognition within the Company’s Pyxis products business (as more fully discussed in Note 1 in “Notes to Consolidated Financial Statements”); | ||
• | developing systems enhancements to enable automated verifications of installed Pyxis automatic dispensing equipment at customer locations; | ||
• | adopting process improvements for establishing and adjusting reserves; | ||
• | adopting improved accounting and reporting controls for complex vendor and customer relationships; | ||
• | developing additional training programs for the Company’s finance and accounting personnel; | ||
• | developing enhanced educational programs for personnel at all levels in ethics, corporate compliance, disclosure, procedures for anonymous reporting of concerns and mechanisms for enforcing Company policies; and | ||
• | implementing an enhanced certification process from the Company’s finance, accounting and operations personnel in connection with the financial statement close process, which enhancements are, in part, intended to ensure operating decisions are based on appropriate business considerations. |
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Consideration Paid | ||||||||||||||||||
(amounts in millions) | ||||||||||||||||||
Stock Options | ||||||||||||||||||
Date | Company | Location | Line of Business | Shares | Converted (1) | Cash | ||||||||||||
8/16/2000 | Bergen Brunswig Medical Corporation | Orange, California | Distributor of medical, surgical and laboratory supplies to doctors’ offices, long-term care and nursing centers, hospitals and other providers of care | — | — | $ | 181 | |||||||||||
2/14/2001 | Bindley Western Industries, Inc. | Indianapolis, Indiana | Wholesale distributor of pharmaceuticals and provider of nuclear pharmacy services | 23.1 | 5.1 | — | ||||||||||||
4/15/2002 | Magellan Laboratories, Inc. | Research Triangle Park, North Carolina | Pharmaceutical contract development organization providing analytical and development services to pharmaceutical and biotechnological industries | — | — | $ | 221 | (2) | ||||||||||
6/26/2002 | Boron, LePore & Associates, Inc. | Wayne, New Jersey | Full-service provider of strategic medical education solutions to the health care industry | — | 1.0 | $ | 189 | |||||||||||
1/1/2003 | Syncor International Corporation | Woodland Hills, California | Leading provider of nuclear pharmacy services | 12.5 | (5) | 3.0 | — | |||||||||||
12/16/2003 | The Intercare Group, plc | United Kingdom | Contract services manufacturer and distributor for pharmaceutical companies | — | — | $ | 570 | (3) | ||||||||||
6/28/2004 | ALARIS Medical Systems, Inc. | San Diego, California | Provider of intravenous medication safety products and services | — | 0.6 | $ | 2,080 | (4) | ||||||||||
* | All share references in the above table are adjusted to reflect all stock splits and stock dividends since the time of the applicable acquisitions. | |
(1) | As a result of the acquisition, the outstanding stock options of the acquired company were converted into options to purchase the Company’s Common Shares. This column represents the number of the Company’s Common Shares subject to such converted stock options immediately following conversion giving effect to interim stock splits. | |
(2) | Purchase price is before consideration of any tax benefits associated with the transaction. | |
(3) | This includes the assumption of approximately $150 million in debt. | |
(4) | This includes the assumption of approximately $358 million in debt. | |
(5) | In addition, the Company assumed approximately $120 million in debt. |
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• | distribute and/or manufacture prescription pharmaceuticals (including certain controlled substances) and/or medical devices; | ||
• | manage or own pharmacy operations; | ||
• | engage in or operate retail pharmacies or nuclear pharmacies; | ||
• | purchase pharmaceuticals; | ||
• | engage in logistics and/or manufacture infusion therapy systems or surgical and respiratory care and intravenous administration set products and devices; | ||
• | develop, manufacture or package pharmaceutical products and devices; | ||
• | manufacture and market pharmaceutical products and provide outsourced pharmaceutical manufacturing services using both proprietary and nonproprietary drug delivery formulations and outsourced analytical development services; | ||
• | develop, create, present or distribute accredited and unaccredited educational or promotional programs or materials; and | ||
• | provide consulting services that assist healthcare institutions and pharmacies in their operations as well as pharmaceutical manufacturers with regard to regulatory submissions and filings made to healthcare agencies such as the FDA. |
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• | changes in governmental support of, and reimbursement for, health care services, including any legislation affecting the payment of fees for distribution services; | ||
• | changes in the method by which health care services are delivered; | ||
• | changes in the prices for health care services; | ||
• | other legislation or regulations governing health care services or mandated benefits; and | ||
• | changes in pharmaceutical and medical-surgical manufacturers’ pricing, selling, inventory, distribution or supply policies or procedures. |
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• | distributing prescription pharmaceuticals (including certain controlled substances); | ||
• | operating pharmacy businesses (including nuclear pharmacies); | ||
• | manufacturing medical/surgical products (including infusion therapy systems and intravenous administration set products and devices); | ||
• | manufacturing pharmaceuticals using proprietary drug delivery systems; | ||
• | development and manufacturing of oral and sterile pharmaceutical products; | ||
• | packaging pharmaceuticals; and | ||
• | the sales and marketing of pharmaceuticals. |
• | the possibility that management may be distracted from regular business concerns by the need to integrate operations; | ||
• | unforeseen difficulties in integrating operations and systems; | ||
• | problems assimilating and retaining the Company’s employees or the employees of the acquired company; | ||
• | accounting issues that could arise in connection with, or as a result of, the acquisition of the acquired company, including unforeseen issues related to internal control over financial reporting at the acquired company; | ||
• | regulatory or compliance issues that could exist at an acquired company; | ||
• | challenges in retaining the Company’s customers or the customers of the acquired company following the acquisition; and | ||
• | potential adverse short-term effects on operating results through increased costs or otherwise. |
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• | facilitate the purchase and distribution of thousands of inventory items from numerous distribution centers; | ||
• | receive, process and ship orders on a timely basis; | ||
• | manage the accurate billing and collections for thousands of customers; and | ||
• | process payments to suppliers. |
• | the distribution and dispensing of pharmaceuticals and nuclear pharmaceuticals; | ||
• | the provision of ancillary services (such as pharmacy management and pharmacy staffing services); | ||
• | the development and manufacture of drug delivery systems and of pharmaceutical products for the Company or its customers; | ||
• | the development, presentation and distribution of medical education and marketing programs and materials; and | ||
• | the manufacture and distribution of medical/surgical products, automated drug dispensing units and infusion therapy systems and intravenous administration set products and devices. |
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NAME | AGE | POSITION | ||||
Robert D. Walter | 60 | Chairman and Chief Executive Officer | ||||
George L. Fotiades | 52 | President and Chief Operating Officer | ||||
Jeffrey W. Henderson | 40 | Executive Vice President and Chief Financial Officer | ||||
Ronald K. Labrum | 49 | Chairman and Chief Executive Officer — Integrated Provider Solutions and Cardinal Health International | ||||
Joseph C. Papa | 49 | Chairman and Chief Executive Officer — Pharmaceutical Technologies and Services | ||||
Mark W. Parrish | 50 | Chairman and Chief Executive Officer — Pharmaceutical Distribution and Provider Services | ||||
David L. Schlotterbeck | 58 | Chairman and Chief Executive Officer — Clinical Technologies and Services | ||||
Jody R. Davids | 49 | Executive Vice President and Chief Information Officer | ||||
Gary D. Dolch | 57 | Executive Vice President — Quality and Regulatory Affairs | ||||
Brendan A. Ford | 47 | Executive Vice President — Corporate Development, Interim General Counsel and Secretary | ||||
Anthony J. Rucci | 54 | Executive Vice President and President of Strategic Corporate Resources | ||||
Daniel J. Walsh | 50 | Executive Vice President and Chief Ethics and Compliance Officer | ||||
Carole S. Watkins | 45 | Executive Vice President — Human Resources |
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High | Low | Dividends | ||||||||||
Fiscal 2004 | ||||||||||||
Quarter Ended: | ||||||||||||
September 30, 2003 | $ | 67.96 | $ | 54.75 | $ | 0.030 | ||||||
December 31, 2003 | 63.73 | 55.99 | 0.030 | |||||||||
March 31, 2004 | 68.90 | 59.13 | 0.030 | |||||||||
June 30, 2004 | 75.98 | 65.61 | 0.030 | |||||||||
Fiscal 2005 | ||||||||||||
Quarter Ended: | ||||||||||||
September 30, 2004 | $ | 52.86 | $ | 42.33 | $ | 0.030 | ||||||
December 31, 2004 | 58.55 | 37.65 | 0.030 | |||||||||
March 31, 2005 | 60.09 | 53.78 | 0.030 | |||||||||
June 30, 2005 | 60.80 | 53.28 | 0.060 | |||||||||
Fiscal 2006 | ||||||||||||
Through September 9, 2005 | $ | 60.00 | $ | 57.28 | $ | 0.060 |
Total Number of | ||||||||||||||||
Shares Purchased | Approximate Dollar | |||||||||||||||
as Part of | Value of Shares that | |||||||||||||||
Total Number | Publicly | May Yet Be | ||||||||||||||
of Shares | Average Price | Announced | Purchased Under the | |||||||||||||
Period | Purchased | Paid per Share | Program (1)(2) | Program | ||||||||||||
April 1-30, 2005 | 1,743,000 | $ | 55.22 | 1,743,000 | $ | 161,845,044 | ||||||||||
May 1-31, 2005 | 2,842,264 | $ | 56.94 | 2,842,264 | — | |||||||||||
June 1-30, 2005 | 192 | (3) | $ | 58.40 | — | $ | 1,000,000,000 | |||||||||
Total | 4,585,456 | $ | 56.29 | 4,585,264 | $ | 1,000,000,000 | ||||||||||
(1) | The Company repurchased approximately 4.6 million Common Shares during the fourth quarter of fiscal 2005 pursuant to a $500 million share repurchase program publicly announced on December 13, 2004 (the “December 2004 Program”). The December 2004 Program expired on May 18, 2005 when the entire $500 million in the aggregate purchase price of Common Shares had been repurchased. The final volume weighted average price per Common Share under the December 2004 Program was $56.76. | |
(2) | On June 27, 2005, the Company announced a $1.0 billion share repurchase program (the “June 2005 Program”). The Company expects to begin repurchasing Common Shares under the June 2005 Program in the first half of fiscal 2006. The June 2005 Program will expire when the entire $1 billion in aggregate purchase price of Common Shares has been repurchased. | |
(3) | Reflects Common Shares owned and tendered by an employee to meet the exercise price for an option exercise. |
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(in millions, except per Common Share amounts)
At or For the Fiscal Year Ended | ||||||||||||||||||||
June 30, (1) | ||||||||||||||||||||
2005 | 2004 | 2003 (2) | 2002 (2)(3) | 2001 (2) | ||||||||||||||||
Earnings Data: | ||||||||||||||||||||
Revenue | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | $ | 51,144.6 | $ | 47,944.3 | ||||||||||
Earnings from continuing operations before cumulative effect of changes in accounting | $ | 1,046.7 | $ | 1,524.7 | $ | 1,381.2 | $ | 1,140.8 | $ | 840.6 | ||||||||||
Earnings/(loss) from discontinued operations (4) | 4.0 | (11.7 | ) | (6.1 | ) | — | — | |||||||||||||
Cumulative effect of changes in accounting (5) (6) | — | (38.5 | ) | — | (70.1 | ) | — | |||||||||||||
Net earnings | $ | 1,050.7 | $ | 1,474.5 | $ | 1,375.1 | $ | 1,070.7 | $ | 840.6 | ||||||||||
Basic earnings per Common Share (7) Continuing operations | $ | 2.43 | $ | 3.51 | $ | 3.10 | $ | 2.53 | $ | 1.90 | ||||||||||
Discontinued operations (4) | 0.01 | (0.03 | ) | (0.02 | ) | — | — | |||||||||||||
Cumulative effect of changes in accounting (5) (6) | — | (0.09 | ) | — | (0.16 | ) | — | |||||||||||||
Net basic earnings per Common Share | $ | 2.44 | $ | 3.39 | $ | 3.08 | $ | 2.37 | $ | 1.90 | ||||||||||
Diluted earnings per Common Share (7) Continuing operations | $ | 2.40 | $ | 3.47 | $ | 3.05 | $ | 2.48 | $ | 1.85 | ||||||||||
Discontinued operations (4) | 0.01 | (0.03 | ) | (0.02 | ) | — | — | |||||||||||||
Cumulative effect of changes in accounting (5) (6) | — | (0.09 | ) | — | (0.15 | ) | — | |||||||||||||
Net diluted earnings per Common Share | $ | 2.41 | $ | 3.35 | $ | 3.03 | $ | 2.33 | $ | 1.85 | ||||||||||
Cash dividends declared per Common Share (7) (8) | $ | 0.150 | $ | 0.120 | $ | 0.105 | $ | 0.100 | $ | 0.085 | ||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Total assets | $ | 22,059.2 | $ | 21,369.1 | $ | 18,465.1 | $ | 16,408.3 | $ | 14,601.1 | ||||||||||
Long-term obligations, less current portion and other short-term borrowings | $ | 2,319.9 | $ | 2,834.7 | $ | 2,471.9 | $ | 2,207.0 | $ | 1,871.0 | ||||||||||
Shareholders’ equity | $ | 8,593.0 | $ | 7,976.3 | $ | 7,674.5 | $ | 6,351.7 | $ | 5,403.5 |
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(1) | Amounts reflect business combinations and the impact of special items in all periods presented. See Note 4 of “Notes to Consolidated Financial Statements” for a further discussion of special items affecting fiscal 2005, 2004 and 2003. Fiscal 2002 amounts reflect the impact of special items of $116.6 million ($73.7 million, net of tax). Fiscal 2001 amounts reflect the impact of special items of $124.9 million ($85.3 million, net of tax). | |
(2) | Subsequent to the filing of the 2004 Form 10-K, certain errors were indentified related to the restatement adjustments previously recorded in the 2004 Form 10-K within fiscal years 2003 through 2000. The impact of these errors was immaterial for all periods presented. See Note 1 of “Notes to Consolidated Financial Statements” for additional information. | |
(3) | During fiscal 2002, the Company recognized a benefit of approximately $23 million as a result of changes in the last-in, first-out (“LIFO”) calculation with respect to generic products in order to more accurately reflect inflationary indices. The Company determined that the cumulative effect of the change in LIFO methods was non-determinable due to the unavailability of historical information needed to calculate the effect. Therefore, in accordance with Accounting Principles Board Opinion No. 20, the Company did not record the adjustment as a cumulative effect of change in accounting principle. | |
(4) | On January 1, 2003, the Company acquired Syncor. Prior to the acquisition, Syncor had announced the discontinuation of certain operations including the medical imaging business and certain overseas operations. The Company proceeded with the discontinuation of these operations and included additional international and non-core domestic businesses to the discontinued operations. The Company sold substantially all of the remaining discontinued operations prior to the end of the third quarter of fiscal 2005. For additional information regarding discontinued operations, see Note 22 of “Notes to Consolidated Financial Statements.” | |
(5) | Effective at the beginning of fiscal 2004, the Company changed its method of recognizing cash discounts from recognizing cash discounts as a reduction of costs of products sold primarily upon payment of vendor invoices to recording cash discounts as a component of inventory cost and recognizing such discounts as a reduction of cost of products sold upon sale of inventory. For more information regarding the change in accounting, see Note 16 of “Notes to Consolidated Financial Statements.” | |
(6) | In the first quarter of fiscal 2002, the method of recognizing revenue for pharmacy automation equipment was changed from recognizing revenue when the units are delivered to the customer to recognizing revenue when the units are installed at the customer site. | |
(7) | Basic earnings, diluted earnings and cash dividends per Common Share have been adjusted to retroactively reflect all stock dividends and stock splits through June 30, 2005. | |
(8) | Cash dividends per Common Share exclude dividends paid by all entities with which subsidiaries of the Company have merged. |
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(in millions, except per Common Share amounts) | Growth (1) | Results of Operations | ||||||||||||||||||
Years ended June 30, | 2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||||
Revenue | 15 | % | 15 | % | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | ||||||||||
Operating earnings | (25 | )% | 7 | % | $ | 1,762.8 | $ | 2,348.8 | $ | 2,187.0 | ||||||||||
Earnings from continuing operations before cumulative effect of change in accounting | (31 | )% | 10 | % | $ | 1,046.7 | $ | 1,524.7 | $ | 1,381.2 | ||||||||||
Net earnings | (29 | )% | 7 | % | $ | 1,050.7 | $ | 1,474.5 | $ | 1,375.1 | ||||||||||
Net diluted earnings per Common Share | (28 | )% | 11 | % | $ | 2.41 | $ | 3.35 | $ | 3.03 |
(1) | Growth is calculated as change (increase or decrease) for a given year as compared to immediately preceding year. |
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• | a lengthened sales and installation cycle; | ||
• | the delayed introduction of Pyxis MedStation® 3000, the next generation of Pyxis’ medication management system; | ||
• | increased competition within the industry; and | ||
• | the impact from the Audit Committee’s internal review, as more fully described in Note 1 of “Notes to Consolidated Financial Statements,” which created execution issues as the efforts and attention of certain sales and installation teams were diverted from ordinary business operations. |
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For the Fiscal Year Ended June 30, (1) | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Pharmaceutical Distribution and Provider | ||||||||||||
Services (“PDPS”) | ||||||||||||
Non-Bulk Revenue | $ | 36,759.4 | $ | 34,325.2 | $ | 30,301.4 | ||||||
Bulk Revenue (2) | 24,084.4 | 18,009.0 | 15,426.5 | |||||||||
Total PDPS | 60,843.8 | 52,334.2 | 45,727.9 | |||||||||
Medical Products and Services | 9,824.0 | 9,143.5 | 8,024.9 | |||||||||
Pharmaceutical Technologies and Services | 2,975.8 | 2,804.1 | 2,250.0 | |||||||||
Clinical Technologies and Services | 2,189.3 | 1,550.6 | 1,410.3 | |||||||||
Corporate (3) | (922.2 | ) | (778.9 | ) | (681.6 | ) | ||||||
Total Company Revenue | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | ||||||
(1) | See Note 18 of “Notes to Consolidated Financial Statements” for discussion of changes to business segments during fiscal 2005. | |
(2) | See discussion below within the Pharmaceutical Distribution and Provider Services section for the Company’s definition of Bulk Revenue. | |
(3) | Corporate revenue primarily consists of the elimination of intersegment revenue for all periods presented and foreign currency translation adjustments in fiscal 2004 and 2003. See footnote 6 of Note 18 of “Notes to Consolidated Financial Statements” for additional information regarding the foreign currency translation adjustments. |
Percent of Company | ||||||||||||||||||||
Growth (1) | Revenue | |||||||||||||||||||
Years ended June 30, | 2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||||
Pharmaceutical Distribution and Provider Services | 16 | % | 14 | % | 80 | % | 80 | % | 80 | % | ||||||||||
Medical Products and Services | 7 | % | 14 | % | 13 | % | 14 | % | 14 | % | ||||||||||
Pharmaceutical Technologies and Services | 6 | % | 25 | % | 4 | % | 4 | % | 4 | % | ||||||||||
Clinical Technologies and Services | 41 | % | 10 | % | 3 | % | 2 | % | 2 | % | ||||||||||
Total Company | 15 | % | 15 | % | 100 | % | 100 | % | 100 | % | ||||||||||
(1) | Growth is calculated as change (increase or decrease) for a given year as compared to immediately preceding year. |
• | a higher sales volume across each of the Company’s segments; | ||
• | revenue growth from existing customers; | ||
• | the addition of new customers, some of which resulted from new corporate arrangements with health care providers that integrate the Company’s diverse offerings; | ||
• | the addition of new products; | ||
• | pharmaceutical price increases within its Pharmaceutical Distribution business averaging approximately 4.9% and 6.2%, respectively, during fiscal 2005 and 2004; and | ||
• | the year-over-year impact of acquisitions. |
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• | deliveries to customer warehouses whereby the Company acts as an intermediary in the ordering and delivery of pharmaceutical products; | ||
• | delivery of products to the customer in the same bulk form as the products are received from the manufacturer; | ||
• | warehouse to customer warehouse or process center deliveries; or | ||
• | deliveries to customers in large or high volume full case quantities. |
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• | a lengthened sales and installation cycle; | ||
• | the delayed introduction of Pyxis MedStation® 3000, the next generation of Pyxis’ medication management system; | ||
• | increased competition within the industry; and | ||
• | the impact from the Audit Committee’s internal review, as more fully described in Note 1 of “Notes to Consolidated Financial Statements,” which created execution issues as the efforts and attention of certain sales and installation teams were diverted from ordinary business operations. |
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For the Fiscal Year Ended June 30, (1) | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Pharmaceutical Distribution and Provider Services | $ | 1,040.2 | $ | 1,061.5 | $ | 1,086.2 | ||||||
Medical Products and Services (2) | 672.4 | 694.4 | 624.1 | |||||||||
Pharmaceutical Technologies and Services | 337.0 | 465.4 | 368.3 | |||||||||
Clinical Technologies and Services | 273.2 | 336.6 | 316.7 | |||||||||
Corporate (2) (3) (4) | (560.0 | ) | (209.1 | ) | (208.3 | ) | ||||||
Total Company Operating Earnings | $ | 1,762.8 | $ | 2,348.8 | $ | 2,187.0 | ||||||
(1) | See Note 18 of “Notes to Consolidated Financial Statements” for discussion of changes to business segments during fiscal 2005. | |
(2) | The cost of the Company’s shared service center in Albuquerque New Mexico, which was previously reported within the Corporate segment, has been classified within the Medical Products and Services operating earnings for fiscal 2004 and 2003 to more accurately reflect the costs within the segment which received the benefits from the shared service center. The cost of these services was approximately $18.2 million, $18.4 million and $19.0 million, respectively, for fiscal 2005, 2004 and 2003. | |
(3) | Corporate operating earnings primarily include special items, impairment charges, investment spending and unallocated corporate administrative expenses. See Note 18 of “Notes to Consolidated Financial Statements” for a description of Corporate operating earnings. | |
(4) | During the first quarter of fiscal 2006, the Company will modify the way in which corporate costs are allocated to the business segments to better align corporate spending with the business segments based on the benefits received. The presentation of the first quarter of fiscal 2006 results will include a re-allocation of the historical segment amounts for comparative purposes. |
Percent of Company | ||||||||||||||||||||
Growth (1) | Operating Earnings | |||||||||||||||||||
Years ended June 30, | 2005 | 2004 | 2005 | 2004 | 2003 | |||||||||||||||
Pharmaceutical Distribution and Provider Services | (2 | )% | (2 | )% | 45 | % | 42 | % | 45 | % | ||||||||||
Medical Products and Services | (3 | )% | 11 | % | 29 | % | 27 | % | 26 | % | ||||||||||
Pharmaceutical Technologies and Services | (28 | )% | 26 | % | 14 | % | 18 | % | 16 | % | ||||||||||
Clinical Technologies and Services | (19 | )% | 6 | % | 12 | % | 13 | % | 13 | % | ||||||||||
Total Company (2) | (25 | )% | 7 | % | 100 | % | 100 | % | 100 | % | ||||||||||
(1) | Growth is calculated as change (increase or decrease) for a given year as compared to immediately preceding year. | |
(2) | The Company’s overall operating earnings growth of (25)% and 7%, respectively, in fiscal 2005 and 2004 includes the effect of special items and impairment charges. Special items and impairment charges are not allocated to the segments. |
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See Notes 4 and 21 in “Notes to Consolidated Financial Statements” for further information regarding the Company’s special items and impairment charges. |
• | reduced vendor margins within the Pharmaceutical Distribution business driven primarily by changes in branded pharmaceutical manufacturers’ sales and pricing practices (see the “Overview” section for further discussion) and competitive pricing; | ||
• | increased mix of lower-margin distribution business, competitive pricing and increased raw material and fuel costs within the Medical Products and Services segment; | ||
• | continued regulatory issues adversely affecting manufacturing efficiencies within the Pharmaceutical Technologies and Services segment; and | ||
• | a lengthened sales and installation cycle, new product launch delays and increased competition within the Pyxis products business in the Clinical Technologies and Services segment. |
• | the favorable impact of approximately $31.7 million from changes in the LIFO reserve, primarily due to price deflation within generic pharmaceutical inventories, lower inventory levels and lower price increases related to branded pharmaceutical inventories; | ||
• | an increase in profit sharing expense of approximately $38.9 million compared to fiscal 2004; | ||
• | an increase in incentive compensation expense of approximately $36.3 million compared to fiscal 2004; | ||
• | expenses of approximately $28.2 million within the Medical Products and Services segment related to the estimated remaining liabilities and settlement of insurance proceeds due for outstanding latex litigation; | ||
• | purchase accounting adjustments related to the Alaris acquisition, which included an inventory valuation adjustment to “fair value,” and the adjusted, higher cost inventory being sold, adversely affecting gross margins by approximately $23.6 million; | ||
• | product line rationalization and inventory and accounts receivable reserve adjustments within the Pyxis products business of approximately $30.3 million; | ||
• | an increase in inventory reserves within the Pharmaceutical Distribution and Provider Services segment of approximately $14.7 million related to a generic manufacturer’s bankruptcy and $10.0 million related to slow moving inventory; and | ||
• | an increase in audit and audit-related fees of approximately $7.5 million compared to fiscal 2004 due to increased costs associated with complying with the Sarbanes-Oxley Act of 2002, expanded audit procedures and a revision in the allocation of audit and audit-related fees to fiscal periods. |
• | the continued dampening effect of reduced vendor margins and competitive pricing within the Pharmaceutical Distribution business driven by changes to its business model (see the “Overview” section for further discussion); | ||
• | an increased mix of lower-margin distribution business within the Medical Products and Services segment; | ||
• | an increased mix of lower margin business, primarily Nuclear Pharmacy Services business, within the Pharmaceutical Technologies and Services segment; and | ||
• | competitive product and pricing actions within the Clinical Technologies and Services segment. |
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• | segment revenue growth of 14% coupled with expense control; | ||
• | a change in accounting for cash discounts resulting in additional gross margin of $20.0 million in fiscal 2004 (see additional discussion of the accounting change in Note 16 of “Notes to Consolidated Financial Statements”); | ||
• | a favorable year-over-year impact of $14.7 million from changes in LIFO reserve; | ||
• | a favorable year-over-year impact of lower incentive compensation expense; | ||
• | a favorable year-over-year impact of certain non-recurring expenses recorded in fiscal 2003 relating to operations from the Bindley acquisition; and | ||
• | a favorable year-over-year impact of $34 million charge recorded in fiscal 2003 relating to the segment’s vendor margins with its generic suppliers. |
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• | decreased revenue of 17% for fiscal 2005; | ||
• | lower unit margins due to adverse year-over-year sales mix; | ||
• | more aggressive price discounting in the market place;. | ||
• | a product line rationalization and inventory and accounts receivable reserve adjustments of approximately $30.3 million; and | ||
• | the positive segment allocation adjustments recorded during fiscal 2004 of $21 million for the estimated interest income that the business would have earned from assets sold as part of the leased asset portfolio sales (which proceeds from such sales were returned to Corporate for general corporate requirements). |
Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Restructuring costs | $ | 203.0 | $ | 37.1 | $ | 67.0 | ||||||
Merger-related costs | 48.9 | 44.7 | 74.4 | |||||||||
Litigation settlements, net | (42.3 | ) | (62.3 | ) | (101.5 | ) | ||||||
Other | 54.6 | 37.9 | — | |||||||||
Total special items | $ | 264.2 | $ | 57.4 | $ | 39.9 | ||||||
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June 30, | ||||||||
(in millions) | 2005 | 2004 | ||||||
FIFO inventory | $ | 7,406.0 | $ | 7,529.1 | ||||
LIFO reserve valuation | (26.0 | ) | (57.8 | ) | ||||
Total inventory | $ | 7,380.0 | $ | 7,471.3 | ||||
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(in millions) | Fiscal Years Ended June 30, | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Cash provided by/(used in): | ||||||||||||
Operating activities | $ | 2,850.2 | $ | 2,624.7 | $ | 1,398.0 | ||||||
Investing activities | ($877.4 | ) | ($2,437.0 | ) | ($343.7 | ) | ||||||
Financing activities | ($1,657.1 | ) | ($815.7 | ) | ($712.3 | ) |
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Payments Due by Period | ||||||||||||||||||||
(in millions) | 2006 | 2007-2008 | 2009-2010 | Thereafter | Total | |||||||||||||||
On Balance Sheet: | ||||||||||||||||||||
Long-term debt (1) | $ | 429.1 | $ | 364.4 | $ | 963.7 | $ | 1,676.0 | $ | 3,433.2 | ||||||||||
Capital lease obligations (2) | 13.2 | 21.1 | 99.5 | 10.8 | 144.6 | |||||||||||||||
Other long-term liabilities (3) | 13.3 | 20.8 | 13.4 | 78.6 | 126.1 | |||||||||||||||
Off-Balance Sheet: | ||||||||||||||||||||
Operating leases (4) | 99.9 | 137.6 | 131.2 | 302.9 | 671.6 | |||||||||||||||
Purchase obligations (5) | 1,870.8 | 102.7 | 27.0 | 11.1 | 2,011.6 | |||||||||||||||
Total financial obligations | $ | 2,426.3 | $ | 646.6 | $ | 1,234.8 | $ | 2,079.4 | $ | 6,387.1 | ||||||||||
(1) | Represents maturities of the Company’s long-term debt obligations excluding capital lease obligations described below. See Note 6 in “Notes to Consolidated Financial Statements” for further information. | |
(2) | Represents maturities of the Company’s capital lease obligations, included within long-term debt on the Company’s balance sheet and the related estimated future interest payments. | |
(3) | Represents cash outflows by period for certain of the Company’s long-term liabilities in which cash outflows could be reasonably estimated. The primary items included are estimates of the Company’s pension and other post-retirement benefit obligations as well as accrued marketing fees and other long-term liabilities. Certain long-term liabilities, such as deferred taxes, have been excluded from the table above as there are no cash outflows associated with the liabilities or the timing of the cash outflows cannot reasonably be estimated. | |
(4) | Represents minimum rental payments and the related estimated future interest payments for operating leases having initial or remaining non-cancelable lease terms as described in Note 11 of “Notes to Consolidated Financial Statements.” | |
(5) | Purchase obligations are defined as an agreement to purchase goods or services that is enforceable and legally binding and specifying all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and approximate timing of the transaction. The purchase obligation amounts disclosed above represent estimates of the minimum for which the Company is obligated and the time period in which cash outflows will occur. Purchase orders and authorizations to purchase that involve no firm commitment from either party are excluded from the above table. In addition, contracts that can be unilaterally cancelled with no termination fee or with proper notice are excluded from the Company’s total purchase obligations except for the amount of the termination fee or the minimum amount of goods that must be purchased during the requisite notice period. The significant amount disclosed within fiscal 2006, as compared to other periods, primarily represents obligations to purchase inventories within the Pharmaceutical Distribution and Provider Services segment. |
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(in millions) | 2005 | 2004 | ||||||
Net estimated transactional exposure | $ | 324.5 | $ | 332.8 | ||||
Sensitivity gain/loss (1) | 32.5 | 33.3 | ||||||
Estimated offsetting impact of hedges | (16.8 | ) | (17.2 | ) | ||||
Estimated net gain/loss | $ | 15.7 | $ | 16.1 | ||||
(1) | Impact of a hypothetical 10% strengthening or weakening of the U.S dollar. |
(in millions) | 2005 | 2004 | ||||||
Net estimated translational exposure | $ | 187.7 | $ | 208.3 | ||||
Sensitivity gain/loss (1) | $ | 18.8 | $ | 20.8 |
(1) | Impact of a hypothetical 10% strengthening or weakening of the U.S dollar. |
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(in millions) | 2005 | 2004 | ||||||
Estimated commodity exposure | $ | 25.8 | $ | 32.4 | ||||
Sensitivity gain/loss (1) | $ | 2.6 | $ | 3.2 |
(1) | Impact of a hypothetical 10% change in commodity market prices. |
Consolidated Financial Statements and Schedule:
Consolidated Balance Sheets at June 30, 2005 and 2004
Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended June 30, 2005, 2004 and 2003
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2005, 2004 and 2003
Notes to Consolidated Financial Statements
Schedule II
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Board of Directors of Cardinal Health, Inc.:
Columbus, Ohio
September 9, 2005
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Fiscal Year Ended June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Revenue | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | ||||||
Cost of products sold | 69,904.2 | 60,312.3 | 52,249.3 | |||||||||
Gross margin | 5,006.5 | 4,741.2 | 4,482.2 | |||||||||
Selling, general and administrative expenses | 2,861.5 | 2,346.5 | 2,246.3 | |||||||||
Impairment charges and other | 118.0 | (11.5 | ) | 9.0 | ||||||||
Special items — restructuring charges | 203.0 | 37.1 | 67.0 | |||||||||
— merger charges | 48.9 | 44.7 | 74.4 | |||||||||
— foundation contribution | — | 31.7 | — | |||||||||
— other | 12.3 | (56.1 | ) | (101.5 | ) | |||||||
Operating earnings | 1,762.8 | 2,348.8 | 2,187.0 | |||||||||
Interest expense and other | 133.5 | 110.4 | 106.3 | |||||||||
Earnings before income taxes, discontinued operations, and cumulative effect of change in accounting | 1,629.3 | 2,238.4 | 2,080.7 | |||||||||
Provision for income taxes | 582.6 | 713.7 | 699.5 | |||||||||
Earnings from continuing operations before cumulative effect of change in accounting | 1,046.7 | 1,524.7 | 1,381.2 | |||||||||
Earnings/(loss) from discontinued operations (net of tax of ($2.6), $7.4 and $2.5 for the year-to-date periods ended June 30, 2005, 2004 and 2003 respectively) | 4.0 | (11.7 | ) | (6.1 | ) | |||||||
Cumulative effect of change in accounting | — | (38.5 | ) | — | ||||||||
Net earnings | $ | 1,050.7 | $ | 1,474.5 | $ | 1,375.1 | ||||||
Basic earnings per Common Share: | ||||||||||||
Continuing operations | $ | 2.43 | $ | 3.51 | $ | 3.10 | ||||||
Discontinued operations | 0.01 | (0.03 | ) | (0.02 | ) | |||||||
Cumulative effect of change in accounting | — | (0.09 | ) | — | ||||||||
Net basic earnings per Common Share | $ | 2.44 | $ | 3.39 | $ | 3.08 | ||||||
Diluted earnings per Common Share: | ||||||||||||
Continuing operations | $ | 2.40 | $ | 3.47 | $ | 3.05 | ||||||
Discontinued operations | 0.01 | (0.03 | ) | (0.02 | ) | |||||||
Cumulative effect of change in accounting | — | (0.09 | ) | — | ||||||||
Net diluted earnings per Common Share | $ | 2.41 | $ | 3.35 | $ | 3.03 | ||||||
Weighted average number of shares outstanding: | ||||||||||||
Basic | 430.5 | 434.4 | 446.0 | |||||||||
Diluted | 435.7 | 440.0 | 453.3 |
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June 30, | June 30, | |||||||
2005 | 2004 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and equivalents | $ | 1,411.7 | $ | 1,096.0 | ||||
Short-term investments available for sale | 99.8 | — | ||||||
Trade receivables, net | 3,451.0 | 3,432.7 | ||||||
Current portion of net investment in sales-type leases | 238.2 | 202.1 | ||||||
Inventories | 7,380.0 | 7,471.3 | ||||||
Prepaid expenses and other | 862.0 | 795.4 | ||||||
Assets held for sale from discontinued operations | — | 60.4 | ||||||
Total current assets | 13,442.7 | 13,057.9 | ||||||
Property and equipment, at cost: | ||||||||
Land, buildings and improvements | 1,647.5 | 1,412.6 | ||||||
Machinery and equipment | 2,868.3 | 2,734.3 | ||||||
Furniture and fixtures | 152.8 | 153.2 | ||||||
Total property and equipment, at cost | 4,668.6 | 4,300.1 | ||||||
Accumulated depreciation and amortization | (2,184.6 | ) | (1,936.1 | ) | ||||
Property and equipment, net | 2,484.0 | 2,364.0 | ||||||
Other assets: | ||||||||
Net investment in sales-type leases, less current portion | 693.8 | 546.0 | ||||||
Goodwill and other intangibles, net | 5,097.4 | 4,938.8 | ||||||
Other | 341.3 | 462.4 | ||||||
Total assets | $ | 22,059.2 | $ | 21,369.1 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 307.9 | $ | 860.6 | ||||
Accounts payable | 7,618.4 | 6,432.4 | ||||||
Other accrued liabilities | 2,178.7 | 2,021.3 | ||||||
Liabilities from discontinued operations | — | 55.1 | ||||||
Total current liabilities | 10,105.0 | 9,369.4 | ||||||
Long-term obligations, less current portion and other short-term borrowings | 2,319.9 | 2,834.7 | ||||||
Deferred income taxes and other liabilities | 1,041.3 | 1,188.7 | ||||||
Shareholders’ equity: | ||||||||
Preferred Shares, without par value | ||||||||
Authorized — 0.5 million shares, Issued — none | — | — | ||||||
Common Shares, without par value | ||||||||
Authorized — 755.0 million shares, Issued — 476.5 million shares and 473.1 million shares at June 30, 2005 and 2004, respectively | 2,765.5 | 2,653.8 | ||||||
Retained earnings | 8,874.2 | 7,888.0 | ||||||
Common Shares in treasury, at cost, 50.3 million shares and 42.2 million shares at June 30, 2005 and 2004, respectively | (3,043.6 | ) | (2,588.1 | ) | ||||
Other comprehensive income | 20.2 | 28.9 | ||||||
Other | (23.3 | ) | (6.3 | ) | ||||
Total shareholders’ equity | 8,593.0 | 7,976.3 | ||||||
Total liabilities and Shareholders' equity | $ | 22,059.2 | $ | 21,369.1 | ||||
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Common Shares | Other | Total | ||||||||||||||||||||||||||||||
Shares | Retained | Treasury Shares | Comprehensive | Shareholders’ | ||||||||||||||||||||||||||||
Issued | Amount | Earnings | Shares | Amount | Income/(Loss) | Other | Equity | |||||||||||||||||||||||||
BALANCE, JUNE 30, 2002 | 461.0 | $ | 2,105.2 | $ | 5,137.0 | (12.2 | ) | $ | (737.0 | ) | $ | (143.0 | ) | $ | (10.5 | ) | $ | 6,351.7 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net earnings | 1,375.1 | 1,375.1 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 99.7 | 99.7 | ||||||||||||||||||||||||||||||
Unrealized gain on derivatives | 2.0 | 2.0 | ||||||||||||||||||||||||||||||
Net change in minimum pension liability | (9.4 | ) | (9.4 | ) | ||||||||||||||||||||||||||||
Total comprehensive income | 1,467.4 | |||||||||||||||||||||||||||||||
Employee stock plans activity, including tax benefits of $65.5 million | 6.2 | 227.8 | 0.5 | 35.6 | 2.5 | 265.9 | ||||||||||||||||||||||||||
Treasury shares acquired | (19.6 | ) | (1,191.7 | ) | (1,191.7 | ) | ||||||||||||||||||||||||||
Dividends declared | (47.0 | ) | (47.0 | ) | ||||||||||||||||||||||||||||
Stock issued for acquisitions and other | 70.7 | 0.1 | 12.5 | 757.3 | 0.1 | 828.2 | ||||||||||||||||||||||||||
BALANCE, JUNE 30, 2003 | 467.2 | $ | 2,403.7 | $ | 6,465.2 | (18.8 | ) | $ | (1,135.8 | ) | $ | (50.7 | ) | $ | (7.9 | ) | $ | 7,674.5 | ||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net earnings | 1,474.5 | 1,474.5 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments | 68.3 | 68.3 | ||||||||||||||||||||||||||||||
Unrealized gain on derivatives | 11.7 | 11.7 | ||||||||||||||||||||||||||||||
Unrealized loss on investments | (1.3 | ) | (1.3 | ) | ||||||||||||||||||||||||||||
Net change in minimum pension liability | 0.9 | 0.9 | ||||||||||||||||||||||||||||||
Total comprehensive income | 1,554.1 | |||||||||||||||||||||||||||||||
Employee stock plans activity, including tax benefits of $66.4 million | 5.9 | 237.2 | 0.8 | 47.7 | 1.6 | 286.5 | ||||||||||||||||||||||||||
Treasury shares acquired | (24.2 | ) | (1,500.0 | ) | (1,500.0 | ) | ||||||||||||||||||||||||||
Dividends declared | (51.8 | ) | (51.8 | ) | ||||||||||||||||||||||||||||
Stock issued for acquisitions and other | 12.9 | 0.1 | 13.0 | |||||||||||||||||||||||||||||
BALANCE, JUNE 30, 2004 | 473.1 | $ | 2,653.8 | $ | 7,888.0 | (42.2 | ) | $ | (2,588.1 | ) | $ | 28.9 | $ | (6.3 | ) | $ | 7,976.3 | |||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||||||||
Net earnings | 1,050.7 | 1,050.7 | ||||||||||||||||||||||||||||||
Foreign currency translation adjustments | (6.3 | ) | (6.3 | ) | ||||||||||||||||||||||||||||
Unrealized gain on derivatives | (2.4 | ) | (2.4 | ) | ||||||||||||||||||||||||||||
Total comprehensive income | 1,042.0 | |||||||||||||||||||||||||||||||
Employee stock plans activity, including tax benefits of $18.1 million | 3.4 | 111.7 | 0.8 | 44.8 | (17.0 | ) | 139.5 | |||||||||||||||||||||||||
Treasury shares acquired | (8.9 | ) | (500.3 | ) | (500.3 | ) | ||||||||||||||||||||||||||
Dividends declared | (64.5 | ) | (64.5 | ) | ||||||||||||||||||||||||||||
BALANCE, JUNE 30, 2005 | 476.5 | $ | 2,765.5 | $ | 8,874.2 | (50.3 | ) | $ | (3,043.6 | ) | $ | 20.2 | $ | (23.3 | ) | $ | 8,593.0 | |||||||||||||||
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Fiscal Year Ended June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Earnings from continuing operations before cumulative effect of change in accounting | $ | 1,046.7 | $ | 1,524.7 | $ | 1,381.2 | ||||||
Adjustments to reconcile earnings from continuing operations before cumulative effect of change in accounting to net cash from operations: | ||||||||||||
Depreciation and amortization | 409.7 | 299.2 | 265.8 | |||||||||
Asset impairments | 223.9 | 5.7 | 22.0 | |||||||||
Provision for deferred income taxes | 53.2 | 105.1 | 215.2 | |||||||||
Provision for bad debts | 8.8 | 1.5 | 22.2 | |||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | ||||||||||||
Increase in trade receivables | (14.9 | ) | (457.1 | ) | (413.7 | ) | ||||||
Decrease/(increase) in inventories | 90.1 | 209.3 | (217.9 | ) | ||||||||
Decrease/(increase) in net investment in sales-type leases | (183.9 | ) | (7.2 | ) | 107.8 | |||||||
Increase/(decrease) in accounts payable | 1,180.5 | 1,014.6 | (278.5 | ) | ||||||||
Other accrued liabilities and operating items, net | 36.1 | (71.1 | ) | 293.9 | ||||||||
Net cash provided by operating activities | 2,850.2 | 2,624.7 | 1,398.0 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Acquisition of subsidiaries, net of cash acquired | (273.2 | ) | (2,089.7 | ) | (26.8 | ) | ||||||
Proceeds from sale of property and equipment | 19.9 | 19.5 | 57.7 | |||||||||
Additions to property and equipment | (571.7 | ) | (410.2 | ) | (423.2 | ) | ||||||
Proceeds from sale of discontinued operations | 47.4 | 43.4 | 48.6 | |||||||||
Purchase of investment securities available for sale | (99.8 | ) | — | — | ||||||||
Net cash used in investing activities | (877.4 | ) | (2,437.0 | ) | (343.7 | ) | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Net change in commercial paper and short-term borrowings | (562.7 | ) | 646.2 | 8.5 | ||||||||
Reduction of long-term obligations | (1,932.6 | ) | (464.3 | ) | (191.0 | ) | ||||||
Proceeds from long-term obligations, net of issuance costs | 1,279.7 | 338.0 | 509.4 | |||||||||
Proceeds from issuance of Common Shares | 110.5 | 216.7 | 197.3 | |||||||||
Dividends on Common Shares | (51.7 | ) | (52.3 | ) | (44.8 | ) | ||||||
Purchase of treasury shares | (500.3 | ) | (1,500.0 | ) | (1,191.7 | ) | ||||||
Net cash used in financing activities | (1,657.1 | ) | (815.7 | ) | (712.3 | ) | ||||||
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS | 315.7 | (628.0 | ) | 342.0 | ||||||||
CASH AND EQUIVALENTS AT BEGINNING OF YEAR | 1,096.0 | 1,724.0 | 1,382.0 | |||||||||
CASH AND EQUIVALENTS AT END OF YEAR | $ | 1,411.7 | $ | 1,096.0 | $ | 1,724.0 | ||||||
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Fiscal 2004 | Fiscal 2003 | Fiscal 2002 | |||||||||
(in millions) | As Corrected | As Corrected | As Corrected | ||||||||
First Quarter | $ | (0.2 | ) | $ | — | $ | (5.4 | ) | |||
Second Quarter | 3.7 | 2.0 | (0.9 | ) | |||||||
Third Quarter | (1.2 | ) | 5.6 | (0.4 | ) | ||||||
Fourth Quarter | (0.7 | ) | 1.9 | — | |||||||
Total | $ | 1.6 | $ | 9.5 | $ | (6.7 | ) | ||||
• | document and process reviews, including a sample of equipment confirmation forms; | ||
• | certifications for selected employees involved in the installation process; | ||
• | interviews of selected employees across regions within the U.S. and at various levels of the Company; | ||
• | interviews of certain former employees of the Company; and | ||
• | interviews of selected customers across all regions within the U.S. |
• | equipment confirmations in the last several weeks of a quarter were the most likely to be executed early by the customer due to requests from certain Company employees; | ||
• | no evidence was discovered of fictitious sales being recorded by the Company; | ||
• | revenue was recognized early primarily by one quarter; in most cases, installations were completed in the following quarter; and | ||
• | the impact on the Company’s financial results was not deemed material for any individual quarter or annually. |
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Operating | ||||||||||||||||
Revenue | % Change | Earnings | % Change | |||||||||||||
Fiscal 2004 | ||||||||||||||||
First Quarter | $ | 3.7 | 2.6 | % | $ | 2.4 | 4.5 | % | ||||||||
Second Quarter | 0.1 | 0.0 | % | — | 0.0 | % | ||||||||||
Third Quarter | (1.9 | ) | (1.1 | %) | (1.2 | ) | (1.7 | %) | ||||||||
Year-To-Date | $ | 1.9 | 0.4 | % | $ | 1.2 | 0.6 | % | ||||||||
Fiscal 2003 | ||||||||||||||||
First Quarter | $ | 2.6 | 1.9 | % | $ | 1.7 | 3.6 | % | ||||||||
Second Quarter | 0.2 | 0.1 | % | 0.1 | 0.1 | % | ||||||||||
Third Quarter | (0.3 | ) | (0.2 | %) | (0.2 | ) | (0.3 | %) | ||||||||
Fourth Quarter | (3.8 | ) | (1.9 | %) | (2.4 | ) | (2.8 | %) | ||||||||
Total Year | ($1.3 | ) | (0.2 | %) | ($0.8 | ) | (0.3 | %) | ||||||||
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Misapplication | Total | |||||||||||
(in millions) | of GAAP | Errors | Restatement | |||||||||
Fiscal 2004: | ||||||||||||
First Quarter | $ | (0.3 | ) | $ | (4.5 | ) | $ | (4.8 | ) | |||
Second Quarter | (0.4 | ) | (4.5 | ) | (4.9 | ) | ||||||
Third Quarter | — | (5.7 | ) | (5.7 | ) | |||||||
Year-to-Date | $ | (0.7 | ) | $ | (14.7 | ) | $ | (15.4 | ) | |||
Fiscal 2003: | ||||||||||||
First Quarter | $ | (3.1 | ) | $ | (3.8 | ) | $ | (6.9 | ) | |||
Second Quarter | (1.1 | ) | 3.7 | 2.6 | ||||||||
Third Quarter | (9.1 | ) | (5.4 | ) | (14.5 | ) | ||||||
Fourth Quarter | (2.3 | ) | (9.6 | ) | (11.9 | ) | ||||||
Total Year | $ | (15.6 | ) | $ | (15.1 | ) | $ | (30.7 | ) | |||
Fiscal 2003 | ||||||||
As | As | |||||||
Reported | Restated | |||||||
Earnings from continuing operations per Common Share: | ||||||||
Basic | $ | 3.17 | $ | 3.10 | ||||
Diluted | $ | 3.12 | $ | 3.05 |
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Fiscal Year Ended | ||||||||
June 30, 2003 | ||||||||
Bulk | Operating | |||||||
(in millions) | Revenue | Revenue | ||||||
First Quarter | $ | — | $ | — | ||||
Second Quarter | 673.0 | (673.0 | ) | |||||
Third Quarter | 140.0 | (140.0 | ) | |||||
Fourth Quarter | — | — | ||||||
Total Year | $ | 813.0 | $ | (813.0 | ) | |||
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• | deliveries to customer warehouses whereby the Company acts as an intermediary in the ordering and delivery of pharmaceutical products; | ||
• | delivery of products to the customer in the same form as the products are received from the manufacturer; | ||
• | warehouse to customer warehouse or process center deliveries; or | ||
• | deliveries to customers in large or high volume full case quantities. |
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• | Revenue is recognized on sales-type leases when the lease becomes noncancellable. The lease is determined to be noncancellable upon completion of the installation, when the equipment is functioning according to material specifications of the user’s manual and the customer has accepted the equipment, as evidenced by signing an equipment confirmation document (see Note 16 for additional information). Interest income on sales-type leases is recognized in revenue using the interest method. | ||
• | Revenue is recognized on the sale of point-of-use systems upon completion of the Company’s installation obligations and upon customer acceptance of the equipment, as evidenced by signing the equipment confirmation document. | ||
• | Consistent with sales-type leases, revenue is recognized on operating leases after installation is complete and customer acceptance has occurred. Operating lease revenue is recognized over the lease term as such amounts become receivable according to the provisions of the lease. |
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Fiscal Year Ended June 30, | ||||||||||||
(in millions, except per Common Share amounts) | 2005 | 2004 | 2003 | |||||||||
Net Earnings, as reported | $ | 1,050.7 | $ | 1,474.5 | $ | 1,375.1 | ||||||
Stock-based employee compensation expense, included in net earnings, net of related tax effects | 6.3 | 2.0 | 1.8 | |||||||||
Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects (1) | (138.9 | ) | (104.3 | ) | (91.6 | ) | ||||||
Pro Forma net earnings | $ | 918.1 | $ | 1,372.2 | $ | 1,285.3 | ||||||
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Fiscal Year Ended June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Basic earnings per Common Share: | ||||||||||||
As reported | $ | 2.44 | $ | 3.39 | $ | 3.08 | ||||||
Pro Forma basic earnings per Common Share | $ | 2.13 | $ | 3.16 | $ | 2.88 | ||||||
Diluted earnings per Common Share: | ||||||||||||
As reported | $ | 2.41 | $ | 3.35 | $ | 3.03 | ||||||
Pro Forma diluted earnings per Common Share (2) | $ | 2.12 | $ | 3.14 | $ | 2.85 |
(1) | The total stock-based employee compensation expense was adjusted to include net employee stock purchase plan expense of $7.5 million, $8.4 million and $6.8 million for the fiscal years ended June 30, 2005, 2004 and 2003, respectively. | |
(2) | The Company uses the treasury stock method when calculating diluted earnings per Common Share as presented in the table above. Under the treasury stock method, diluted shares outstanding is adjusted for the weighted-average unrecognized compensation component should the Company adopt SFAS 123. |
Amount | ||||||||
Category | (in millions) | Average Life (Years) | ||||||
Trademarks and trade names | $ | 153.8 | Indefinite | |||||
Patents | 108.2 | 10 | ||||||
Customer relationships | 151.2 | 8 | ||||||
Total intangible assets acquired | $ | 413.2 | ||||||
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Fiscal Year Ended June 30, | ||||||||||||
(in millions, except per Common Share amounts) | 2005 | 2004 | 2003 | |||||||||
Restructuring costs | $ | 203.0 | $ | 37.1 | $ | 67.0 | ||||||
Merger-related costs | 48.9 | 44.7 | 74.4 | |||||||||
Litigation settlements, net | (42.3 | ) | (62.3 | ) | (101.5 | ) | ||||||
Other | 54.6 | 37.9 | — | |||||||||
Total special items | 264.2 | 57.4 | 39.9 | |||||||||
Tax effect of special items (1) | (67.9 | ) | (21.8 | ) | (6.7 | ) | ||||||
Net earnings effect of special items | 196.3 | 35.6 | 33.2 | |||||||||
Net decrease on Diluted EPS | $ | 0.45 | $ | 0.08 | $ | 0.07 | ||||||
(1) | The Company applies varying tax rates to its special items depending upon the tax jurisdiction where the item was incurred. The overall effective tax rate varies each period depending upon the unique nature of the Company’s special items and the tax jurisdiction where the item was incurred. |
Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Restructuring costs: | ||||||||||||
Global restructuring program: | ||||||||||||
Pharmaceutical Distribution and Provider Services | $ | 9.5 | $ | — | $ | — | ||||||
Medical Products and Services | 27.0 | — | — | |||||||||
Pharmaceutical Technologies and Services | 118.9 | — | — | |||||||||
Clinical Technologies and Services | 0.7 | — | — | |||||||||
Other | 30.0 | — | — | |||||||||
Other restructuring programs: | ||||||||||||
Pharmaceutical Distribution and Provider Services | 0.5 | — | 1.4 | |||||||||
Medical Products and Services | 8.5 | 8.7 | 23.6 | |||||||||
Pharmaceutical Technologies and Services | 6.2 | 23.3 | 40.7 | |||||||||
Clinical Technologies and Services | 0.6 | 4.2 | — | |||||||||
Other | 1.1 | 0.9 | 1.3 | |||||||||
Total restructuring costs | $ | 203.0 | $ | 37.1 | $ | 67.0 | ||||||
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Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Global restructuring program costs: | ||||||||||||
Pharmaceutical Distribution and Provider Services | ||||||||||||
Employee-related costs (1) | $ | 2.9 | $ | — | $ | — | ||||||
Facility exit and other costs (2) | 6.6 | — | — | |||||||||
Total Pharmaceutical Distribution and Provider Services | 9.5 | — | — | |||||||||
Medical Products and Services | ||||||||||||
Employee-related costs (1) | 17.5 | — | — | |||||||||
Facility exit and other costs (2) | 9.5 | — | — | |||||||||
Total Medical Products and Services | 27.0 | — | — | |||||||||
Pharmaceutical Technologies and Services | ||||||||||||
Employee-related costs (1) | 13.0 | — | — | |||||||||
Asset impairments (3) | 102.7 | — | — | |||||||||
Facility exit and other costs (2) | 3.2 | — | — | |||||||||
Total Pharmaceutical Technologies and Services | 118.9 | — | — | |||||||||
Clinical Technologies and Services | ||||||||||||
Employee-related costs (1) | 0.7 | — | — | |||||||||
Total Clinical Technologies and Services | 0.7 | — | — | |||||||||
Other | ||||||||||||
Employee-related costs (1) | 8.0 | — | — | |||||||||
Facility exit and other costs (2) | 22.0 | — | — | |||||||||
Total Other | 30.0 | — | — | |||||||||
Total global restructuring program costs | $ | 186.1 | $ | — | $ | — | ||||||
(1) | Employee-related costs consist primarily of severance accrued upon either communication of terms to employees or management’s commitment to the restructuring plan when a defined severance plan exists. Outplacement services provided to employees who have been involuntarily terminated and duplicate payroll costs during transition periods are also included within this classification. | |
(2) | Facility exit and other costs consist of accelerated depreciation, equipment relocation costs, project consulting fees and costs associated with restructuring the Company’s delivery of information technology infrastructure services. | |
(3) | Asset impairments were recorded in connection with the Company’s plan to sell three facilities and transfer business from a fourth facility, as described in more detail below. |
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Expected | Headcount Reduction | |||||||||||
Fiscal Year of | As of | |||||||||||
Completion (1) | Expected (2) | June 30, 2005 | ||||||||||
Global restructuring program: | ||||||||||||
Pharmaceutical Distribution and Provider Services | 2006 | 75 | 75 | |||||||||
Medical Products and Services | 2008 | 2,675 | 340 | |||||||||
Pharmaceutical Technologies and Services | 2007 | 985 | 430 | |||||||||
Clinical Technologies and Services | 2005 | 15 | 15 | |||||||||
Other | 2009 | 540 | — | |||||||||
Total global restructuring program | 4,290 | 860 | ||||||||||
(1) | Expected fiscal year in which the last project will be completed. | |
(2) | Represents projects that have been initiated as of June 30, 2005. |
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Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Merger-related costs: | ||||||||||||
Employee-related costs | $ | 16.3 | $ | 11.9 | $ | 18.7 | ||||||
Pharmaceutical distribution center consolidation | — | 0.1 | 22.7 | |||||||||
Asset impairments and other exit costs | 1.6 | 0.9 | 5.4 | |||||||||
Debt issuance cost write-off | 8.8 | — | — | |||||||||
In-process research and development | — | 12.7 | — | |||||||||
Integration costs and other | 22.2 | 19.1 | 27.6 | |||||||||
Total merger-related costs | $ | 48.9 | $ | 44.7 | $ | 74.4 | ||||||
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Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Litigation settlements, net: | ||||||||||||
Vitamin litigation | $ | (0.6 | ) | $ | (6.5 | ) | $ | (102.9 | ) | |||
Pharmaceutical manufacturer antitrust litigation | (41.7 | ) | (55.9 | ) | — | |||||||
Other | — | 0.1 | 1.4 | |||||||||
Total litigation settlements, net | $ | (42.3 | ) | $ | (62.3 | ) | $ | (101.5 | ) | |||
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Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Balance at beginning of year | $ | 39.9 | $ | 45.7 | $ | 64.7 | ||||||
Additions (1) | 306.5 | 119.8 | 142.8 | |||||||||
Payments | (260.1 | ) | (125.6 | ) | (161.8 | ) | ||||||
Balance at end of year | $ | 86.3 | $ | 39.9 | $ | 45.7 | ||||||
(1) | Amounts represent items that have been expensed as incurred or accrued in accordance with GAAP. These amounts do not include gross litigation settlement income recorded during fiscal 2005, 2004 and 2003 of $42.3 million, $62.4 million and $102.9 million, respectively, which were recorded as special items. |
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June 30, | June 30, | |||||||
(in millions) | 2005 | 2004 | ||||||
Future minimum lease payments receivable | $ | 1,056.0 | $ | 844.0 | ||||
Unguaranteed residual values | 23.8 | 21.6 | ||||||
Unearned income | (133.9 | ) | (101.8 | ) | ||||
Allowance for uncollectible minimum lease payments receivable | (13.9 | ) | (15.7 | ) | ||||
Net investment in sales-type leases | 932.0 | 748.1 | ||||||
Less: current portion | 238.2 | 202.1 | ||||||
Net investment in sales-type leases, less current portion | $ | 693.8 | $ | 546.0 | ||||
(in millions) | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | |||||||||||||||||||||
Minimum lease payments | $ | 312.6 | $ | 266.1 | $ | 231.3 | $ | 170.0 | $ | 71.9 | $ | 4.1 | $ | 1,056.0 |
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June 30, | June 30, | |||||||
(in millions) | 2005 | 2004 | ||||||
4.00% Notes due 2015 | $ | 473.7 | $ | 432.9 | ||||
4.45% Notes due 2005 | — | 305.5 | ||||||
6.00% Notes due 2006 | 150.2 | 151.6 | ||||||
6.25% Notes due 2008 | 150.0 | 150.0 | ||||||
6.75% Notes due 2011 | 506.6 | 497.0 | ||||||
7.25% Senior subordinated notes due 2011 | 11.6 | 195.3 | ||||||
7.30% Notes due 2006 | 128.1 | 130.3 | ||||||
7.80% Debentures due 2016 | 75.7 | 75.7 | ||||||
7.00% Debentures due 2026 | 192.0 | 192.0 | ||||||
Bank term loan due 2009 | — | 162.6 | ||||||
Commercial paper | — | 634.2 | ||||||
Preferred debt securities | 650.0 | 650.0 | ||||||
Short-term borrowings, reclassified | 5.6 | 15.0 | ||||||
Other obligations; interest averaging 4.91% in 2005 and 4.52% in 2004, due in varying installments through 2015 | 284.3 | 103.2 | ||||||
Total | 2,627.8 | 3,695.3 | ||||||
Less: current portion and other short-term borrowings | 307.9 | 860.6 | ||||||
Long-term obligations, less current portion and other short-term borrowings. | $ | 2,319.9 | $ | 2,834.7 | ||||
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(in millions) | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | |||||||||||||||||||||
Maturities of long-term obligations | $ | 307.9 | $ | 145.4 | $ | 5.1 | $ | 892.1 | $ | 5.1 | $ | 1,272.2 | $ | 2,627.8 |
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(in millions) | 2005 | 2004 | ||||||
Pay-fixed interest rate swaps: | ||||||||
Notional amount | $ | 500.0 | $ | 171.0 | ||||
Assets | — | 0.8 | ||||||
Liabilities | 7.3 | — | ||||||
Pay-floating interest rate swaps: | ||||||||
Notional amount | $ | 1,027.8 | $ | 1,327.8 | ||||
Assets | 7.1 | 10.6 | ||||||
Liabilities | 22.9 | 67.1 |
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(in millions) | 2005 | 2004 | ||||||
Forward contracts — cash flow hedge: | ||||||||
Notional amount | $ | 286.4 | $ | 276.9 | ||||
Assets | 7.9 | 1.4 | ||||||
Liabilities | 2.5 | 4.9 | ||||||
Forward contracts — fair value hedge: | ||||||||
Notional amount | $ | 563.7 | $ | 489.0 | ||||
Assets | 1.1 | — | ||||||
Liabilities | 16.8 | 19.5 |
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(in millions) | 2005 | 2004 | ||||||||||||||
Notional | Fair Value | Notional | Fair Value | |||||||||||||
Amount | Gain/(Loss) | Amount | Gain/(Loss) | |||||||||||||
Foreign currency forward contracts | $ | 850.1 | $ | (10.3 | ) | $ | 765.9 | $ | (23.0 | ) | ||||||
Interest rate swaps | $ | 1,527.8 | $ | (23.1 | ) | $ | 1,498.8 | $ | (55.7 | ) |
Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
U.S. Based Operations | $ | 1,320.4 | $ | 1,845.1 | $ | 1,733.8 | ||||||
Non-U.S. Based Operations | 308.9 | 393.3 | 346.9 | |||||||||
$ | 1,629.3 | $ | 2,238.4 | $ | 2,080.7 | |||||||
Fiscal Year Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Current: | ||||||||||||
Federal | $ | 437.2 | $ | 547.3 | $ | 426.5 | ||||||
State | 24.3 | 39.1 | 29.5 | |||||||||
Foreign | 41.6 | 22.2 | 28.3 | |||||||||
Total | 503.1 | 608.6 | 484.3 | |||||||||
Deferred: | ||||||||||||
Federal | 44.8 | 99.8 | 191.0 | |||||||||
State | 2.7 | 7.1 | 27.1 | |||||||||
Foreign | 5.7 | (1.8 | ) | (2.9 | ) | |||||||
Total | 53.2 | 105.1 | 215.2 | |||||||||
Unremitted earnings to be repatriated | 26.3 | — | — | |||||||||
Total provision | $ | 582.6 | $ | 713.7 | $ | 699.5 | ||||||
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Fiscal Year Ended June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Provision at federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal benefit | 2.2 | 2.0 | 1.7 | |||||||||
Foreign tax rates | (4.2 | ) | (4.0 | ) | (3.2 | ) | ||||||
Nondeductible expenses | 0.9 | 0.3 | 0.5 | |||||||||
Unremitted earnings to be repatriated | 1.6 | — | — | |||||||||
Other | 0.3 | (1.4 | ) | (0.4 | ) | |||||||
Effective income tax rate | 35.8 | % | 31.9 | % | 33.6 | % | ||||||
June 30, | June 30, | |||||||
(in millions) | 2005 | 2004 | ||||||
Deferred income tax assets: | ||||||||
Receivable basis difference | $ | 46.1 | $ | 32.5 | ||||
Accrued liabilities | 167.1 | 146.8 | ||||||
Net operating loss carryforwards | 59.4 | 21.6 | ||||||
Other | 36.2 | — | ||||||
Total deferred income tax assets | 308.8 | 200.9 | ||||||
Valuation allowance for deferred income tax assets | (8.4 | ) | (15.8 | ) | ||||
Net deferred income tax assets | $ | 300.4 | $ | 185.1 | ||||
Deferred income tax liabilities: | ||||||||
Inventory basis differences | (613.8 | ) | (498.8 | ) | ||||
Property-related | (589.4 | ) | (339.2 | ) | ||||
Revenue on lease contracts | (187.4 | ) | (231.2 | ) | ||||
Other | (145.7 | ) | (153.3 | ) | ||||
Total deferred income tax liabilities | (1,536.3 | ) | (1,222.5 | ) | ||||
Net deferred income tax liabilities | $ | (1,235.9 | ) | $ | (1,037.4 | ) | ||
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June 30, | June 30, | |||||||
(in millions) | 2005 | 2004 | ||||||
Other current assets and current liabilities | $ | (510.0 | ) | $ | (175.8 | ) | ||
Deferred income taxes and other liabilities | (725.9 | ) | (861.6 | ) | ||||
Net deferred income tax liabilities | $ | (1,235.9 | ) | $ | (1,037.4 | ) | ||
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Pension Benefits | Other Postretirement Benefits | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Projected benefit obligation at beginning of year | $ | 195.6 | $ | 161.0 | $ | 5.1 | $ | 5.6 | ||||||||
Service cost | 1.9 | 1.6 | — | — | ||||||||||||
Interest cost | 11.4 | 9.2 | 0.4 | 0.2 | ||||||||||||
Plan amendments | — | 0.1 | — | — | ||||||||||||
Benefits paid | (7.7 | ) | (5.9 | ) | (0.2 | ) | (0.1 | ) | ||||||||
Participant contributions | 0.1 | 0.3 | — | — | ||||||||||||
Curtailments | — | (7.3 | ) | — | — | |||||||||||
Settlements | (2.2 | ) | — | — | — | |||||||||||
Special termination benefits | — | — | — | — | ||||||||||||
Actuarial loss/(gain) | 20.8 | 0.4 | 2.1 | (0.6 | ) | |||||||||||
Cumulative translation adjustment | — | 15.2 | — | — | ||||||||||||
Business combinations | — | 21.0 | — | — | ||||||||||||
Projected benefit obligation at end of year | $ | 219.9 | $ | 195.6 | $ | 7.4 | $ | 5.1 | ||||||||
Pension Benefits | Other Postretirement Benefits | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Fair value of plan assets at beginning of year | $ | 119.5 | $ | 74.0 | $ | — | $ | — | ||||||||
Participant contributions | 0.1 | 0.3 | — | |||||||||||||
Employer contributions | 6.1 | 16.4 | 0.2 | 0.1 | ||||||||||||
Benefits paid | (6.5 | ) | (5.5 | ) | (0.2 | ) | (0.1 | ) | ||||||||
Actual return on plan assets | 10.9 | 8.5 | — | — | ||||||||||||
Settlements | (2.2 | ) | — | — | — | |||||||||||
Cumulative translation adjustment | — | 5.7 | — | — | ||||||||||||
Business combinations | — | 20.1 | — | — | ||||||||||||
Fair value of plan assets at end of year | $ | 127.9 | $ | 119.5 | $ | — | $ | — | ||||||||
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Pension Benefits | Other Postretirement Benefits | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Funded status | $ | (92.0 | ) | $ | (76.1 | ) | $ | (7.4 | ) | $ | (5.1 | ) | ||||
Unrecognized net transition asset | (0.2 | ) | (0.2 | ) | — | — | ||||||||||
Unrecognized prior service cost | 0.1 | 0.1 | — | — | ||||||||||||
Unrecognized net actuarial loss/(gain) | 58.5 | 48.5 | (0.8 | ) | (2.5 | ) | ||||||||||
Other | 1.0 | 1.5 | — | — | ||||||||||||
Net amount recognized | $ | (32.6 | ) | $ | (26.2 | ) | $ | (8.2 | ) | $ | (7.6 | ) | ||||
Prepaid benefit cost | $ | 0.3 | $ | 4.0 | $ | — | $ | — | ||||||||
Accrued benefit cost | (87.3 | ) | (60.8 | ) | (8.2 | ) | (7.6 | ) | ||||||||
Intangible asset | 0.1 | — | — | — | ||||||||||||
Accumulated other comprehensive income | 54.3 | 30.6 | — | — | ||||||||||||
Net amount recognized | $ | (32.6 | ) | $ | (26.2 | ) | $ | (8.2 | ) | $ | (7.6 | ) | ||||
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Projected benefit obligation | $ | 216.8 | $ | 178.5 | $ | 7.4 | $ | 5.1 | ||||||||
Fair value of plan assets | 124.8 | 101.8 | — | — |
Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
(in millions) | 2005 | 2004 | 2005 | 2004 | ||||||||||||
Accumulated benefit obligation | $ | 215.4 | $ | 174.6 | N/A | N/A | ||||||||||
Fair value of plan assets | 127.9 | 101.8 | — | — |
Pension Benefits | Other Postretirement Benefits | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||
Components of net periodic benefit cost: | ||||||||||||||||||||||||
Service cost | $ | 1.9 | $ | 1.6 | $ | 4.6 | $ | — | $ | — | $ | 0.6 | ||||||||||||
Interest cost | 11.4 | 9.2 | 8.4 | 0.4 | 0.3 | 0.7 | ||||||||||||||||||
Expected return on plan assets | (8.5 | ) | (5.6 | ) | (5.4 | ) | — | — | — | |||||||||||||||
Net amortization and other (1) | 2.5 | 2.8 | 1.2 | (0.1 | ) | (0.1 | ) | — | ||||||||||||||||
Net amount recognized | $ | 7.3 | $ | 8.0 | $ | 8.8 | $ | 0.3 | $ | 0.2 | $ | 1.3 | ||||||||||||
(1) | Amount primarily represents the amortization of unrecognized actuarial losses, as well as the amortization of the transition obligation and prior service costs. |
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Other Postretirement | ||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
Discount rate | 5.03 | % | 5.60 | % | 5.75 | % | 6.00 | % | ||||||||
Rate of increase in compensation levels | 2.71 | % | 3.50 | % | N/A | N/A |
Other Postretirement | ||||||||||||||||||||||||
Pension Benefits | Benefits | |||||||||||||||||||||||
2005 | 2004 | 2003 | 2005 | 2004 | 2003 | |||||||||||||||||||
Discount rate | 5.47 | % | 5.50 | % | 6.00 | % | 5.98 | % | 6.25 | % | 7.25 | % | ||||||||||||
Rate of increase in compensation levels | 2.71 | % | 3.50 | % | 3.80 | % | N/A | N/A | N/A | |||||||||||||||
Expected long-term rate of return (1) | 6.53 | % | 6.30 | % | 6.90 | % | N/A | N/A | N/A |
(1) | To develop the expected long-term rate of return on assets assumption, the Company considered the historical returns and the future expectations for returns for each asset class, as well as the target asset allocation of the pension portfolio. This rate is gross of any investment or administrative expenses. |
Other Postretirement Benefits | ||||||||
2005 | 2004 | |||||||
Healthcare cost trend rate assumed for next year: | ||||||||
Pre — Medicare | 10.90 | % | 11.20 | % | ||||
Post — Medicare | 12.20 | % | 11.60 | % | ||||
Rate to which the cost trend is assumed to decline (ultimate trend rate): | ||||||||
Pre — Medicare | 5.60 | % | 5.60 | % | ||||
Post — Medicare | 5.70 | % | 5.60 | % | ||||
Year that the rate reaches the ultimate trend rate: | ||||||||
Pre — Medicare | 2014 | 2014 | ||||||
Post — Medicare | 2014 | 2014 |
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2005 | 2004 | |||||||||||||||||||
Asset Category | Actual $ | Actual % | Actual $ | Actual % | Target | |||||||||||||||
Equity Securities | $ | 67.0 | 52 | % | $ | 55.0 | 46 | % | 52 | % | ||||||||||
Debt Securities | 34.8 | 27 | % | 34.7 | 29 | % | 28 | % | ||||||||||||
Real Estate | 6.6 | 5 | % | — | 0 | % | 6 | % | ||||||||||||
Other | 19.5 | 16 | % | 29.8 | 25 | % | 14 | % | ||||||||||||
Total | $ | 127.9 | 100 | % | $ | 119.5 | 100 | % | 100 | % | ||||||||||
Fiscal Year Ended June 30, | Pension | Other | ||||||
(in millions) | Benefits | Benefits | ||||||
2006 | $ | 5.4 | $ | 0.8 | ||||
2007 | 5.4 | 0.7 | ||||||
2008 | 5.6 | 0.7 | ||||||
2009 | 5.8 | 0.7 | ||||||
2010 | 6.0 | 0.7 | ||||||
2011 – 2015 | $ | 33.5 | $ | 3.1 |
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(in millions) | 2005 | 2004 | 2003 | |||||||||
Proceeds received on transfer of receivables | $ | 550.0 | $ | 321.4 | $ | 375.8 | ||||||
Cash collected in servicing of related receivables | 3.9 | 3.9 | 2.2 | |||||||||
Proceeds received on subordinated interests | 1.9 | 8.9 | 18.3 | |||||||||
Cash inflow to the Company | 555.8 | 334.2 | 396.3 | |||||||||
Cash collection remitted to the bank | 224.6 | 226.0 | 131.0 | |||||||||
Cash collection remitted to QSPE | 1.9 | 8.9 | 17.7 | |||||||||
Net benefit to the Company’s Cash Flow | $ | 329.3 | $ | 99.3 | $ | 247.6 | ||||||
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(in millions) | 2006 | 2007 | 2008 | 2009 | 2010 | Thereafter | Total | |||||||||||||||||||||
Minimum rental payments | $ | 99.9 | $ | 77.3 | $ | 60.3 | $ | 96.2 | $ | 35.0 | $ | 302.9 | $ | 671.6 |
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Percent of Revenue | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
CVS Corporation (“CVS”) | 21 | % | 18 | % | 18 | % | ||||||
Walgreen Co. (“Walgreens”) | 10 | % | 8 | % | 7 | % |
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Weighted Average | ||||||||||||||||||||
Options | Exercise Price | |||||||||||||||||||
(in millions, except per Common Share amounts) | Outstanding | per Common Share | ||||||||||||||||||
Balance at June 30, 2002 | 36.2 | $ | 43.95 | |||||||||||||||||
Granted | 9.5 | 67.49 | ||||||||||||||||||
Exercised | (6.2 | ) | 27.04 | |||||||||||||||||
Canceled | (2.5 | ) | 63.29 | |||||||||||||||||
Other | 3.0 | 49.23 | ||||||||||||||||||
Balance at June 30, 2003 | 40.0 | $ | 51.35 | |||||||||||||||||
Granted | 11.8 | 61.48 | ||||||||||||||||||
Exercised | (5.9 | ) | 29.78 | |||||||||||||||||
Canceled | (4.2 | ) | 65.30 | |||||||||||||||||
Other | 0.6 | 34.24 | ||||||||||||||||||
Balance at June 30, 2004 | 42.3 | $ | 55.52 | |||||||||||||||||
Granted | 14.0 | 43.12 | ||||||||||||||||||
Exercised | (3.0 | ) | 25.79 | |||||||||||||||||
Canceled | (5.3 | ) | 58.76 | |||||||||||||||||
Other | — | — | ||||||||||||||||||
Balance at June 30, 2005 | 48.0 | $ | 53.16 | |||||||||||||||||
Outstanding | Exercisable | |||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||
Range of exercise | average | average | average | |||||||||||||||||
prices | remaining | exercise price | exercise price | |||||||||||||||||
per Common | Options | contractual life | per Common | Options | per Common | |||||||||||||||
Share | (in millions) | in years | Share | (in millions) | Share | |||||||||||||||
$0.00 - $44.14 | 7.8 | 3.9 | $ | 25.87 | 7.1 | $ | 26.80 | |||||||||||||
$44.15 - $59.19 | 14.2 | 8.3 | $ | 45.66 | 2.0 | $ | 50.49 | |||||||||||||
$59.20 - $64.11 | 9.9 | 8.1 | $ | 61.49 | 0.4 | $ | 62.19 | |||||||||||||
$64.12 - $67.90 | 10.1 | 6.4 | $ | 67.21 | 3.7 | $ | 66.07 | |||||||||||||
$67.91- $132.72 | 6.0 | 5.8 | $ | 69.05 | 5.5 | $ | 69.06 | |||||||||||||
$0.00 - $132.72 | 48.0 | 6.8 | $ | 53.16 | 18.7 | $ | 50.18 | |||||||||||||
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As of June 30, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Risk-free interest rate | 3.50 | % | 3.17 | % | 2.32 | % | ||||||
Expected life | 5 years | 5 years | 4 years | |||||||||
Expected volatility | 38 | % | 37 | % | 38 | % | ||||||
Dividend yield | 0.27 | % | 0.19 | % | 0.18 | % |
(in millions) | 2005 | 2004 | 2003 | |||||||||
Weighted-average shares-basic | 430.5 | 434.4 | 446.0 | |||||||||
Effect of dilutive securities: | ||||||||||||
Employee stock options, restricted shares and restricted share units | 5.2 | 5.6 | 7.3 | |||||||||
Weighted-average shares-diluted | 435.7 | 440.0 | 453.3 | |||||||||
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2002 | ||||||
(in millions, except per Common Share amounts) | 2003 | As Corrected | ||||
Earnings from continuing operations before cumulative effect of changes in accounting: | ||||||
As reported | $ | 1,381.2 | $ | 1,140.8 | ||
Pro forma | $ | 1,368.4 | $ | 1,131.8 | ||
Net earnings: | ||||||
As reported | $ | 1,375.1 | $ | 1,070.7 | ||
Pro forma | $ | 1,362.3 | $ | 1,061.7 | ||
Basic earnings per Common Share from continuing operations: | ||||||
As reported | $ | 3.10 | $ | 2.53 | ||
Pro forma | $ | 3.07 | $ | 2.51 | ||
Diluted earnings per Common Share from continuing operations: | ||||||
As reported | $ | 3.05 | $ | 2.48 | ||
Pro forma | $ | 3.02 | $ | 2.46 | ||
Net basic earnings per Common Share: | ||||||
As reported | $ | 3.08 | $ | 2.37 | ||
Pro forma | $ | 3.05 | $ | 2.36 | ||
Net diluted earnings per Common Share: | ||||||
As reported | $ | 3.03 | $ | 2.33 | ||
Pro forma | $ | 3.01 | $ | 2.31 |
Subsequent to the filing of the 2004 Form 10-K, certain errors were identified related to the Company’s fiscal 2002 pro forma disclosures related to cash discounts. The errors were a result of incomplete information used in the corresponding calculations. The corrected fiscal 2002 pro forma disclosures are reflected in the table above. The impact of the correction of the errors on the previously reported pro forma fiscal 2002 amounts was as follows: decreased pro forma earnings from continuing operations before cumulative effect of change in accounting and pro forma net earnings by $11.1 million, decreased pro forma basic and diluted earnings per Common Share from continuing operations by $0.03, and decreased pro forma net basic and diluted earnings per Common Share from continuing operations by $0.02.
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Pharmaceutical | ||||||||||||||||||||
Distribution | Medical | Pharmaceutical | Clinical | |||||||||||||||||
and Provider | Products | Technologies | Technologies | |||||||||||||||||
(in millions) | Services | and Services | and Services | and Services | Total | |||||||||||||||
Balance at June 30, 2002 | $ | 90.5 | $ | 675.4 | $ | 708.7 | $ | 50.7 | $ | 1,525.3 | ||||||||||
Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other | 5.6 | 19.3 | 723.6 | — | 748.5 | |||||||||||||||
Goodwill write-off | — | — | (9.1 | ) | — | (9.1 | ) | |||||||||||||
Balance at June 30, 2003 | $ | 96.1 | $ | 694.7 | $ | 1,423.2 | $ | 50.7 | $ | 2,264.7 | ||||||||||
Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other | 83.3 | 14.1 | 428.0 | 1,536.8 | 2,062.2 | |||||||||||||||
Goodwill related to the divestiture/ closure of businesses | — | — | (7.6 | ) | — | (7.6 | ) | |||||||||||||
Transfer | 31.6 | (31.6 | ) | — | — | — | ||||||||||||||
Balance at June 30, 2004 (1) | $ | 211.0 | $ | 677.2 | $ | 1,843.6 | $ | 1,587.5 | $ | 4,319.3 | ||||||||||
Goodwill acquired, net of purchase price adjustments, foreign currency translation adjustments and other (2)(3)(4) | 28.5 | (3.7 | ) | 84.8 | 106.5 | 216.1 | ||||||||||||||
Impairment charges (5) | — | — | (18.7 | ) | — | (18.7 | ) | |||||||||||||
Goodwill related to the divestiture/ closure of businesses (6) | — | — | (7.3 | ) | — | (7.3 | ) | |||||||||||||
Transfer (7) | (60.1 | ) | — | — | 60.1 | — | ||||||||||||||
Balance at June 30, 2005 | $ | 179.4 | $ | 673.5 | $ | 1,902.4 | $ | 1,754.1 | $ | 4,509.4 | ||||||||||
(1) | The June 30, 2004 balances for the former Automation and Information Services segment and Alaris were combined under Clinical Technologies and Services. | |
(2) | The increase within the Pharmaceutical Distribution and Provider Services segment primarily relates to Medicap Pharmacies Incorporated purchase price tax adjustments of approximately $25.2 million. | |
(3) | The increase within the Pharmaceutical Technologies and Services segment primarily relates to the acquisition of Geodax Technology, Inc. and an acquisition within the Intercare business, which resulted in goodwill allocations of approximately $63.8 and $26.6 million respectively. The affect of these acquisitions was partially offset by purchase price adjustments of approximately $18.6 million. The remaining amounts represent goodwill acquired from an other immaterial acquisition, other purchase price adjustments and foreign currency translation adjustments. | |
(4) | The increase within the Clinical Technologies and Services segment primarily relates to Alaris purchase price tax adjustments of approximately $117.9 million which were offset by approximately $19.3 million for the reclassification of goodwill to intangibles within the Alaris business. | |
(5) | These impairment charges relate to the Pharmaceutical Development, Oral Technologies and Biotechnology and Sterile Life Science businesses within the Pharmaceutical Technologies and Services segment. See Note 4 above for additional information regarding these impairment charges. | |
(6) | This goodwill decrease relates to the sale of the Radiation Management Services business within the Pharmaceutical Technologies and Services segment during the second quarter. See Note 22 below for additional information regarding this sale of business. |
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(7) | During the first quarter of fiscal 2005, the Company transferred its Clinical Services and Consulting business, previously reported within the Pharmaceutical Distribution and Provider Services segment, to its Clinical Technologies and Services segment to better align business operations. This transfer resulted in approximately $60.1 million of goodwill being reclassed between the segments. |
Gross | Accumulated | Net | ||||||||||
(in millions) | Intangible | Amortization | Intangible | |||||||||
June 30, 2003 | ||||||||||||
Amortized intangibles: | ||||||||||||
Trademarks and patents | $ | 48.1 | $ | 20.8 | $ | 27.3 | ||||||
Non-compete agreements | 27.3 | 21.9 | 5.4 | |||||||||
Customer relationships | 12.5 | 1.2 | 11.3 | |||||||||
Other | 37.1 | 13.5 | 23.6 | |||||||||
Total intangibles | $ | 125.0 | $ | 57.4 | $ | 67.6 | ||||||
June 30, 2004 | ||||||||||||
Unamortized intangibles: | ||||||||||||
Trademarks and patents | $ | 183.9 | $ | 0.4 | $ | 183.5 | ||||||
Total unamortized intangibles | $ | 183.9 | $ | 0.4 | $ | 183.5 | ||||||
Amortized intangibles: | ||||||||||||
Trademarks and patents | $ | 162.0 | $ | 23.0 | $ | 139.0 | ||||||
Non-compete agreements | 32.0 | 24.8 | 7.2 | |||||||||
Customer relationships | 231.4 | 6.8 | 224.6 | |||||||||
Other | 82.4 | 17.2 | 65.2 | |||||||||
Total amortized intangibles | $ | 507.8 | $ | 71.8 | $ | 436.0 | ||||||
Total intangibles | $ | 691.7 | $ | 72.2 | $ | 619.5 | ||||||
June 30, 2005 | ||||||||||||
Unamortized intangibles: | ||||||||||||
Trademarks and patents | $ | 184.6 | $ | 0.4 | $ | 184.2 | ||||||
Total unamortized intangibles | $ | 184.6 | $ | 0.4 | $ | 184.2 | ||||||
Amortized intangibles: | ||||||||||||
Trademarks and patents | $ | 152.7 | $ | 24.3 | $ | 128.4 | ||||||
Non-compete agreements | 9.2 | 4.0 | 5.2 | |||||||||
Customer relationships | 234.9 | 35.2 | 199.7 | |||||||||
Other | 98.7 | 28.2 | 70.5 | |||||||||
Total amortized intangibles | $ | 495.5 | $ | 91.7 | $ | 403.8 | ||||||
Total intangibles | $ | 680.1 | $ | 92.1 | $ | 588.0 | ||||||
(in millions) | 2006 | 2007 | 2008 | 2009 | 2010 | |||||||||||||||
Amortization expense | $ | 53.8 | $ | 51.2 | $ | 45.7 | $ | 43.6 | $ | 42.6 |
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(in millions) | Revenue | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Pharmaceutical Distribution and Provider Services (1) | $ | 60,843.8 | $ | 52,334.2 | $ | 45,727.9 | ||||||
Medical Products and Services (2) | 9,824.0 | 9,143.5 | 8,024.9 | |||||||||
Pharmaceutical Technologies and Services (3) | 2,975.8 | 2,804.1 | 2,250.0 | |||||||||
Clinical Technologies and Services (4) (6) | 2,189.3 | 1,550.6 | 1,410.3 | |||||||||
Corporate (5) | (922.2 | ) | (778.9 | ) | (681.6 | ) | ||||||
Total revenue | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | ||||||
(in millions) | Operating Earnings | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Pharmaceutical Distribution and Provider Services (1) | $ | 1,040.2 | $ | 1,061.5 | $ | 1,086.2 | ||||||
Medical Products and Services (7) | 672.4 | 694.4 | 624.1 | |||||||||
Pharmaceutical Technologies and Services (6) | 337.0 | 465.4 | 368.3 | |||||||||
Clinical Technologies and Services (6) | 273.2 | 336.6 | 316.7 | |||||||||
Corporate (6) (7) | (560.0 | ) | (209.1 | ) | (208.3 | ) | ||||||
Total operating earnings | $ | 1,762.8 | $ | 2,348.8 | $ | 2,187.0 | ||||||
(in millions) | Depreciation and Amortization Expense | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Pharmaceutical Distribution and Provider Services | $ | 45.0 | $ | 42.0 | $ | 51.6 | ||||||
Medical Products and Services | 95.8 | 88.5 | 88.1 | |||||||||
Pharmaceutical Technologies and Services | 131.7 | 106.6 | 82.7 | |||||||||
Clinical Technologies and Services | 83.9 | 21.8 | 20.9 | |||||||||
Corporate | 53.3 | 40.3 | 22.5 | |||||||||
Total depreciation and amortization expense | $ | 409.7 | $ | 299.2 | $ | 265.8 | ||||||
(in millions) | Capital Expenditures | |||||||||||
2005 | 2004 | 2003 | ||||||||||
Pharmaceutical Distribution and Provider Services | $ | 69.7 | $ | 54.3 | $ | 56.2 | ||||||
Medical Products and Services | 117.0 | 101.3 | 85.7 | |||||||||
Pharmaceutical Technologies and Services | 260.1 | 193.0 | 182.9 | |||||||||
Clinical Technologies and Services | 59.7 | 29.6 | 13.0 | |||||||||
Corporate | 65.2 | 32.0 | 85.4 | |||||||||
Total capital expenditures | $ | 571.7 | $ | 410.2 | $ | 423.2 | ||||||
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(in millions) | Assets | |||||||
2005 | 2004 | |||||||
Pharmaceutical Distribution and Provider Services | $ | 9,112.3 | $ | 8,512.2 | ||||
Medical Products and Services | 4,144.1 | 3,829.6 | ||||||
Pharmaceutical Technologies and Services | 4,344.6 | 4,389.3 | ||||||
Clinical Technologies and Services | 3,868.1 | 3,647.7 | ||||||
Corporate (8) | 590.1 | 990.3 | ||||||
Total assets | $ | 22,059.2 | $ | 21,369.1 | ||||
(1) | Operating results for Intercare, acquired in December 2003, include a Specialty Pharmaceutical Distribution business that is similar to the Company’s Pharmaceutical Distribution business. For segment reporting purposes, this specialty pharmaceutical distribution business is included in the Pharmaceutical Distribution and Provider Services segment. This classification was not reported during the second quarter of fiscal 2004 immediately following the acquisition as the Company was still assessing the appropriate segment reporting treatment. Intercare’s results of operations for the second quarter of fiscal 2004 were not material to the Company or the Company’s individual segments. | |
(2) | The Medical Products and Services segment’s revenue is derived from two main product categories. These product categories and their respective contributions to revenue are as follows: |
Product Category | 2005 | 2004 | 2003 | |||||||||
Medical, Surgical and Laboratory Products | 76 | % | 77 | % | 79 | % | ||||||
Specialty Pharmaceutical Products | 24 | % | 23 | % | 21 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(3) | The Pharmaceutical Technologies and Services segment’s revenue is derived from three main product categories. These product categories and their respective contributions to revenue are as follows: |
Product Category | 2005 | 2004 | 2003 | |||||||||
Manufactured Products and Radiopharmaceuticals | 71 | % | 68 | % | 63 | % | ||||||
Packaged Products | 14 | % | 14 | % | 18 | % | ||||||
Other Products and Services | 15 | % | 18 | % | 19 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(4) | The Clinical Technologies and Services segment’s revenue is derived from three main product categories. These product categories and their respective contributions to revenue are as follows: |
Product Category | 2005 | 2004 | 2003 | |||||||||
Clinical Services and Consulting | 45 | % | 55 | % | 55 | % | ||||||
Intravenous Medication Safety and Infusion Delivery Systems | 29 | % | 1 | % | — | % | ||||||
Point-of-Use Systems | 26 | % | 44 | % | 45 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
(5) | Corporate revenue primarily consists of the elimination of inter-segment revenue and foreign currency translation adjustments. |
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(6) | Corporate operating earnings include special items of $264.2 million, $57.4 million and $39.9 million for the fiscal years ended June 30, 2005, 2004 and 2003, respectively (see Note 4 for discussion of special items). The Company allocated a portion of its corporate costs to the business segments to estimate the costs the segments would have incurred for certain services provided by the corporate entity. In addition, the Company attempts to maintain a relatively consistent year-over-year rate of Corporate allocated costs. During the first quarter of fiscal 2006, the Company will modify the way in which corporate costs are allocated to the business segments, to better align corporate spending with the business segments based on the benefits received. The presentation of the first quarter of fiscal 2006 results will include a re-allocation of the historical segment amounts for comparative purposes. | |
During fiscal 2005, 2004 and 2003, corporate operating earnings include unallocated Corporate administrative expenses, costs not attributable to the operations of the segments and certain other Corporate directed costs described below: |
• | Investment spending – The Company has encouraged its business units to identify investment projects which will provide future returns. These projects typically require incremental strategic investments in the form of additional capital or operating expenses. As approval decisions for such projects are dependent upon Corporate management, the expenses for such projects are retained at the Corporate segment. Investment spending for fiscal years, 2005, 2004 and 2003 was $18.0 million, $48.3 million and $58.0 million, respectively. | ||
• | Interest income adjustment – At the direction of Corporate management, the former Automation and Information Services segment sold portions of its leased asset portfolio and transferred the proceeds to Corporate. As the capital proceeds associated with these sales have not been redeployed within the business segment, but utilized for other general corporate purposes, the segment was allocated a benefit by Corporate for the interest income that would have been earned associated with these sold leases. In fiscal 2004, the segment received a $21 million allocation from Corporate. Effective the first quarter of fiscal 2005, the Pyxis products business did not receive an allocation adjustment from Corporate for the estimated interest income related to the sale of certain lease portfolios. | ||
• | Foreign exchange adjustments – Effective the first quarter of fiscal 2005, the Pharmaceutical Technologies and Services segment changed its basis for measuring the impact of translating foreign subsidiaries’ operating results into U.S. dollars. Historically since 2000, this segment’s revenue and operating earnings were not impacted by foreign exchange fluctuations as the Company applied constant exchange rates to translate its foreign operating results into U.S. dollars and recorded the actual impact of foreign exchange rate changes within the Corporate segment. For fiscal 2004 and 2003, $11.2 million and $17.5 million of expenses were allocated to Corporate representing the difference between “constant rates” and “actual” exchange rates. Effective the first quarter of fiscal 2005, the impact of foreign exchange fluctuations were included in the Pharmaceutical Technologies and Services segment. |
(7) | The cost of the Company’s shared service center in Albuquerque New Mexico, which was previously reported within the Corporate segment, has been reclassified within the Medical Products and Services operating earnings for fiscal 2004 and 2003 to more accurately reflect the costs within the segment that received the benefits from the shared service center. The cost of these services was approximately $18.2 million, $18.4 million and $19.0 million, respectively, for fiscal 2005, 2004 and 2003. | |
(8) | The Corporate assets primarily include cash and cash equivalents, net property and equipment and unallocated deferred taxes. |
Revenue | Long-Lived Assets | |||||||||||||||||||||||
For The Fiscal Year Ended June 30, | As of June 30, | |||||||||||||||||||||||
(in millions) | 2005 | 2004 | 2003 | 2005 | 2004 | 2003 | ||||||||||||||||||
United States | $ | 72,804.4 | $ | 63,373.4 | $ | 55,673.1 | $ | 1,766.4 | $ | 1,852.5 | $ | 1,693.5 | ||||||||||||
International | 2,106.3 | 1,680.1 | 1,058.4 | 717.6 | 511.5 | 396.0 | ||||||||||||||||||
Total | $ | 74,910.7 | $ | 65,053.5 | $ | 56,731.5 | $ | 2,484.0 | $ | 2,364.0 | $ | 2,089.5 | ||||||||||||
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(in millions, except per Common Share amounts) | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
Fiscal 2005 | ||||||||||||||||
Revenue | $ | 17,796.0 | $ | 18,554.6 | $ | 19,103.0 | $ | 19,457.1 | ||||||||
Gross margin | 1,086.5 | 1,206.5 | 1,346.8 | 1,366.7 | ||||||||||||
Selling, general and administrative expenses | 693.1 | 699.6 | 703.1 | 765.7 | ||||||||||||
Earnings from continuing operations | 217.8 | 203.8 | 367.6 | 257.5 | ||||||||||||
Earnings (Loss) from discontinued operations | (4.5 | ) | 10.2 | (1.9 | ) | 0.2 | ||||||||||
Net earnings | $ | 213.3 | $ | 214.0 | $ | 365.7 | $ | 257.7 | ||||||||
Earnings from continuing operations | ||||||||||||||||
per Common Share: | ||||||||||||||||
Basic | $ | 0.50 | $ | 0.47 | $ | 0.85 | $ | 0.60 | ||||||||
Diluted | $ | 0.50 | $ | 0.47 | $ | 0.84 | $ | 0.59 |
• | a favorable adjustment of approximately $31.7 million from changes in the LIFO reserve, primarily due to price deflation within generic pharmaceutical inventories, lower inventory levels and lower price increases related to branded pharmaceutical inventories; | ||
• | product line rationalization and inventory and accounts receivable reserve adjustments within the Pyxis products business of approximately $30.3 million; | ||
• | an adjustment of approximately $26.3 million pursuant to the repatriation provisions of the AJCA; | ||
• | an adjustment of approximately $11.8 million within the Medical Products and Services segment related to the estimated remaining liabilities and settlement of insurance proceeds due for outstanding latex litigation; | ||
• | an increase in inventory reserves of approximately $14.7 million within the Pharmaceutical Distribution and Provider Services segment related to a generic manufacturer’s bankruptcy and approximately $10.0 million related to slow moving inventory reserves; and | ||
• | adjustments of approximately $8.0 million related to the write down of inventory within the Biotechnology and Sterile Life Sciences business. |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Fiscal 2004 | ||||||||||||||||
Revenue | $ | 15,388.2 | $ | 16,350.8 | $ | 16,391.8 | $ | 16,922.7 | ||||||||
Gross margin | 1,072.8 | 1,161.0 | 1,283.4 | 1,224.0 | ||||||||||||
Selling, general and administrative expenses | 547.6 | 588.0 | 608.9 | 602.1 | ||||||||||||
Earnings from continuing operations before cumulative effect of change in accounting | 323.5 | 373.6 | 430.1 | 397.4 | ||||||||||||
Loss from discontinued operations | (1.8 | ) | (5.1 | ) | (0.8 | ) | (3.9 | ) | ||||||||
Cumulative effect of change in accounting | (38.5 | ) | — | — | — | |||||||||||
Net earnings | $ | 283.2 | $ | 368.5 | $ | 429.3 | $ | 393.5 | ||||||||
Earnings from continuing operations before cumulative effect of change in accounting per Common Share: | ||||||||||||||||
Basic | $ | 0.73 | $ | 0.86 | $ | 1.00 | $ | 0.92 | ||||||||
Diluted | $ | 0.72 | $ | 0.85 | $ | 0.99 | $ | 0.91 |
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First | Second | Third | Fourth | |||||||||||||
(in millions, except per Common Share amounts) | Quarter | Quarter | Quarter | Quarter | ||||||||||||
Fiscal 2005 | ||||||||||||||||
Net earnings | $ | (20.0 | ) | $ | (71.1 | ) | $ | (28.5 | ) | $ | (76.7 | ) | ||||
Diluted net earnings per Common Share | $ | (0.05 | ) | $ | (0.16 | ) | $ | (0.06 | ) | $ | (0.18 | ) | ||||
Fiscal 2004 | ||||||||||||||||
Net earnings | $ | (8.7 | ) | $ | 3.3 | $ | (4.9 | ) | $ | (25.3 | ) | |||||
Diluted net earnings per Common Share | $ | (0.02 | ) | $ | 0.01 | $ | (0.01 | ) | $ | (0.06 | ) | |||||
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• | Impairments of approximately $70.7 million within the Pharmaceutical Technologies and Services segment. The impairments related primarily to recognizing reductions in the value of assets within the Oral Technologies business based on discounted cash flow analyses performed in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” as a result of strategic business decisions made during the second quarter of fiscal 2005. | ||
• | Impairments of approximately $21.9 million related to lease agreements for certain real estate and equipment used in the operations of the Company (see Notes 10 and 20 above for additional information regarding these lease agreements). | ||
• | Impairments of $7.2 million within the Corporate entity relating to a decision to write-off internally developed software. | ||
• | Impairment of $5.4 million to record machinery and equipment at its net realizable value as it met the held for sale criteria of SFAS No. 144 within the Pharmaceutical Technology and Services segment. | ||
• | Impairment of $5.2 million on an aircraft within its Corporate entity, which was repurchased from an operating lease agreement. The aircraft met all criteria to be classified as held for sale during the second quarter of fiscal 2005. The asset impairment recognized reduced the cost of the aircraft to its fair market value based upon quoted market prices of similar assets. The Company subsequently sold the aircraft during the third quarter of fiscal 2005 and no significant gain or loss was recognized (see Notes 10 and 20 above for additional information regarding these lease agreements). |
• | A net gain of approximately $8.7 million related to the sale of a non-strategic business within its Pharmaceutical Technologies and Services segment. | ||
• | A net gain of approximately $6.8 million related to the sale of land within its Medical Products and Services segment. | ||
• | A net gain of approximately $6.3 million related to the sale of a non-strategic business within its Medical Products and Services segment. | ||
• | The Company recorded a $4.2 million asset impairment charge relating to domestic intellectual property rights within its former Automation and Information Services segment. |
• | A net gain of approximately $17.6 million related to the sale of a non-strategic business within the Pharmaceutical Distribution and Provider Services segment. | ||
• | Impairment of $7.9 million related to certain obsolete assets as a result of a system implementation within the Pharmaceutical Technologies and Services segment. | ||
• | Impairment of $6.0 million related to two investments within the Company’s former Automation and Information Services segment. | ||
• | Impairment of $5.5 million related to an aircraft within the Corporate entity which met all criteria to be classified as held for sale during the second quarter of fiscal 2003. |
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Fiscal Year | ||||||||||||
Ended June 30, | ||||||||||||
(in millions) | 2005 | 2004 | 2003 | |||||||||
Revenue | $ | 4.4 | $ | 77.1 | $ | 92.5 | ||||||
Gain from sale of business unit | 18.7 | — | — | |||||||||
Earnings/(loss) before income taxes | 6.6 | (19.1 | ) | (8.6 | ) | |||||||
Income tax benefit/(expense) | (2.6 | ) | 7.4 | 2.5 | ||||||||
Earnings/(loss) from discontinued operations | $ | 4.0 | $ | (11.7 | ) | $ | (6.1 | ) | ||||
Fiscal Year | ||||||||
Ended June 30, | ||||||||
(in millions) | 2005 | 2004 | ||||||
Current Assets | $ | — | $ | 21.2 | ||||
Property and Equipment | — | 22.0 | ||||||
Other Assets | — | 17.2 | ||||||
Total Assets | $ | — | $ | 60.4 | ||||
Current Liabilities | $ | — | $ | 30.9 | ||||
Long Term Debt and Other | — | 24.2 | ||||||
Total Liabilities | $ | — | $ | 55.1 | ||||
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• | appointing a new Chief Financial Officer with substantial public company business management, governance and financial experience; | ||
• | creating an office of Chief Ethics and Compliance Officer (“CECO”) and appointing a CECO to help ensure that the Company is following best practices with respect to regulatory and compliance matters; | ||
• | appointing a new Chief Accounting Officer and Controller, who is primarily responsible for keeping the Company apprised of contemporary accounting issues; | ||
• | appointing a new Treasurer; | ||
• | enhancing the Company’s internal audit function by increasing the number of internal audit staff and recruiting additional seasoned audit professionals; | ||
• | adopting additional governance processes relating to operation of the Company’s Disclosure Committee and increasing the membership of the Committee; | ||
• | developing written procedures for, among other items, reviewing unusual financial statement adjustments and allocating costs to the Company’s segments; | ||
• | adopting process improvements concerning the Company’s financial statement close process; | ||
• | adopting policy, procedure and oversight improvements concerning the timing of revenue recognition within the Company’s Pyxis products business (as more fully discussed in Note 1 in “Notes to Consolidated Financial Statements”); | ||
• | developing systems enhancements to enable automated verifications of installed Pyxis automatic dispensing equipment at customer locations; | ||
• | adopting process improvements for establishing and adjusting reserves; | ||
• | adopting improved accounting and reporting controls for complex vendor and customer relationships; | ||
• | developing additional training programs for the Company’s finance and accounting personnel; | ||
• | developing enhanced educational programs for personnel at all levels in ethics, corporate compliance, disclosure, procedures for anonymous reporting of concerns and mechanisms for enforcing Company policies; and | ||
• | implementing an enhanced certification process from the Company’s finance, accounting and operations personnel in connection with the financial statement close process, which enhancements are, in part, intended to ensure operating decisions are based on appropriate business considerations. |
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ASSESSMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Board of Directors of Cardinal Health, Inc.:
Columbus, Ohio
September 9, 2005
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Number of Common Shares | ||||||||||||
Remaining Available for | ||||||||||||
Future Issuance Under Equity | ||||||||||||
Number of Common Shares | Compensation Plans | |||||||||||
to be Issued Upon Exercise | Weighted-Average | (excluding Common Shares | ||||||||||
of Outstanding Options | Exercise Price of | reflected in column (a)) | ||||||||||
(in millions) | Outstanding Options | (in millions) | ||||||||||
Plan Category | (a) | (b) | (c) | |||||||||
Plans approved by shareholders (1) | 14.3 | (2) | $ | 51.18 | (2) | 21.9 | (3) | |||||
Plans not approved by shareholders | 29.9 | (4) | $ | 56.61 | (4) | 11.2 | (5) | |||||
Plans acquired through acquisition (6) | 4.1 | (6) | $ | 34.44 | — | |||||||
Balance at June 30, 2005 | 48.3 | $ | 53.16 | 33.1 | ||||||||
(1) | Under the Company’s Amended and Restated Equity Incentive Plan, as amended (the “Equity Incentive Plan”),which was approved by the Company’s shareholders in November 1995, the total number of Common Shares available for grant of awards under the plan is an amount equal to the sum of (a) 1.5% of the total outstanding Common Shares as of the last day of |
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the Company’s immediately preceding fiscal year, plus (b) the number of Common Shares available for grant under the plan as of November 23, 1998, plus (c) any Common Shares related to awards that expire or are unexercised, forfeited, terminated, cancelled, settled in such a manner that all or some of the Common Shares covered by an award are not issued to a participant, or returned to the Company in payment of the exercise price or tax withholding obligations in connection with outstanding awards, plus (d) any unused portion of the Common Shares available under clause (a) above for the previous two fiscal years as a result of not being used in such previous two fiscal years. | ||
(2) | In addition to stock options outstanding under the Equity Incentive Plan, also includes 468,963 restricted share units outstanding under the Equity Incentive Plan that are payable solely in Common Shares. Restricted share units do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price. | |
(3) | Includes approximately 18.5 million Common Shares remaining available for future issuance under the Equity Incentive Plan in the form of option, restricted share, restricted share unit, performance share, performance share unit and incentive compensation restricted share awards. Also includes approximately 3.4 million Common Shares remaining available for future issuance under the Company’s Employee Stock Purchase Plan. | |
(4) | In addition to stock options outstanding under the Broadly-based Equity Incentive Plan and Outside Director Equity Incentive Plan, also includes 24,250 restricted share units outstanding under the Broadly-based Equity Incentive Plan that are payable solely in Common Shares. Also includes 43,740 Common Share units outstanding under the Deferred Compensation Plan that are payable solely in Common Shares. These awards do not have an exercise price, and therefore were not included for purposes of computing the weighted-average exercise price. | |
(5) | Includes: approximately 3.2 million Common Shares remaining available for future issuance under the Broadly-based Equity Incentive Plan in the form of option, restricted share or restricted share unit awards; approximately 1.4 million Common Shares remaining available for future issuance under the Outside Director Equity Incentive Plan in the form of option or restricted share awards; approximately 2.3 million Common Shares remaining available for future issuance under the Deferred Compensation Plan; and approximately 4.3 million Common Shares remaining available for future issuance under the Global Employee Stock Purchase Plan. | |
(6) | Includes options to purchase approximately 1.4 million Common Shares in the aggregate that were assumed by the Company in connection with acquisitions that were approved by the Company’s shareholders. The remaining options to purchase approximately 2.7 million Common Shares in the aggregate were assumed by the Company in connection with acquisitions that were not approved by the Company’s shareholders. |
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Page | ||||
Report of Independent Registered Public Accounting Firm.......................................................................................................................... | 53 | |||
Financial Statements: | ||||
Consolidated Statements of Earnings for the Fiscal Years Ended June 30, 2005, 2004 and 2003................................................................ | 54 | |||
Consolidated Balance Sheets at June 30, 2005 and 2004............................................................................................................................... | 55 | |||
Consolidated Statements of Shareholders’ Equity for the Fiscal Years Ended June 30, 2005, 2004 and 2003............................................. | 56 | |||
Consolidated Statements of Cash Flows for the Fiscal Years Ended June 30, 2005, 2004 and 2003............................................................ | 57 | |||
Notes to Consolidated Financial Statements................................................................................................................................................... | 58 |
Page | ||||
Schedule II — Valuation and Qualifying Accounts....................................................................................................................................... | 127 |
Exhibit | ||
Number | Exhibit Description | |
3.01 | Amended and Restated Articles of Incorporation, as amended (16) | |
3.02 | Restated Code of Regulations (7) | |
4.01 | Specimen Certificate for the Registrant’s Common Shares (10) | |
4.02 | Indenture, dated as of May 1, 1993, between the Registrant and Bank One, Indianapolis, NA, Trustee, relating to the Registrant’s 6% Notes Due 2006 (26) | |
4.03 | Indenture, dated as of April 18, 1997, between the Registrant and Bank One, Columbus, NA, Trustee, relating to the Registrant’s 61/4% Notes Due 2008, 63/4% Notes Due 2011 and 4.00% Notes Due 2015 (1) | |
4.04 | Indenture, dated as of October 1, 1996, between Allegiance Corporation and PNC Bank, Kentucky, Inc. (“PNC”), Trustee; and First Supplemental Indenture, dated as of February 3, 1999, by and among Allegiance Corporation, the Registrant and Chase Manhattan Trust Company, National Association (as successor in interest to PNC), Trustee (2) | |
4.05 | Form of Warrant Certificate to Purchase the Registrant’s Common Shares (4) | |
4.06 | Form of Debt Securities (9) | |
4.07 | Agreement to furnish to the Securities and Exchange Commission upon request a copy of instruments defining the rights of holders of certain long-term debt of the Registrant and consolidated subsidiaries | |
10.01 | Form of Commercial Paper Dealer Agreement 4(2) Program, dated as of August 26, 1999, between the Registrant, as Issuer, and certain entities, each as Dealer, concerning notes to be issued pursuant to Issuing and Paying Agency Agreement, dated as of June 28, 1999, between the Issuer and The First National Bank of Chicago, as Issuing and Paying Agent (8) |
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Exhibit | ||
Number | Exhibit Description | |
10.02 | Five-year Credit Agreement, dated as of March 27, 2003, between the Registrant, certain subsidiaries of the Registrant, certain lenders, Bank One, NA, as Administrative Agent, Bank of America N.A., as Syndication Agent, Wachovia Bank, National Association, as Syndication Agent, Barclays Bank PLC, as Documentation Agent, Credit Suisse First Boston, as Documentation Agent, Deutsche Bank Securities, Inc., as Documentation Agent, and Banc One Capital Markets, Inc., as Lead Arranger and Book Manager (12) | |
10.03 | First Amendment to Credit Agreement, Agency Agreement and Amendment to Guaranty, dated as of March 24, 2004, between the Registrant, certain subsidiaries of the Registrant, certain lenders, Bank One, NA and Wachovia Bank, National Association (15) | |
10.04 | Five-year Credit Agreement, dated as of March 23, 2004, between the Registrant, certain subsidiaries of the Registrant, certain lenders, Wachovia Bank, National Association, as Administrative Agent, Bank One, NA, as Syndication Agent, Bank of America N.A., as Syndication Agent, Barclays Bank PLC, as Documentation Agent, Deutsche Bank Securities, Inc., as Documentation Agent, Wachovia Capital Markets, LLC, as Lead Arranger and Book Manager, and Banc One Capital Markets, Inc., as Lead Arranger and Book Manager (15) | |
10.05 | Partnership Agreement of R.P. Scherer GmbH & Co. KG (3) | |
10.06 | Amended and Restated Receivables Purchase Agreement, dated as of May 21, 2004, among Cardinal Health Funding, LLC, as Seller, Griffin Capital, LLC, as Servicer, the Conduits party thereto, the Financial Institutions party thereto, the Managing Agents party thereto and Bank One, NA (Main Office Chicago), as Agent (confidential treatment has been requested for certain confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act) (18) | |
10.07 | Omnibus Amendment and Reaffirmation of Performance Guaranty, dated as of August 18, 2004, by and among Cardinal Health Funding, LLC, Griffin Capital, LLC, the Conduits party thereto, the Financial Institutions party thereto, the Managing Agents party thereto, Bank One, NA (Main Office Chicago), as the Agent, and Cardinal Health, Inc. (confidential treatment has been requested for certain confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act) (18) | |
10.08 | Omnibus Limited Waiver and Second Omnibus Amendment and Reaffirmation of Performance Guaranty, dated as of September 24, 2004, by and among Cardinal Health Funding, LLC, Griffin Capital, LLC, the Conduits party thereto, the Financial Institutions party thereto, the Managing Agents party thereto, Bank One, NA (Main Office Chicago), as the Agent, and Cardinal Health, Inc. (confidential treatment has been requested for certain confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act) (18) | |
10.09 | Amendment No. 3 to Amended and Restated Receivables Purchase Agreement and Confirmations of Transfers, dated as of September 30, 2004, by and among Griffin Capital, LLC, Cardinal Health Funding, LLC, each entity signatory thereto as a Conduit, each entity signatory thereto as a Financial Institution, each entity signatory thereto as a Managing Agent and Bank One, NA (Main Office Chicago), as the Agent (confidential treatment has been requested for certain confidential commercial and financial information, pursuant to Rule 24b-2 under the Exchange Act) (18) | |
10.10 | Amended and Restated Performance Guaranty, dated as of September 30, 2004, executed by Cardinal Health, Inc. in favor of Cardinal Health Funding, LLC (18) | |
10.11 | Amended and Restated Equity Incentive Plan, as amended (8) and (10)* | |
10.12 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for cliff vesting and manual signature (22)* | |
10.13 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for residents of California, cliff vesting and manual signature* | |
10.14 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for cliff vesting and electronic signature (22)* |
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Exhibit | ||
Number | Exhibit Description | |
10.15 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for staggered vesting and manual signature (22)* | |
10.16 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for residents of California, staggered vesting and manual signature* | |
10.17 | Form of Nonqualified Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended, for staggered vesting and electronic signature (22)* | |
10.18 | Form of Restricted Share Units Agreement under the Amended and Restated Equity Incentive Plan, as amended, for cliff vesting (22)* | |
10.19 | Form of Restricted Share Units Agreement under the Amended and Restated Equity Incentive Plan, as amended, for residents of California and cliff vesting* | |
10.20 | Form of Restricted Share Units Agreement under the Amended and Restated Equity Incentive Plan, as amended, for staggered vesting (22)* | |
10.21 | Form of Restricted Share Units Agreement under the Amended and Restated Equity Incentive Plan, as amended, for residents of California and staggered vesting* | |
10.22 | Form of Directors’ Stock Option Agreement under the Amended and Restated Equity Incentive Plan, as amended (20)* | |
10.23 | Amended and Restated Outside Directors Equity Incentive Plan* | |
10.24 | Form of Directors’ Stock Option Agreement under the Outside Directors Equity Incentive Plan (20)* | |
10.25 | Broadly-based Equity Incentive Plan, as amended (11)* | |
10.26 | Deferred Compensation Plan, amended and restated effective January 1, 2005 (19)* | |
10.27 | Global Employee Stock Purchase Plan, as amended* | |
10.28 | Management Incentive Plan (19)* | |
10.29 | Supplemental Benefit Plan for Key Employees of R.P. Scherer Corporation (22)* | |
10.30 | Allegiance Corporation 1996 Incentive Compensation Program (5)* | |
10.31 | ALARIS Medical Systems, Inc. 1996 Stock Option Plan (17)* | |
10.32 | Amended and Restated Employment Agreement, effective as of February 1, 2004, between the Registrant andRobert D. Walter (14)* | |
10.33 | Employment Agreement, effective as of February 1, 2004, between the Registrant and George L. Fotiades (14)* | |
10.34 | Amendment, dated and effective as of February 4, 2005, to Employment Agreement, dated and effective as of February 1, 2004, between the Registrant and George L. Fotiades (20)* | |
10.35 | Employment Agreement, dated and effective as of November 5, 2003, between the Registrant and Ronald K. Labrum (13)* | |
10.36 | Retention Agreement, dated as of August 31, 2004, between ALARIS Medical Systems, Inc. and David L. Schlotterbeck* | |
10.37 | Letter providing terms of offer of employment, executed by the Registrant on April 13, 2005, and confirmed by Jeffrey W. Henderson on April 13, 2005 (23)* |
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Exhibit | ||
Number | Exhibit Description | |
10.38 | Form of Indemnification Agreement between the Registrant and individual Directors (16)* | |
10.39 | Form of Indemnification Agreement between the Registrant and individual Officers (16)* | |
10.40 | Restricted Share Units Agreement, dated October 15, 2001, between the Registrant and Robert D. Walter (11)* | |
10.41 | Nonqualified Stock Option Agreement, dated November 19, 2001, between the Registrant and Robert D. Walter (6)* | |
10.42 | Restricted Share Units Agreement, dated November 20, 2001, between the Registrant and Robert D. Walter (6)* | |
10.43 | Restricted Share Units Agreement, dated December 31, 2001, between the Registrant and Robert D. Walter (11)* | |
10.44 | Restricted Share Units Agreement, dated December 31, 2001, between the Registrant and George L. Fotiades (6)* | |
10.45 | Form of Restricted Share Units Agreement, dated December 31, 2001, between the Registrant and Anthony J. Rucci (6)* | |
10.46 | Restricted Share Units Agreement, dated February 1, 2002, between the Registrant and Robert D. Walter (11)* | |
10.47 | Restricted Share Units Agreement, dated February 1, 2002, between the Registrant and Robert D. Walter (11)* | |
10.48 | Deferred Payment Stock Appreciation Right Agreement, dated as of March 3, 2005, between the Registrant and Robert D. Walter (21)* | |
10.49 | Deferred Payment Stock Appreciation Right Agreement, dated as of August 3, 2005, between the Registrant and Robert D. Walter (24)* | |
10.50 | Nonqualified Stock Option Agreement, dated September 2, 2005, between the Registrant and Robert D. Walter (25)* | |
10.51 | Restricted Share Unit Agreement, dated September 2, 2005, between the Registrant and Robert D. Walter (25)* | |
10.52 | Description of compensation and benefits for named executive officers and certain other executive officers effective September 9, 2005* | |
10.53 | Description of non-management director compensation and benefits effective November 2, 2005 (24)* | |
18.01 | Letter Regarding Change in Accounting Principle (7) | |
18.02 | Letter Regarding Change in Accounting Principle (16) | |
21.01 | List of Subsidiaries of the Registrant | |
23.01 | Consent of Independent Registered Public Accounting Firm | |
31.01 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.02 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.01 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.02 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
99.01 | Statement Regarding Forward-Looking Information |
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Exhibit | ||
Number | Exhibit Description | |
99.02 | First Amendment to the Cardinal Health 401(k) Savings Plan (As amended and restated January 1, 2005) | |
99.03 | First Amendment to the Cardinal Health 401(k) Savings Plan for Employees of Puerto Rico (As amended and restated January 1, 2005) |
* | Management contract or compensation plan or arrangement. | |
(1) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed April 21, 1997 (File No. 1-11373) and incorporated herein by reference. | |
(2) | Included as an exhibit to the Registrant’s Registration Statement on Form S-4 (No. 333-74761) and incorporated herein by reference. | |
(3) | Included as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1998 (File No. 1-11373) and incorporated herein by reference. | |
(4) | Included as an exhibit to the Registrant’s Registration Statement on Form S-4 (No. 333-30889) and incorporated herein by reference. | |
(5) | Included as an exhibit to the Registrant’s Post-Effective Amendment No. 1 on Form S-8 to Form S-4 Registration Statement (No. 333-68819) and incorporated herein by reference. | |
(6) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2001 (File No. 1-11373) and incorporated herein by reference. | |
(7) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-11373) and incorporated herein by reference. | |
(8) | Included as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 1999 (File No. 1-11373) and incorporated herein by reference. | |
(9) | Included as an exhibit to the Registrant’s Registration Statement on Form S-3 (No. 333-62944) and incorporated herein by reference. | |
(10) | Included as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2001 (File No. 1-11373) and incorporated herein by reference. | |
(11) | Included as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002 (File No. 1-11373) and incorporated herein by reference. | |
(12) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (File No. 1-11373) and incorporated herein by reference. | |
(13) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2003 (File No. 1-11373) and incorporated herein by reference. | |
(14) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed February 6, 2004 (File No. 1-11373) and incorporated herein by reference. | |
(15) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed October 20, 2004 (File No. 1-11373) and incorporated herein by reference. | |
(16) | Included as an exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended June 30, 2004 (File No. 1-11373) and incorporated herein by reference. |
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(17) | Included as an exhibit to the Registrant’s Registration Statement on Form S-8 (No. 333-120006) and incorporated herein by reference. | |
(18) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-11373) and incorporated herein by reference. | |
(19) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed December 14, 2004 (File No. 1-11373) and incorporated herein by reference. | |
(20) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 (File No. 1-11373) and incorporated herein by reference. | |
(21) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed March 4, 2005 (File No. 1-11373) and incorporated herein by reference. | |
(22) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 (File No. 1-11373) and incorporated herein by reference. | |
(23) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed April 15, 2005 (File No. 1-11373) and incorporated herein by reference. | |
(24) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed August 5, 2005 (File No. 1-11373) and incorporated herein by reference. | |
(25) | Included as an exhibit to the Registrant’s Current Report on Form 8-K filed September 9, 2005 (File No. 1-11373) and incorporated herein by reference. | |
(26) | Included as an exhibit to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 (File No. 1-11373) and incorporated herein by reference. |
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SIGNATURES
CARDINAL HEALTH, INC. | ||||
By: | /s/ Robert D. Walter | |||
Robert D. Walter, Chairman and | ||||
Chief Executive Officer | ||||
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Signature | Title | |
/s/ Robert D. Walter | Chairman, Chief Executive Officer and Director (principal executive officer) | |
/s/ Jeffrey W. Henderson | Executive Vice President and Chief Financial Officer (principal financial officer) | |
/s/ Eric R. Slusser | Senior Vice President-Finance, Chief Accounting Officer and Controller (principal accounting officer) | |
/s/ Dave Bing | Director | |
/s/ George H. Conrades | Director | |
/s/ John F. Finn | Director | |
/s/ Robert L. Gerbig | Director | |
/s/ John F. Havens | Director | |
/s/ J. Michael Losh | Director | |
/s/ John B. McCoy | Director | |
/s/ Richard C. Notebaert | Director | |
/s/ Michael D. O’Halleran | Director | |
/s/ David W. Raisbeck | Director | |
/s/ Jean G. Spaulding | Director | |
/s/ Matthew D. Walter | Director |
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(In millions)
Balance at | Charged to | Charged to | Balance at | ||||||||||||||||||
Beginning | Costs and | Other | End | ||||||||||||||||||
Description | of Period | Expenses | Accounts (1) (2) | Deductions (3) | of Period | ||||||||||||||||
Fiscal Year 2005: | |||||||||||||||||||||
Accounts receivable | $ | 119.1 | $ | 8.8 | $ | 2.4 | $ | (20.5 | ) | $ | 109.8 | ||||||||||
Finance notes receivable | 4.1 | 2.0 | 0.8 | (2.5 | ) | 4.4 | |||||||||||||||
Net investment in sales-type leases | 15.7 | (2.0 | ) | 0.7 | (0.5 | ) | 13.9 | ||||||||||||||
$ | 138.9 | $ | 8.8 | $ | 3.9 | $ | (23.5 | ) | $ | 128.1 | |||||||||||
Fiscal Year 2004: | |||||||||||||||||||||
Accounts receivable | $ | 121.3 | $ | 6.4 | $ | 12.8 | $ | (21.4 | ) | $ | 119.1 | ||||||||||
Finance notes receivable | 4.5 | 0.3 | 1.5 | (2.2 | ) | 4.1 | |||||||||||||||
Net investment in sales-type leases | 17.8 | (5.2 | ) | 2.2 | 0.9 | 15.7 | |||||||||||||||
$ | 143.6 | $ | 1.5 | $ | 16.5 | $ | (22.7 | ) | $ | 138.9 | |||||||||||
Fiscal Year 2003: | |||||||||||||||||||||
Accounts receivable | $ | 122.9 | $ | 19.1 | $ | 5.9 | $ | (26.6 | ) | $ | 121.3 | ||||||||||
Finance notes receivable | 4.7 | 0.6 | 0.6 | (1.4 | ) | 4.5 | |||||||||||||||
Net investment in sales-type leases | 16.0 | 2.5 | — | (0.7 | ) | 17.8 | |||||||||||||||
$ | 143.6 | $ | 22.2 | $ | 6.5 | $ | (28.7 | ) | $ | 143.6 | |||||||||||
(1) | During fiscal 2005, 2004 and 2003 recoveries of amounts provided for or written off in prior years were $3.7 million, $3.8 million and $2.4 million, respectively. | |
(2) | In fiscal 2005, 2004 and 2003, $0.2 million, $13.9 million and $7.1 million, respectively, relates to the beginning balance for acquisitions accounted for as purchase transactions. | |
(3) | Write-off of uncollectible accounts. |
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