Exhibit 99.1
7000 Cardinal Place
Dublin,OH 43017
www.cardinalhealth.com
FOR IMMEDIATE RELEASE
Contacts:
Media: | Troy Kirkpatrick | Investors: | Sally Curley | |||
(614) 757-6225 | (614) 757-7115 | |||||
troy.kirkpatrick@cardinalhealth.com | sally.curley@cardinalhealth.com |
CARDINAL HEALTH REPORTS SECOND-QUARTER RESULTS
• | Revenue increases 3 percent to $24.9 billion |
• | Earnings from continuing operations increase 36 percent to $230 million, or $0.64 per share |
• | Non-GAAP diluted earnings per share from continuing operations increase 12 percent to $0.57 |
• | Company increases outlook for fiscal 2010 non-GAAP EPS to $2.08 to $2.18 from previous range of $1.90 to $2.00 |
DUBLIN, Ohio, Jan. 28, 2010— Cardinal Health today reported fiscal second-quarter results, with revenue increasing 3 percent to $24.9 billion and non-GAAP diluted earnings per share from continuing operations1 increasing 12 percent to $0.57.
Highlights from the quarter include a 38 percent increase in profit from the Medical segment and continued improvement within the Pharmaceutical segment, with a decline in segment profit of 1 percent. The company also reported strong operating cash flow of $524 million and improvements in working capital for the quarter.
GAAP earnings from continuing operations were $230 million for the quarter, or $0.64 per share. GAAP results include a positive $0.07 per share net after-tax contribution, primarily from a previously disclosed insurance recovery and the gain on the sale of CareFusion stock, partially offset by restructuring expenses and other costs associated with the spinoff of CareFusion Corp.
“We are encouraged by our performance in the second quarter and in the first half of our fiscal year,” said George Barrett, chairman and CEO of Cardinal Health. “These results reflect excellent progress on our key initiatives and customer focus across our businesses, as well as the benefit from external factors that were more pronounced than we had anticipated. Our medical segment has had particularly strong year-over-year growth, and our pharmaceutical segment continued its momentum, performing considerably better than we expected in the second quarter.”
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Q2 FY10 SUMMARY
Q2 FY10 | Q2 FY09 | Y/Y | ||||
Revenue | $24.9 billion | $24.1 billion | 3% | |||
Operating Earnings | $367 million | $313 million | 17% | |||
Non-GAAP Operating Earnings2 | $358 million | $337 million | 6% | |||
Earnings from Continuing Operations | $230 million | $169 million | 36% | |||
Non-GAAP Earnings from Continuing Operations3 | $207 million | $183 million | 13% | |||
Diluted EPS from Continuing Operations | $0.64 | $0.47 | 36% | |||
Non-GAAP Diluted EPS from Continuing Operations | $0.57 | $0.51 | 12% |
SECOND-QUARTER SEGMENT RESULTS
Pharmaceutical Segment
The Pharmaceutical segment increased revenue by 3 percent to $22.7 billion, primarily driven by increased sales to existing pharmaceutical distribution customers. Sales to non-bulk customers increased 7 percent to $11.7 billion and sales to bulk customers declined 1 percent to $11 billion. Segment profit declined 1 percent to $260 million as a result of fewer significant generic product launches versus the prior year period, the effect of customer contract repricings within the pharmaceutical distribution business and the expected impact from the Medicine Shoppe International franchisee contract transition. The decline in segment profit was partially offset by the positive margin impact from key initiatives including changes to the company’s sourcing model, solid performance under its branded manufacturer agreements and disciplined cost controls.
Q2 FY10 | Q2 FY09 | Y/Y | ||||
Revenue | $22.7 billion | $22.1 billion | 3% | |||
Segment Profit | $260 million | $263 million | (1)% |
Medical Segment
Revenue for the Medical segment increased 9 percent to $2.2 billion, primarily from sales growth with existing customers. Segment profit grew 38 percent to $103 million, primarily driven by the sales growth and decreased cost of raw materials associated with commodity price movements. Segment profit was partially dampened from investments associated with the Medical Transformation project.
Q2 FY10 | Q2 FY09 | Y/Y | ||||
Revenue | $2.2 billion | $2.1 billion | 9% | |||
Segment Profit | $103 million | $75 million | 38% |
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OUTLOOK
The company also raised its EPS outlook for the year and now expects full-year fiscal 2010 non-GAAP diluted earnings per share from continuing operations to be in the range of $2.08 to $2.18, up from the company’s previous guidance range of $1.90 to $2.00.
“Based on our year-to-date performance and our best assessment of our current environment, our outlook for the full year has improved considerably since we last reported,” Barrett said. “Although our journey is in its early stages, we are pleased with our rate of progress.”
ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS:
• | Renewed multi-billion-dollar pharmaceutical supply chain contracts with Express Scripts and American Associated Pharmacies, the parent company of Associated Pharmacies, Inc. (API) and United Drugs and largest cooperative of independent pharmacy owners. |
• | Entered into exclusive distribution agreement for SurgiCount™ Surgical Safety products. |
• | Dr. James J. Mongan and Carrie S. Cox appointed to the company’s board of directors. |
CONFERENCE CALL
Cardinal Health will host a conference call and webcast today at 8:30 a.m. EST to discuss second-quarter results. To access the call and corresponding slide presentation, go to the Investor page atcardinalhealth.com/investors or dial 617.213.4856, passcode 28763800. Presentation slides, an audio replay and transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. EST on Feb. 4 by dialing 617.801.6888, passcode 90738815.
UPCOMING EVENTS
Cardinal Health will be participating in the following health care investor conferences:
• | UBS Global Healthcare Services Conference in New York on Monday, Feb. 8 at 11 a.m. EST |
• | Raymond James Annual Institutional Investors Conference in Orlando, Fla. on Tuesday, March 9 at 11 a.m. EST |
• | Barclays Capital Global Healthcare Conference in Miami on Tuesday, March 23 at 8:30 a.m. EST |
At these events, company executives will discuss Cardinal Health’s diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks or a transcript, go to the Investors page atcardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a Fortune 18 health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. As one of the largest health care companies in the world, Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 40,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company
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supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation’s largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found atcardinalhealth.com.
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1 | Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding. |
2 | Non-GAAP operating earnings: Operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spinoff Costs (as defined at the end of the attached tables) included within distribution, selling, general and administrative expenses. |
3 | Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spinoff Costs, and (5) gain on sale of CareFusion stock, each net of tax. |
A reconciliation of the differences between these non-GAAP financial measures and their most directly comparable GAAP financial measures is provided in the attached tables and at cardinalhealth.com.
Cardinal Health uses its Web site as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the investor page at cardinalhealth.com.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding the effect of the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds realized from future sales of CareFusion stock; competitive pressures in Cardinal Health’s various lines of business; the loss of one or more key customer or supplier relationships or changes to the terms of those relationships; the timing of generic and branded pharmaceutical introductions and the frequency or rate of branded pharmaceutical price appreciation or generic pharmaceutical price deflation; changes in the distribution patterns or reimbursement rates for health care products and/or services; the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal or administrative proceedings; the effects of disruptions in the financial markets, including uncertainties related to the availability and/or cost of credit on Cardinal Health’s customers and vendors; the ultimate features of government health care reform initiatives and their enactment and implementation; and conditions in the pharmaceutical market and general economic and market conditions. In addition, Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and exhibits to those reports. This news release reflects management’s views as of Jan. 28, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Second Quarter | |||||||||||
(in millions, except per Common Share amounts) | 2010 | 2009 | % Change | ||||||||
Revenue | $ | 24,919.7 | $ | 24,117.8 | 3 | % | |||||
Cost of products sold | 23,962.0 | 23,202.7 | 3 | % | |||||||
Gross margin | 957.7 | 915.1 | 5 | % | |||||||
Operating expenses | |||||||||||
Distribution, selling, general and administrative expenses | 605.2 | 578.5 | 5 | % | |||||||
Restructuring and employee severance | 10.7 | 16.9 | N.M. | ||||||||
Impairments and loss on sale of assets | 0.4 | 6.9 | N.M. | ||||||||
Litigation (credits)/charges, net | (25.4 | ) | (0.3 | ) | N.M. | ||||||
Operating earnings | 366.8 | 313.1 | 17 | % | |||||||
Other (income)/expense, net | (25.6 | ) | 19.7 | N.M. | |||||||
Interest expense, net | 27.4 | 22.2 | 24 | % | |||||||
Earnings before income taxes and discontinued operations | 365.0 | 271.2 | 35 | % | |||||||
Provision for income taxes | 134.8 | 102.2 | 32 | % | |||||||
Earnings from continuing operations | 230.2 | 169.0 | 36 | % | |||||||
Earnings from discontinued operations (net of tax expense of $2.4 million and $56.7 million for the second quarter of fiscal 2010 and 2009, respectively) | 4.3 | 147.5 | N.M. | ||||||||
Net earnings | $ | 234.5 | $ | 316.5 | (26 | )% | |||||
Basic earnings per Common Share: | |||||||||||
Continuing operations | $ | 0.64 | $ | 0.48 | 33 | % | |||||
Discontinued operations | 0.01 | 0.41 | N.M. | ||||||||
Net basic earnings per Common Share | $ | 0.65 | $ | 0.89 | (27 | )% | |||||
Diluted earnings per Common Share: | |||||||||||
Continuing operations | $ | 0.64 | $ | 0.47 | 36 | % | |||||
Discontinued operations | 0.01 | 0.41 | N.M. | ||||||||
Net diluted earnings per Common Share | $ | 0.65 | $ | 0.88 | (26 | )% | |||||
Weighted average number of Common Shares outstanding: | |||||||||||
Basic | 359.0 | 357.3 | |||||||||
Diluted | 361.0 | 360.3 |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Year-to-Date | |||||||||||
(in millions, except per Common Share amounts) | 2010 | 2009 | % Change | ||||||||
Revenue | $ | 49,700.4 | $ | 47,554.9 | 5 | % | |||||
Cost of products sold | 47,833.9 | 45,738.6 | 5 | % | |||||||
Gross margin | 1,866.5 | 1,816.3 | 3 | % | |||||||
Operating expenses | |||||||||||
Distribution, selling, general and administrative expenses | 1,191.3 | 1,168.8 | 2 | % | |||||||
Restructuring and employee severance | 70.4 | 37.6 | N.M. | ||||||||
Impairments and loss on sale of assets | 24.0 | 10.5 | N.M. | ||||||||
Litigation (credits)/charges, net | (25.9 | ) | (0.3 | ) | N.M. | ||||||
Operating earnings | 606.7 | 599.7 | 1 | % | |||||||
Other (income)/expense, net | (34.5 | ) | 22.2 | N.M. | |||||||
Interest expense, net | 61.3 | 51.4 | 19 | % | |||||||
Loss on extinguishment of debt | 39.9 | — | N.M. | ||||||||
Earnings before income taxes and discontinued operations | 540.0 | 526.1 | 3 | % | |||||||
Provision for income taxes | 371.6 | 184.9 | N.M. | ||||||||
Earnings from continuing operations | 168.4 | 341.2 | (51 | )% | |||||||
Earnings from discontinued operations (net of tax expense of $28.4 million and $88.7 million for fiscal 2010 and 2009 year-to-date, respectively) | 27.9 | 224.4 | N.M. | ||||||||
Net earnings | $ | 196.3 | $ | 565.6 | (65 | )% | |||||
Basic earnings per Common Share: | |||||||||||
Continuing operations | $ | 0.47 | $ | 0.96 | (51 | )% | |||||
Discontinued operations | 0.08 | 0.62 | N.M. | ||||||||
Net basic earnings per Common Share | $ | 0.55 | $ | 1.58 | (65 | )% | |||||
Diluted earnings per Common Share: | |||||||||||
Continuing operations | $ | 0.47 | $ | 0.95 | (51 | )% | |||||
Discontinued operations | 0.07 | 0.62 | N.M. | ||||||||
Net diluted earnings per Common Share | $ | 0.54 | $ | 1.57 | (66 | )% | |||||
Weighted average number of Common Shares outstanding: | |||||||||||
Basic | 359.1 | 357.0 | |||||||||
Diluted | 361.1 | 361.2 |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) | ||||||
(in millions) | December 31, 2009 | June 30, 2009 | ||||
Assets | ||||||
Cash and equivalents | $ | 1,746.8 | $ | 1,221.6 | ||
Trade receivables, net | 4,927.5 | 5,214.9 | ||||
Inventories | 7,961.0 | 6,832.8 | ||||
Prepaid expenses and other | 674.1 | 523.0 | ||||
Assets from businesses held for sale and discontinued operations | 148.9 | 7,189.4 | ||||
Total current assets | 15,458.3 | 20,981.7 | ||||
Property and equipment, net | 1,423.2 | 1,464.5 | ||||
Investment in CareFusion | 897.4 | — | ||||
Goodwill and other intangibles, net | 2,294.7 | 2,266.9 | ||||
Other assets | 747.9 | 405.7 | ||||
Total assets | $ | 20,821.5 | $ | 25,118.8 | ||
Liabilities and Shareholders’ Equity | ||||||
Current portion of long-term obligations and other short-term borrowings | $ | 12.7 | $ | 366.2 | ||
Accounts payable | 10,543.1 | 9,041.9 | ||||
Other accrued liabilities | 1,609.9 | 1,496.2 | ||||
Liabilities from businesses held for sale and discontinued operations | 37.3 | 1,370.9 | ||||
Total current liabilities | 12,203.0 | 12,275.2 | ||||
Long-term obligations, less current portion and other short-term borrowings | 2,099.2 | 3,271.6 | ||||
Deferred income taxes and other liabilities | 1,293.2 | 847.3 | ||||
Total shareholders’ equity | 5,226.1 | 8,724.7 | ||||
Total liabilities and shareholders’ equity | $ | 20,821.5 | $ | 25,118.8 | ||
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Second Quarter | Year-to-Date | |||||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Cash Flows From Operating Activities: | ||||||||||||||||
Net earnings | $ | 234.5 | $ | 316.5 | $ | 196.3 | $ | 565.6 | ||||||||
Earnings from discontinued operations | (4.3 | ) | (147.5 | ) | (27.9 | ) | (224.4 | ) | ||||||||
Earnings from continuing operations | 230.2 | 169.0 | 168.4 | 341.2 | ||||||||||||
Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 59.5 | 68.7 | 125.8 | 116.1 | ||||||||||||
Loss on debt extinguishment | — | — | 39.9 | — | ||||||||||||
Gain on sale of investment | (20.0 | ) | — | (20.0 | ) | — | ||||||||||
Impairments and loss on sale of assets | 0.4 | 6.9 | 24.0 | 10.5 | ||||||||||||
Equity compensation | 20.1 | 29.2 | 42.1 | 50.2 | ||||||||||||
Provision for bad debts | 9.1 | 9.4 | 21.4 | 21.8 | ||||||||||||
Change in operating assets and liabilities, net of effects from acquisitions: | ||||||||||||||||
Decrease/(Increase) in trade receivables | 985.3 | 619.6 | 269.2 | (238.6 | ) | |||||||||||
Increase in inventories | (1,099.2 | ) | (956.1 | ) | (1,127.2 | ) | (1,820.3 | ) | ||||||||
Increase in accounts payable | 496.1 | 321.0 | 1,499.2 | 1,299.1 | ||||||||||||
Other accrued liabilities and operating items, net | (159.7 | ) | (282.1 | ) | (259.0 | ) | (286.4 | ) | ||||||||
Net cash provided by/(used in) operating activities - continuing operations | 521.8 | (14.4 | ) | 783.8 | (506.4 | ) | ||||||||||
Net cash provided by operating activities - discontinued operations | 2.3 | 380.7 | 146.8 | 717.6 | ||||||||||||
Net cash provided by operating activities | 524.1 | 366.3 | 930.6 | 211.2 | ||||||||||||
Cash Flows From Investing Activities: | ||||||||||||||||
Acquisition of subsidiaries, net of divestitures and cash acquired | — | — | (32.0 | ) | (6.2 | ) | ||||||||||
Proceeds from sale of property and equipment | — | 11.6 | 4.3 | 12.3 | ||||||||||||
Additions to property and equipment | (42.9 | ) | (73.0 | ) | (79.9 | ) | (130.5 | ) | ||||||||
Proceeds from sale of CareFusion common stock | 135.0 | — | 135.0 | — | ||||||||||||
Net cash provided by/(used in) investing activities - continuing operations | 92.1 | (61.4 | ) | 27.4 | (124.4 | ) | ||||||||||
Net cash used in investing activities - discontinued operations | — | (19.9 | ) | (9.9 | ) | (51.7 | ) | |||||||||
Net cash provided by/(used in) investing activities | 92.1 | (81.3 | ) | 17.5 | (176.1 | ) | ||||||||||
Cash Flows From Financing Activities: | ||||||||||||||||
Net change in commercial paper and short-term borrowings | — | 100.0 | — | 101.1 | ||||||||||||
Reduction of long-term obligations | (350.4 | ) | (153.8 | ) | (1,484.9 | ) | (304.5 | ) | ||||||||
Proceeds from long-term obligations, net of issuance costs | — | 13.2 | — | 21.4 | ||||||||||||
Proceeds from issuance of Common Shares | 9.2 | 2.8 | 27.9 | 20.7 | ||||||||||||
Tax (expense)/benefit from stock options | — | (1.1 | ) | (6.1 | ) | 2.3 | ||||||||||
Payment of premiums for debt extinguishment | — | — | (66.4 | ) | — | |||||||||||
Dividends on Common Shares | (63.0 | ) | (50.2 | ) | (127.2 | ) | (100.0 | ) | ||||||||
Purchase of treasury shares | (50.0 | ) | — | (50.0 | ) | — | ||||||||||
Net cash used in financing activities - continuing operations | (454.2 | ) | (89.1 | ) | (1,706.7 | ) | (259.0 | ) | ||||||||
Net cash provided by/(used in) financing activities - discontinued operations | — | (0.7 | ) | 1,283.8 | (2.3 | ) | ||||||||||
Net cash used in financing activities | (454.2 | ) | (89.8 | ) | (422.9 | ) | (261.3 | ) | ||||||||
Net increase/(decrease) in cash and equivalents | 162.0 | 195.2 | 525.2 | (226.2 | ) | |||||||||||
Cash and equivalents at beginning of period | 1,584.8 | 387.4 | 1,221.6 | 808.8 | ||||||||||||
Cash and equivalents at end of period | $ | 1,746.8 | $ | 582.6 | $ | 1,746.8 | $ | 582.6 | ||||||||
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
Second Quarter | Non-GAAP Second Quarter | |||||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Revenue | ||||||||||||||||
Amount | $ | 24,920 | $ | 24,118 | ||||||||||||
Growth Rate | 3 | % | 8 | % | ||||||||||||
Operating Earnings | ||||||||||||||||
Amount | $ | 367 | $ | 313 | $ | 358 | $ | 337 | ||||||||
Growth Rate | 17 | % | (8 | )% | 6 | % | — | |||||||||
Earnings from Continuing Operations | ||||||||||||||||
Amount | $ | 230 | $ | 169 | $ | 207 | $ | 183 | ||||||||
Growth Rate | 36 | % | (21 | )% | 13 | % | (15 | )% | ||||||||
Year-to-Date | Non-GAAP Year-to-Date | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue | ||||||||||||||||
Amount | $ | 49,700 | $ | 47,555 | ||||||||||||
Growth Rate | 5 | % | 9 | % | ||||||||||||
Operating Earnings | ||||||||||||||||
Amount | $ | 607 | $ | 600 | $ | 681 | $ | 648 | ||||||||
Growth Rate | 1 | % | (11 | )% | 5 | % | (6 | )% | ||||||||
Earnings from Continuing Operations | ||||||||||||||||
Amount | $ | 168 | $ | 341 | $ | 401 | $ | 351 | ||||||||
Growth Rate | (51 | )% | (20 | )% | 14 | % | (20 | )% |
Refer to the GAAP / Non-GAAP Reconciliation for definitions and calculations supporting the non-GAAP balances.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Second Quarter | Second Quarter | |||||||||||||||||
(in millions) | 2010 | 2009 | (in millions) | 2010 | 2009 | |||||||||||||
PHARMACEUTICAL | MEDICAL | |||||||||||||||||
Revenue | Revenue | |||||||||||||||||
Amount | $ | 22,695 | $ | 22,079 | Amount | $ | 2,232 | $ | 2,057 | |||||||||
Growth Rate | 3 | % | 8 | % | Growth Rate | 9 | % | 4 | % | |||||||||
Mix | 91 | % | 91 | % | Mix | 9 | % | 9 | % | |||||||||
Segment Profit | Segment Profit | |||||||||||||||||
Amount | $ | 260 | $ | 263 | Amount | $ | 103 | $ | 75 | |||||||||
Growth Rate | (1 | )% | 12 | % | Growth Rate | 38 | % | (24 | )% | |||||||||
Mix | 72 | % | 78 | % | Mix | 28 | % | 22 | % | |||||||||
Segment Profit Margin | 1.14 | % | 1.19 | % | Segment Profit Margin | 4.59 | % | 3.62 | % |
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended December 31, 2009 was $24,920 million, which included total segment revenue of $24,927 million and Corporate revenue of $(7) million. Total consolidated revenue for the three months ended December 31, 2008 was $24,118 million, which included total segment revenue of $24,136 million and Corporate revenue of $(18) million. Corporate revenue consists primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the three months ended December 31, 2009 were $367 million, which included total segment profit of $363 million and Corporate profit of $4 million. Total consolidated operating earnings for the three months ended December 31, 2008 were $313 million, which included total segment profit of $338 million and Corporate loss of $25 million. Corporate includes, among other things, restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
Year-to-Date | Year-to-Date | |||||||||||||||||
(in millions) | 2010 | 2009 | (in millions) | 2010 | 2009 | |||||||||||||
PHARMACEUTICAL | MEDICAL | |||||||||||||||||
Revenue | Revenue | |||||||||||||||||
Amount | $ | 45,257 | $ | 43,483 | Amount | $ | 4,469 | $ | 4,094 | |||||||||
Growth Rate | 4 | % | 10 | % | Growth Rate | 9 | % | 6 | % | |||||||||
Mix | 91 | % | 91 | % | Mix | 9 | % | 9 | % | |||||||||
Segment Profit | Segment Profit | |||||||||||||||||
Amount | $ | 468 | $ | 476 | Amount | $ | 217 | $ | 172 | |||||||||
Growth Rate | (2 | )% | (8 | )% | Growth Rate | 26 | % | (1 | )% | |||||||||
Mix | 68 | % | 73 | % | Mix | 32 | % | 27 | % | |||||||||
Segment Profit Margin | 1.03 | % | 1.09 | % | Segment Profit Margin | 4.86 | % | 4.21 | % |
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the six months ended December 31, 2009 was $49,700 million, which included total segment revenue of $49,726 million and Corporate revenue of $(26) million. Total consolidated revenue for the six months ended December 31, 2008 was $47,555 million, which included total segment revenue of $47,577 million and Corporate revenue of $(22) million. Corporate revenue consists primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the six months ended December 31, 2009 were $607 million, which included total segment profit of $685 million and Corporate loss of $78 million. Total consolidated operating earnings for the six months ended December 31, 2008 were $600 million, which included total segment profit of $648 million and Corporate loss of $48 million. Corporate includes, among other things, restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
Second Quarter | Year-to-Date | |||||||||||||||
(in millions, except per Common Share amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Restructuring and Employee Severance | ||||||||||||||||
Restructuring and employee severance | $ | (10.7 | ) | $ | (16.9 | ) | $ | (70.4 | ) | $ | (37.6 | ) | ||||
Tax benefit | 2.6 | 6.5 | 20.0 | 13.9 | ||||||||||||
Restructuring and employee severance, net of tax | $ | (8.1 | ) | $ | (10.4 | ) | $ | (50.4 | ) | $ | (23.7 | ) | ||||
Decrease to diluted EPS from continuing operations | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.14 | ) | $ | (0.06 | ) | ||||
Impairments and Loss on Sale of Assets | ||||||||||||||||
Impairments and loss on sale of assets | $ | (0.4 | ) | $ | (6.9 | ) | $ | (24.0 | ) | $ | (10.5 | ) | ||||
Tax benefit | 0.2 | 3.4 | 8.3 | 24.3 | ||||||||||||
Impairments and loss on sale of asset, net of tax | $ | (0.2 | ) | $ | (3.5 | ) | $ | (15.7 | ) | $ | 13.8 | |||||
(Decrease)/increase to diluted EPS from continuing operations | $ | — | $ | (0.01 | ) | $ | (0.04 | ) | $ | 0.04 | ||||||
Litigation Credits/(Charges), Net | ||||||||||||||||
Litigation credits/(charges), net | $ | 25.4 | $ | 0.3 | $ | 25.9 | $ | 0.3 | ||||||||
Tax expense | (9.6 | ) | (0.1 | ) | (9.8 | ) | (0.1 | ) | ||||||||
Litigation credits/(charges), net, net of tax | $ | 15.8 | $ | 0.2 | $ | 16.1 | $ | 0.2 | ||||||||
Increase to diluted EPS from continuing operations | $ | 0.04 | $ | — | $ | 0.04 | $ | — | ||||||||
Other Spin-Off Costs | ||||||||||||||||
Other spin-off costs 1 | $ | (5.3 | ) | $ | — | $ | (47.6 | ) | $ | — | ||||||
Tax benefit/(expense)2 | 1.4 | — | (154.5 | ) | — | |||||||||||
�� | ||||||||||||||||
Other spin-off costs, net of tax | $ | (3.9 | ) | $ | — | $ | (202.1 | ) | $ | — | ||||||
Decrease to diluted EPS from continuing operations | $ | (0.01 | ) | $ | — | $ | (0.56 | ) | $ | — | ||||||
Gain on Sale of CareFusion stock | ||||||||||||||||
Gain on sale of CareFusion stock3 | $ | 20.0 | $ | — | $ | 20.0 | $ | — | ||||||||
Tax expense | — | — | — | — | ||||||||||||
Gain on sale of CareFusion stock, net of tax | $ | 20.0 | $ | — | $ | 20.0 | $ | — | ||||||||
Increase to diluted EPS from continuing operations | $ | 0.06 | $ | — | $ | 0.06 | $ | — | ||||||||
Weighted Average Number of Diluted Shares Outstanding | 361.0 | 360.3 | 361.1 | 361.2 |
1 | Other spin-off costs included in other (income)/expense, net for the six months ended December 31, 2009 were $2.4 million. Other spin-off costs also include the $39.9 million loss on extinguishment of debt for the six months ended December 31, 2009. |
2 | The fiscal 2010 year-to-date tax expense associated with the other spin-off costs includes $171.9 million related to the anticipated repatriation of a portion of cash loaned to the Company’s entities within the United States. |
3 | Included within other (income)/expense, net on the unaudited condensed consolidated statements of earnings. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
Second Quarter | Year-To-Date | |||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||
Receivable Days | 17.5 | 17.7 | ||||||||||
Days Inventory on Hand | 27 | 28 | ||||||||||
Debt to Total Capital | 29 | % | 32 | % | ||||||||
Net Debt to Capital | 7 | % | 29 | % | ||||||||
Return on Equity | 18.5 | % | 15.8 | % | 6.2 | % | 14.3 | % | ||||
Non-GAAP Return on Equity | 16.6 | % | 17.2 | % | 16.2 | % | 17.0 | % | ||||
Return on Invested Capital | 7.72 | % | 7.09 | % | 2.96 | % | 6.35 | % | ||||
Non-GAAP Return on Invested Capital | 6.98 | % | 6.19 | % | 6.57 | % | 5.95 | % | ||||
Effective Tax Rate from Continuing Operations | 36.9 | % | 37.7 | % | 68.8 | % | 35.1 | % | ||||
Non-GAAP Effective Tax Rate from Continuing Operations | 38.5 | % | 38.0 | % | 37.0 | % | 38.9 | % |
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter 2010 | Year-To-Date 2010 | |||||||||||||||||||||||||||||||||||||||||||||||||||
(in millions, except per amounts) | GAAP | Restructuring and Employee Severance | Impairments and Loss on Sale of Assets | Litigation (Credits)/ Charges, Net | Other Spin-Off Costs | Gain on Sale of CareFusion Stock | Non-GAAP | GAAP | Restructuring and Employee Severance | Impairments and Loss on Sale of Assets | Litigation (Credits)/ Charges, Net | Other Spin-Off Costs | Gain on Sale of CareFusion Stock | Non-GAAP | ||||||||||||||||||||||||||||||||||||||
Operating Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 367 | $ | 11 | — | $ | (25 | ) | $ | 5 | — | $ | 358 | $ | 607 | $ | 70 | $ | 24 | $ | (26 | ) | $ | 5 | — | $ | 681 | |||||||||||||||||||||||||
Growth Rate | 17 | % | 6 | % | 1 | % | 5 | % | ||||||||||||||||||||||||||||||||||||||||||||
Earnings Before Income Taxes and Discontinued Operations | $ | 365 | $ | 11 | — | $ | (25 | ) | $ | 5 | $ | (20 | ) | $ | 336 | $ | 540 | $ | 70 | $ | 24 | $ | (26 | ) | $ | 48 | $ | (20 | ) | $ | 636 | |||||||||||||||||||||
Provision for Income Taxes1 | $ | 135 | $ | 3 | — | $ | (10 | ) | $ | 1 | — | $ | 129 | $ | 372 | $ | 20 | $ | 8 | $ | (10 | ) | $ | (155 | ) | — | $ | 236 | ||||||||||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 230 | $ | 8 | — | $ | (16 | ) | $ | 4 | $ | (20 | ) | $ | 207 | $ | 168 | $ | 50 | $ | 16 | $ | (16 | ) | $ | 202 | $ | (20 | ) | $ | 401 | |||||||||||||||||||||
Growth Rate | 36 | % | 13 | % | (51 | )% | 14 | % | ||||||||||||||||||||||||||||||||||||||||||||
Diluted EPS from Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 0.64 | $ | 0.02 | — | $ | (0.04 | ) | $ | 0.01 | $ | (0.06 | ) | $ | 0.57 | $ | 0.47 | $ | 0.14 | $ | 0.04 | $ | (0.04 | ) | $ | 0.56 | $ | (0.06 | ) | $ | 1.11 | |||||||||||||||||||||
Growth Rate | 36 | % | 12 | % | (51 | )% | 14 | % | ||||||||||||||||||||||||||||||||||||||||||||
Second Quarter 2009 | Year-To-Date 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||
GAAP | Restructuring and Employee Severance | Impairments and Loss on Sale of Assets | Litigation (Credits)/ Charges, Net | Other Spin-Off Costs | Gain on Sale of CareFusion Stock | Non-GAAP | GAAP | Restructuring and Employee Severance | Impairments and Loss on Sale of Assets | Litigation (Credits)/ Charges, Net | Other Spin-Off Costs | Gain on Sale of CareFusion Stock | Non-GAAP | |||||||||||||||||||||||||||||||||||||||
Operating Earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 313 | $ | 17 | $ | 7 | — | — | — | $ | 337 | $ | 600 | $ | 38 | $ | 11 | — | — | — | $ | 648 | ||||||||||||||||||||||||||||||
Growth Rate | (8 | )% | — | (11 | )% | (6 | )% | |||||||||||||||||||||||||||||||||||||||||||||
Earnings Before Income Taxes and Discontinued Operations | $ | 271 | $ | 17 | $ | 7 | — | — | — | $ | 295 | $ | 526 | $ | 38 | $ | 11 | — | — | — | $ | 574 | ||||||||||||||||||||||||||||||
Provision for Income Taxes1 | $ | 102 | $ | 7 | $ | 3 | — | — | — | $ | 112 | $ | 185 | $ | 14 | $ | 24 | — | — | — | $ | 223 | ||||||||||||||||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 169 | $ | 10 | $ | 4 | — | — | — | $ | 183 | $ | 341 | $ | 24 | $ | (14 | ) | — | — | — | $ | 351 | |||||||||||||||||||||||||||||
Growth Rate | (21 | )% | (15 | )% | (20 | )% | (20 | )% | ||||||||||||||||||||||||||||||||||||||||||||
Diluted EPS from Continuing Operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Amount | $ | 0.47 | $ | 0.03 | $ | 0.01 | — | — | — | $ | 0.51 | $ | 0.95 | $ | 0.06 | $ | (0.04 | ) | — | — | — | $ | 0.97 | |||||||||||||||||||||||||||||
Growth Rate | (20 | )% | (14 | )% | (18 | )% | (18 | )% |
The sum of the components may not equal the total due to rounding.
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter | Second Quarter | ||||||||||||||
(in millions) | 2010 | 2009 | |||||||||||||
GAAP Return on Invested Capital | 7.72 | % | 7.09 | % | |||||||||||
Adjusted Net Earnings | |||||||||||||||
Net earnings | $ | 234.5 | $ | 316.5 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations1 | 8.1 | 10.4 | |||||||||||||
Impairments and loss on sale of assets, net of tax, in continuing operations1 | 0.2 | 3.5 | |||||||||||||
Litigation (credits)/charges, net, net of tax, in continuing operations1 | (15.8 | ) | (0.2 | ) | |||||||||||
Other spin-off costs, net of tax1 | 3.9 | — | |||||||||||||
Gain on sale of CareFusion stock, net of tax1 | (20.0 | ) | — | ||||||||||||
Other (income)/expense, net, net of tax1 | (3.5 | ) | 12.6 | ||||||||||||
Interest expense, net, net of tax1 | 17.1 | 14.2 | |||||||||||||
CareFusion net earnings in discontinued operations2 | (0.3 | ) | (147.0 | ) | |||||||||||
Adjusted net earnings | $ | 224.2 | $ | 210.0 | |||||||||||
Annualized | $ | 896.8 | $ | 840.0 | |||||||||||
Second Quarter | First Quarter | Second Quarter | First Quarter | ||||||||||||
2010 | 2010 | 2009 | 2009 | ||||||||||||
GAAP Total Invested Capital | $ | 12,819.9 | $ | 12,888.9 | $ | 19,522.8 | $ | 19,220.0 | |||||||
Non-GAAP Total Invested Capital | |||||||||||||||
Total shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 8,127.9 | $ | 7,918.1 | |||||||
Current portion of long-term obligations and other short-term borrowings | 12.7 | 362.3 | 459.0 | 158.0 | |||||||||||
Long-term obligations, less current portion and other short-term borrowings | 2,099.2 | 2,103.5 | 3,385.8 | 3,593.3 | |||||||||||
Non-cash dividend related to CareFusion spin-off | — | — | (3,752.4 | ) | (3,752.4 | ) | |||||||||
Current portion of long-term obligations and other short-term borrowings in discontinued operations | — | — | 7.2 | 7.3 | |||||||||||
Long-term obligations, less current portion and other short-term borrowings in discontinued operations | — | — | 3.4 | 3.7 | |||||||||||
Unrecorded goodwill3 | 5,481.9 | 5,481.9 | 5,481.9 | 5,481.9 | |||||||||||
Non-GAAP total invested capital | $ | 12,819.9 | $ | 12,888.9 | $ | 13,712.8 | $ | 13,409.9 | |||||||
Average non-GAAP total invested capital | $ | 12,854.4 | $ | 13,561.4 | |||||||||||
Non-GAAP Return on Invested Capital | 6.98 | % | 6.19 | % |
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
2 | To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented. |
3 | Unrecorded goodwill is $5.5 billion on a GAAP basis at December 31, 2009 and September 30, 2009, respectively. Unrecorded goodwill is $7.5 billion on a GAAP basis at December 31, 2008 and September 30, 2008, respectively, of which $2.0 billion relates to CareFusion. Accordingly, on a non-GAAP basis, unrecorded goodwill is $5.5 billion for all periods presented. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-Date | Year-To-Date | ||||||||||||||||||||||
(in millions) | 2010 | 2009 | |||||||||||||||||||||
GAAP Return on Invested Capital | 2.96 | % | 6.35 | % | |||||||||||||||||||
Adjusted Net Earnings | |||||||||||||||||||||||
Net earnings | $ | 196.3 | $ | 565.6 | |||||||||||||||||||
Restructuring and employee severance, net of tax, in continuing operations1 | 50.4 | 23.7 | |||||||||||||||||||||
Impairments and loss on sale of assets, net of tax, in continuing operations1 | 15.7 | (13.8 | ) | ||||||||||||||||||||
Litigation (credits)/charges, net, net of tax, in continuing operations1 | (16.1 | ) | (0.2 | ) | |||||||||||||||||||
Other spin-off costs, net of tax1 | 202.1 | — | |||||||||||||||||||||
Gain on sale of CareFusion stock, net of tax1 | (20.0 | ) | — | ||||||||||||||||||||
Other (income)/expense, net, net of tax1 | (10.6 | ) | 14.2 | ||||||||||||||||||||
Interest expense, net, net of tax1 | 38.2 | 32.8 | |||||||||||||||||||||
CareFusion net earnings in discontinued operations2 | (20.4 | ) | (221.0 | ) | |||||||||||||||||||
Adjusted net earnings | $ | 435.6 | $ | 401.3 | |||||||||||||||||||
Annualized | $ | 871.2 | $ | 802.6 | |||||||||||||||||||
Second Quarter | First Quarter | Fourth Quarter | Second Quarter | First Quarter | Fourth Quarter | ||||||||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||||
GAAP Total Invested Capital | $ | 12,819.9 | $ | 12,888.9 | $ | 19,911.5 | $ | 19,522.8 | $ | 19,220.0 | $ | 19,133.4 | |||||||||||
Non-GAAP Total Invested Capital | |||||||||||||||||||||||
Total shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 8,724.7 | $ | 8,127.9 | $ | 7,918.1 | $ | 7,747.5 | |||||||||||
Current portion of long-term obligations and other short-term borrowings | 12.7 | 362.3 | 366.2 | 459.0 | 158.0 | 151.6 | |||||||||||||||||
Long-term obligations, less current portion and other short-term borrowings | 2,099.2 | 2,103.5 | 3,271.6 | 3,385.8 | 3,593.3 | 3,681.7 | |||||||||||||||||
Non-cash dividend related to CareFusion spin-off | — | — | (3,752.4 | ) | (3,752.4 | ) | (3,752.4 | ) | (3,752.4 | ) | |||||||||||||
Current portion of long-term obligations and other short-term borrowings in discontinued operations | — | — | 1.1 | 7.2 | 7.3 | 7.4 | |||||||||||||||||
Long-term obligations, less current portion and other short-term borrowings in discontinued operations | — | — | 8.4 | 3.4 | 3.7 | 5.7 | |||||||||||||||||
Unrecorded goodwill3 | 5,481.9 | 5,481.9 | 5,481.9 | 5,481.9 | 5,481.9 | 5,481.9 | |||||||||||||||||
Non-GAAP total invested capital | $ | 12,819.9 | $ | 12,888.9 | $ | 14,101.5 | $ | 13,712.8 | $ | 13,409.9 | $ | 13,323.4 | |||||||||||
Average non-GAAP total invested capital | $ | 13,270.1 | $ | 13,482.0 | |||||||||||||||||||
Non-GAAP Return on Invested Capital | 6.57 | % | 5.95 | % |
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
2 | To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented. |
3 | Unrecorded goodwill is $5.5 billion on a GAAP basis at December 31, 2009 and September 30, 2009, respectively. Unrecorded goodwill is $7.5 billion on a GAAP basis at June 30, 2009, December 31, 2008, September 30, 2008 and June 30, 2008, respectively, of which $2.0 billion relates to CareFusion. Accordingly, on a non-GAAP basis, unrecorded goodwill is $5.5 billion for all periods presented. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter | Second Quarter | ||||||||||||||
(in millions) | 2010 | 2009 | |||||||||||||
GAAP Return on Equity | 18.5 | % | 15.8 | % | |||||||||||
Non-GAAP Return on Equity | |||||||||||||||
Net earnings | $ | 234.5 | $ | 316.5 | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations1 | 8.1 | 10.4 | |||||||||||||
Impairments and loss on sale of assets, net of tax, in continuing operations1 | 0.2 | 3.5 | |||||||||||||
Litigation (credits)/charges, net, net of tax, in continuing operations1 | (15.8 | ) | (0.2 | ) | |||||||||||
Other spin-off costs, net of tax1 | 3.9 | — | |||||||||||||
Gain on sale of CareFusion stock, net of tax1 | (20.0 | ) | — | ||||||||||||
CareFusion net earnings in discontinued operations1, 2 | (0.3 | ) | (147.0 | ) | |||||||||||
Adjusted net earnings | $ | 210.6 | $ | 183.2 | |||||||||||
Annualized | $ | 842.4 | $ | 732.8 | |||||||||||
Second Quarter | First Quarter | Second Quarter | First Quarter | ||||||||||||
2010 | 2010 | 2009 | 2009 | ||||||||||||
Non-GAAP Shareholders’ Equity | |||||||||||||||
Total shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 8,127.9 | $ | 7,918.1 | |||||||
Non-cash dividend related to CareFusion spin-off | — | — | (3,752.4 | ) | (3,752.4 | ) | |||||||||
Non-GAAP shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 4,375.5 | $ | 4,165.7 | |||||||
Average non-GAAP shareholders’ equity | 5,083.7 | 4,270.6 | |||||||||||||
Non-GAAP return on equity | 16.6 | % | 17.2 | % |
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
2 | To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Year-To-Date | Year-To-Date | ||||||||||||||||||||||
(in millions) | 2010 | 2009 | |||||||||||||||||||||
GAAP Return on Equity | 6.2 | % | 14.3 | % | |||||||||||||||||||
Non-GAAP Return on Equity | |||||||||||||||||||||||
Net earnings | $ | 196.3 | $ | 565.6 | |||||||||||||||||||
Restructuring and employee severance, net of tax, in continuing operations1 | 50.4 | 23.7 | |||||||||||||||||||||
Impairments and loss on sale of assets, net of tax, in continuing operations1 | 15.7 | (13.8 | ) | ||||||||||||||||||||
Litigation (credits)/charges, net, net of tax, in continuing operations1 | (16.1 | ) | (0.2 | ) | |||||||||||||||||||
Other spin-off costs, net of tax1 | 202.1 | — | |||||||||||||||||||||
Gain on sale of CareFusion stock, net of tax1 | (20.0 | ) | — | ||||||||||||||||||||
CareFusion net earnings in discontinued operations1, 2 | (20.4 | ) | (221.0 | ) | |||||||||||||||||||
Adjusted net earnings | $ | 408.0 | $ | 354.3 | |||||||||||||||||||
Annualized | $ | 816.0 | $ | 708.6 | |||||||||||||||||||
Second Quarter | First Quarter | Fourth Quarter | Second Quarter | First Quarter | Fourth Quarter | ||||||||||||||||||
2010 | 2010 | 2009 | 2009 | 2009 | 2008 | ||||||||||||||||||
Non-GAAP Shareholders’ Equity | |||||||||||||||||||||||
Total shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 8,724.7 | $ | 8,127.9 | $ | 7,918.1 | $ | 7,747.5 | |||||||||||
Non-cash dividend related to CareFusion spin-off | — | — | (3,752.4 | ) | (3,752.4 | ) | (3,752.4 | ) | (3,752.4 | ) | |||||||||||||
Non-GAAP shareholders’ equity | $ | 5,226.1 | $ | 4,941.2 | $ | 4,972.3 | $ | 4,375.5 | $ | 4,165.7 | $ | 3,995.1 | |||||||||||
Average non-GAAP shareholders’ equity | 5,046.5 | 4,178.8 | |||||||||||||||||||||
Non-GAAP return on equity | 16.2 | % | 17.0 | % |
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
2 | To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter | Year-to-Date | |||||||||||||||
(in millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
GAAP Effective Tax Rate from Continuing Operations | 36.9 | % | 37.7 | % | 68.8 | % | 35.1 | % | ||||||||
Non-GAAP Effective Tax Rate from Continuing Operations | ||||||||||||||||
Earnings before income taxes and discontinued operations | $ | 365.0 | $ | 271.2 | $ | 540.0 | $ | 526.1 | ||||||||
Restructuring and employee severance | 10.7 | 16.9 | 70.4 | 37.6 | ||||||||||||
Impairments and loss on sale of assets | 0.4 | 6.9 | 24.0 | 10.5 | ||||||||||||
Litigation (credits)/charges, net | (25.4 | ) | (0.3 | ) | (25.9 | ) | (0.3 | ) | ||||||||
Other spin-off costs | 5.3 | — | 47.6 | — | ||||||||||||
Gain on sale of CareFusion stock | (20.0 | ) | — | (20.0 | ) | — | ||||||||||
Adjusted earnings before income taxes and discontinued operations | $ | 336.0 | $ | 294.7 | $ | 636.1 | $ | 573.9 | ||||||||
Provision for income taxes1 | $ | 134.8 | $ | 102.2 | $ | 371.6 | �� | $ | 184.9 | |||||||
Restructuring and employee severance tax benefit1 | 2.6 | 6.5 | 20.0 | 13.9 | ||||||||||||
Impairments and loss on sale of assets, tax benefit1 | 0.2 | 3.4 | 8.3 | 24.3 | ||||||||||||
Litigation (credits)/charges, net tax expense1 | (9.6 | ) | (0.1 | ) | (9.8 | ) | (0.1 | ) | ||||||||
Other spin-off costs tax expense1 | 1.4 | — | (154.5 | ) | — | |||||||||||
Gain on sale of CareFusion stock tax expense1 | — | — | — | — | ||||||||||||
Adjusted provision for income taxes | $ | 129.4 | $ | 112.0 | $ | 235.6 | $ | 223.0 | ||||||||
Non-GAAP effective tax rate from continuing operations | 38.5 | % | 38.0 | % | 37.0 | % | 38.9 | % | ||||||||
Second Quarter | ||||||||||||||||
2010 | 2009 | |||||||||||||||
Debt to Total Capital | 29 | % | 32 | % | ||||||||||||
Net Debt to Capital | ||||||||||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 12.7 | $ | 459.0 | ||||||||||||
Long-term obligations, less current portion and other short-term borrowings | 2,099.2 | 3,385.8 | ||||||||||||||
Debt | $ | 2,111.9 | $ | 3,844.8 | ||||||||||||
Cash and equivalents | (1,746.8 | ) | (582.6 | ) | ||||||||||||
Net debt | $ | 365.1 | $ | 3,262.2 | ||||||||||||
Total shareholders’ equity | $ | 5,226.1 | $ | 8,127.9 | ||||||||||||
Capital | $ | 5,591.2 | $ | 11,390.1 | ||||||||||||
Net Debt to Capital | 7 | % | 29 | % |
1 | The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
Second Quarter | ||||||
(in millions) | 2010 | 2009 | ||||
Days Inventory on Hand | ||||||
Inventories | $ | 7,961.0 | $ | 8,224.5 | ||
Cost of products sold | $ | 23,962.0 | $ | 23,202.7 | ||
Chargeback billings | 2,790.8 | 2,972.4 | ||||
Adjusted cost of products sold | $ | 26,752.8 | $ | 26,175.1 | ||
Adjusted cost of products sold divided by 90 days | $ | 297.3 | $ | 290.8 | ||
Days inventory on hand | 27 | 28 |
Days Inventory on Hand: inventory divided by ((quarterly costs of products sold plus chargeback billings) divided by 90 days). Chargeback billings are the difference between a product’s wholesale acquisition cost and the contract price established between pharmaceutical manufacturers and the end customer.
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP earnings from continuing operations and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures, including per share calculations) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from continuing operations and effective tax rate from continuing operations. The Company is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because the Company cannot reliably forecast restructuring and employee severance, impairments and loss on sale of assets, litigation (credits)/charges, net, other spin-off costs and gains or losses on sale of CareFusion stock, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact the Company’s future financial results.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
DEFINITIONS
GAAP
Debt: long-term obligations plus short-term borrowings
Debt to Total Capital:debt divided by (debt plus total shareholders’ equity)
Diluted EPS from Continuing Operations: earnings from continuing operations divided by diluted weighted average shares outstanding
Effective Tax Rate from Continuing Operations:provision for income taxes divided by earnings before income taxes and discontinued operations
Gain on Sale of CareFusion Stock: realized gains and losses from the sale of the Company’s ownership of CareFusion common stock retained in connection with the spin-off
Other Spin-Off Costs:costs and tax charges incurred in connection with the Company’s spin-off of CareFusion that are not included in restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net. Other spin-off costs include, among other things, the loss on extinguishment of debt and the income tax charge related to the anticipated repatriation of a portion of cash loaned to the Company’s entities within the United States
Receivable Days:trade receivables, net divided by (monthly revenue divided by 30 days)
Segment Profit:segment revenue minus (segment cost of products sold and segment distribution, selling, general and administrative expenses)
Segment Profit Margin:segment profit divided by segment revenue
Segment Profit Mix: segment profit divided by total segment profit for all segments
Return on Equity:annualized net earnings divided by average shareholders’ equity
Return on Invested Capital: annualized net earnings plus other (income)/expense, net plus interest expense, net divided by (average total shareholders’ equity plus debt plus unrecorded goodwill)
Revenue Mix:segment revenue divided by total segment revenue for all segments
NON-GAAP
Net Debt to Capital: net debt divided by (net debt plus total shareholders’ equity)
Net Debt:debt minus (cash and equivalents)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding
Non-GAAP Diluted EPS from Continuing Operations Growth Rate:(current period non-GAAP diluted EPS from continuing operations minus prior period non-GAAP diluted EPS from continuing operations) divided by prior period non-GAAP diluted EPS from continuing operations
Non-GAAP Earnings from Continuing Operations:earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock, each net of tax
Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period non-GAAP earnings from continuing operations
Non-GAAP Effective Tax Rate from Continuing Operations:(provision for income taxes adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock) divided by (earnings before income taxes and discontinued operations adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock)
Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs included within distribution, selling, general and administrative expenses
Non-GAAP Operating Earnings Growth Rate:(current period non-GAAP operating earnings minus prior period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings
Non-GAAP Return on Equity:(annualized current period net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) CareFusion net earnings in discontinued operations and (6) gain on sale of CareFusion stock, each net of tax) divided by average shareholders’ equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off
Non-GAAP Return on Invested Capital: (annualized net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) gain on sale of CareFusion stock, (6) other (income)/expense, net, (7) interest expense, net and (8) CareFusion net earnings in discontinued operations, each net of tax) divided by (average total shareholders’ equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off plus debt plus unrecorded goodwill excluding unrecorded goodwill attributed to CareFusion)