Exhibit 99.1
| Media: | Troy Kirkpatrick | Investors: | Brian Baker | |||
| (614) 757-6225 | (614) 757-5035 | |||||
| troy.kirkpatrick@cardinalhealth.com | brian.baker@cardinalhealth.com |
CARDINAL HEALTH REPORTS FIRST-QUARTER RESULTS
| • | Earnings from continuing operations increase to $294 million, or $225 million on a non-GAAP basis1 |
| • | Diluted earnings per share from continuing operations of $0.84 or $0.64 on a non-GAAP basis2, an increase of 19 percent |
DUBLIN, Ohio, Oct. 28, 2010 — Cardinal Health today reported fiscal 2011 first-quarter revenue of $24.4 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $0.64, up 19 percent versus last year, driven by 42 percent segment profit growth within its Pharmaceutical Segment.
“Our first quarter was an excellent start to the year,” said George Barrett, chairman and chief executive officer of Cardinal Health. “These results reflect the progress we have made in our Pharmaceutical Segment, specifically in the work we have been doing to improve margins across that segment by strengthening our generics programs and expanding our retail independent pharmacy customer base. Our Medical Segment declined as we had expected, largely as a result of unique events in the prior-year period and commodity price increases. Although medical procedures remained somewhat soft during the period, we continue to make great progress in our program to position our medical businesses to serve the needs of these evolving markets.”
Q1 FY11 SUMMARY
| Q1 FY11 | Q1 FY10 | Y/Y | ||||||||||
Revenue | $ | 24.4 billion | $ | 24.8 billion | (1 | )% | ||||||
Operating Earnings | $ | 364 million | $ | 240 million | 52 | % | ||||||
Non-GAAP Operating Earnings3 | $ | 372 million | $ | 323 million | 15 | % | ||||||
Earnings/(Loss) from Continuing Operations | $ | 294 million | ($ | 62) million | N.M. | |||||||
Non-GAAP Earnings from Continuing Operations | $ | 225 million | $ | 194 million | 16 | % | ||||||
Diluted EPS from Continuing Operations | $ | 0.84 | ($ | 0.17 | ) | N.M. | ||||||
Non-GAAP Diluted EPS from Continuing Operations | $ | 0.64 | $ | 0.54 | 19 | % | ||||||
First-quarter GAAP earnings from continuing operations were $294 million or $0.84 per share. GAAP results include a positive $0.21 per share net, after-tax contribution from the gain on the sale of CareFusion stock. As previously announced, Cardinal Health, during the quarter, sold the remaining 30.5 million shares of common stock of CareFusion Corp. that it had retained from the
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spinoff. The aggregate proceeds from this sale were $705.9 million in cash. The transaction resulted in approximately $75 million in GAAP earnings with no associated income tax expense. GAAP results for the prior-year period were negatively impacted by certain items relating to the CareFusion spinoff.
SEGMENT RESULTS
Pharmaceutical Segment
Revenue for the Pharmaceutical Segment declined 1 percent to $22.3 billion as a result of reduced sales to existing bulk customers, previously disclosed contract terminations of two large-revenue customers and the effect on revenue mix from the conversion of certain brand pharmaceuticals to generics. Increased sales to retail independent pharmacies and other direct-store-door customers partially offset the revenue decline. Generic sales were up 19 percent, with sales under our SOURCESM Generics program up 34 percent. Segment profit increased 42 percent to $296 million primarily driven by strong generic performance, including the impact of new generic launches, and solid performance under branded manufacturer agreements, including the impact of branded pharmaceutical inflation. A change in estimated reserves related to distribution service agreement fees receivable from certain manufacturers also contributed $9 million to segment profit for the quarter.
| Q1 FY11 | Q1 FY10 | Y/Y | ||||||||||
Revenue | $ | 22.3 billion | $ | 22.6 billion | (1 | )% | ||||||
Segment Profit | $ | 296 million | $ | 208 million | 42 | % | ||||||
Medical Segment
Revenue for the Medical Segment decreased 3 percent to $2.2 billion. As previously disclosed, the prior period was positively impacted by the immediate revenue recognition of $51 million for international sales to CareFusion as a result of the spinoff. The unusually strong and early flu season in fiscal 2010 also contributed to the negative year-over-year comparison. As expected, segment profit declined for the quarter, down 28 percent to $83 million, driven by the combined prior-year impact of the CareFusion revenue recognition benefit and the unusual flu season, as well as the impact of commodity price increases on the current period’s cost of products sold.
| Q1 FY11 | Q1 FY10 | Y/Y | ||||||||||
Revenue | $ | 2.17 billion | $ | 2.24 billion | (3 | )% | ||||||
Segment Profit | $ | 83 million | $ | 115 million | (28 | )% | ||||||
FISCAL 2011 OUTLOOK
“Given the strong start to the year for our Pharmaceutical Segment and the progress we project on various company-wide initiatives, we have become more confident in achieving the higher end of our non-GAAP diluted EPS guidance range of $2.38 to $2.48,” Barrett said.
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ADDITIONAL FIRST-QUARTER AND RECENT HIGHLIGHTS
| • | Early completion of a $500 million share repurchase program, of which $250 million of shares were repurchased during the first quarter. |
| • | Named Meghan FitzGerald to the newly created position of president, Cardinal Health Specialty Solutions for the Pharmaceutical Segment and promoted Lisa Ashby to president, Category Management for the Medical Segment. |
| • | Completed Healthcare Solutions Holding acquisition on July 15. |
CONFERENCE CALL
Cardinal Health will host a webcast and conference call today at 8:30 a.m. EDT to discuss first-quarter results and its future outlook. To access the call and corresponding slide presentation, go to the Investor page atcardinalhealth.com/investors or dial 617-213-4848 passcode 23771725. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will also be available until Nov. 1 by dialing 617-801-6888, passcode 65259301.
UPCOMING EVENTS
| • | Annual Meeting of Cardinal Health Shareholders on Nov. 3 at Cardinal Health Headquarters in Dublin, Ohio. |
| • | 2010 Credit Suisse Healthcare Conference on Nov. 10 at the Arizona Biltmore in Phoenix. |
| • | Lazard Healthcare Conference on Nov. 16 at the St. Regis Hotel in New York. |
| • | Cardinal Health Investor and Analyst Day on Dec. 7 at the Hudson Theatre in New York. |
At these events, Cardinal Health executives will discuss the company’s diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks, go to the Investors page atcardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $99 billionhealth care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helpspharmacies,hospitals,ambulatory surgery centers andphysician offices focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. Cardinal Health is an essential link in the health care supply chain, providingpharmaceuticals andmedical products to more than 60,000 locations each day. The company is also a leading manufacturer ofmedical and surgical products, includinggloves,surgical apparel andfluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products toclinical laboratories and operating the nation’s largestnetwork of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #17 on the Fortune 500, Cardinal Healthemploys more than 30,000 people worldwide. More information about the company may be found atcardinalhealth.com.
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| 1 | Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spinoff Costs (as defined at the end of the attached tables), and (6) gain on sale of CareFusion stock, each net of tax. |
| 2 | Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding. |
| 3 | Non-GAAP operating earnings: Operating earnings excluding (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, and (5) Other Spinoff Costs included within distribution, selling, general and administrative expenses. |
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 atcardinalhealth.com.
Cardinal Health uses its website 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 Investors page atcardinalhealth.com.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements, which are not based on historical facts, addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” and similar expressions, and include statements reflecting future results or guidance, statements of outlook and tax accruals. 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 related to demand for Cardinal Health’s products and services; uncertainties and risks regarding CareFusion’s remaining obligations to Cardinal Health; uncertainties due to government health care reform including the recently enacted federal health care reform legislation; 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; uncertainties regarding the ability to successfully integrate and grow acquired businesses; and 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. 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 Oct. 28, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
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CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
| First Quarter | ||||||||||||
(in millions, except per Common Share amounts) | 2011 | 2010 | % Change | |||||||||
Revenue | $ | 24,437.5 | $ | 24,780.7 | (1 | )% | ||||||
Cost of products sold | 23,475.3 | 23,871.9 | (2 | )% | ||||||||
Gross margin | 962.2 | 908.8 | 6 | % | ||||||||
Operating expenses | ||||||||||||
Distribution, selling, general and administrative expenses | 591.9 | 586.1 | 1 | % | ||||||||
Restructuring and employee severance | 1.8 | 59.6 | N.M. | |||||||||
Acquisition related costs | 1.3 | 0.1 | N.M. | |||||||||
Impairments and loss on sale of assets | 1.9 | 23.6 | N.M. | |||||||||
Litigation (credits)/charges, net | 1.4 | (0.5 | ) | N.M. | ||||||||
Operating earnings | 363.9 | 239.9 | 52 | % | ||||||||
Other income, net | (7.5 | ) | (8.9 | ) | N.M. | |||||||
Interest expense, net | 22.0 | 33.9 | (35 | )% | ||||||||
Loss on extinguishment of debt | — | 39.9 | N.M. | |||||||||
Gain on sale of investment in CareFusion | (74.8 | ) | — | N.M. | ||||||||
Earnings before income taxes and discontinued operations | 424.2 | 175.0 | N.M. | |||||||||
Provision for income taxes | 129.8 | 236.8 | N.M. | |||||||||
Earnings/(loss) from continuing operations | 294.4 | (61.8 | ) | N.M. | ||||||||
Earnings from discontinued operations (net of tax expense of $0.0 million and $26.0 million for the first quarter of fiscal 2011 and 2010, respectively) | 0.4 | 23.6 | N.M. | |||||||||
Net earnings/(loss) | $ | 294.8 | $ | (38.2 | ) | N.M. | ||||||
Basic earnings/(loss) per Common Share: | ||||||||||||
Continuing operations | $ | 0.84 | $ | (0.17 | ) | N.M. | ||||||
Discontinued operations | — | 0.06 | N.M. | |||||||||
Net basic earnings/(loss) per Common Share | $ | 0.84 | $ | (0.11 | ) | N.M. | ||||||
Diluted earnings/(loss) per Common Share: | ||||||||||||
Continuing operations | $ | 0.84 | $ | (0.17 | ) | N.M. | ||||||
Discontinued operations | — | 0.06 | N.M. | |||||||||
Net diluted earnings/(loss) per Common Share | $ | 0.84 | $ | (0.11 | ) | N.M. | ||||||
Weighted average number of Common Shares outstanding: | ||||||||||||
Basic | 348.9 | 359.1 | ||||||||||
Diluted1 | 351.9 | 359.1 | ||||||||||
| 1 | Due to the loss from continuing operations and the net loss during the first quarter of fiscal 2010, dilutive potential Common Shares have not been included in the denominator of the dilutive per share computation due to their antidilutive effect. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions) | September 30, 2010 | June 30, 2010 | ||||||
| (UNAUDITED) | ||||||||
Assets | ||||||||
Cash and equivalents | $ | 2,712.2 | $ | 2,755.3 | ||||
Trade receivables, net | 5,454.1 | 5,170.6 | ||||||
Inventories | 7,087.5 | 6,355.9 | ||||||
Prepaid expenses and other | 664.4 | 637.1 | ||||||
Total current assets | 15,918.2 | 14,918.9 | ||||||
Property and equipment, net | 1,475.3 | 1,468.8 | ||||||
Investment in CareFusion | — | 691.5 | ||||||
Goodwill and other intangibles, net | 2,896.9 | 2,253.2 | ||||||
Other assets | 682.1 | 657.8 | ||||||
Total assets | $ | 20,972.5 | $ | 19,990.2 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Accounts payable | $ | 10,532.3 | $ | 9,494.9 | ||||
Current portion of long-term obligations and other short-term borrowings | 233.6 | 233.2 | ||||||
Other accrued liabilities | 1,685.7 | 1,809.5 | ||||||
Total current liabilities | 12,451.6 | 11,537.6 | ||||||
Long-term obligations, less current portion | 1,906.4 | 1,896.1 | ||||||
Deferred income taxes and other liabilities | 1,375.5 | 1,280.4 | ||||||
Total shareholders’ equity | 5,239.0 | 5,276.1 | ||||||
Total liabilities and shareholders’ equity | $ | 20,972.5 | $ | 19,990.2 | ||||
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
| First Quarter | ||||||||
(in millions) | 2011 | 2010 | ||||||
Cash Flows From Operating Activities: | ||||||||
Net earnings/(loss) | $ | 294.8 | $ | (38.2 | ) | |||
Earnings from discontinued operations | (0.4 | ) | (23.6 | ) | ||||
Earnings/(loss) from continuing operations | 294.4 | (61.8 | ) | |||||
Adjustments to reconcile earnings/(loss) from continuing operations to net cash from operations: | ||||||||
Depreciation and amortization | 68.5 | 66.3 | ||||||
Loss on extinguishment of debt | — | 39.9 | ||||||
Gain on sale of investment in CareFusion | (74.8 | ) | — | |||||
Impairments and loss on sale of assets | 1.9 | 23.6 | ||||||
Share-based compensation | 21.4 | 22.0 | ||||||
Provision for bad debts | 2.7 | 12.3 | ||||||
Change in operating assets and liabilities, net of effects from acquisitions: | ||||||||
Increase in trade receivables | (272.3 | ) | (716.1 | ) | ||||
Increase in inventories | (731.8 | ) | (28.1 | ) | ||||
Increase in accounts payable | 1,033.1 | 1,003.1 | ||||||
Other accrued liabilities and operating items, net | (125.4 | ) | (99.6 | ) | ||||
Net cash provided by operating activities - continuing operations | 217.7 | 261.6 | ||||||
Net cash provided/(used in) operating activities - discontinued operations | (0.7 | ) | 144.4 | |||||
Net cash provided by operating activities | 217.0 | 406.0 | ||||||
Cash Flows From Investing Activities: | ||||||||
Acquisition of subsidiaries, net of cash acquired | (559.9 | ) | (32.0 | ) | ||||
Proceeds from sale of property and equipment | 0.1 | 4.8 | ||||||
Additions to property and equipment | (62.0 | ) | (37.0 | ) | ||||
Proceeds from sale of investment in CareFusion | 705.9 | — | ||||||
Net cash provided by/(used in) investing activities - continuing operations | 84.1 | (64.2 | ) | |||||
Net cash used in investing activities - discontinued operations | — | (9.9 | ) | |||||
Net cash provided by/(used in) investing activities | 84.1 | (74.1 | ) | |||||
Cash Flows From Financing Activities: | ||||||||
Reduction of long-term obligations | (0.4 | ) | (1,134.4 | ) | ||||
Proceeds from issuance of Common Shares | 8.4 | 30.1 | ||||||
Tax disbursements from share-based compensation | (14.1 | ) | (11.4 | ) | ||||
Tax proceeds/(disbursements) from exercises of stock options | 2.0 | (6.2 | ) | |||||
Payment of premiums for debt extinguishment | — | (66.4 | ) | |||||
Dividends on Common Shares | (70.3 | ) | (64.2 | ) | ||||
Purchase of treasury shares | (269.8 | ) | — | |||||
Net cash used in financing activities - continuing operations | (344.2 | ) | (1,252.5 | ) | ||||
Net cash provided by financing activities - discontinued operations | — | 1,283.8 | ||||||
Net cash provided by/(used in) financing activities | (344.2 | ) | 31.3 | |||||
Net increase/(decrease) in cash and equivalents | (43.1 | ) | 363.2 | |||||
Cash and equivalents at beginning of period | 2,755.3 | 1,221.6 | ||||||
Cash and equivalents at end of period | $ | 2,712.2 | $ | 1,584.8 | ||||
Supplemental Information: | ||||||||
Non-cash investing and financing transactions for: | ||||||||
Retained investment in CareFusion at date of Spin-Off | $ | — | $ | 863.1 | ||||
Non-cash dividend in connection with Spin-Off | $ | — | $ | 3,688.9 | ||||
CARDINAL HEALTH, INC. AND SUBSIDIARIES
BUSINESS ANALYSIS
TOTAL COMPANY
| First Quarter | Non-GAAP First Quarter | |||||||||||||||
(in millions) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
Revenue | ||||||||||||||||
Amount | $ | 24,438 | $ | 24,781 | ||||||||||||
Growth Rate | (1 | )% | 6 | % | ||||||||||||
Operating Earnings | ||||||||||||||||
Amount | $ | 364 | $ | 240 | $ | 372 | $ | 323 | ||||||||
Growth Rate | 52 | % | (16 | )% | 15 | % | 4 | % | ||||||||
Earnings/(loss) from Continuing Operations | ||||||||||||||||
Amount | $ | 294 | ($ | 62 | ) | $ | 225 | $ | 194 | |||||||
Growth Rate | N.M. | N.M. | 16 | % | 15 | % | ||||||||||
Refer to the GAAP / Non-GAAP Reconciliation for definitions and calculations supporting the non-GAAP balances.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SEGMENT BUSINESS ANALYSIS
| First Quarter | ||||||||
(in millions) | 2011 | 2010 | ||||||
PHARMACEUTICAL | ||||||||
Revenue | ||||||||
Amount | $ | 22,273 | $ | 22,562 | ||||
Growth Rate | (1 | )% | 5 | % | ||||
Mix | 91 | % | 91 | % | ||||
Segment Profit | ||||||||
Amount | $ | 296 | $ | 208 | ||||
Growth Rate | 42 | % | (2 | )% | ||||
Mix | 78 | % | 64 | % | ||||
Segment Profit Margin | 1.33 | % | 0.92 | % | ||||
| First Quarter | ||||||||
(in millions) | 2011 | 2010 | ||||||
MEDICAL | ||||||||
Revenue | ||||||||
Amount | $ | 2,169 | $ | 2,237 | ||||
Growth Rate | (3 | )% | 10 | % | ||||
Mix | 9 | % | 9 | % | ||||
Segment Profit | ||||||||
Amount | $ | 83 | $ | 115 | ||||
Growth Rate | (28 | )% | 17 | % | ||||
Mix | 22 | % | 36 | % | ||||
Segment Profit Margin | 3.82 | % | 5.13 | % | ||||
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended September 30, 2010 was $24,438 million, which included total segment revenue of $24,442 million and Corporate revenue of $(4) million. Total consolidated revenue for the three months ended September 30, 2009 was $24,781 million, which included total segment revenue of $24,799 million and Corporate revenue of $(18) million. Corporate revenue consists primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the three months ended September 30, 2010 were $364 million, which included total segment profit of $379 million and Corporate loss of $(15) million. Total consolidated operating earnings for the three months ended September 30, 2009 were $240 million, which included total segment profit of $323 million and Corporate loss of $(83) million. Corporate includes, among other things, restructuring and employee severance, acquisition related costs, impairments and loss on sale of assets, litigation (credits)/charges, net and certain investment spending that are not allocated to the segments.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
SCHEDULE OF NOTABLE ITEMS
| First Quarter | ||||||||
(in millions, except per Common Share amounts) | 2011 | 2010 | ||||||
Restructuring and Employee Severance | ||||||||
Restructuring and employee severance | $ | (1.8 | ) | $ | (59.6 | ) | ||
Tax benefit | 0.6 | 17.4 | ||||||
Restructuring and employee severance, net of tax | $ | (1.2 | ) | $ | (42.2 | ) | ||
Decrease to diluted EPS from continuing operations | $ | — | $ | (0.12 | ) | |||
Acquisition Related Costs | ||||||||
Acquisition related costs | $ | (1.3 | ) | $ | (0.1 | ) | ||
Tax benefit | 0.2 | — | ||||||
Acquisition related costs, net of tax | $ | (1.1 | ) | $ | (0.1 | ) | ||
Decrease to diluted EPS from continuing operations | $ | — | $ | — | ||||
Impairments and Loss on Sale of Assets | ||||||||
Impairments and loss on sale of assets | $ | (1.9 | ) | $ | (23.6 | ) | ||
Tax benefit | 0.7 | 8.1 | ||||||
Impairments and loss on sale of asset, net of tax | $ | (1.2 | ) | $ | (15.5 | ) | ||
Decrease to diluted EPS from continuing operations | $ | — | $ | (0.04 | ) | |||
Litigation Credits/(Charges), Net | ||||||||
Litigation credits/(charges), net | $ | (1.4 | ) | $ | 0.5 | |||
Tax benefit/(expense) | 0.6 | (0.2 | ) | |||||
Litigation credits/(charges), net, net of tax | $ | (0.8 | ) | $ | 0.3 | |||
Increase/(decrease) to diluted EPS from continuing operations | $ | — | $ | — | ||||
Other Spin-Off Costs | ||||||||
Other spin-off costs 1 | $ | (1.6 | ) | $ | (42.3 | ) | ||
Tax benefit/(expense) 2 | 0.6 | (155.9 | ) | |||||
Other spin-off costs, net of tax | $ | (1.0 | ) | $ | (198.2 | ) | ||
Decrease to diluted EPS from continuing operations | $ | — | $ | (0.55 | ) | |||
Gain on Sale of CareFusion Stock | ||||||||
Gain on sale of CareFusion stock | $ | 74.8 | $ | — | ||||
Tax expense | — | — | ||||||
Gain on sale of CareFusion stock, net of tax | $ | 74.8 | $ | — | ||||
Increase to diluted EPS from continuing operations | $ | 0.21 | $ | — | ||||
Weighted Average Number of Diluted Shares Outstanding | ||||||||
Weighted average number of diluted shares outstanding | 351.9 | 359.1 | ||||||
Antidilutive effect due to loss from continuing operations and net loss | — | 1.9 | ||||||
Weighted average number of diluted shares outstanding for non-GAAP calculations | 351.9 | 361.0 | ||||||
| 1 | Other spin-off costs included in other income, net for the three months ended September 30, 2009 were $2.4 million. Other spin-off costs also included the $39.9 million loss on extinguishment of debt for the three months ended September 30, 2009. The remaining other spin-off costs are included within distribution, selling, general and administrative expenses for all periods presented. |
| 2 | For the three months ended September 30, 2009, the tax expense associated with the other spin-off costs includes $171.9 million related to the anticipated repatriation of a portion of cash loaned to our entities within the United States. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
ASSET MANAGEMENT ANALYSIS
| First Quarter | ||||||||
| 2011 | 2010 | |||||||
Days Sales Outstanding | 19.9 | 20.1 | ||||||
Days Inventory on Hand | 23.8 | 23.1 | ||||||
Days Payable Outstanding | 35.4 | 33.8 | ||||||
Debt to Total Capital | 29 | % | 33 | % | ||||
Net Debt to Capital | (12 | )% | 15 | % | ||||
Return on Equity | 22.4 | % | (2.2 | )% | ||||
Non-GAAP Return on Equity | 17.1 | % | 15.8 | % | ||||
Effective Tax Rate from Continuing Operations | 30.6 | % | 135.3 | % | ||||
Non-GAAP Effective Tax Rate from Continuing Operations | 37.1 | % | 35.4 | % | ||||
Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations. Refer to DSO, DIOH and DPO below for definitions and calculation.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
| First Quarter 2011 | ||||||||||||||||||||||||||||||||
(in millions, except per Common Share amounts) | GAAP | Restructuring and Employee Severance | Acquisition Related Costs | 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 | $ | 364 | $ | 2 | $ | 1 | $ | 2 | $ | 1 | $ | 2 | — | $ | 372 | |||||||||||||||||
Growth Rate | 52 | % | 15 | % | ||||||||||||||||||||||||||||
Earnings Before Income Taxes and Discontinued Operations | $ | 424 | $ | 2 | $ | 1 | $ | 2 | $ | 1 | $ | 2 | ($ | 75 | ) | $ | 357 | |||||||||||||||
Provision for Income Taxes1 | $ | 130 | $ | 1 | — | $ | 1 | $ | 1 | $ | 1 | — | $ | 133 | ||||||||||||||||||
Earnings from Continuing Operations | ||||||||||||||||||||||||||||||||
Amount | $ | 294 | $ | 1 | $ | 1 | $ | 1 | $ | 1 | $ | 1 | ($ | 75 | ) | $ | 225 | |||||||||||||||
Growth Rate | N.M. | 16 | % | |||||||||||||||||||||||||||||
Diluted EPS from Continuing Operations | ||||||||||||||||||||||||||||||||
Amount | $ | 0.84 | — | — | — | — | — | ($ | 0.21 | ) | $ | 0.64 | ||||||||||||||||||||
Growth Rate | N.M. | 19 | % | |||||||||||||||||||||||||||||
| First Quarter 2010 | ||||||||||||||||||||||||||||||||
| GAAP | Restructuring and Employee Severance | Acquisition Related Costs | 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 | $ | 240 | $ | 60 | — | $ | 24 | — | — | — | $ | 323 | ||||||||||||||||||||
Growth Rate | (16 | )% | 4 | % | ||||||||||||||||||||||||||||
Earnings Before Income Taxes and Discontinued Operations | $ | 175 | $ | 60 | — | $ | 24 | — | $ | 42 | — | $ | 300 | |||||||||||||||||||
Provision for Income Taxes1 | $ | 237 | $ | 17 | — | $ | 8 | — | ($ | 156 | ) | — | $ | 106 | ||||||||||||||||||
Earnings/(Loss) from Continuing Operations | ||||||||||||||||||||||||||||||||
Amount | ($ | 62 | ) | $ | 42 | — | $ | 16 | — | $ | 198 | — | $ | 194 | ||||||||||||||||||
Growth Rate | N.M. | 15 | % | |||||||||||||||||||||||||||||
Diluted EPS from Continuing Operations | ||||||||||||||||||||||||||||||||
Amount | ($ | 0.17 | ) | $ | 0.12 | — | $ | 0.04 | — | $ | 0.55 | — | $ | 0.54 | ||||||||||||||||||
Growth Rate | N.M. | 15 | % | |||||||||||||||||||||||||||||
The sum of the components may not equal the total due to rounding.
| 1 | We apply varying tax rates depending upon the tax jurisdiction where the items are incurred. |
CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
| First Quarter | First Quarter | |||||||||||||||
(in millions) | 2011 | 2010 | ||||||||||||||
GAAP Return on Equity | 22.4 | % | (2.2 | )% | ||||||||||||
Non-GAAP Return on Equity | ||||||||||||||||
Net earnings/(loss) | $ | 294.8 | $ | (38.2 | ) | |||||||||||
Restructuring and employee severance, net of tax, in continuing operations1 | 1.2 | 42.2 | ||||||||||||||
Acquisition related costs, net of tax, in continuing operations1 | 1.1 | 0.1 | ||||||||||||||
Impairments and loss on sale of assets, net of tax, in continuing operations1 | 1.2 | 15.5 | ||||||||||||||
Litigation (credits)/charges, net, net of tax, in continuing operations1 | 0.8 | (0.3 | ) | |||||||||||||
Other spin-off costs, net of tax1 | 1.0 | 198.2 | ||||||||||||||
Gain on sale of CareFusion stock, net of tax1 | (74.8 | ) | — | |||||||||||||
CareFusion net earnings in discontinued operations1, 2 | — | (20.1 | ) | |||||||||||||
Adjusted net earnings | $ | 225.3 | $ | 197.4 | ||||||||||||
Annualized | $ | 901.2 | $ | 789.6 | ||||||||||||
| First Quarter | Fourth Quarter | First Quarter | Fourth Quarter | |||||||||||||
| 2011 | 2010 | 2010 | 2009 | |||||||||||||
Non-GAAP Shareholders’ Equity | ||||||||||||||||
Total shareholders’ equity | $ | 5,239.0 | $ | 5,276.1 | $ | 4,941.2 | $ | 8,724.7 | ||||||||
Non-cash dividend related to CareFusion spin-off | — | — | — | (3,688.9 | ) | |||||||||||
Non-GAAP shareholders’ equity | $ | 5,239.0 | $ | 5,276.1 | $ | 4,941.2 | $ | 5,035.8 | ||||||||
Divided by average shareholders’ equity | 5,257.6 | 4,988.5 | ||||||||||||||
Non-GAAP return on equity | 17.1 | % | 15.8 | % | ||||||||||||
| 1 | We apply 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
| First Quarter | ||||||||
(in millions) | 2011 | 2010 | ||||||
GAAP Effective Tax Rate from Continuing Operations | 30.6 | % | 135.3 | % | ||||
Non-GAAP Effective Tax Rate from Continuing Operations | ||||||||
Earnings before income taxes and discontinued operations | $ | 424.2 | $ | 175.0 | ||||
Restructuring and employee severance | 1.8 | 59.6 | ||||||
Acquisition related costs | 1.3 | 0.1 | ||||||
Impairments and loss on sale of assets | 1.9 | 23.6 | ||||||
Litigation (credits)/charges, net | 1.4 | (0.5 | ) | |||||
Other spin-off costs | 1.6 | 42.3 | ||||||
Gain on sale of CareFusion stock | (74.8 | ) | — | |||||
Adjusted earnings before income taxes and discontinued operations | $ | 357.4 | $ | 300.1 | ||||
Provision for income taxes1 | $ | 129.8 | $ | 236.8 | ||||
Restructuring and employee severance tax benefit1 | 0.6 | 17.4 | ||||||
Acquisition related costs tax benefit1 | 0.2 | — | ||||||
Impairments and loss on sale of assets tax benefit1 | 0.7 | 8.1 | ||||||
Litigation (credits)/charges, net tax benefit/(expense)1 | 0.6 | (0.2 | ) | |||||
Other spin-off costs tax benefit/(expense)1 | 0.6 | (155.9 | ) | |||||
Gain on sale of CareFusion stock tax expense1 | — | — | ||||||
Adjusted provision for income taxes | $ | 132.5 | $ | 106.2 | ||||
Non-GAAP effective tax rate from continuing operations | 37.1 | % | 35.4 | % | ||||
| First Quarter | ||||||||
| 2011 | 2010 | |||||||
Debt to Total Capital | 29 | % | 33 | % | ||||
Net Debt to Capital | ||||||||
Current portion of long-term obligations and other short-term borrowings | $ | 233.6 | $ | 362.3 | ||||
Long-term obligations, less current portion | 1,906.4 | 2,103.5 | ||||||
Debt | $ | 2,140.0 | $ | 2,465.8 | ||||
Cash and equivalents | (2,712.2 | ) | (1,584.8 | ) | ||||
Net debt | $ | (572.2 | ) | $ | 881.0 | |||
Total shareholders’ equity | $ | 5,239.0 | $ | 4,941.2 | ||||
Capital | $ | 4,666.8 | $ | 5,822.2 | ||||
Net Debt to Capital | (12 | )% | 15 | % | ||||
| 1 | We apply varying tax rates depending upon the tax jurisdiction where the items are incurred. |
Forward-Looking Non-GAAP Financial Measures
We present 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. We are unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because we cannot reliably forecast restructuring and employee severance, acquisition related costs, impairments and loss on sale of assets, litigation (credits)/charges, net, and other spin-off costs, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact our future financial results.
CARDINAL HEALTH, INC. AND SUBSIDIARIES
| First Quarter | ||||||||
(in millions) | 2011 | 2010 | ||||||
Days Inventory on Hand | ||||||||
Inventories | $ | 7,087.5 | $ | 6,861.9 | ||||
Cost of products sold | $ | 23,475.3 | $ | 23,871.9 | ||||
Chargeback billings | 3,289.1 | 2,843.4 | ||||||
Adjusted cost of products sold | $ | 26,764.4 | $ | 26,715.3 | ||||
Adjusted cost of products sold divided by 90 days | $ | 297.4 | $ | 296.8 | ||||
Days inventory on hand | 23.8 | 23.1 | ||||||
Days Inventory on Hand: inventory divided by ((quarterly cost 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.
| First Quarter | ||||||||
| 2011 | 2010 | |||||||
Days Payable Outstanding | ||||||||
Accounts payable | $ | 10,532.3 | $ | 10,047.1 | ||||
Cost of products sold | $ | 23,475.3 | $ | 23,871.9 | ||||
Chargeback billings | 3,289.1 | 2,843.4 | ||||||
Adjusted cost of products sold | $ | 26,764.4 | $ | 26,715.3 | ||||
Adjusted cost of products sold divided by 90 days | $ | 297.4 | $ | 296.8 | ||||
Days Payable Outstanding | 35.4 | 33.8 | ||||||
Days Payable Outstanding: accounts payable divided by ((quarterly cost 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.
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 from the sale of our ownership of CareFusion common stock retained in connection with the spin-off
Other Spin-Off Costs: costs and tax charges incurred in connection with our spin-off of CareFusion that are not included in restructuring and employee severance, acquisition related costs, 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 our entities within the United States
Days Sales Outstanding: 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
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) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spin-Off Costs and (6) 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) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spin-Off Costs and (6) gain on sale of CareFusion stock) divided by (earnings before income taxes and discontinued operations adjusted for (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spin-Off Costs and (6) gain on sale of CareFusion stock)
Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation credits/(charges), net and (5) 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) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spin-Off Costs, (6) CareFusion net earnings in discontinued operations and (7) 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