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FOR IMMEDIATE RELEASE
OCTOBER 23, 1995
For Additional Information:
Debra Dendahl Hadley
Director - Investor
Relations
614/761-8700
MARGIN IMPROVEMENT DRIVES HIGHER EARNINGS
AT CARDINAL HEALTH, INC.
DUBLIN, OHIO, OCTOBER 23, 1995 -- Cardinal Health,
Inc. (NYSE: CAH) today reported substantially higher earnings
for the first quarter of its fiscal year 1996. Net income rose
28% in the quarter to $20.5 million from $16.0 million in the
first quarter of 1995. Fully diluted earnings per share were
$.48 for the first quarter, an increase of 23% from $.39 earned
in the same period one year ago.
These higher earnings levels were driven by gross
margin improvement and increased sales. The gross margin was
5.82% of net sales for the first quarter of 1996, up from 5.68%
earned in the same period last year. Reasons for the improve-
ment in the gross margin over the past year include: greater con-
tribution from sales of generic drugs, increased development of
customer and supplier marketing programs, growth in Cardinal's
higher-margin specialty businesses, and a stable customer mix.
Net sales were $2.0 billion in the first quarter of
1996, up from $1.8 billion in the prior year, an increase of
12%. All of the increase in sales was internally generated.
Not included in net sales is an additional $533 million of
brokerage shipments to customer warehouses during the first
quarter of 1996, up 48% from the prior year. The addition of
brokerage shipments to net sales resulted in total customer
shipments of $2.6 billion in the first quarter of 1996.
"I am very pleased that our first quarter results
reflect an improved balance between volume and margin," noted
Robert D. Walter, chairman and chief executive officer. "Our
sales growth for the quarter was somewhat below recent histori-
cal levels due to a comparison with the first quarter a year
ago in which we experienced an internal growth rate of a robust
30%. During the first quarter of this year, Cardinal signed
contracts with a number of major new customers which will en-
hance sales growth in future periods.
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[LETTERHEAD OF CARDINAL HEALTH, INC.]
"Our primary focus is to optimize our profit equa-
tion," Mr. Walter emphasized. "As a result, we will not take
on business that does not meet our long-term return objectives
and enable us to continue to invest in new systems and services
for our customers. We strongly believe, as do the majority of
our customers, that over the long term, high service levels and
creative partnership initiatives are of the greatest value in
delivering quality health care services to the marketplace.
"Cardinal's service levels are the best they have
ever been," Mr. Walter continued. "In addition, we are adding
more value at multiple points along the pharmaceutical supply
chain than ever before. Our high service levels combined with
the breadth of services we offer continue to distinguish us in
the marketplace. In addition, we are being compensated to a
greater degree today than we have been in the past for the val-
ue we are creating, which should continue to be favorably re-
flected in our gross margin."
Productivity improvements also contributed to Cardi-
nal Health's earnings performance in the first quarter. Earn-
ings per employee increased 18% from the first quarter of 1995
to the same period this year. Selling, general and administra-
tive expenses declined from 3.97% of net sales in the first
quarter of 1995 to 3.93% in the most recent quarter.
"Our core business expenses continue to move towards
3% of sales, enabling us to continue to make investments for
our future," Mr. Walter added. "We currently have numerous
initiatives underway to relocate, expand and/or renovate cer-
tain distribution facilities. In addition, we continue to de-
velop enhanced systems capabilities which will enable our cus-
tomers to improve further the management of their pharmacy
operations."
Cardinal closed the quarter with a very strong capi-
tal position. Over the last twelve months, shareholders' eq-
uity increased 18.2% to $568.7 million. Total debt, net of
cash, to total capital at the end of the first quarter of 1996
was 23%.
In August, Cardinal Health and Medicine Shoppe Inter-
national, Inc. announced the signing of a definitive merger
agreement. Medicine Shoppe is the largest franchiser of
apothecary-style independent pharmacies in the United States.
A special meeting of Medicine Shoppe's shareholders has been
scheduled for November 13, 1995 to vote on approval of the
merger. The company currently expects to close the transaction
prior to December 1, 1995.
Cardinal Health, Inc., based in Dublin, Ohio, is one
of the country's largest pharmaceutical distributors. The com-
pany provides an array of innovative, value-added services to a
broad base of customers nationwide including hospitals, inde-
pendent and chain pharmacies, managed care facilities, alter-
nate care centers, and the pharmacy departments of supermarkets
and mass merchandisers.
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CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
FIRST QUARTER (unaudited)
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September 30, % of September 30, % of
1995 Net Sales 1994 Net Sales % Change
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Net Sales $ 2,033,034 100.00% $ 1,818,687 100.00% 12%
Cost of Products Sold 1,914,787 94.18% 1,715,330 94.32% 12%
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Gross Margin 118,247 5.82% 103,357 5.68% 14%
S, G & A Expenses (79,840) 3.93% (72,201) 3.97% 11%
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Operating Earnings 38,407 1.89% 31,156 1.71% 23%
Other Income (Expense):
Interest Expense (4,140) 0.20% (3,856) 0.21% 7%
Other, net 1,119 0.05% 401 0.02% 179%
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Earnings Before Income Taxes 35,386 1.74% 27,701 1.52% 28%
Provision for Income Taxes (14,859) 0.73% (11,676) 0.64% 27%
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Earnings Available for
Common Shares $ 20,527 1.01% $ 16,025 0.88% 28%
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Earnings per Common Share:
Primary $ 0.48 $ 0.39 23%
Fully Diluted $ 0.48 $ 0.39 23%
Weighted Avg. Number of
Shares Outstanding:
Primary 42,796 40,614
Fully Diluted 42,876 40,678
/TABLE
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CARDINAL HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
($000'S)
(unaudited)
September 30, June 30, September 30, September/June September/September
1995 1995 1994 Difference Difference
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ASSETS
CURRENT ASSETS
Cash and Equivalents and Marketable
Securities $ 62,230 $ 63,195 $ 126,781 $ (965) $ (64,551)
Trade Receivables 568,269 516,262 473,137 52,007 95,132
Merchandise Inventories 1,120,739 1,071,811 962,251 48,928 158,488
Prepaid Expenses and Other 24,892 23,446 26,656 1,446 (1,764)
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Total Current Assets 1,776,130 1,674,714 1,588,825 101,416 187,305
Property and Equipment - at Cost 186,667 177,284 145,300 9,383 41,367
Less Accumulated Depreciation
and Amortization (86,867) (82,056) (72,839) (4,811) (14,028)
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Property and Equipment - Net 99,800 95,228 72,461 4,572 27,339
OTHER ASSETS 71,617 71,862 65,867 (245) 5,750
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TOTAL ASSETS $ 1,947,547 $ 1,841,804 $1,727,153 $ 105,743 $ 220,394
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Banks $ 19,800 $ 3,000 $ 16,800 $ 19,800
Current Portion of Long-Term
Obligations 2,102 2,083 $ 3,517 19 (1,415)
Accounts Payable 1,021,893 949,992 937,215 71,901 84,678
Other Accrued Liabilities 115,478 118,295 93,753 (2,817) 21,725
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Total Current Liabilities 1,159,273 1,073,370 1,034,485 85,903 124,788
Long-Term Obligations, Less Current
Portion 208,179 209,202 211,443 (1,023) (3,264)
Deferred Taxes and Other Liabilities 11,364 11,035 191 329 11,173
Common Shares - Without Par Value 347,047 345,538 343,574 1,509 3,473
Retained Earnings 229,073 209,804 144,623 19,269 84,450
Common Shares in Treasury - At Cost (4,189) (4,011) (3,438) (178) (751)
Unamortized Value of Restricted Stock
Issued (3,200) (3,134) (3,725) (66) 525
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Total Shareholders' Equity 568,731 548,197 481,034 20,534 87,697
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 1,947,547 $ 1,841,804 $ 1,727,153 $ 105,743 $ 220,394
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