UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarter Ended March 31, 2002 Commission File Number 1-11373
CARDINAL HEALTH, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-0958666
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7000 CARDINAL PLACE, DUBLIN, OHIO 43017
(Address of principal executive offices and zip code)
(614) 757-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of Registrant's Common Shares outstanding at the close of
business on April 30, 2002 was as follows:
Common Shares, without par value: 451,678,817
-----------
CARDINAL HEALTH, INC. AND SUBSIDIARIES
Index *
Page No.
Part I. Financial Information:
---------------------
Item 1. Financial Statements:
Condensed Consolidated Statements of Earnings for the Three and Nine Months
Ended March 31, 2002 and 2001 (unaudited).......................................... 3
Condensed Consolidated Balance Sheets at March 31, 2002 and
June 30, 2001 (unaudited).......................................................... 4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 2002 and 2001 (unaudited)................................................ 5
Notes to Condensed Consolidated Financial Statements............................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................................ 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 17
Part II. Other Information:
-----------------
Item 1. Legal Proceedings.................................................................. 18
Item 5. Other Information.................................................................. 18
Item 6. Exhibits and Reports on Form 8-K................................................... 18
* Items not listed are inapplicable.
Page 2
PART I. FINANCIAL INFORMATION
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Operating revenue $ 11,541.3 $ 10,334.2 $ 32,628.4 $ 28,405.8
Operating cost of products sold 10,472.8 9,388.1 29,644.7 25,771.1
----------- ----------- ----------- -----------
Operating gross margin 1,068.5 946.1 2,983.7 2,634.7
Bulk deliveries to customer warehouses 1,700.7 2,245.9 5,479.1 7,140.8
Cost of products sold - bulk deliveries 1,700.7 2,245.9 5,479.1 7,139.8
----------- ----------- ----------- -----------
Bulk gross margin -- -- -- 1.0
Selling, general and administrative expenses 536.0 497.3 1,552.4 1,431.9
Goodwill amortization -- 12.6 -- 37.1
Special charges 39.1 86.3 68.2 106.6
----------- ----------- ----------- -----------
Operating earnings 493.4 349.9 1,363.1 1,060.1
Interest expense and other 39.6 43.7 107.0 116.9
----------- ----------- ----------- -----------
Earnings before income taxes 453.8 306.2 1,256.1 943.2
Provision for income taxes 153.5 113.3 426.1 339.1
----------- ----------- ----------- -----------
Net earnings before cumulative effect of
change in accounting principle 300.3 192.9 830.0 604.1
Cumulative effect on prior years of change in
accounting principle, net of tax (See Note 8) -- -- 70.1 --
----------- ----------- ----------- -----------
Net earnings $ 300.3 $ 192.9 $ 759.9 $ 604.1
=========== =========== =========== ===========
Basic earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 0.67 $ 0.43 $ 1.85 $ 1.37
Cumulative effect of change in
accounting principle -- -- (0.16) --
----------- ----------- ----------- -----------
Net basic earnings per Common Share $ 0.67 $ 0.43 $ 1.69 $ 1.37
=========== =========== =========== ===========
Diluted earnings per Common Share:
Before cumulative effect of change in
accounting principle $ 0.66 $ 0.42 $ 1.81 $ 1.33
Cumulative effect of change in
accounting principle -- -- (0.15) --
----------- ----------- ----------- -----------
Net diluted earnings per Common Share $ 0.66 $ 0.42 $ 1.66 $ 1.33
=========== =========== =========== ===========
Weighted average number of Common Shares outstanding:
Basic 449.9 444.3 449.8 441.6
Diluted 459.1 456.5 459.8 453.9
Cash dividends declared per Common Share $ 0.025 $ 0.020 $ 0.075 $ 0.060
See notes to condensed consolidated financial statements.
Page 3
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN MILLIONS)
MARCH 31, JUNE 30,
2002 2001
------------ ------------
ASSETS
Current assets:
Cash and equivalents $ 869.2 $ 934.1
Trade receivables, net 2,536.0 2,408.7
Current portion of net investment in sales-type leases 204.6 236.3
Inventories 7,902.0 6,286.1
Prepaid expenses and other 870.8 851.1
------------ ------------
Total current assets 12,382.6 10,716.3
------------ ------------
Property and equipment, at cost 3,411.7 3,345.9
Accumulated depreciation and amortization (1,587.9) (1,507.6)
------------ ------------
Property and equipment, net 1,823.8 1,838.3
Other assets:
Net investment in sales-type leases, less current portion 569.6 671.7
Goodwill and other intangibles 1,178.3 1,175.4
Other 302.2 240.7
------------ ------------
Total $ 16,256.5 $ 14,642.4
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 3.7 $ 8.3
Current portion of long-term obligations 13.5 5.9
Accounts payable 5,266.9 5,319.9
Other accrued liabilities 1,486.6 1,240.7
------------ ------------
Total current liabilities 6,770.7 6,574.8
------------ ------------
Long-term obligations, less current portion 2,464.0 1,871.0
Deferred income taxes and other liabilities 812.8 759.5
Shareholders' equity:
Common Shares, without par value 2,038.6 1,893.1
Retained earnings 4,870.3 4,146.0
Common Shares in treasury, at cost (544.1) (457.2)
Accumulated other comprehensive loss, net of tax (144.2) (140.3)
Other (11.6) (4.5)
------------ ------------
Total shareholders' equity 6,209.0 5,437.1
------------ ------------
Total $ 16,256.5 $ 14,642.4
============ ============
See notes to condensed consolidated financial statements.
Page 4
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)
NINE MONTHS ENDED
MARCH 31,
2002 2001
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings before cumulative effect of change in accounting principle $ 830.0 $ 604.1
Adjustments to reconcile net earnings before cumulative effect of change
in accounting principle to net cash from operating activities:
Depreciation and amortization 181.5 209.0
Provision for bad debts 36.9 16.2
Change in operating assets and liabilities, net of effects from acquisitions:
Increase in trade receivables (164.4) (460.0)
Increase in inventories (1,609.2) (1,359.6)
(Increase)/decrease in net investment in sales-type leases 133.9 (79.8)
Increase/(decrease) in accounts payable (54.7) 1,135.7
Other operating items, net 203.2 (77.3)
------------ ------------
Net cash used in operating activities (442.8) (11.7)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (10.9) (323.3)
Proceeds from sale of property and equipment 17.6 17.8
Additions to property and equipment (186.1) (234.8)
------------ ------------
Net cash used in investing activities (179.4) (540.3)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in commercial paper and short-term debt 290.3 (536.1)
Reduction of long-term obligations (9.7) (40.7)
Proceeds from long-term obligations, net of issuance costs 318.4 917.7
Proceeds from issuance of Common Shares 112.2 186.9
Dividends on Common Shares and cash paid
in lieu of fractional shares (33.7) (26.5)
Purchase of treasury shares (115.7) (138.8)
Other (4.5) (1.4)
------------ ------------
Net cash provided by financing activities 557.3 361.1
------------ ------------
NET DECREASE IN CASH AND EQUIVALENTS (64.9) (190.9)
CHANGE IN BINDLEY'S FISCAL YEAR -- 47.6
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 934.1 539.5
------------ ------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 869.2 $ 396.2
============ ============
See notes to condensed consolidated financial statements.
Page 5
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. The condensed consolidated financial statements of Cardinal
Health, Inc. (the "Company") include the accounts of all
majority-owned subsidiaries and all significant intercompany amounts
have been eliminated. These condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-Q and include all of the information and disclosures required
by generally accepted accounting principles for interim reporting. In
the opinion of management, all adjustments necessary for a fair
presentation have been included. Except as disclosed elsewhere
herein, all such adjustments are of a normal and recurring nature.
The condensed consolidated financial statements included herein
should be read in conjunction with the audited consolidated financial
statements and related notes contained in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 2001 (the "2001 Form
10-K"). Without limiting the generality of the foregoing, Note 1 of
the "Notes to Consolidated Financial Statements" from the 2001 Form
10-K is specifically incorporated herein by reference.
Note 2. Basic earnings per Common Share ("Basic") is computed by dividing
net earnings (the numerator) by the weighted average number of Common
Shares outstanding during each period (the denominator). Diluted
earnings per Common Share is similar to the computation for Basic,
except that the denominator is increased by the dilutive effect of
stock options outstanding, computed using the treasury stock method.
In September 2001, the Company's Board of Directors authorized the
repurchase of Common Shares up to an aggregate amount of $500
million. As of March 31, 2002, 1.8 million Common Shares having an
aggregate cost of approximately $115.7 million had been repurchased
through this plan. The repurchased shares will be held as treasury
shares and used for general corporate purposes.
Note 3. The Company's comprehensive income consists of net earnings,
foreign currency translation adjustments, unrealized (loss)/gain on
investment, reclassification adjustment for investment losses
included in net income, and net unrealized (loss)/gain on derivative
instruments, all net of tax, as follows:
For the Three Months Ended For the Nine Months Ended
(in millions) March 31, March 31,
2002 2001 2002 2001
--------- --------- --------- ---------
Net earnings $ 300.3 $ 192.9 $ 759.9 $ 604.1
Foreign currency translation
adjustments (12.6) (1.5) (8.6) (22.6)
Unrealized (loss)/gain on
investment -- -- 2.2 (5.4)
Reclassification adjustment for
investment losses included in
net income -- -- 3.2 --
Net unrealized (loss)/gain on
derivative instruments 3.6 (5.5) (0.7) (6.0)
--------- --------- --------- ---------
Total comprehensive income $ 291.3 $ 185.9 $ 756.0 $ 570.1
========= ========= ========= =========
Note 4. Pyxis Funding LLC ("Pyxis Funding") was organized during the first
quarter of fiscal year 2002 for the sole purpose of buying
receivables and selling them to certain investors. Pyxis Funding is a
wholly owned, special purpose, bankruptcy-remote subsidiary of Pyxis
Corporation ("Pyxis"). During the first quarter of fiscal year 2002,
Pyxis Funding acquired a pool of sales-type leases from Pyxis, and
sold an undivided interest in those leases to an investor for
approximately $150 million, which approximated the fair value of the
sold interest. This was accounted for as a sale by the Company and
Pyxis under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishment of Liabilities." Although
Pyxis Funding is consolidated by the Company and Pyxis as required by
U.S. generally accepted accounting principles, it is a separate legal
entity and maintains separate financial statements. The assets of
Pyxis Funding are available, first and foremost, to satisfy claims of
its creditors.
Page 6
Note 5. Costs of effecting mergers and subsequently integrating the
operations of the various merged companies are recorded as
merger-related costs when incurred. The merger-related costs
currently being recognized are primarily a result of the merger
transactions with Bindley Western Industries, Inc. ("Bindley"),
Bergen Brunswig Medical Corporation ("BBMC"), Automatic Liquid
Packaging, Inc. ("ALP"), Allegiance Corporation ("Allegiance") and
R.P. Scherer Corporation ("Scherer"). The following is a summary of
the special charges for the three and nine-month periods ended March
31, 2002 and 2001.
Special Charges Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------------------------------------------------------------------------------
(in millions) 2002 2001 2002 2001
------------------------------------------------------------------------------------------------------
Merger-Related Costs:
Transaction costs $ -- $ (20.8) $ -- $ (20.8)
Employee-related costs (12.3) (29.0) (22.3) (39.7)
Net exit costs and asset impairment (12.4) (15.0) (16.1) (15.2)
Restructuring costs -- -- -- (1.6)
Other integration costs (14.4) (9.7) (29.8) (22.5)
------------------------------------------------------------------------------------------------------
Total merger-related costs $ (39.1) $ (74.5) $ (68.2) $ (99.8)
------------------------------------------------------------------------------------------------------
Other Special Charges:
Distribution center closures $ -- $ (4.4) $ -- $ (4.4)
Manufacturing facility closures -- (2.2) -- (2.2)
Employee-related costs -- (5.2) -- (5.2)
Litigation settlement -- -- -- 5.0
------------------------------------------------------------------------------------------------------
Total other special charges $ -- $ (11.8) $ -- $ (6.8)
------------------------------------------------------------------------------------------------------
Total special charges $ (39.1) $ (86.3) $ (68.2) $ (106.6)
Tax effect of special charges 14.4 24.5 25.6 32.8
------------------------------------------------------------------------------------------------------
Net effect of special charges $ (24.7) $ (61.8) $ (42.6) $ (73.8)
======================================================================================================
Merger-Related Costs
During the prior fiscal year, the Company incurred direct transaction
costs related to its merger transactions. These expenses primarily
included investment banking, legal, accounting and other professional
fees associated with the Bindley merger transaction. In addition,
during the periods shown above, the Company incurred employee-related
costs, primarily consisting of severance, non-compete agreements, and
transaction/stay bonuses as a result of certain acquisitions. Exit
costs relate primarily to costs associated with lease terminations,
moving expenses, and asset impairments as a direct result of the
merger transactions with Bindley, BBMC, ALP, Allegiance and Scherer.
Other integration costs include charges primarily related to
integrating the operations of the above-mentioned merger
transactions.
The Company incurred a restructuring charge of $1.6 million during
the first quarter of fiscal 2001 relating to the Company's merger
transaction with Scherer. As part of the business restructuring, the
Company has closed certain facilities. In connection with such
closings, the Company has incurred employee-related costs, asset
impairment charges and exit costs related to the termination of
contracts and lease agreements.
Other Special Charges
During the three months ended March 31, 2001, the Company recorded a
special charge of $5.0 million related to the rationalization of its
pharmaceutical distribution centers. Approximately $4.4 million
related to asset impairments, lease exit costs and duplicate facility
costs resulting from the Company's decision to consolidate
distribution centers and relocate to a more modern distribution
center. The remaining amount related to employee severance costs.
In addition, during the three months ended March 31, 2001, the
Company recorded a special charge of $6.8 million related to the
rationalization of its health and nutrition manufacturing facilities.
Approximately, $2.2 million related to lease exit costs. The
remaining amount related to employee severance costs associated with
the rationalization.
Page 7
During the first quarter of fiscal 2001, Bindley recorded a benefit
of approximately $5.0 million related to a reduction in a litigation
settlement accrual, which was previously recorded. The amount of the
final settlement was lower than originally anticipated.
Summary
The net effect of the various special charges recorded during the
three months ended March 31, 2002 and 2001 was to reduce net earnings
by $24.7 million to $300.3 million and by $61.8 million to $192.9
million, respectively, and to reduce reported diluted earnings per
Common Share by $0.05 per share to $0.66 per share and by $0.14 per
share to $0.42 per share, respectively. The net effect of the various
special charges recorded during the nine months ended March 31, 2002
and 2001 was to reduce net earnings before cumulative effect of
change in accounting principle by $42.6 million to $830.0 million and
by $73.8 million to $604.1 million, respectively, and to reduce
reported diluted earnings per Common Share before cumulative effect
of change in accounting principle by $0.09 per share to $1.81 per
share and by $0.16 per share to $1.33 per share, respectively.
Note 6. The Company is organized based on the products and services it
offers. Under this organizational structure, the Company operates in
four business segments: Pharmaceutical Distribution and Provider
Services, Medical-Surgical Products and Services, Pharmaceutical
Technologies and Services, and Automation and Information Services.
With the exception noted in Note 8 for the Automation and Information
Services segment, the Company has not made any significant changes in
the segments reported or the basis of measurement of segment profit
or loss from the information provided in the Company's 2001 Form
10-K.
The Pharmaceutical Distribution and Provider Services segment
involves the distribution of a broad line of pharmaceuticals,
healthcare and beautycare products, radiopharmaceuticals, therapeutic
plasma and other specialty pharmaceutical products and other items
typically sold by hospitals, retail drug stores and other healthcare
providers. In addition, this segment provides services to the
healthcare industry through integrated pharmacy management, temporary
pharmacy staffing, as well as franchising of apothecary-style retail
pharmacies.
The Medical-Surgical Products and Services segment involves the
manufacture of medical, surgical and laboratory products and the
distribution of these products to hospitals, physician offices,
surgery centers and other healthcare providers.
The Pharmaceutical Technologies and Services segment provides
services to the healthcare manufacturing industry through the design
of unique drug delivery systems, liquid fill contract manufacturing,
comprehensive packaging services, analytical services, and sales and
marketing services.
The Automation and Information Services segment provides services to
hospitals and other healthcare providers through pharmacy automation
equipment and clinical information system services.
The Company evaluates the performance of the segments based on
operating earnings after the corporate allocation of administrative
expenses. Special charges are not allocated to the segments.
Page 8
The following tables include revenue and operating earnings for the
three and nine-month periods ended March 31, 2002 and 2001 for each
segment and reconciling items necessary to equal amounts reported in
the condensed consolidated financial statements:
For the Three Months Ended For the Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
(in millions) Revenue Revenue
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating revenue:
Pharmaceutical Distribution and Provider
Services $ 9,542.5 $ 8,447.9 $ 26,717.7 $ 22,928.5
Medical-Surgical Products and Services 1,560.8 1,498.2 4,624.9 4,350.4
Pharmaceutical Technologies and Services 316.4 301.2 947.3 859.9
Automation and Information Services 142.3 112.3 390.3 321.9
Other (20.7) (25.4) (51.8) (54.9)
------------ ------------ ------------ ------------
Total operating revenue 11,541.3 10,334.2 32,628.4 28,405.8
Bulk deliveries to customer warehouses:
Pharmaceutical Distribution and Provider
Services 1,700.7 2,245.9 5,479.1 7,140.8
------------ ------------ ------------ ------------
Total revenue $ 13,242.0 $ 12,580.1 $ 38,107.5 $ 35,546.6
============================================================
(in millions) Operating Earnings Operating Earnings
----------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Operating earnings:
Pharmaceutical Distribution and Provider
Services $ 314.8 $ 257.7 $ 792.8 $ 640.0
Medical-Surgical Products and Services 138.6 112.0 395.6 320.2
Pharmaceutical Technologies and Services 60.9 50.0 188.1 158.8
Automation and Information Services 53.4 41.1 138.3 109.6
Corporate (1) (74.3) (110.9) (151.7) (168.5)
------------ ------------ ------------ ------------
Total operating earnings $ 493.4 $ 349.9 $ 1,363.1 $ 1,060.1
=====================================================================================================================
(1) Corporate - operating earnings primarily consist of special
charges of $39.1 million and $86.3 million for the three
months ended March 31, 2002 and 2001, respectively, and
$68.2 million and $106.6 million for the nine months ended
March 31, 2002 and 2001, respectively, and unallocated
corporate administrative expenses and investment spending.
Note 7. On September 30, 1996, Baxter International Inc. ("Baxter") and its
subsidiaries transferred to Allegiance and its subsidiaries their
U.S. Healthcare distribution business, surgical and respiratory
therapy business and healthcare cost-saving business, as well as
certain foreign operations (the "Allegiance Business") in connection
with a spin-off of the Allegiance Business by Baxter. In connection
with this spin-off, Allegiance, which was acquired by the Company on
February 3, 1999, agreed to indemnify Baxter Healthcare Corporation
("BHC") from certain claims related to the Allegiance Business,
including certain claims of alleged personal injuries as a result of
exposure to natural rubber latex gloves. Allegiance will be defending
and indemnifying BHC, as contemplated by the agreements between
Baxter and Allegiance, for all expenses and potential liabilities
associated with claims pertaining to the litigation assumed by
Allegiance. As of March 31, 2002, there were approximately 415
lawsuits involving BHC and/or Allegiance containing allegations of
sensitization to natural rubber latex products. Some of the cases are
now proceeding to trial. Because of the number of claims filed and
the ongoing defense costs that will be incurred, the Company believes
it is probable that it will continue to incur significant expenses
related to the resolution of cases involving natural rubber latex
gloves. The Company believes a substantial portion of any liability
will be covered by insurance, subject to self-insurance retentions,
exclusions, conditions, coverage gaps, policy limits and insurer
solvency.
Page 9
The Company also becomes involved from time-to-time in other
litigation incidental to its business, including, without limitation,
inclusion of certain of its subsidiaries as a potentially responsible
party for environmental clean-up costs. Although the ultimate
resolution of the litigation referenced herein cannot be forecast
with certainty, the Company intends to vigorously defend itself and
does not currently believe that the outcome of any pending litigation
will have a material adverse effect on the Company's consolidated
financial statements.
Note 8. In the first quarter of fiscal 2002, the method of recognizing
revenue for pharmacy automation equipment was changed from
recognizing revenue when the units were delivered to the customer to
recognizing revenue when the units are installed at the customer
site. Management believes that the change in accounting method will
provide for a more objectively determinable method of revenue
recognition. In addition, the Company has implemented other changes
to better service its customers and leverage operational
efficiencies. The Company has recorded a cumulative effect of change
in accounting principle of $70.1 million (net of tax of $44.6
million) in the consolidated statement of earnings during the first
quarter of fiscal 2002. The after tax dilutive impact of the
cumulative effect is $0.15 per diluted share. The estimated effect of
the change for the three and nine months ended March 31, 2002, is to
reduce net earnings before the cumulative effect by $0.8 million and
$6.7 million, respectively. This change resulted in no impact to
diluted earnings per share for the three months ended March 31, 2002,
but did reduce diluted earnings per share by $0.01 for the nine
months ended March 31, 2002. The pro-forma effect of this accounting
change on prior periods has not been presented as the required
information is not available.
Note 9. In July 2001, the Financial Accounting Standards Board ("FASB")
issued SFAS 142 "Goodwill and Other Intangible Assets" which revises
the accounting for purchased goodwill and other intangible assets.
SFAS 142 is effective for fiscal years beginning after December 15,
2001, with earlier adoption permitted. The Company elected to adopt
SFAS 142 beginning with the first quarter of fiscal 2002. Under SFAS
142, purchased goodwill and intangible assets with indefinite lives
are no longer amortized, but instead tested for impairment at least
annually. Accordingly, the Company has ceased amortization of all
goodwill and intangible assets with indefinite lives as of July 1,
2001. Intangible assets with finite lives, primarily patents and
trademarks, will continue to be amortized over their useful lives.
During the three and nine month periods ended March 31, 2002, there
were no material changes to goodwill as a result of acquisitions,
impairment losses, or disposals.
SFAS 142 requires a two step impairment test for goodwill. The first
step is to compare the carrying amount of the reporting unit's assets
to the fair value of the reporting unit. If the carrying amount
exceeds the fair value then the second step is required to be
completed, which involves the fair value of the reporting unit being
allocated to each asset and liability with the excess being implied
goodwill. The impairment loss is the amount by which the recorded
goodwill exceeds the implied goodwill. The Company was required to
complete a "transitional" impairment test for goodwill as of the
beginning of the fiscal year in which the statement is adopted. This
transitional impairment test required that the Company complete step
one of the goodwill impairment test within six months from the date
of initial adoption, or December 31, 2001. The Company completed the
transitional impairment test and did not incur any impairment
charges.
The following table compares the Company's net earnings and per share
amounts before the cumulative effect of change in accounting
principle for the three and nine months ended March 31, 2002, to net
earnings and per share amounts for the three and nine months ended
March 31, 2001, adjusted for the amortization of intangible assets
and goodwill.
For the Three Months Ended For the Nine Months Ended
(in millions, except per share March 31, March 31,
amounts)
---------------------------------------------------------------
2002 2001 2002 2001
---------------------------------------------------------------
Earnings before cumulative effect
of change in accounting principle $ 300.3 $ 204.4 $ 830.0 $ 637.9
Basic earnings per share $ 0.67 $ 0.46 $ 1.85 $ 1.44
Diluted earnings per share $ 0.66 $ 0.45 $ 1.81 $ 1.41
Page 10
Note 10. In June 2001, the FASB issued SFAS No. 141, "Business Combinations."
This statement requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. The
Company does not believe that the adoption of this standard will have
a material impact on its consolidated financial statements.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This standard is effective for fiscal years
beginning after June 15, 2002, and provides accounting requirements
for asset retirement obligations associated with tangible long-lived
assets. The Company does not believe that the adoption of this
standard will have a material impact on the Company's consolidated
financial statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." This statement creates one
accounting model, based on the framework established in SFAS No. 121,
to be applied to all long-lived assets including discontinued
operations. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001. The Company does not believe that the
adoption of this standard will have a material impact on the
Company's consolidated financial statements.
Note 11. Subsequent to the quarter ended March 31, 2002, the Company
completed an acquisition of Magellan Laboratories, Inc., a leading
full-service contract pharmaceutical development organization with
facilities located in Research Triangle Park, North Carolina and San
Diego, California. Magellan Laboratories will be integrated into the
Company's Pharmaceutical Technologies and Services segment to expand
and enhance the broad range of services currently offered.
Page 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management's discussion and analysis is concerned with material changes in
financial condition and results of operations for the Company's condensed
consolidated balance sheets as of March 31, 2002 and June 30, 2001, and for the
condensed consolidated statements of earnings for the three and nine-month
periods ended March 31, 2002 and 2001.
This discussion and analysis should be read together with management's
discussion and analysis included in the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 2001.
Portions of management's discussion and analysis presented below include
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The words "believe", "expect", "anticipate",
"project", and similar expressions, among others, identify "forward-looking
statements", which speak only as of the date the statement was made. Such
forward-looking statements are subject to risks, uncertainties and other
factors, which could cause actual results to materially differ from those made,
projected or implied. The most significant of such risks, uncertainties and
other factors are described in Exhibit 99.01 to this Form 10-Q and are
incorporated herein by reference. The Company disclaims any obligation to update
any forward-looking statement.
GENERAL
The Company operates within four operating business segments:
Pharmaceutical Distribution and Provider Services, Medical-Surgical Products and
Services, Pharmaceutical Technologies and Services and Automation and
Information Services. See Note 6 of "Notes to Condensed Consolidated Financial
Statements" for a description of these segments.
RESULTS OF OPERATIONS
Operating Revenue Three Months Ended Nine Months Ended
March 31, 2002 March 31, 2002
--------------------------------------------------------------------
Percent of Total Percent of Total
Growth (1) Operating Revenues Growth (1) Operating Revenues
- ---------------------------------------------------------------------------------------------------------------------
Pharmaceutical Distribution and Provider
Services 13% 83% 17% 82%
Medical-Surgical Products and Services 4% 13% 6% 14%
Pharmaceutical Technologies and Services 5% 3% 10% 3%
Automation and Information Services 27% 1% 21% 1%
Total Company 12% 100% 15% 100%
- ---------------------------------------------------------------------------------------------------------------------
(1) The growth rate applies to the applicable three and nine-month
periods ended March 31, 2002 compared to the corresponding periods of
the prior year.
Total operating revenue for the three and nine months ended March 31, 2002
increased 12% and 15%, respectively, compared to the same periods of the prior
year. The increase in operating revenue resulted from a higher sales volume to
existing customers; pharmaceutical price increases; and the addition of new
customers, some of which was a result of cross-selling opportunities among the
various businesses.
The Pharmaceutical Distribution and Provider Services segment's operating
revenue growth during the three and nine months ended March 31, 2002 resulted
from strong sales to all customer segments, especially mail order, government,
and retail chain customers. The specialty distribution business generated strong
results within the third quarter as well. The growth for this segment was
organic, resulting from increased volume to existing customers and new
contracts. A portion of the growth can be attributed to pharmaceutical price
increases during the period.
The Medical-Surgical Products and Services segment's operating revenue
growth during the quarter and nine months ended March 31, 2002 resulted from
organic growth, led by strong sales of self-manufactured products, particularly
sales of surgical instruments and custom kits. Virtually all self-manufactured
product categories have experienced an accelerated growth rate
Page 12
during the nine-month period ended March 31, 2002. In addition, several new
long-term contracts have been signed during the nine-month period within the
segment's distribution business.
The Pharmaceutical Technologies and Services segment's operating revenue
growth during the three and nine months ended March 31, 2002 resulted from
higher sales volume particularly involving development and analytical services,
pharmaceutical technologies, and its proprietary packaging offerings.
Accelerating demand for sterile-liquid and controlled-release technologies was a
significant contributor to the growth within the pharmaceutical technologies
business. The pharmaceutical packaging business' growth was attributable to the
addition of several new customers and increased volume from existing customers.
The Automation and Information Services segment's operating revenue growth
during the quarter and nine months ended March 31, 2002, resulted from strong
sales of the patient safety and supply management product lines, such as
MEDSTATION SN(R) and SUPPLYSTATION(R) System 30.
Bulk Deliveries to Customer Warehouses. The Company reports bulk deliveries made
to customers' warehouses as revenue. These sales involve the Company acting as
an intermediary in the ordering and subsequent delivery of pharmaceutical
products. Fluctuations in bulk deliveries result largely from circumstances that
the Company cannot control, including consolidation within the customers'
industries, decisions by customers to either begin or discontinue warehousing
activities, and changes in policies by manufacturers related to selling directly
to customers. Due to the lack of margin generated through bulk deliveries,
fluctuations in their amount have no significant impact on the Company's
earnings.
Gross Margin Three Months Ended Nine Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------------------------------
(as a percentage of operating revenue) 2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------------
Pharmaceutical Distribution and Provider Services 5.45% 5.41% 5.18% 5.21%
Medical-Surgical Products and Services 22.39% 21.97% 21.98% 22.01%
Pharmaceutical Technologies and Services 32.83% 31.98% 33.54% 33.39%
Automation and Information Services 69.06% 68.81% 68.06% 67.36%
Total Company 9.26% 9.15% 9.14% 9.28%
- --------------------------------------------------------------------------------------------------------------------
The overall gross margin as a percentage of operating revenue increased
during the three months ended March 31, 2002, compared to the same period of the
prior year. This increase resulted primarily from improved product mix within
each of the segments, seasonal vendor margin opportunities and slowing sell-side
margin declines in the Pharmaceutical Distribution and Provider Services
segment. The overall gross margin as a percentage of operating revenue decreased
during the nine months ended March 31, 2002, compared to the same period of the
prior year. This decrease resulted primarily from a greater mix of lower margin
pharmaceutical distribution business. The Pharmaceutical Distribution and
Provider Services segment has a gross margin rate that is significantly below
the other segments due to the high volume, low margin nature of the
pharmaceutical distribution business.
The Pharmaceutical Distribution and Provider Services segment's gross
margin as a percentage of operating revenue increased during the three months
ended March 31, 2002, as compared to the same period of the prior year. This
increase was primarily due to seasonal vendor margin opportunities and increased
buying potential realized from recent acquisitions. This segment is also
beginning to benefit from some abatement of sell-side margin declines that have
occurred within the industry over the last several years. The Pharmaceutical
Distribution and Provider Services segment's gross margin as a percentage of
operating revenue decreased during the nine months ended March 31, 2002. This
decrease was primarily due to the highly competitive market within the
pharmaceutical distribution industry and a greater mix of sales to retail chain
customers. Such customers have a relatively lower margin in connection with a
lower cost of service, as compared to some other customer classes.
The Medical-Surgical Products and Services segment's gross margin as a
percentage of operating revenue increased for the three months ended March 31,
2002, primarily from manufacturing productivity improvements and a higher sales
volume of self-manufactured products that carry significantly higher gross
margins than other portions of this segment's business. For the nine months
ended March 31, 2002, this segment's gross margin as a percentage of operating
revenue decreased primarily due to the purchase of Bergen Brunswig Medical
Corporation ("BBMC") during the first quarter of fiscal 2001. This purchase
temporarily shifted product mix away from self-manufactured products toward
lower margin distributed products.
Page 13
The Pharmaceutical Technologies and Services segment's gross margin as a
percentage of operating revenue increased during the quarter and nine months
ended March 31, 2002. This increase was primarily due to a larger mix of higher
margin pharmaceutical products versus health and nutritional products,
as well as cost efficiencies due to recent infrastructure investments at
manufacturing facilities. For the nine months ended March 31, 2002, the gross
margin in this segment was negatively impacted by certain items that occurred in
fiscal year 2001 that did not recur in fiscal year 2002, namely milestone
payments related to the use of certain of the Company's proprietary technology.
These declines were somewhat offset in the nine-month period by the recording in
the first quarter of fiscal 2002 of the minimum recovery expected to be received
for claims against vitamin manufacturers for amounts overbilled in prior years.
This pricing adjustment was recorded as a reduction of cost of goods sold,
consistent with the classification of the original overcharge.
The Automation and Information Services segment's gross margin as a
percentage of operating revenue increased during the quarter and nine months
ended March 31, 2002. This increase was primarily due to an improved product mix
within the various offerings provided to its customers as well as productivity
efficiencies realized from the operational improvements implemented within the
segment.
Selling, General & Administrative Expenses Three Months Ended Nine Months Ended
March 31, March 31,
- --------------------------------------------------------------------------------------------------------------------
(as a percentage of operating revenue) 2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------------
Pharmaceutical Distribution and Provider Services 2.15% 2.36% 2.21% 2.42%
Medical-Surgical Products and Services 13.51% 14.49% 13.43% 14.65%
Pharmaceutical Technologies and Services 13.57% 15.39% 13.68% 14.92%
Automation and Information Services 31.57% 32.20% 32.65% 33.31%
Total Company 4.64% 4.93% 4.76% 5.17%
- --------------------------------------------------------------------------------------------------------------------
Selling, general and administrative expenses as a percentage of operating
revenue decreased during the three and nine months ended March 31, 2002, as
compared to the same periods of the prior year. This decrease reflects economies
of scale associated with the Company's revenue growth, significant productivity
gains resulting from continued cost control efforts in all segments and the
continuation of consolidation and selective automation of operating facilities.
The Company is continuing to take advantage of synergies from recent
acquisitions to decrease selling, general and administrative expenses as a
percentage of operating revenue. In addition, the Company ceased amortizing
goodwill during the first quarter of fiscal 2002 due to the adoption of
Statement of Financial Accounting Standards 142 "Goodwill and Other Intangible
Assets" (see Note 9 in the "Notes to Condensed Consolidated Financial
Statements" for further discussion), which also contributed to the improvement.
Selling, general and administrative expenses, including goodwill
amortization in fiscal 2001, increased 5% and 6% during the three and nine
months ended March 31, 2002, compared to the respective periods in the prior
fiscal year. This increase is primarily attributed to increases in personnel
costs and depreciation expense, partially offset by the fact that no goodwill
amortization was recorded in fiscal 2002. The overall increase compares
favorably to the 12% and 15% growth in operating revenue for the three and nine
months ended March 31, 2002, respectively.
Page 14
Special Charges. Costs of effecting mergers and subsequently integrating the
operations of the various merged companies are recorded as merger-related costs
when incurred. The merger-related costs currently being recognized are primarily
a result of the merger transactions with Bindley Western Industries, Inc.
("Bindley"), Bergen Brunswig Medical Corporation ("BBMC"), Automatic Liquid
Packaging, Inc. ("ALP"), Allegiance Corporation ("Allegiance") and R.P. Scherer
Corporation ("Scherer"). The following is a summary of the special charges for
the three and nine-month periods ended March 31, 2002 and 2001.
Special Charges Three Months Ended Nine Months Ended
March 31, March 31,
- -------------------------------------------------------------------------------------------------------
(in millions) 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------
Merger-Related Costs:
Transaction costs $ -- $ (20.8) $ -- $ (20.8)
Employee-related costs (12.3) (29.0) (22.3) (39.7)
Net exit costs and asset impairment (12.4) (15.0) (16.1) (15.2)
Restructuring costs -- -- -- (1.6)
Other integration costs (14.4) (9.7) (29.8) (22.5)
- -------------------------------------------------------------------------------------------------------
Total merger-related costs $ (39.1) $ (74.5) $ (68.2) $ (99.8)
- -------------------------------------------------------------------------------------------------------
Other Special Charges:
Distribution center closures $ -- $ (4.4) $ -- $ (4.4)
Manufacturing facility closures -- (2.2) -- (2.2)
Employee-related costs -- (5.2) -- (5.2)
Litigation settlement -- -- -- 5.0
- -------------------------------------------------------------------------------------------------------
Total other special charges $ -- $ (11.8) $ -- $ (6.8)
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Total special charges $ (39.1) $ (86.3) $ (68.2) $ (106.6)
Tax effect of special charges 14.4 24.5 25.6 32.8
- -------------------------------------------------------------------------------------------------------
Net effect of special charges $ (24.7) $ (61.8) $ (42.6) $ (73.8)
- -------------------------------------------------------------------------------------------------------
Merger-Related Costs. During the prior fiscal year, the Company incurred
direct transaction costs related to its merger transactions. These expenses
primarily included investment banking, legal, accounting and other professional
fees associated with the Bindley merger transaction. In addition, during the
periods shown above, the Company incurred employee-related costs, primarily
consisting of severance, non-compete agreements, and transaction/stay bonuses as
a result of certain acquisitions. Exit costs relate primarily to costs
associated with lease terminations, moving expenses, and asset impairments as a
direct result of the merger transactions with Bindley, BBMC, ALP, Allegiance and
Scherer. Other integration costs include charges primarily related to
integrating the operations of the above-mentioned merger transactions.
The Company incurred a restructuring charge of $1.6 million during the first
quarter of fiscal 2001 relating to the Company's merger transaction with
Scherer. As part of the business restructuring, the Company has closed certain
facilities. In connection with such closings, the Company has incurred
employee-related costs, asset impairment charges and exit costs related to the
termination of contracts and lease agreements.
Other Special Charges. During the three months ended March 31, 2001, the Company
recorded a special charge of $5.0 million related to the rationalization of its
pharmaceutical distribution centers. Approximately, $4.4 million related to
asset impairments, lease exit costs and duplicate facility costs resulting from
the Company's decision to consolidate distribution centers and relocate to a
more modern distribution center. The remaining amount related to employee
severance costs.
In addition, during the three months ended March 31, 2001, the Company recorded
a special charge of $6.8 million related to the rationalization of its health
and nutrition manufacturing facilities. Approximately $2.2 million related to
lease exit costs. The remaining amount related to employee severance costs
associated with the rationalization.
During the first quarter of fiscal 2001, Bindley recorded a benefit of
approximately $5.0 million related to a reduction in a litigation settlement
accrual, which was previously recorded. The amount of the final settlement was
lower than originally anticipated.
Page 15
Summary. The net effect of the various special charges recorded during the three
months ended March 31, 2002 and 2001 was to reduce net earnings by $24.7 million
to $300.3 million and by $61.8 million to $192.9 million, respectively, and to
reduce reported diluted earnings per Common Share by $0.05 per share to $0.66
per share and by $0.14 per share to $0.42 per share, respectively. The net
effect of the various special charges recorded during the nine months ended
March 31, 2002 and 2001 was to reduce net earnings before cumulative effect of
change in accounting principle by $42.6 million to $830.0 million and by $73.8
million to $604.1 million, respectively, and to reduce reported diluted earnings
per Common Share before cumulative effect of change in accounting principle by
$0.09 per share to $1.81 per share and by $0.16 per share to $1.33 per share,
respectively.
The Company estimates that it will incur additional merger-related costs and
integration expenses associated with the various mergers it has completed to
date (primarily related to the Bindley merger) of approximately $ 132.2 million
($82.3 million, net of tax) in future periods (primarily fiscal 2002 and 2003)
related to the exit of contractual arrangements, employee-related costs, and
costs to properly integrate operations and implement efficiencies. Such amounts
will be charged to expense when incurred.
Provision for Income Taxes. The Company's provision for income taxes relative to
pre-tax earnings, excluding the impact of goodwill amortization, was 33.8% and
35.9%, respectively, for the third quarters of fiscal 2002 and 2001 and 33.9%
and 34.9%, respectively, for the nine-month periods ended March 31, 2002 and
2001. Fluctuations in the effective tax rate are primarily due to the impact of
recording non-deductible merger-related costs during various periods as well as
fluctuating state and foreign effective tax rates as a result of the Company's
business mix. The provision for income taxes excluding the impact of
merger-related charges and goodwill amortization was 34.1% and 34.3%,
respectively, for the third quarters of fiscal 2002 and 2001 and 34.1% and
34.5%, respectively, for the nine month-periods ended March 31, 2002 and 2001.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $5.6 billion at March 31, 2002 from $4.1
billion at June 30, 2001. This increase resulted primarily from additional
investments in inventories of $1.6 billion. The inventory increase reflects the
Company's investment in conjunction with various vendor-margin programs. The
increase also reflects the higher level of business volume in Pharmaceutical
Distribution and Provider Services' activities. Also, an increase in trade
receivables of $100 million and a decrease in accounts payable of $100 million
helped drive the increase in working capital. Partially offsetting the increases
in current assets was an increase in other accrued liabilities of $200 million.
Property and equipment, at cost, increased by $65.8 million from June 30,
2001. The increase was primarily the result of ongoing plant expansion and
manufacturing equipment purchases in certain manufacturing businesses, as well
as additional investments made for management information systems and upgrades
to distribution facilities.
The investment in sales-type leases decreased $133.8 million during the
first nine months of fiscal 2002. This decrease was primarily the result of the
sale by Pyxis Funding LLC ("Pyxis Funding") of an undivided interest in a
defined pool of sales-type leases to an investor at amounts approximating their
fair value. Pyxis Funding obtained proceeds of approximately $150 million
related to the transaction (see Note 4 in the "Notes to Condensed Consolidated
Financial Statements" for further discussion).
During the quarter ended March 31, 2002, the Company issued $300 million of
4.45% Notes due 2005, the proceeds of which were used for general corporate
purposes, which included working capital, capital expenditures, repayment or
refinancing of indebtedness, acquisitions, and investments. After such issuance,
the Company has the capacity to issue approximately $700 million of additional
equity or debt securities pursuant to the shelf registration statements filed
with the Securities and Exchange Commission.
Shareholders' equity increased to $6.2 billion at March 31, 2002 from $5.4
billion at June 30, 2001, primarily due to net earnings of $759.9 million and
the investment of $112.2 million by employees of the Company through various
employee stock benefit plans. These increases were partially offset by the
purchase of treasury shares of $115.7 million and dividends paid of $33.7
million.
In September 2001, the Company's Board of Directors authorized the
repurchase of Common Shares up to an aggregate amount of $500 million. As of
March 31, 2002, 1.8 million Common Shares having an aggregate cost of
approximately $115.7 million had been repurchased through this plan. The
repurchased shares will be held as treasury shares and used for general
corporate purposes.
The Company believes that it has adequate capital resources at its disposal
to fund currently anticipated capital expenditures, business growth and
expansion, and current and projected debt service requirements, including those
related to business combinations.
Page 16
SUBSEQUENT EVENT
On April 15, 2002, the Company completed an acquisition of Magellan
Laboratories, Inc., a leading full-service contract pharmaceutical development
organization with facilities located in Research Triangle Park, North Carolina
and San Diego, California. Magellan Laboratories will be integrated into the
Company's Pharmaceutical Technologies and Services segment to expand and enhance
the broad range of services currently offered.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company believes there has been no material change in its exposure to
market risk from that discussed in the Company's Form 10-K for the fiscal year
ended June 30, 2001.
Page 17
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
The following disclosure should be read together with the disclosure set
forth in the Company's Form 10-K for the fiscal year ended June 30, 2001, and to
the extent any such statements constitute "forward looking statements" reference
is made to Exhibit 99.01 of this Form 10-Q.
On September 30, 1996, Baxter International Inc. ("Baxter") and its
subsidiaries transferred to Allegiance and its subsidiaries their U.S.
Healthcare distribution business, surgical and respiratory therapy business and
healthcare cost-saving business, as well as certain foreign operations (the
"Allegiance Business") in connection with a spin-off of the Allegiance Business
by Baxter. In connection with this spin-off, Allegiance, which was acquired by
the Company on February 3, 1999, agreed to indemnify Baxter Healthcare
Corporation ("BHC") from certain claims related to the Allegiance Business,
including certain claims of alleged personal injuries as a result of exposure to
natural rubber latex gloves. Allegiance will be defending and indemnifying BHC,
as contemplated by the agreements between Baxter and Allegiance, for all
expenses and potential liabilities associated with claims pertaining to the
litigation assumed by Allegiance. As of March 31, 2002, there were approximately
415 lawsuits involving BHC and/or Allegiance containing allegations of
sensitization to natural rubber latex products. Some of the cases are now
proceeding to trial. Because of the number of claims filed and the ongoing
defense costs that will be incurred, the Company believes it is probable that it
will continue to incur significant expenses related to the resolution of cases
involving natural rubber latex gloves. The Company believes a substantial
portion of any liability will be covered by insurance, subject to self-insurance
retentions, exclusions, conditions, coverage gaps, policy limits and insurer
solvency.
The Company also becomes involved from time-to-time in other litigation
incidental to its business, including, without limitation, inclusion of certain
of its subsidiaries as a potentially responsible party for environmental
clean-up costs. Although the ultimate resolution of the litigation referenced
herein cannot be forecast with certainty, the Company intends to vigorously
defend itself and does not currently believe that the outcome of any pending
litigation will have a material adverse effect on the Company's consolidated
financial statements.
ITEM 5: OTHER INFORMATION
The Board of Directors of the Company has appointed three new directors to
the Board, bringing to 15 the total number of Cardinal Board members. David W.
Raisbeck is vice chairman of Cargill Inc., an international marketer, processor
and distributor of agricultural, food, financial and industrial products and
services. Jean G. Spaulding is a trustee of The Duke Endowment and maintains a
private practice in psychiatry for children, adolescents and adults. Matthew D.
Walter is chief executive officer of Bound Tree Medical, LLC, the largest
provider of medical equipment and supplies to the emergency medical market in
the U.S. Mr. Walter is also founding and managing partner of Talisman Capital,
a private equity partnership focused on making control-type investments in
middle-market companies.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
(a) Listing of Exhibits:
Exhibit
Number Exhibit Description
------ -------------------
10.01 364-Day Credit Agreement dated as of March 28, 2002, among the
Registrant, certain subsidiaries of the Registrant, certain
lenders, and Bank One, NA, as Administrative Agent, Bank of
America N.A., as Syndication Agent, Credit Suisse First Boston, as
Documentation Agent, Duetsche Banc Alex. Brown Inc., as
Documentation Agent, First Union National Bank, as Documentation
Agent and Banc One Capital Markets, Inc., as Lead Arranger and
Book Manager.
99.01 Statement Regarding Forward-Looking Information (1)
- ----------------
(1) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 2001 (File No. 1-11373)
and incorporated herein by reference.
Page 18
(b) Reports on Form 8-K:
On March 11, 2002, the Company filed a Current Report on Form 8-K under
Item 7 which filed as exhibits a Form of Underwriting Agreement between the
Company and certain underwriters relating to the offering of 4.45% Notes due
2005 by the Company and a Statement Regarding Computation of Ratios of Earnings
to Fixed Charges.
Page 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARDINAL HEALTH, INC.
Date: May 8, 2002 By: /s/ Robert D. Walter
--------------------------------------------
Robert D. Walter
Chairman and Chief Executive Officer
By: /s/ Richard J. Miller
--------------------------------------------
Richard J. Miller
Executive Vice President and Chief Financial
Officer
Page 20