Exhibit 99.01
[Cardinal Health Logo]
7000 Cardinal Place
Dublin, OH 43017
www.cardinal.com
FOR IMMEDIATE RELEASE
CONTACTS:
Media: Jim Mazzola Investors: Jim Hinrichs
(614) 757-3690 (614) 757-7828
jim.hinrichs@cardinal.com jim.mazzola@cardinal.com
CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS, UPDATES
FISCAL 2005 OUTLOOK
AUDIT COMMITTEE REACHES RESPONSIBILITY CONCLUSIONS IN ACCOUNTING REVIEW
DUBLIN, OHIO, FEB. 4, 2005 -- Cardinal Health, Inc. (NYSE: CAH), the leading
provider of products and services supporting the health care industry, today
announced revenue for its second quarter rose 13 percent to $18.6 billion, while
earnings from continuing operations declined to $204 million and diluted
earnings per share from continuing operations declined to $0.47.
Results for the quarter and first half of fiscal 2005, ended Dec. 31, were in
line with the company's previously revised guidance. Excluding special items of
$71 million for the quarter, net earnings from continuing operations decreased
26 percent to $275 million compared to $370 million in the prior year. Diluted
earnings per share from continuing operations before special items declined 25
percent to $0.63 versus $0.84 last year. These results include non-recurring
charges for the quarter of $67 million or $0.10 per share.
First-half revenues climbed 15 percent to $36.4 billion, while ongoing margin
pressure caused net earnings from continuing operations to decline 40 percent to
$422 million. Excluding special items, earnings from continuing operations
declined 27 percent to $513 million. Diluted earnings per share from continuing
operations were $0.97, or $1.18 excluding special items. These results include
non-recurring charges for the six months ended Dec. 31 of $107 million or $0.17
per share.
"Our second-quarter performance, while below Cardinal Health's potential, was in
line with our previously revised expectations and reflects steady progress in
several key areas of the business, including the transition to non-contingent
distribution contracts with pharmaceutical manufacturers," said Robert D.
Walter, chairman and chief executive officer. "We continued to experience
earnings pressure as we manage this transition, which is not only important to
Cardinal Health's business, but paramount to the efficiency of the U.S.
pharmaceutical supply chain.
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CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS
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"Cardinal Health's highly efficient distribution network has helped drive
billions of dollars of cost out of the supply chain, resulting in savings for
pharmacies and ultimately lower prices for consumers," Walter added. "We are
committed to the transition and to our disciplined, fact-based approach in
reaching new agreements with our manufacturer customers."
AUDIT COMMITTEE REVIEW AND VITAMINS REVIEW
Cardinal Health said that the Audit Committee of its Board of Directors
had reached conclusions concerning its assignment of responsibility for certain
financial statement matters discussed in the company's Annual Report on Form
10-K for the fiscal year ended June 30, 2004, resulting in disciplinary actions
for certain employees.
In addition, a separate committee of the Board of Directors, with the assistance
of independent counsel, is separately conducting an internal review to assign
responsibility for matters relating to Cardinal Health's accounting treatment of
certain recoveries from vitamin manufacturers. (Additional information
regarding the Audit Committee review and the separate vitamins review is
included in the Form 8-K, filed today with the Securities and Exchange
Commission which can be found at the investor relations page of
http://www.cardinalhealth.com). The Audit Committee review, the separate
vitamins review, and the previously announced investigations by the Securities
and Exchange Commission and U.S. Attorney remain ongoing.
SEGMENT AND OPERATIONAL RESULTS
Operating earnings in each business segment improved from the first quarter, as
Cardinal Health addressed key challenges and performance-improvement actions
began to deliver results. The company also remains on schedule to improve its
cost structure by $125 million during fiscal 2005 through a restructuring
program initiated during the first quarter.
Lower capital requirements in its pharmaceutical distribution business enabled
Cardinal Health to generate strong cash flow from operations of $626 million
during the quarter, including net proceeds of $300 million through an
accounts-receivable securitization program. Free cash flow exceeded $500 million
during the quarter, an increase of more than 200 percent from the prior period,
and reached $1.3 billion for the year-to-date, which includes net proceeds of
$800 million through an accounts-receivable securitization program.
(See the attached financial table for a reconciliation of the non-GAAP amounts
to their GAAP equivalents and a schedule of non-recurring items. Tables with
specific segment results for the second quarter and fiscal year-to-date are also
attached and available at the Investor Relations page on
www.cardinalhealth.com.)
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
Revenues within the Pharmaceutical Distribution and Provider Services segment
increased 15 percent for the quarter to $15.1 billion, while operating earnings
declined by 9 percent to $213 million. The operating-earnings decline was
primarily due to lower branded pharmaceutical buy margins, driven by lower price
appreciation and available inventory compared to prior years.
During the quarter, Cardinal Health continued its transition to non-contingent
distribution-service agreements with pharmaceutical manufacturers, rather than
agreements based on pharmaceutical price appreciation. Strong progress was made
with a number of
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CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS
PAGE 3
manufacturers, including signing multi-year contracts with Eli Lilly and Company
during the quarter and with Eisai Inc. in January. By April 1, the company
expects to have completed contracts that will transition the majority of branded
vendor margin to non-contingent compensation.
This transition will drive improvements in the second half of fiscal 2005 and
create stronger, more predictable earnings growth for fiscal 2006. Expense
control measures continue to drive efficiency, with selling, general and
administrative expenses as a percent of sales declining from the prior year. In
addition, efficiency and profitability within the segment will continue to be
enhanced by the ramp up of Cardinal Health's National Logistics Center, which
began operations during September 2004.
MEDICAL PRODUCTS AND SERVICES
Revenue growth within Medical Products and Services increased 6 percent to $2.4
billion, with operating earnings equal to the second quarter of fiscal 2004 at
$170 million. Sales of new products and recent hospital and group purchase
organization (GPO) contract wins drove the revenue increase, while profitability
continued to be affected by competitive pricing on a large GPO contract and
rising costs of raw materials used in manufacturing. This pressure was partially
offset by strong sales of Cardinal Health surgeon gloves, efficiency programs
and profitable international performance. In addition, growth in specialty
surgical instruments and sales of private label products contributed to
operating earnings in the period. Selling, general and administrative expenses
as a percent of sales were below prior year levels, the result of ongoing
efficiency actions.
Continued emphasis on new products, operating efficiencies and implementation of
new contracts are expected to improve Medical Products and Services earnings
during the second half of the fiscal year.
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
Pharmaceutical Technologies and Services revenues increased 7 percent during the
quarter to $760 million, driven by sales growth in oral technologies, nuclear
pharmacy services and the year-over-year benefit of the Intercare acquisition,
completed in December 2003. However, operating earnings declined 22 percent to
$89 million for the quarter, primarily related to sterile-manufacturing costs
associated with delays in opening new facilities and from existing facilities
operating below their planned capacity. This weakness was partially offset by an
increase in demand for softgel products, including Abbott's protease inhibitor
Kaletra(R). Operating earnings for the period were not materially affected by
acquisitions.
The company also continued to expand its relationships with pharmaceutical
manufacturers during the quarter and said it now provides pharmaceutical
development, manufacturing, packaging or marketing services for nearly 170 of
the top 200 drugs worldwide.
Operating-earnings improvements during the second half of fiscal 2005 and fiscal
2006 will be driven by increases in production at Cardinal Health's Albuquerque,
N.M. and other sterile manufacturing facilities, and from restructuring
benefits. New product opportunities in blow/fill/seal sterile manufacturing are
also expected to contribute to earnings growth in 2006.
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CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS
PAGE 4
In addition, Cardinal Health has signed a letter of intent with VaxGen, Inc. to
fill, finish and package a recombinant anthrax vaccine. The companies plan to
have a full supply agreement in place by the end of June 2005, which is subject
to the approval of the U.S. government. Cardinal Health expects the agreement
would result in revenues of $100 million to $150 million over the two-year
period ending December 2007.
CLINICAL TECHNOLOGIES AND SERVICES
(Results for this segment, which include Cardinal Health's Alaris(R) products,
Pyxis(R) products and Clinical Services and Consulting organizations, are being
reported for the first time this fiscal year. Prior-year results used in
comparisons have been adjusted to include Pyxis and Clinical Services and
Consulting, but not Alaris, which was acquired by Cardinal Health in July 2004.)
Revenues for the Clinical Technologies and Services segment increased 38 percent
to $547 million for the quarter, while operating earnings decreased 21 percent
to $76 million. Excluding Alaris products, revenues declined 4 percent and
operating earnings declined 51 percent. Strong revenues and operating earnings
for Alaris products were offset by year-over-year revenue and operating-earnings
declines for Pyxis products.
Pyxis sales growth was dampened by the delayed introduction of Pyxis MedSystem.
This new product and service offering, which includes Pyxis MedStation(R) 3000,
the next generation of Cardinal Health's market-leading medication management
system for the nurses' station, was launched in December and is now being
well-received by customers. In addition, Pyxis results were negatively affected
by execution issues related to system installations. Revenue backlog from
committed contracts ended the quarter at $206 million.
Over the long-term, growth in the segment will be driven by innovative product
and service offerings that draw on the vast clinical resources assembled in this
organization, the company said. In addition to Pyxis MedSystem, new products
introduced during the quarter included the Alaris(R) Patient-Controlled
Analgesia Module, Alaris(R) EtCO(2) Module and upgrades to the Guardrails(R)
Suite of safety software, all enhancements to the market-leading Alaris
Medication Management System designed for the patient's bedside.
Clinical Technologies and Services results are expected to improve during the
year as customers adopt these new products and the company gains additional
efficiencies from the formation of the segment. Significant progress was made
during the quarter to improve efficiency, including implementation of lean
manufacturing processes and a restructuring of customer support operations. In
addition, the integration of Alaris with Cardinal Health is still expected to
achieve synergies of $80 million to $100 million on a pre-tax basis by the end
of fiscal 2007.
OUTLOOK
Cardinal Health expects earnings per share for fiscal 2005 to be $3.20 to $3.40,
excluding special items and non-recurring charges. Earnings expectations have
been reduced from prior guidance to reflect uncertainty about branded
pharmaceutical price increases, available inventory and the short-term impact of
the transition to fee-based distribution service agreements in its
Pharmaceutical Distribution business.
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CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS
PAGE 5
The new guidance also reflects the potential for continued delays in the
installation of Pyxis committed contracts as a result of organizational
re-staffing. For fiscal 2005, free cash flow is expected to be approximately $2
billion, including $800 million from an accounts-receivable securitization
program.
The company expects to enter fiscal 2006, beginning July 1, 2005, with strong
momentum. Earnings are expected to grow at a rate considerably above its
long-term growth goal of mid-teens or better, excluding special items and
non-recurring charges. The guidance is based on Cardinal Health's confidence in
signing agreements with pharmaceutical manufacturers during fiscal 2005 that
will result in the substantial majority of vendor margins for fiscal 2006 being
converted to non-contingent compensation.
The fiscal 2006 guidance is further based on the company's confidence for
substantial improvement in Pyxis sales and installation capability, continued
strong demand and significant improvement in manufacturing efficiency for
sterile product and overall continued strong performance in its other
businesses. Cash flow for the year is expected to grow in-line with earnings
growth.
George Fotiades, Cardinal Health President and COO, said "We are making progress
on our most important operating issues identified for fiscal year 2005, as
evidenced by our sequential improvement in operating earnings growth for all
four of our segments. However, the pace of that progress has been slower than we
originally expected. We believe that the second half of the fiscal year will
show continued improvement and we are optimistic about the momentum that we
expect to have as we enter our 2006 fiscal year."
CONFERENCE CALL
Cardinal Health has scheduled a conference call at 11 a.m. Eastern Standard Time
to discuss its second-quarter results. To access the conference call and
corresponding slide presentation, go to the Investor Relations page at
www.cardinalhealth.com. The conference call may also be accessed by calling
706-634-5100, passcode 3250964. An audio replay will be available until 11:00
p.m. on Feb. 7 at 706-645-9291, passcode 3250964. A transcript and audio replay
will also be available at www.cardinalhealth.com.
ABOUT CARDINAL HEALTH
CARDINAL HEALTH, INC. (www.cardinalhealth.com) is the leading provider of
products and services supporting the health care industry. Cardinal Health
develops, manufactures, packages and markets products for patient care; develops
drug-delivery technologies; distributes pharmaceuticals and medical, surgical
and laboratory supplies; and offers consulting and other services that improve
quality and efficiency in health care. Headquartered in Dublin, Ohio, Cardinal
Health employs more than 55,000 people on six continents and produces annual
revenues of more than $65 billion.
###
Except for historical information, all other information in this news release
consists of forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
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CARDINAL HEALTH ANNOUNCES SECOND QUARTER RESULTS
PAGE 6
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected, anticipated or implied. The
most significant of these uncertainties are described in Cardinal Health's Form
10-K, Form 8-K and Form 10-Q reports (including all amendments to those reports)
and exhibits to those reports, and include (but are not limited to) the costs,
difficulties, and uncertainties related to the integration of acquired
businesses, the loss of one or more key customer or supplier relationships or
changes to the terms of those relationships, 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 and administrative proceedings, the impact of
previously announced restatements, difficulties in opening new facilities or
fully utilizing existing capacity, difficulties and uncertainties associated
with business model transitions, and general economic and market conditions.
Cardinal Health undertakes no obligation to update or revise any forward-looking
statement.
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CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SECOND QUARTER
----------------------------------
December December
2004 2003 % Change
--------- --------- --------
Revenue $18,554.6 $16,350.8 13%
Cost of products sold 17,348.1 15,189.8 14%
--------- ---------
Gross margin 1,206.5 1,161.0 4%
Selling, general and administrative expenses 699.6 588.0 19%
Impairment charges and other 83.0 (8.1) N.M.
Special items - restructuring charges 105.1 12.9 N.M.
- merger charges 10.2 7.8 N.M.
- other (12.2) (24.2) N.M.
--------- ---------
Operating earnings 320.8 584.6 (45)%
Interest expense and other 16.9 27.6 (39)%
--------- ---------
Earnings before income taxes and discontinued operations 303.9 557.0 (45)%
Provision for income taxes 100.1 183.4 (45)%
--------- ---------
Earnings from continuing operations 203.8 373.6 (45)%
Earnings/(loss) from discontinued operations (net of tax $(6.5) and $3.1
for the quarters ending December 31, 2004 and 2003, respectively) 10.2 (5.1) N.M.
--------- ---------
Net earnings $ 214.0 $ 368.5 N.M.
========= =========
Basic earnings per Common Share:
Continuing operations $ 0.47 $ 0.86 (45)%
Discontinued operations 0.02 (0.01) N.M.
--------- ---------
Net basic earnings per Common Share $ 0.49 $ 0.85 N.M.
========= =========
Diluted earnings per Common Share:
Continuing operations $ 0.47 $ 0.85 (45)%
Discontinued operations 0.02 (0.01) N.M.
--------- ---------
Net diluted earnings per Common Share $ 0.49 $ 0.84 N.M.
========= =========
Weighted average number of shares outstanding:
Basic 432.1 433.2
Diluted 437.1 438.7
The following table summarizes the impact of special items on net earnings and
diluted earnings per Common Share in the quarters in which they were recorded:
Current Year Prior Year
---------------------- ----------------------
Net Diluted Net Diluted
Earnings EPS Earnings EPS
--------- --------- --------- ---------
Impact of special items - restructuring charges $ (72.4) $ (0.17) $ (8.2) $ (0.02)
- merger charges (6.3) (0.01) (4.6) (0.01)
- other 7.6 0.02 16.1 0.04
--------- --------- --------- ---------
Impact of special items $ (71.1) $ (0.16) $ 3.3 $ 0.01
========= ========= ========= =========
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CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
YEAR - TO - DATE
----------------------------------
December December
2004 2003 % Change
--------- --------- --------
Revenue $36,350.6 $31,739.0 15%
Cost of products sold 34,057.6 29,505.2 15%
--------- ---------
Gross margin 2,293.0 2,233.8 3%
Selling, general and administrative expenses 1,392.7 1,135.6 23%
Impairment charges and other 86.8 (6.4) N.M.
Special items - restructuring charges 112.6 20.2 N.M.
- merger charges 27.1 16.4 N.M.
- other (4.7) (26.9) N.M.
--------- ---------
Operating earnings 678.5 1,094.9 (38)%
Interest expense and other 54.3 53.9 1%
--------- ---------
Earnings before income taxes, discontinued operations and
cumulative effect of change in accounting 624.2 1,041.0 (40)%
Provision for income taxes 202.6 343.9 (41)%
--------- ---------
Earnings from continuing operations before cumulative effect of
change in accounting 421.6 697.1 (40)%
Earnings/(loss) from discontinued operations (net of tax $(3.7) and $4.2
for the six months ended December 31, 2004 and 2003, respectively) 5.7 (6.9) N.M.
Cumulative effect of change in accounting - (38.5) N.M.
--------- ---------
Net earnings $ 427.3 $ 651.7 N.M.
========= =========
Basic earnings per Common Share:
Continuing operations $ 0.98 $ 1.60 (39)%
Discontinued operations 0.01 (0.02) N.M.
Cumulative effect of change in accounting - (0.09) N.M.
--------- ---------
Net basic earnings per Common Share $ 0.99 $ 1.49 N.M.
========= =========
Diluted earnings per Common Share:
Continuing operations $ 0.97 $ 1.58 (39)%
Discontinued operations 0.01 (0.02) N.M.
Cumulative effect of change in accounting - (0.09) N.M.
--------- ---------
Net diluted earnings per Common Share $ 0.98 $ 1.47 N.M.
========= =========
Weighted average number of shares outstanding:
Basic 431.7 436.8
Diluted 436.3 442.5
The following table summarizes the impact of special items on net earnings and
diluted earnings per Common Share in the quarters in which they were recorded:
Current Year Prior Year
---------------------- ----------------------
Net Diluted Net Diluted
Earnings EPS Earnings EPS
--------- --------- --------- ---------
Impact of special items - restructuring charges $ (77.1) $ (0.18) $ (13.3) $ (0.03)
- merger charges (16.9) (0.04) (10.0) (0.02)
- other 2.9 0.01 17.9 0.04
--------- --------- --------- ---------
Impact of special items $ (91.1) $ (0.21) $ (5.4) $ (0.01)
========= ========= ========= =========
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CARDINAL HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(unaudited)
DECEMBER 31, June 30, December 31,
2004 2004 2003
------------ --------- ------------
ASSETS
CURRENT ASSETS
Cash and equivalents $ 1,273.7 $ 1,096.0 $ 544.3
Trade receivables, net 2,821.9 3,432.7 3,369.3
Current portion of investment in sales-type leases 211.5 202.1 192.2
Inventories 8,177.5 7,471.3 8,410.6
Prepaid expenses and other 794.3 795.4 736.8
Assets held for sale from discontinued operations 32.1 60.4 151.8
--------- --------- ---------
Total current assets 13,311.0 13,057.9 13,405.0
--------- --------- ---------
Property and equipment - net 2,393.1 2,364.0 2,177.3
Investment in sales-type leases, less current portion 631.9 546.0 514.9
Other assets 5,453.0 5,401.2 3,282.8
--------- --------- ---------
TOTAL ASSETS $21,789.0 $21,369.1 $19,380.0
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - banks and current portion of
long-term obligations $ 435.4 $ 860.6 $ 253.2
Accounts payable 7,231.9 6,432.4 6,349.3
Other accrued liabilities 1,968.5 2,021.3 1,757.0
Liabilities from discontinued operations 53.5 55.1 72.0
--------- --------- ---------
Total current liabilities 9,689.3 9,369.4 8,431.5
--------- --------- ---------
Long-term obligations, less current portion 2,384.6 2,834.7 2,472.4
Deferred taxes and other liabilities 1,155.6 1,188.7 1,020.1
Total shareholders' equity 8,559.5 7,976.3 7,456.0
--------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $21,789.0 $21,369.1 $19,380.0
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CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
DECEMBER 31, DECEMBER 31,
---------------------- ----------------------
2004 2003 2004 2003
--------- --------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations before cumulative
effect of change in accounting $ 203.8 $ 373.6 $ 421.6 $ 697.1
Adjustments to reconcile earnings from continuing operations
before cumulative effect of change in accounting
to net cash from operations:
Depreciation and amortization 105.7 74.5 198.2 143.2
Asset impairments 150.9 2.9 155.8 4.8
Change in operating assets and liabilities, net of
effects from acquisitions:
(Increase)/decrease in trade receivables 543.7 (280.5) 623.1 (491.0)
(Increase)/decrease in inventories 15.5 (220.9) (707.5) (841.4)
(Increase)/decrease in net investment in sales-type leases (50.5) 82.9 (95.3) 22.0
Increase/(decrease) in accounts payable (453.6) 97.4 794.1 964.3
Other operating items - net 110.5 124.4 129.2 49.4
--------- --------- --------- ---------
Net cash provided by operating activities 626.0 254.3 1,519.2 548.4
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiaries, net of cash acquired (8.3) (484.1) (273.2) (499.1)
Proceeds from sale of property, equipment, and other assets - 2.7 4.2 5.2
Additions to property and equipment (107.1) (86.3) (214.6) (164.1)
Proceeds from sale of discontinued operations 36.7 - 39.5 -
--------- --------- --------- ---------
Net cash used in investing activities (78.7) (567.7) (444.1) (658.0)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in commercial paper and short-term debt 72.9 0.7 (562.7) 0.6
Net change in long-term obligations (503.9) (156.7) (356.6) (124.3)
Proceeds from issuance of Common Shares 18.0 34.7 47.8 80.0
Purchase of Treasury Stock - - - (1,000.0)
Dividends on Common Shares (13.0) (13.0) (25.9) (26.4)
--------- --------- --------- ---------
Net cash used in financing activities (426.0) (134.3) (897.4) (1,070.1)
--------- --------- --------- ---------
NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS 121.3 (447.7) 177.7 (1,179.7)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 1,152.4 992.0 1,096.0 1,724.0
--------- --------- --------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 1,273.7 $ 544.3 $ 1,273.7 $ 544.3
========= ========= ========= =========
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CARDINAL HEALTH, INC. - SECOND QUARTER FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
2005 2004
------- -------
- - REVENUE
- Amount $15,059 $13,150
- Growth Rate 15% 15%
- Mix 80% 80%
- - OPERATING EARNINGS
- Amount $ 213 $ 234
- Growth Rate (9)% (14)%
- Mix 39% 38%
- Ratio to Revenue 1.42% 1.78%
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $2,427 $2,286
- Growth Rate 6% 14%
- Mix 13% 14%
- - OPERATING EARNINGS
- Amount $ 170 $ 170
- Growth Rate - 10%
- Mix 31% 28%
- Ratio to Revenue 7.00% 7.45%
- -------------------------------------------------------------------------------
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $ 760 $ 708
- Growth Rate 7% 52%
- Mix 4% 4%
- - OPERATING EARNINGS
- Amount $ 89 $ 113
- Growth Rate (22)% 32%
- Mix 16% 18%
- Ratio to Revenue 11.68% 16.02%
- -------------------------------------------------------------------------------
CLINICAL TECHNOLOGIES AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $ 547 $ 397
- Growth Rate 38% 14%
- Mix 3% 2%
- - OPERATING EARNINGS
- Amount $ 76 $ 96
- Growth Rate (21)% 17%
- Mix 14% 16%
- Ratio to Revenue 13.89% 24.18%
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CARDINAL HEALTH, INC. - SECOND QUARTER FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
TOTAL Excluding Special Items
------------------ -----------------------
2005 2004 2005 2004
------- ------- ------- --------
- - REVENUE
- Amount $18,555 $16,351
- Growth Rate 13% 16%
- - OPERATING EARNINGS
- Amount $ 321 $ 585 $ 424 $ 581
- Growth Rate (45)% (2)% (27)% 4%
- - RATIO TO REVENUE
- Gross Margin 6.50% 7.10%
- Expenses 3.77% 3.60%
- Impairment Charges and Other 0.45% (0.05)%
- Special Items 0.55% (0.02)%
- Operating Earnings 1.73% 3.57% 2.28% 3.55%
- - NET EARNINGS *
- Amount $ 204 $ 374 $ 275 $ 370
- Growth Rate (45)% 1% (26)% 6%
- Ratio to Revenue 1.10% 2.29% 1.48% 2.26%
- - PRODUCTIVITY
- Margin per Expense Dollar $ 1.72 $ 1.97
- - ASSET MANAGEMENT
- Operating Cash Flow $ 626 $ 254
- Free Cash Flow $ 506 $ 158
- Return on Invested Capital 4.07% 7.98% 5.42% 7.91%
* THE NET EARNINGS SECTION IS PRESENTED BEFORE DISCONTINUED OPERATIONS
- - MARGIN PER EXPENSE DOLLAR = RATIO OF GROSS MARGIN TO EXPENSES
SEE THE GAAP/NON-GAAP RECONCILIATION FOR THE CALCULATIONS AND DEFINITIONS
SUPPORTING THE BALANCES EXCLUDING SPECIAL ITEMS.
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CARDINAL HEALTH, INC. - FIRST SIX MONTHS OF FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
2005 2004
------- -------
- - REVENUE
- Amount $29,460 $25,592
- Growth Rate 15% 16%
- Mix 80% 80%
- - OPERATING EARNINGS
- Amount $ 377 $ 465
- Growth Rate (19)% (9)%
- Mix 39% 39%
- Ratio to Revenue 1.28% 1.82%
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $4,820 $4,435
- Growth Rate 9% 13%
- Mix 13% 14%
- - OPERATING EARNINGS
- Amount $ 308 $ 331
- Growth Rate (7)% 11%
- Mix 32% 28%
- Ratio to Revenue 6.39% 7.46%
- -------------------------------------------------------------------------------
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $1,465 $1,354
- Growth Rate 8% 52%
- Mix 4% 4%
- - OPERATING EARNINGS
- Amount $ 170 $ 220
- Growth Rate (23)% 39%
- Mix 17% 19%
- Ratio to Revenue 11.58% 16.23%
- -------------------------------------------------------------------------------
CLINICAL TECHNOLOGIES AND SERVICES
2005 2004
------ ------
- - REVENUE
- Amount $1,071 $ 731
- Growth Rate 46% 8%
- Mix 3% 2%
- - OPERATING EARNINGS
- Amount $ 122 $ 163
- Growth Rate (25)% 17%
- Mix 12% 14%
- Ratio to Revenue 11.38% 22.36%
--more--
CARDINAL HEALTH, INC. - FIRST SIX MONTHS OF FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
TOTAL Excluding Special Items
------------------ -----------------------
2005 2004 2005 2004
------- ------- ------- --------
- - REVENUE
- Amount $36,351 $31,739
- Growth Rate 15% 17%
- - OPERATING EARNINGS
- Amount $ 679 $ 1,095 $ 814 $1,105
- Growth Rate (38)% 4% (26)% 7%
- - RATIO TO REVENUE
- Gross Margin 6.31% 7.04%
- Expenses 3.83% 3.58%
- Impairment Charges and Other 0.24% (0.02)%
- Special Items 0.37% 0.03%
- Operating Earnings 1.87% 3.45% 2.24% 3.48%
- - NET EARNINGS *
- Amount $ 422 $ 697 $ 513 $ 703
- Growth Rate (40)% 7% (27)% 9%
- Ratio to Revenue 1.16% 2.20% 1.41% 2.21%
- - PRODUCTIVITY
- Margin per Expense Dollar $ 1.65 $ 1.97
- - ASSET MANAGEMENT
- Operating Cash Flow $ 1,519 $ 548
- Free Cash Flow $ 1,283 $ 363
- Return on Invested Capital 4.32% 7.41% 5.17% 7.46%
* THE NET EARNINGS SECTION IS PRESENTED BEFORE DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING.
- - MARGIN PER EXPENSE DOLLAR = RATIO OF GROSS MARGIN TO EXPENSES
SEE THE GAAP/NON-GAAP RECONCILIATION FOR THE CALCULATIONS AND DEFINITIONS
SUPPORTING THE BALANCES EXCLUDING SPECIAL ITEMS.
--more--
- -------------------------------------------------------------------------------
CARDINAL HEALTH, INC. - QUARTERLY FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
Q1 Q2 Q3 Q4 TOTAL
-------- -------- ------ ------ ------
- - REVENUE
- Amount $ 14,402 $ 15,059
- Growth Rate 16% 15%
- Mix 80% 80%
- - OPERATING EARNINGS
- Amount $ 163 $ 213
- Growth Rate (29)% (9)%
- Mix 38% 39%
- Ratio to Revenue 1.13% 1.42%
- -------------------------------------------------------------------------------
MEDICAL PRODUCTS AND SERVICES
Q1 Q2 Q3 Q4 TOTAL
-------- -------- ------ ------ ------
- - REVENUE
- Amount $ 2,393 $ 2,427
- Growth Rate 11% 6%
- Mix 13% 13%
- - OPERATING EARNINGS
- Amount $ 138 $ 170
- Growth Rate (14)% -
- Mix 32% 31%
- Ratio to Revenue 5.78% 7.00%
- -------------------------------------------------------------------------------
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
Q1 Q2 Q3 Q4 TOTAL
-------- -------- ------ ------ ------
- - REVENUE
- Amount $ 705 $ 760
- Growth Rate 9% 7%
- Mix 4% 4%
- - OPERATING EARNINGS
- Amount $ 81 $ 89
- Growth Rate (24)% (22)%
- Mix 19% 16%
- Ratio to Revenue 11.46% 11.68%
- -------------------------------------------------------------------------------
CLINICAL TECHNOLOGIES AND SERVICES
Q1 Q2 Q3 Q4 TOTAL
-------- -------- ------ ------ ------
- - REVENUE
- Amount $ 524 $ 547
- Growth Rate 57% 38%
- Mix 3% 3%
- - OPERATING EARNINGS
- Amount $ 46 $ 76
- Growth Rate (32)% (21)%
- Mix 11% 14%
- Ratio to Revenue 8.76% 13.89%
--more--
CARDINAL HEALTH, INC. - QUARTERLY FY 2005 BUSINESS ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
TOTAL (EXCLUDING SPECIAL ITEMS)
------------------------------
Q1 Q2 Q3 Q4 TOTAL
------- ------- ------- ------- -----
- - REVENUE
- Amount $17,796 $18,555
- Growth Rate 16% 13%
- - OPERATING EARNINGS
- Amount $ 390 $ 424
- Growth Rate (26)% (27)%
- - RATIO TO REVENUE
- Gross Margin 6.10% 6.50%
- Expenses 3.89% 3.77%
- Impairment Charges and Other 0.02% 0.45%
- Operating Earnings 2.19% 2.28%
- - NET EARNINGS*
- Amount $ 238 $ 275
- Growth Rate (28)% (26)%
- Ratio to Revenue 1.34% 1.48%
- - PRODUCTIVITY
- Margin Per Expense Dollar $ 1.57 $ 1.72
- - ASSET MANAGEMENT
- Operating Cash Flow $ 893 $ 626
- Free Cash Flow $ 777 $ 506
- Return on Invested Capital 4.95% 5.42%
- - MARGIN PER EXPENSE DOLLAR = RATIO OF GROSS MARGIN TO EXPENSES
* THE NET EARNINGS SECTION IS PRESENTED BEFORE DISCONTINUED OPERATIONS.
SEE THE GAAP/NON-GAAP RECONCILIATION FOR THE CALCULATIONS AND DEFINITIONS
SUPPORTING THE BALANCES EXCLUDING SPECIAL ITEMS.
--more--
CARDINAL HEALTH, INC. - FIRST SIX MONTHS FISCAL 2005 AND 2004 ASSET MANAGEMENT
ANALYSIS
($ MILLIONS)
- -------------------------------------------------------------------------------
2005
------
Q1 Q2 YTD
------ ------ ----
- - RECEIVABLE DAYS 16.4 13.3
- - DAYS INVENTORY ON HAND 39 38
- - CASH $1,152 $1,274
- - DEBT $3,255 $2,820
- - EQUITY $8,219 $8,559
- - NET DEBT/TOTAL CAPITAL 20% 15%
- - TANGIBLE NET WORTH $3,200 $3,519
- - RETURN ON EQUITY 10.8% 9.7% 10.2%
EXCLUDING SPECIAL ITEMS 11.7% 13.0% 12.4%
- - TAX RATE FROM CONTINUING OPERATIONS 32.0% 32.9% 32.5%
EXCLUDING SPECIAL ITEMS 32.5% 32.5% 32.5%
2004
------
Q1 Q2 YTD
------ ------ ----
- - RECEIVABLE DAYS 17.5 17.4
- - DAYS INVENTORY ON HAND 45 44
- - CASH $ 992 $ 544
- - DEBT $2,724 $2,726
- - EQUITY $6,993 $7,456
- - NET DEBT/TOTAL CAPITAL 20% 23%
- - TANGIBLE NET WORTH $4,653 $4,558
- - RETURN ON EQUITY 17.6% 20.7% 18.9%
EXCLUDING SPECIAL ITEMS 18.1% 20.5% 19.0%
- - TAX RATE FROM CONTINUING OPERATIONS 33.2% 32.9% 33.0%
EXCLUDING SPECIAL ITEMS 33.2% 33.1% 33.1%
--more--
- -------------------------------------------------------------------------------
CARDINAL HEALTH, INC. - BUSINESS ANALYSIS RECONCILIATION
($ MILLIONS)
- -------------------------------------------------------------------------------
SECOND QUARTER FISCAL 2005
GAAP* EXCLUDING
BASIS SPECIAL ITEMS SPECIAL ITEMS
----- ------------- -------------
- - SPECIAL ITEMS
- Restructuring related costs $ 105 $ 105 -
- Merger related costs $ 10 $ 10 -
- Other $ (12) $ (12) -
- - OPERATING EARNINGS
- Amount $ 321 $ 103 $ 424
- Growth rate (45)% (27)%
- Ratio to revenue (Return on sales) 1.73% 2.28%
- - NET EARNINGS**
- Amount $ 204 $ 71 $ 275
- Growth rate (45)% (26)%
- Ratio to revenue 1.10% 1.48%
- Diluted EPS $0.47 $ 0.16 $0.63
- - INCOME TAX PROVISION
-Income tax provision $ 100 $ 32 $ 132
- -------------------------------------------------------------------------------
SECOND QUARTER FISCAL 2004
GAAP* EXCLUDING
BASIS SPECIAL ITEMS SPECIAL ITEMS
----- ------------- -------------
- - SPECIAL ITEMS
- Restructuring related costs $ 13 $ 13 -
- Merger related costs $ 8 $ 8 -
- Other $ (25) $ (25) -
- - OPERATING EARNINGS
- Amount $ 585 $ (4) $ 581
- Growth rate (2)% 4%
- Ratio to revenue (Return on sales) 3.57% 3.55%
- - NET EARNINGS**
- Amount $ 374 $ (4) $ 370
- Growth rate 1% 6%
- Ratio to revenue 2.29% 2.26%
- Diluted EPS $0.85 $(0.01) $0.84
- - INCOME TAX PROVISION
-Income tax provision $ 183 $ 0 $ 183
- -------------------------------------------------------------------------------
FIRST SIX MONTHS FISCAL 2005
GAAP* EXCLUDING
BASIS SPECIAL ITEMS SPECIAL ITEMS
------ ------------- -------------
- - SPECIAL ITEMS
- Restructuring related costs $ 113 $ 113 -
- Merger related costs $ 27 $ 27 -
- Other $ (5) $ (5) -
- - OPERATING EARNINGS
- Amount $ 679 $ 135 $ 814
- Growth rate (38)% (26)%
- Ratio to revenue (Return on sales) 1.87% 2.24%
- - NET EARNINGS**
- Amount $ 422 $ 91 $ 513
- Growth rate (40)% (27)%
- Ratio to revenue 1.16% 1.41%
- Diluted EPS $0.97 $ 0.21 $1.18
- - INCOME TAX PROVISION
-Income tax provision $ 203 $ 44 $ 247
- -------------------------------------------------------------------------------
FIRST SIX MONTHS FISCAL 2004
GAAP* EXCLUDING
BASIS SPECIAL ITEMS SPECIAL ITEMS
------ ------------- -------------
- - SPECIAL ITEMS
- Restructuring related costs $ 20 $ 20 -
- Merger related costs $ 17 $ 17 -
- Other $ (27) $ (27) -
- - OPERATING EARNINGS
- Amount $1,095 $ 10 $1,105
- Growth rate 4% 7%
- Ratio to revenue (Return on sales) 3.45% 3.48%
- - NET EARNINGS**
- Amount $ 697 $ 5 $ 702
- Growth rate 7% 9%
- Ratio to revenue 2.20% 2.21%
- Diluted EPS $ 1.58 $ 0.01 $ 1.59
- - INCOME TAX PROVISION
-Income tax provision $ 344 $ 5 $ 349
* GAAP - AMOUNTS THAT CONFORM WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
** THE NET EARNINGS SECTION IS PRESENTED BEFORE DISCONTINUED OPERATIONS AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING.
DEFINITIONS:
RETURN ON EQUITY (EXCLUDING SPECIAL ITEMS) = (Earnings from continuing
operations + special items after tax) /average shareholders' equity
Note: Average shareholders' equity used in the return on equity calculation was
$8.4 billion and $7.2 billion in the second quarter of fiscal 2005 and 2004,
respectively, and $8.3 billion and $7.4 billion for year to date of fiscal 2005
and 2004, respectively.
EFFECTIVE TAX RATE (EXCLUDING SPECIAL ITEMS) = (Income tax provision + tax
effect of special items) / (earnings before income taxes + special items)
GROWTH RATE (EXCLUDING SPECIAL ITEMS) = (Current quarter earnings excluding
special items - prior year quarter earnings excluding special items)/ prior year
quarter earnings excluding special items
RATIO TO REVENUE (EXCLUDING SPECIAL ITEMS) = Current quarter earnings excluding
special items / operating revenue
FREE CASH FLOW = Operating cash flow - net property activity - dividends
RETURN ON INVESTED CAPITAL (EXCLUDING SPECIAL ITEMS) = [Operating earnings
excluding special items annualized x (1-effective tax rate, excluding special
items)] / average (equity + debt + unrecorded goodwill)
Note: Average unrecorded goodwill used in return on invested capital calculation
was $9.7 billion in fiscal 2005 and fiscal 2004.
NET DEBT TO TOTAL CAPITAL = Net debt / (net debt + shareholders' equity)
Note: Net debt = long-term obligations + short-term obligations + notes payable
banks - cash
--more--
CARDINAL HEALTH INC. - RECONCILIATION OF NON-RECURRING CHARGES
($ MILLIONS)
- -------------------------------------------------------------------------------
Q2 FY05 YTD FY05
-------- --------
Impairment charges and other $ (83.0) $ (86.8)
Less: minority interest and realized currency
translation adjustment 19.4 19.4
-------- --------
Net impairment charges (63.6) (67.4)
Alaris inventory adjustment (3.4) (23.6)
Latex litigation - (16.4)
-------- --------
Total non-recurring charges (67.0) (107.4)
Tax impact 21.8 34.9
-------- --------
Impact on net earnings $ (45.2) $ (72.5)
======== ========
Weighted average diluted number
of shares outstanding 437.1 436.3
Impact on EPS $ (0.10) $ (0.17)
</Table>
Q2 FY04 YTD FY04
-------- --------
Impairment charges and other $ 8.1 $ 6.4
Tax impact (2.7) (2.1)
-------- --------
Impact on net earnings $ 5.4 $ 4.3
======== ========
Weighted average diluted number
of shares outstanding 438.7 442.5
Impact on EPS $ 0.01 $ 0.01
###