1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1993 Commission File Number 0-12591
----------------- -------
CARDINAL HEALTH, INC.
(formerly known as Cardinal Distribution, 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.)
655 METRO PLACE SOUTH, SUITE 925, DUBLIN, OHIO 43017
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code (614) 761-8700
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
------------ ----------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Shares, without par value 23,084,826
-------------------------------- ----------------
(Class) (Outstanding at
February 1, 1994)
2
PART I. FINANCIAL INFORMATION
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
December 31, 1993 March 31, 1993
----------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 52,124 $ 66,649
Marketable securities 38,269 37,292
Trade receivables 196,729 143,949
Merchandise inventories 449,469 318,708
Prepaid expenses and other 18,107 5,792
-------- --------
Total current assets 754,698 572,390
PROPERTY AND EQUIPMENT - At Cost:
Land, buildings and improvements 24,976 25,203
Machinery and equipment 33,217 25,678
Furniture and fixtures 9,261 10,057
-------- --------
Total 67,454 60,938
Accumulated depreciation and amortization (26,995) (21,966)
-------- --------
Property and equipment-net 40,459 38,972
OTHER ASSETS 45,343 38,938
-------- --------
TOTAL $840,500 $650,300
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $ 1,386 $ 3,092
Accounts payable 342,287 168,369
Other accrued liabilities 36,027 45,573
-------- --------
Total current liabilities 379,700 217,034
LONG-TERM OBLIGATIONS - Less current portion 109,608 185,322
DEFERRED INCOME TAXES 2,305 2,305
SHAREHOLDERS' EQUITY:
Common shares-without par value 245,641 168,153
Retained earnings 110,223 83,564
Common shares in treasury, at cost (3,141) (3,074)
Unamortized restricted stock awards (3,836) (3,004)
-------- --------
Total shareholders' equity 348,887 245,639
-------- --------
TOTAL $840,500 $650,300
======== ========
<FN>
See notes to consolidated financial statements.
3
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
(Unaudited)
(In thousands, except per share data)
3-Months Ended 9-Months Ended
----------------------------- -------------------------------
December 31, December 31, December 31, December 31,
1993 1992 1993 1992
-------- -------- ---------- ----------
NET SALES $657,653 $511,623 $1,805,065 $1,467,640
COST OF PRODUCTS SOLD,
including distribution costs 619,641 480,408 1,698,612 1,376,548
-------- -------- ---------- ----------
GROSS MARGIN 38,012 31,215 106,453 91,092
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES (19,339) (16,970) (56,573) (51,194)
UNUSUAL ITEMS
Termination fee 13,466
Nonrecurring charges (9,882)
-------- -------- ---------- ----------
OPERATING EARNINGS 18,673 14,245 49,880 43,482
OTHER INCOME (EXPENSE):
Interest expense (1,958) (2,992) (7,332) (10,141)
Other, net 1,019 1,502 3,232 3,763
-------- -------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 17,734 12,755 45,780 37,104
PROVISION FOR INCOME TAXES (6,810) (4,783) (17,855) (14,063)
-------- -------- ---------- ----------
NET EARNINGS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 10,924 7,972 27,925 23,041
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (10,000)
-------- -------- ---------- ----------
NET EARNINGS $ 10,924 $ 7,972 $ 27,925 $ 13,041
======== ======== ========== ==========
EARNINGS PER COMMON SHARE:
Primary
Net earnings before cumulative
effect of change in accounting
principle $ .48 $ .42 $1.29 $1.22
Cumulative effect of change in
accounting principle (.53)
-------- -------- ---------- ----------
Net Earnings $ .48 $ .42 $1.29 $ .69
======== ======== ========== ==========
Fully Diluted
Net earnings before cumulative
effect of change in accounting
principle $ .47 $ .39 $1.25 $1.13
Cumulative effect of change in
accounting principle (.45)
-------- -------- ---------- ----------
Net Earnings $ .47 $ .39 $1.25 $ .68
======== ======== ========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Primary 22,876 19,005 21,611 18,956
Fully diluted 23,222 22,657 23,081 22,636
<FN>
See notes to consolidated financial statements.
4
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
9-Months Ended
------------------------------
December 31, December 31,
1993 1992
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $27,925 $13,041
Adjustments to reconcile net earnings
to net cash provided by operations:
Cumulative effect of change in accounting principle 10,000
Depreciation and amortization 6,454 5,438
Provision for bad debts 2,537 2,932
Change in operating assets and liabilities
net of effects from acquisitions:
Trade receivables (36,835) (3,775)
Merchandise inventories (99,276) 25,895
Accounts payable 148,050 91,805
Other operating items (29,319) 3,171
------- -------
Net cash provided by operating activities 19,536 148,507
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 1,247 141
Additions to property and equipment (4,660) (3,551)
Purchase of marketable securities (195,176)
Proceeds from sale of marketable securities 194,199 1,004
------- -------
Net cash used in investing activities (4,390) (2,406)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Reduction of short-term borrowings of an acquired subsidiary (5,226)
Reduction of long-term obligations (7,730) (3,448)
Proceeds from issuance of common shares 353 2,309
Dividends paid (1,614) (1,137)
Repurchase of common shares (15,374)
Purchase of treasury shares (67) (663)
Debenture conversion costs charged to common shares (13)
------- -------
Net cash used in financing activities (29,671) (2,939)
------- -------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (14,525) 143,162
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 66,649 3,659
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD $52,124 $146,821
======= =======
Supplemental Disclosure of Noncash Investing &
Financing Activities:
Capital lease obligations incurred $ 293 $ 648
Debentures converted to common shares 74,920
Unamortized debenture offering costs charged
to common shares (1,767)
<FN>
See notes to consolidated financial statements.
5
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. The accompanying unaudited 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 considered necessary for a fair
presentation have been included.
These condensed consolidated financial statements should be
read in conjunction with the audited financial statements and related
notes of the Company contained in the Company's Annual Report on Form
10-K, as amended, for the fiscal year ended March 31, 1993.
Certain reclassifications have been made to the prior period
amounts to conform with the classifications at and for the nine-month
period ended December 31, 1993.
Note 2. Primary earnings per common share are based on the
weighted average number of shares outstanding during each period. The
dilutive effect of stock options and warrants is not significant and
is not reflected in the computation.
Fully diluted earnings per common share reflect the assumed
exercise of stock options and warrants from the date of grant and
conversion of all of the Company's 7-1/4% Convertible Subordinated
Debentures Due 2015 (the "Subordinated Debentures") from the date of
issuance in July, 1990 (see Note 6).
Note 3. In September 1992, the Company received a termination
fee of approximately $13,466,000, resulting from the termination by
Durr-Fillauer Medical, Inc. of its agreement to merge with the
Company.
In the second quarter of 1993, the Company recorded
nonrecurring charges totaling $9,882,000, primarily related to the
closing of certain non-core operations and the rationalization and
standardization of selected distribution operations, information
systems and support functions. The charges included the write-down of
certain assets associated with the affected operations and
modification costs necessary to centralize and standardize certain
information systems and support functions.
The following supplemental information summarizes the results
of operations of the Company excluding the impact of the termination
fee and nonrecurring charges:
(In thousands, except per share data)
9-Months Ended
December 31, 1992
-----------------
Operating Earnings $ 39,898
Net earnings before cumulative effect
of change in accounting principle $ 20,801
Net earnings per common share
before cumulative effect of change
in accounting principle:
Primary $ 1.10
Fully diluted $ 1.03
6
Note 4. On April 14, 1993, the Company repurchased all of the
580,157 Common Shares owned by subsidiaries of North American National
Corporation, the Chairman of which is also a director of the Company,
at a price of $26.50 per share. Nearly all of these shares were
subject to certain restrictions contained in a Shareholders Agreement
among North American National Corporation and other individual
shareholders, which restrictions were released as part of the
repurchase transaction.
Note 5. On May 4, 1993, the Company acquired all of the
outstanding capital stock of Solomons Company ("Solomons"), a
wholesale drug distributor based in Savannah, Georgia, in exchange for
849,358 of the Company's Common Shares. The transaction was accounted
for by the purchase method. Had the acquisition occurred at the
beginning of Fiscal 1993, operating results on a pro forma basis would
not have been significantly different.
Note 6. On June 11, 1993, the Company called for redemption,
effective as of July 2, 1993, the $75 million outstanding principal
amount of its Subordinated Debentures. Following this call,
$74,920,000 of Subordinated Debentures outstanding as of March 31,
1993 were converted at the conversion price of $21.89 per share, into
3,422,521 Common Shares of the Company. The remaining $80,000 of
Subordinated Debentures outstanding as of March 31, 1993 were redeemed
for cash. The pro forma primary net earnings (loss) per share of the
Company, as if the above conversion and redemption had occurred at the
beginning of Fiscal 1993, would have been as follows:
3-Months Ended 9-Months Ended
------------------------------ -------------------------
December 31, December 31, December 31, December 31,
1993 1992 1993 1992
------ ------ ------ ------
Net earnings before cumulative effect
of change in accounting principle $ .48 $ .39 $ 1.26 $ 1.14
Cumulative effect of change in
accounting principle (.45)
------ ------ ------ ------
Net earnings $ .48 $ .39 $ 1.26 $ .69
====== ======= ====== ======
Note 7. Effective April 1, 1993, the Company adopted SFAS 109
"Accounting for Income Taxes." This statement requires an asset and
liability approach for measuring deferred taxes. The cumulative effect
of adopting this statement has been reported as a change in accounting
principle retroactive to April 1, 1992 (the beginning of Fiscal 1993).
Note 8. On December 17, 1993, the Company issued 236,626 Common
Shares in a merger transaction for all of the capital stock of PRN
Services, Inc. ("PRN"), a distributor of pharmaceuticals and medical
supplies to oncologists and oncology clinics. The transaction was
accounted for as a pooling of interests. The impact of the PRN merger,
on both an historical and pro forma basis, is not significant.
Accordingly, prior periods have not been restated for the PRN merger.
Note 9. On January 27, 1994, shareholders of the Company and
Whitmire Distribution Corporation ("Whitmire") approved and adopted the
Agreement and Plan of Reorganization dated October 11, 1993 (the
"Reorganization Agreement"), pursuant to which Cardinal Merger Corp., a
wholly-owned subsidiary of the Company, was merged with and into
Whitmire effective as of February 7, 1994 (the "Effective Time").
Whitmire is a national distributor of pharmaceutical products with
revenues of $2.7 billion for the fiscal year ended July 3, 1993. The
merger was accounted for as a pooling of interests whereby holders of
outstanding Whitmire stock at the Effective Time received an aggregate
of 5,441,815 Company common shares, without par value, and 1,488,529
shares of the Company's newly authorized Class b common shares, without
par value, in exchange for all of the previously outstanding stock of
Whitmire. In addition, Whitmire stock options outstanding at the
Effective Time were converted into options to purchase an
7
aggregate of approximately 1,377,000 additional Company common shares,
without par value, pursuant to the terms of the Reorganization
Agreement.
At the Effective Time, Whitmire became a wholly owned subsidiary
of the Company. The following summarizes the pro forma results of the
operations of the Company as if the acquisition had occurred at April
1, 1992 (the beginning of Fiscal 1993) (excluding estimated
nonrecurring merger expenses of $28 million, net of tax):
3-Months Ended 9-Months Ended
---------------------------------- ---------------------------------
December 31, December 31, December 31, December 31,
1993 1992 1993 1992
-------------- -------------- -------------- --------------
Net Sales $1,397,739,000 $1,141,379,000 $4,002,451,000 $3,206,301,000
Net earnings before cumulative
effect of change in accounting
principle $14,968,000 $9,855,000 $39,554,000 $25,037,000
Net earnings per common share
before cumulative effect of change
in accounting principle:
Primary $0.48 $0.36 $1.32 $0.91
Fully diluted $0.48 $0.34 $1.29 $0.89
The pro forma results above include the following unusual items: (a) equity
transaction costs of $1,973,000 recorded by Whitmire in its fiscal quarter
ended June 27, 1992; and (b) a termination fee of approximately $13,466,000 and
certain nonrecurring charges of $9,882,000 recorded by the Company in its
fiscal quarter ended September 30, 1992 (See Note 3 of "Notes to Consolidated
Financial Statements" ). Excluding the impact of these unusual items, pro
forma net earnings before cumulative effect of change in accounting principle
would be $24,770,000 for the nine months ended December 31, 1992 and net
earnings per common share before cumulative effect of change in accounting
principle would be $0.90 and $0.88 on a primary and fully diluted basis
respectively for the nine months ended December 31, 1992.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The discussion below is concerned with material changes in financial
condition and results of operations for the Company's consolidated balance
sheets as of December 31, 1993 and March 31, 1993 and for the consolidated
statements of earnings for the 3 and 9-month periods ended December 31, 1993
and December 31, 1992. Unless indicated to the contrary for purposes of this
discussion, all references to "1994" and "1993" shall mean the Company's fiscal
years ended March 31, 1994 and March 31, 1993, respectively.
NET SALES. Net sales increased 29% for the third quarter of 1994 and
23% for the nine-month period. The increase in the third quarter was due to
internal growth of 20% and sales resulting from the acquisition of Solomons
Company ("Solomons") on May 4, 1993. (See Note 5 of "Notes to Consolidated
Financial Statements"). The increase in the nine-month period was due to
internal growth of 17% and sales resulting from the acquisition of Solomons.
The internal business growth in both the third quarter and nine-month period
resulted primarily from the addition of new customers (partially as a result of
expanded sales territories) and, to a lesser extent, increased sales to
existing customers and price increases.
The net sales increases of 29% and 23% in the third quarter and nine
month period, respectively, were comprised of strong unit volume growth,
moderating per unit price inflation, and a reduced selling margin rate
reflecting a more competitive market and the Company's increased sales to
higher volume customers (see "Gross Margin," below). The Company expects the
decline in selling margin rates to be a continuing trend in the immediate but
not the long-term future.
GROSS MARGIN. As a percentage of net sales, gross margin for the third
quarter was 5.78% versus 6.10% last year. For the nine-month period, gross
margin was 5.90% versus 6.21% last year. The decreases in the gross margin
percentages were due to (a) lower selling margin rates, reflecting a more
competitive market, and a greater mix of higher volume customers where a lower
cost of distribution and better asset management and cash flow enabled the
Company to offer lower selling margins, and (b) reduced purchasing gains
associated with lower drug price inflation. The reduced purchasing gains were
partially offset by a lower LIFO charge.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the third quarter,
selling, general and administrative expenses improved as a percentage of net
sales to 2.94% from 3.32% last year. For the nine-month period, selling,
general and administrative expenses improved to 3.13% from 3.49% last year.
The improvements are due primarily to economies associated with the Company's
significant sales growth, particularly to major customers where the support
costs can be lower, and productivity improvements.
UNUSUAL ITEMS. A termination fee of $13.5 million was received in the
second quarter of 1993 and resulted from the termination by Durr-Fillauer
Medical, Inc. of its agreement to merge with the Company. (See Note 3 of
"Notes to Consolidated Financial Statements").
Nonrecurring charges of $9.9 million were recorded in the second
quarter of 1993 and are primarily related to the closing of certain non-core
operations and the rationalization and standardization of selected distribution
operations, information systems and support functions. (See Note 3 of "Notes
to Consolidated Financial Statements").
9
INTEREST EXPENSE. The decrease in interest expense of $1.0 million and
$2.8 million in the third quarter and nine-month period of 1994, respectively,
was due primarily to conversion of debt to equity following the call for
redemption, effective July 2, 1993, of the Company's $75 million face amount of
7-1/4% Convertible Subordinated Debentures Due 2015 (the "Subordinated
Debentures"). (See Note 6 of "Notes to Consolidated Financial Statements").
PROVISION FOR INCOME TAXES. The Company's effective tax rate for the
third quarter was 38.4% in 1994 versus 37.5% in 1993. The effective tax rate
for the nine month period was 39.0% in 1994 versus 37.9% in 1993. The increase
in both the third quarter and nine month period was due primarily to the 1993
Omnibus Budget Reconciliation Act's 1% tax rate increase enacted on August 11,
1993 retroactive to January 1, 1993. The total impact of the rate increase on
taxes currently payable and the net deferred tax liability recorded under SFAS
109 was not material and was recorded in the second quarter of 1994 when the
new law was enacted.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. In the first
quarter of 1994, the Company adopted SFAS 109, "Accounting for Income Taxes."
The cumulative effect of adopting this statement has been reported as a change
in accounting principle retroactive to April 1, 1992 (the beginning of Fiscal
1993). The $10 million cumulative effect recorded by the Company resulted
primarily from the fact that SFAS 109 modifies the accounting for previous
business combinations recorded using the purchase method.
LIQUIDITY AND CAPITAL RESOURCES. Net working capital increased to
$375.0 million at December 31, 1993 from $355.4 million at March 31, 1993 and
included an increased investment in merchandise inventories of $99.3 million,
excluding the impact of the Solomons and PRN acquisitions (the "Acquisitions")
(See Notes 5 and 8, respectively, of the "Notes to Consolidated Financial
Statements") and increased accounts payable of approximately $148.1 million,
excluding the impact of the Acquisitions. The increase in merchandise
inventories and accounts payable described above reflects the timing of
seasonal purchases and related payments. Excluding the impact of the
Acquisitions, trade receivables increased by approximately $36.8 million due
primarily to increased sales. The remaining significant changes in working
capital were due to (a) an increase in prepaid expenses and other current
assets of $11.3 million, primarily as a result of an increase in non-trade
receivables, (b) a decrease in other accrued liabilities of $10.4 million
resulting from a variety of individually immaterial items of a normal, ongoing
nature consistent with the nature of the Company's business, and (c) the impact
of the Acquisitions (including the payment of deferred compensation amounts
related to the Solomons acquisition).
Shareholders' equity increased to $348.9 million at December 31, 1993
from $245.6 million at March 31, 1993 due primarily to (a) the issuance of
additional Common Shares upon the conversion of $74.9 million of the
Subordinated Debentures, offset by approximately $1.8 million of unamortized
debenture offering costs charged to Common Shares, (b) net income of $27.9
million, (c) a net increase in Common Shares of approximately $2.8 million
resulting from the issuance of 849,358 Common Shares to acquire Solomons (See
Note 5 of "Notes to Consolidated Financial Statements") offset by the
repurchase of 580,157 Common Shares owned by North American National at a price
of $26.50 per share (See Note 4 of "Notes to Consolidated Financial
Statements"), less (d) dividends paid of approximately $1.6 million.
The Company has line-of-credit agreements with various bank sources
aggregating $175 million, of which $45 million is represented by committed
line-of-credit agreements and the balance is uncommitted. None of the available
lines-of-credit of $175 million were in use at December 31, 1993.
On May 6, 1993, the Company filed with the Securities and Exchange
Commission a Registration Statement for the public offering, from time-to-time,
of its debt securities (the "Debt Securities") issuable in one or more series
in an aggregate principal amount not to exceed $150 million. The net proceeds
from any issuance of the Debt Securities will be used by the Company to finance
working capital growth and for other general corporate purposes, including
possible acquisitions.
10
On February 7, 1994, the Company completed its combination with
Whitmire (see Note 9 of "Notes to Consolidated Financial Statements"). In
conjunction with the Whitmire transaction, the Company anticipates that it will
refinance Whitmire's prior revolving credit agreement of approximately $120
million, incur fees and nonrecurring costs related to the transaction and the
subsequent integration of the two companies' business operations of
approximately $28 million (net of tax), and fund the increased working capital
requirements associated with the addition of new primary supply relationships
with customers, including the recently announced agreement between Whitmire and
Kmart Corporation under which Whitmire will be the primary supplier of
prescription and certain over-the-counter pharmaceutical products to most of
Kmart's pharmacies.
The Company believes that it has adequate resources at its disposal to
meet currently anticipated capital expenditures, routine business growth and
expansion, and current and projected debt service, including the additional
liquidity and capital resources associated with the PRN and Whitmire business
combinations (see Notes 8 and 9 of "Notes to Consolidated Financial
Statements").
11
PART II. OTHER INFORMATION
Item 1. Legal Procedings
In November 1993, the Company and Whitmire Distribution Corporation
("Whitmire") were each named as defendants in a series of nine
purported class lawsuits (the "Brand Name Prescription Drug
Litigation") filed in the United States District Court for the Southern
District of New York, together with 24 pharmaceutical manufacturers and
six other wholesale distributors. The plaintiffs, which consist of a
total of 14 independent drug stores, claim that the manufacturers and
distributors conspired to inflate prices by using a chargeback system
of pricing and seek injunctive relief barring the alleged unfair
pricing in the future and an unspecified amount of damages to be
trebled under the federal antitrust laws. These cases are similar to
43 other cases that have been filed against manufacturers throughout
the nation regarding the pricing of brand name prescription drugs.
Only the nine most recent cases have named wholesalers as defendants as
well. There has been no significant activity in the cases since they
were filed in November. Currently, the parties are awaiting a ruling
by the Judicial Panel for MultiDistrict Litigation as to whether the
cases nationwide should be consolidated in a single court for pretrial
purposes. The Company and Whitmire believe that the allegations
against them in the Brand Name Prescription Drug Litigation are without
merit, and they intend to contest such allegations vigorously.
Item 5. Other Information
The following information, which would otherwise be filed by the
Company pursuant to Items 2 and 7 of Form 8-K as a result of the merger
of a subsidiary of the Company with and into Whitmire Distribution
Corporation ("Whitmire") is provided herein:
On January 27, 1994, shareholders of the Company and Whitmire approved
and adopted the Agreement and Plan of Reorganization dated October 11,
1993 (the "Reorganization Agreement"), pursuant to which Cardinal
Merger Corp., a wholly-owned subsidiary of the Company, was merged with
and into Whitmire effective as of February 7, 1994 (the "Effective
Time"). Whitmire is a Folsom, California, based national distributor
of pharmaceutical products with revenues of $2.7 billion for the fiscal
year ended July 3, 1993.
Under the terms of the Reorganization Agreement, the approximately 66
holders of outstanding Whitmire stock at the Effective Time (consisting
primarily of members of Whitmire management, Apollo Investment Fund,
L.P., and Chemical Venture Partners) received an aggregate of 5,441,815
Company common shares, without par value, and 1,488,529 shares of the
Company's newly authorized Class b common shares, without par value, in
exchange for all of the previously outstanding stock of Whitmire. In
addition, Whitmire stock options outstanding at the Effective Time were
converted into options to purchase an aggregate of approximately
1,377,000 additional Company common shares, without par value, pursuant
to the terms of the Reorganization Agreement. The amount of the
consideration described above was determined by arms-length
negotiations between representatives of the Company and Whitmire.
The principal assets acquired by the Company as a result of the
Reorganization Agreement are the inventory, receivables, equipment,
accounts, fixtures, furnishings, and other tangible and intangible
property owned by Whitmire in the operation of its business as a
wholesaler of pharmaceutical and related products. The Company intends
to continue to use those assets previously used by Whitmire in the
operation of its business, and intends to continue the existence of
Whitmire after the Effective Time as a wholly-owned subsidiary of
Cardinal. There was no material relationship between the Company and
the stockholders of Whitmire prior to the execution of the
Reorganization Agreement.
12
The following financial information pertaining to the merger with
Whitmire is provided herein:
(a) Audited Balance Sheets of Whitmire at July 3, 1993 and June 27, 1992.
(b) Unaudited Balance Sheet of Whitmire at October 2, 1993.
(c) Audited Statements of Operations, Shareholders' Equity, and Cash Flows
of Whitmire for each of the three years in the period ended July 3,
1993.
(d) Unaudited Statements of Operations and Cash Flows of Whitmire for the
three months ended October 2, 1993 and September 26, 1992, and unaudited
Statement of Shareholders' Equity for the three months ended October 2,
1993.
(e) Unaudited Pro Forma Combined Balance Sheet combining the consolidated
balance sheet of the Company as of September 30, 1993 with the balance
sheet of Whitmire as of October 2, 1993.
(f) Unaudited Pro Forma Combined Statements of Earnings combining the
consolidated statements of earnings of the Company for the fiscal
years ended March 31, 1993, March 31, 1992, and March 31, 1991, and
for the six months ended September 30, 1993 and September 30, 1992
with the statements of earnings of Whitmire for the fiscal years ended
July 3, 1993, June 27, 1992, and June 29, 1991, and for the six months
ended October 2, 1993 and September 26, 1992.
13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Whitmire Distribution Corporation:
We have audited the accompanying balance sheets (as restated) of Whitmire
Distribution Corporation (a Delaware corporation), as of July 3, 1993 and June
27, 1992, and the related statements of operations (as restated), stockholders'
equity (as restated) and cash flows (as restated) for each of the three years
in the period ended July 3, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Whitmire
Distribution Corporation as of July 3, 1993 and June 27, 1992, and the results
of its operations and its cash flows for each of the three years in the period
ended July 3, 1993, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN & CO.
Sacramento, California
September 3, 1993 (except with respect
to the matter discussed in Note 10, as
to which the date is October 11, 1993)
14
WHITMIRE DISTRIBUTION CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
JUNE 27, JULY 3, OCTOBER 2,
1992 1993 1993
-------- -------- --------
(UNAUDITED)
ASSETS
Current assets
Cash ..................................................... $3,497 $90 $113
Accounts receivable, less allowance for doubtful accounts
of $4,291, $3,889 and $4,071 ........................... 100,289 104,449 113,677
Inventories .............................................. 237,220 316,400 334,657
Prepaid expenses ......................................... 1,655 2,503 2,245
-------- -------- --------
Total current assets ............................... 342,661 423,442 450,692
Property and equipment
Machinery and equipment .................................. 32,299 39,850 41,153
Leasehold improvements ................................... 2,642 3,026 2,994
-------- -------- --------
34,941 42,876 44,147
Less: Accumulated depreciation ........................... 16,379 22,535 24,300
-------- -------- --------
Property and equipment, net .............................. 18,562 20,341 19,847
Other assets, net of accumulated amortization ................ 9,957 8,072 7,903
-------- -------- --------
$371,180 $451,855 $478,442
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ........................................... $224,660 $317,609 $355,626
Accrued liabilities ........................................ 13,336 18,107 15,617
Current portion of long-term debt and capital leases ....... 2,400 2,344 2,139
-------- -------- --------
Total current liabilities .......................... 240,396 338,060 373,382
Long-term debt and capital leases .......................... 116,822 90,467 78,999
Other liabilities .......................................... 1,266 705 862
-------- -------- --------
Total liabilities .................................. 358,484 429,232 453,243
Commitments and contingent liabilities
Redeemable preferred stock (Note 5) ........................ 19,560 20,400 20,400
Stockholders' equity (deficit) ............................. (6,864) 2,223 4,799
-------- -------- --------
$371,180 $451,855 $478,442
======== ======== ========
<FN>
See accompanying notes to financial statements.
15
WHITMIRE DISTRIBUTION CORPORATION
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED
FISCAL YEAR ---------------------
------------------------------------- SEPT. 26, OCT. 2,
1991 1992 1993 1992 1993
---------- ---------- ---------- --------- ---------
(UNAUDITED) (UNAUDITED)
Net sales ........................... $1,618,811 $2,033,067 $2,666,829 $566,928 $694,092
Cost of sales ....................... 1,518,472 1,916,880 2,531,427 539,102 662,205
---------- ---------- ---------- -------- --------
Gross margin ........................ 100,339 116,187 135,402 27,826 31,887
Selling, general and
administrative expenses .......... 81,568 91,247 100,907 23,074 24,105
Unusual items
Restructuring charges ............ 3,775
Equity transaction costs ......... 1,973
Stock option compensation ........ 5,247
---------- ---------- ---------- -------- --------
18,771 22,967 25,473 4,752 7,782
Interest ............................ 16,479 16,277 13,266 2,839 2,259
---------- ---------- ---------- -------- --------
Income before taxes on income ....... 2,292 6,690 12,207 1,913 5,523
Taxes on income ..................... 3,520 5,292 829 2,427
---------- ---------- ---------- -------- --------
Net income .......................... 2,292 3,170 6,915 1,084 3,096
Preferred stock dividends ........... 2,000 2,000 2,036 509 520
Preferred stock accretion ........... 840 840 840 210
---------- ---------- ---------- -------- --------
Net income available for common
shares ........................... $(548) $330 $4,039 $365 $2,576
========== ========== ========== ======== ========
Earnings per common share ........... $(0.55) $0.33 $4.08 $0.37 $2.60
========== ========== ========== ======== ========
Weighted average common and
common equivalent shares
outstanding ...................... 996,776 993,373 990,591 991,091 989,091
========== ========== ========== ======== ========
<FN>
See accompanying notes to financial statements.
16
WHITMIRE DISTRIBUTION CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
COMMON STOCK RETAINED
-------------- CAPITAL IN EARNINGS
PAR EXCESS OF (CUMULATIVE
SHARES VALUE PAR VALUE DEFICIT) TOTAL
------ ----- ------------ ----------- --------
Balance, June 30, 1990 ........................ 184 $ 2 $(6,826) $(6,824)
Cash dividends declared on preferred stock .... (2,000) (2,000)
Preferred stock accretion ..................... (840) (840)
Net income .................................... 2,292 2,292
--- ----- ----- ------- -------
Balance, June 29, 1991 ........................ 184 2 (7,374) (7,372)
Warrant exercises ............................. 379 4 174 178
Cash dividends declared on preferred stock .... (2,000) (2,000)
Preferred stock accretion ..................... (840) (840)
Net income .................................... 3,170 3,170
--- ----- ----- ------- -------
Balance, June 27, 1992 ........................ 563 6 (6,870) (6,864)
Stock repurchases ............................. (4) $(199) (199)
Cash dividends declared on preferred stock .... (2,036) (2,036)
Stock option compensation ..................... 5,247 5,247
Preferred stock accretion ..................... (840) (840)
Net income .................................... 6,915 6,915
--- ----- ----- ------- -------
Balance, July 3, 1993 ......................... 559 6 4,208 (1,991) 2,223
Cash dividends declared on preferred stock .... (520) (520)
Net income .................................... 3,096 3,096
--- ----- ----- ------- -------
Balance, October 2, 1993 (unaudited) .......... 559 $6 $4,208 $585 $4,799
=== ===== ====== ======= =======
<FN>
See accompanying notes to financial statements.
17
WHITMIRE DISTRIBUTION CORPORATION
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
FISCAL YEAR ----------------------
---------------------------- SEPT. 26, OCT. 2,
1991 1992 1993 1992 1993
------- ------ ------- --------- ---------
(UNAUDITED) (UNAUDITED)
Cash flows from operations:
Net income .................................. $2,292 $3,170 $6,915 $1,084 $3,096
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization ............ 7,993 12,389 11,064 2,276 1,985
Stock option compensation ................ 5,247
Change in operating assets & liabilities
Accounts receivable .................... (25,030) (15,937) (4,160) (10,019) (9,228)
Inventories ............................ (58,784) 3,367 (79,180) (30,691) (18,257)
Prepaid expenses ....................... (943) 25 (848) (2,214) 258
Accounts payable ....................... 67,889 19,307 92,949 48,069 38,017
Accrued liabilities and other .......... 1,407 (894) 2,576 (1,020) (2,164)
------- ------- ------- ------- -------
Total adjustments ........................... (7,468) 18,257 27,648 6,401 10,611
Net cash provided (used) by operations....... (5,176) 21,427 34,563 7,485 13,707
Cash flows used by investing
activities:
Capital expenditures ..................... (8,556) (7,571) (9,324) (2,049) (1,491)
------- ------- ------- ------- -------
Net cash used by investing activities ....... (8,556) (7,571) (9,324) (2,049) (1,491)
Cash flows provided (used) by financing
activities:
Revolving lines of credit .............. 16,643 (4,957) (25,749) (7,974) (11,468)
Repayment of long-term debt and
capital leases ...................... (1,698) (2,250) (662) (250) (205)
Additional paid-in capital ............. 178 (199)
Issuance of Series A redeemable
preferred stock ....................... 400
Debt fees ............................... (1,750)
Dividends on preferred stock ........... (2,000) (2,000) (2,036) (509) (520)
------- ------- ------- ------- -------
Net cash provided (used) by financing
activities ............................... 12,945 (10,379) (28,646) (8,733) (12,193)
Net increase (decrease) in cash ............. $(787) $3,477 $(3,407) $(3,297) $23
======= ======= ======= ======= =======
<FN>
See accompanying notes to financial statements.
18
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Period and Financial Statement Classification
Whitmire's fiscal year ends on the Saturday closest to the end of June.
Fiscal year 1993 contained 53 weeks. Fiscal years 1991 and 1992 each contained
52 weeks. Certain amounts in the financial statements have been reclassified to
conform with the 1993 presentation.
Inventories
Inventories consist of merchandise held for sale and are stated at the
lower of cost or market. The cost of inventories is determined under the
last-in, first-out (LIFO) method. As of June 27, 1992, and July 3, 1993, the
allowance to reduce inventories to cost under the LIFO method totaled
$14,300,000 and $20,800,000, respectively.
Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed on a
straight-line basis over the estimated useful lives of the related assets as
follows: equipment and fixtures, 3-15 years; leasehold improvements, lease
term, generally 3-5 years. Maintenance and repairs, which do not improve or
extend the lives of the respective assets, are expensed currently.
Other Assets
Other assets as of July 3, 1993, consist primarily of deferred taxes, the
cash surrender value of officers' life insurance and loan fees. Loan fees are
amortized over the period that the related debt is expected to be outstanding.
As of June 27, 1992, other assets included the excess of cost of acquired
businesses over the fair market value of their tangible assets. This excess was
assigned to intangible assets, primarily trade names, work force value and
goodwill. Accumulated amortization totaled $10,104,000 at June 27, 1992. These
costs were fully amortized during 1993.
Taxes on Income
Effective as of the beginning of fiscal 1992, Whitmire began accounting
for income taxes under the liability method by adopting Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (See Note 7).
Earnings per Common Share
Earnings per share are calculated by dividing net income, less preferred
stock dividends and preferred stock accretion, by the weighted average shares
outstanding adjusting for the dilutive effect of stock options and warrants.
Cash Flows
For purposes of reporting cash flows, Whitmire considers cash to include
cash in banks and on hand. Cash paid during 1991, 1992, and 1993 for interest
wan $16,078,000, $13,449,000 and $12,414,000, respectively. Cash paid during
1991, 1992, and 1993 for taxes was $89,000, $3,859,000 and $9,585,000,
respectively. At June 29, 1991, June 27, 1992, and July 3, 1993, approximately
$500,000 of senior preferred stock dividends were accrued but not yet paid.
19
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
Interim Financial Information
Financial information for the three-month periods ended September 26,
1992, and October 2, 1993, is unaudited; however, in the opinion of management,
such information includes all adjustments, consisting only of normal recurring
adjustments, necessary for a fair statement of the results for these interim
periods.
2. SPECIAL CHARGES FOR RESTRUCTURING
Results of operations for 1993 include special charges totaling
$3,775,000 resulting from a program adopted by Whitmire to improve its
warehouse network. The restructuring, which will be implemented over several
years, is intended to reduce operating costs while improving Whitmire's
distribution capabilities. The restructuring charges are comprised of asset
write-offs, moving expenses and other related costs. During 1993, two
warehouses were closed, one warehouse was relocated and one warehouse was
enlarged under this program.
3. LONG-TERM DEBT
During 1992, Whitmire entered into a new revolving credit agreement under
which it may borrow up to $210,000,000. During 1993, the agreement was amended
to provide for seasonal increases in the availability up to $235,000,000.
Interest is payable monthly at 1.5% over the prime rate of a major bank or, at
Whitmire's election, 3.25% over the London Interbank Offered Rate. The credit
agreement expires March 31, 1995, and includes provisions for two one-year
renewal periods. The average interest rate under the revolving credit agreement
at July 3, 1993, was 6.9%. This agreement replaced a $175,000,000 revolving
credit agreement and term loan with General Electric Capital Corporation.
Interest expense in 1992 includes charges of $1,837,000 associated with the
retirement of Whitmire's debt with General Electric Capital Corporation.
Borrowings under the revolving credit agreement are secured by all of
Whitmire's assets, including inventories and accounts receivable. At June 27,
1992, $114,545,000 and at July 3, 1993, $88,824,000 was outstanding under the
revolving credit agreement. An additional $117,496,000 was available at July 3,
1993 based on eligible inventory and accounts receivable, as defined in the
revolving credit agreement.
The revolving credit agreement contains limitations on borrowings,
investments, capital expenditures, and acquisitions or consolidations, and
requires maintenance of specific financial ratios and a minimum net worth.
4. CAPITAL AND OPERATING LEASES
Leased property consists of all of Whitmire's warehouse facilities, the
corporate headquarters in Folsom, California and substantially all of
Whitmire's data processing equipment and automobiles. Generally, the leases are
renewable and require Whitmire to pay maintenance, taxes and insurance costs.
Rental expense charged to earnings during 1991, 1992 and 1993 amounted to
approximately $6,200,000, $6,100,000 and $6,542,000, respectively.
20
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
Minimum rental commitments payable in future years under non-cancelable
long-term leases are as follows (in thousands):
CAPITAL OPERATING
LEASES LEASES
------ ----------
1994 ........................................... $2,528 $5,222
1995 ........................................... 1,281 4,754
1996 ........................................... 323 3,934
1997 ........................................... 63 3,294
1998 ........................................... 2,795
Remaining years ................................ 5,204
------ -------
Total minimum payments ......................... 4,195 $25,203
=======
Less: Amounts representing interest ........... (227)
------
Present value of minimum lease payments ........ $3,968
======
5. REDEEMABLE PREFERRED STOCK
Whitmire has authorized 360,000 shares of preferred $.01 par value stock.
The preferred stock is divided into two series: 350,000 shares designated as
Senior Preferred Stock and 10,000 shares designated as Series A Preferred
Stock.
The holders of Whitmire's preferred stock are entitled to cumulative
annual dividends of $10.00 per share for Senior Preferred Stock and $10.125 for
Series A Preferred Stock when and as declared by the Board of Directors of
Whitmire. In lieu of paying cash dividends to the holders of Senior Preferred
Stock and Series A Preferred Stock, Whitmire may, at its election, pay
scheduled dividends with additional shares of Senior Preferred Stock or Series
A Preferred Stock, as appropriate. The number of additional shares to be issued
is determined using the $100.00 per share liquidation value of Senior Preferred
Stock and the Series A Preferred Stock. So long as any shares of Senior
Preferred Stock or Series A Preferred Stock are outstanding, Whitmire may not
declare or pay cash dividends to common stockholders.
In the event of liquidation, the holders of Senior Preferred Stock and
Series A Preferred Stock are entitled to a liquidation preference of $100.00
per share plus all accrued but unpaid dividends.
Whitmire is required to redeem, at $100.00 per share plus accrued but
unpaid dividends, all shares of Senior Preferred Stock in eight equal quarterly
installments, commencing in October 1994. Whitmire is required to redeem, at
$100.00 per share plus accrued but unpaid dividends, all shares of Series A
Preferred Stock in July 1996. Whitmire has charged capital in excess of par
value for common stockholders or retained earnings $840,000 in each of 1991,
1992 and 1993 for accretion relative to this mandatory redemption obligation.
As of July 3, 1993, a total of $4,200,000 had been credited to redeemable
preferred stock through accretion. As of July 3, 1993, the aggregate redemption
value of Whitmire's Senior Preferred Stock and Series A Preferred Stock totals
$20,400,000.
Whitmire may, at the option of the Board of Directors, redeem any and all
shares of Senior Preferred Stock and the Series A Preferred Stock at $100.00
per share plus all accrued but unpaid dividends.
The holders of Senior Preferred Stock and Series A Preferred Stock are
not entitled to vote, except that in the event that Whitmire is in arrears in
the payment of any two or more quarterly dividends on Senior Preferred Stock or
has failed to make any two or more mandatory redemption payments, and has
available funds to make such payments, in which case the holders of Senior
Preferred Stock voting separately as a class may elect the smallest number of
directors that will constitute a majority of the then authorized number of
directors.
21
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
6. STOCKHOLDERS' EQUITY
During 1992, Whitmire completed a series of transactions which affected
its capitalization as follows:
- Warrants for the purchase of 150,000 shares of common stock were
returned to Whitmire and canceled.
- Whitmire granted options to purchase 150,000 shares of common
stock to Melco Managers (Melco) for distribution to key employees
of Whitmire. Melco was formed for the sole purpose of
administering a management stock option plan.
- Whitmire granted to its outside investors adjustment share
rights representing rights to purchase 666,667 shares of common
stock. A defined percentage of the adjustment share rights were
cancelable yearly (up to 100%) based upon Whitmire achieving
specified financial targets.
- Whitmire issued 4,000 shares of Series A Preferred Stock to
certain of its outside investors as reimbursement of expenses
associated with the acquisition of their interests in Whitmire.
- Put and call provisions of Whitmire's remaining outstanding
warrants were canceled.
The 1992 financial statements have been restated to reflect fees and
expenses associated with the 1992 equity transactions of $1,973,000 as a charge
to operations.
During 1993, Whitmire and its principal outside investors agreed to amend
certain agreements which, among other things, canceled the adjustment share
rights and eliminated certain conditions relative to the exercise of the
options granted to Melco. For financial reporting purposes, the modification of
the terms of these options has been treated as if the options were issued on
the date that the terms were modified. Accordingly, Whitmire has recorded a
compensation charge totaling $5,247,000 relative to these changes. The
compensation charge is equal to the fair value (as determined by an independent
appraisal) of the options on the date that the terms of the options were
modified.
Following is a description of the components of Whitmire's equity:
Common Stock
Whitmire has authorized 2,500,000 shares of common stock with a par value
of $.01 per share and 800,000 shares of non-voting common stock with a par
value of $.01 per share. At July 3, 1993, 271,229 shares were reserved for
issuance to the holders of warrants to purchase common shares and 164,917
shares of common stock were reserved for issuance to the holders of common
stock options. Of the 558,754 shares outstanding at July 3, 1993, 91,986 shares
were non-voting common stock.
Common Stock Warrants
Warrants to purchase 271,229 common shares were outstanding as of July 3,
1993, with an average exercise price of $0.87 per share. These warrants are
part of the warrants to acquire 800,000 common shares that Whitmire granted to
Amfac, Inc. and General Electric Capital Corporation on August 1, 1988 as part
of the transaction in which Whitmire acquired substantially all of the assets
of Amfac Health Care, a division of Amfac Distribution Corporation. The
original warrant exercise price was $0.56 per share, the fair market value at
the date of grant. The current average exercise price reflects increases
effected in connection with the 1992 transactions described above.
Common Stock Options
Whitmire's common stock option plans were established to offer selected
employees an opportunity to acquire common stock of Whitmire. Under the terms
of the plans, both incentive and non-statutory options
22
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
may be granted. Outstanding options generally vest ratably over a period of
five years, subject to certain conditions.
At July 3, 1993, options to acquire 164,917 shares were outstanding with
an average exercise price of $16.64. As of July 3, 1993, no options had been
exercised.
7. TAXES ON INCOME
The provision for income taxes consists of the following (in thousands):
1991 1992 1993
------ ------ ------
Current:
Federal ....................................... $3,387 $7,057
State and local .............................. 672 1,697
------ ------ ------
Total current ......................... $4,059 $8,754
====== ====== ======
Deferred:
Federal ....................................... $841 $407 $(2,816)
State and local ............................... 178 106 (646)
------ ------ ------
Total deferred ......................... 1,019 513 (3,462)
------ ------ ------
Net operating loss benefit .................... (1,019) (1,052)
------ ------ ------
Total provision ........................ $0 $3,520 $5,292
====== ====== ======
Deferred tax assets and (liabilities) are comprised of the following (in
thousands):
1992 1993
------- -------
ASSETS
Allowance for doubtful accounts .............. $288 $608
Vacation and moving .......................... 1,646 1,176
Other ........................................ 109
------- -------
Current ...................................... 1,934 1,893
------- -------
Stock option compensation ................... 2,275
Restructuring charges ........................ 1,479
Deferred compensation ........................ 270 373
Other ........................................ 171
------- -------
Noncurrent ................................... 441 4,127
------- -------
Total ...................................... $2,375 $6,020
------- -------
LIABILITIES
Inventory basis differences .................. (1,793) (1,675)
Other ........................................ (316)
------- -------
Current ...................................... $(1,793) $(1,991)
------- -------
Total net current .......................... $141 $(98)
======= =======
Noncurrent deferred tax assets are included in other assets in the accompanying
balance sheet.
23
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
The reconciliation between Whitmire's effective tax rate and the
statutory federal income tax rate follows:
1991 1992 1993
----- ----- ----
Statutory federal income tax rate ....................... 34.0% 34.0% 34.0%
State and local income taxes net of federal tax benefits 7.8% 6.6% 4.8%
Nondeductible expenses .................................. 5.2% 11.9% 1.2%
Valuation allowance ..................................... 14.0% 2.5%
NOL benefit ............................................. (45.0%) (15.8%)
Other, net .............................................. (2.0%) 1.9% 0.7%
----- ----- ----
Effective tax rate ...................................... 0.0% 52.6% 43.2%
===== ===== ====
Effective as of the beginning of fiscal 1992, Whitmire adopted Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS
109). Under the provisions of SFAS 109, income taxes are recorded under the
liability method. SFAS 109 results in the recognition of deferred tax assets
and liabilities for the expected future tax consequences of existing
differences between financial reporting and tax reporting bases of assets and
liabilities (temporary differences), and operating loss and tax credit
carryforwards for tax purposes. The cumulative effect on retained earnings as
of the beginning of 1992 of adopting SFAS 109 was not material and has been
included in the provision for income taxes, and not separately presented in the
accompanying statement of operations.
For 1991, deferred federal income taxes result from timing differences
between the amounts of reported assets and liabilities in the financial
statements and their tax bases. Timing differences are due principally to
differences in depreciable lives of property and equipment, cash discounts in
inventory, the application of uniform inventory cost capitalization, tax
regulations and differences in LIFO reserves.
During 1991, net operating losses of approximately $2,475,000 and
$1,082,000 were utilized for book and federal tax reporting purposes. The
resulting benefit is included in the tax provision in the accompanying
statement of operations and has not been reflected as an extraordinary item
since it is not material to the financial statements.
8. RETIREMENT SAVINGS PLAN
Whitmire's defined contribution retirement savings plan, which covers
substantially ail of its employees after one year of service, provides for
regular contributions by Whitmire based on salaries of eligible employees. In
addition, employees may make pre-tax contributions up to 12% of their salary,
subject to statutory limitations. The Company will match a minimum of 25% to a
maximum of 50% of the first 6% of salary contributed by the employee, based
upon Whitmire's earnings before taxes and amortization, but after interest and
depreciation. Payments upon retirement or termination of employees are based on
vested amounts credited to individual accounts. Costs of the plan charged to
operations for 1991, 1992 and 1993 amounted to approximately $680,000, $775,000
and $982,000, respectively.
9. CONTINGENT LIABILITIES
Whitmire becomes involved in litigation arising out of its normal
business activities. In the opinion of management, Whitmire's liability, if
any, under any pending litigation would not materially affect its financial
position or results of operations.
10. SUBSEQUENT EVENT
On October 11, 1993, Whitmire and Cardinal Distribution, Inc. (Cardinal)
entered into a definitive agreement whereby a wholly owned subsidiary of
Cardinal will merge with and into Whitmire and Whitmire
24
WHITMIRE DISTRIBUTION CORPORATION
NOTES TO FINANCIAL STATEMENTS --- (CONTINUED)
will become a wholly owned subsidiary of Cardinal. Under the terms of the
agreement, common shares and options of Whitmire will be exchanged for
equivalent shares and options of Cardinal based upon an exchange ratio of 8.35
Cardinal common shares for each Whitmire common share. The transaction is
expected to be accounted for using the pooling-of-interests method of
accounting. The merger is subject to stockholder and regulatory approvals and
is expected to be completed in early 1994.
25
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information should
be read in conjunction with the financial statements, including notes
thereto, of Cardinal Distribution, Inc. ("Cardinal") and the financial
statements of Whitmire Distribution Corporation ("Whitmire"), including
the notes thereto, set forth herein. The pro forma information is presented
for illustration purposes only and is not necessarily indicative of the
operating results or financial position that would have occurred if the
combination of Cardinal and Whitmire had been consummated in accordance with
the assumptions set forth below, nor is it indicative of future operating
results or financial position.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet presents,
under the pooling-of-interests accounting method, the consolidated balance
sheet of Cardinal as of September 30, 1993, combined with the balance sheet
of Whitmire as of October 2, 1993.
WHITMIRE
CARDINAL DISTRIBUTION
DISTRIBUTION, INC. CORPORATION
SEPTEMBER 30, OCTOBER 2, PRO FORMA PRO FORMA
1993 1993 ADJUSTMENTS BALANCES
------------------ ------------- -------------- ------------
(IN THOUSANDS)
ASSETS
Current assets
Cash and equivalents and marketable securities.. $100,688 $ 113 $(20,674)(1)(2) $ 80,127
Trade receivables .............................. 163,529 113,677 277,206
Merchandise inventories ........................ 364,802 334,657 699,459
Prepaid expenses and other ..................... 14,398 2,245 16,643
-------- -------- -------- ----------
Total current assets ......................... 643,417 450,692 (20,674) 1,073,435
Property and equipment -- net .................... 40,589 19,847 60,436
Other assets ..................................... 45,011 7,903 52,914
-------- -------- -------- ----------
Total ........................................ $729,017 $478,442 $(20,674) $1,186,785
======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term obligations ....... $ 1,186 $ 2,139 $ $ 3,325
Accounts payable ............................... 239,649 355,626 28,000 (3) 623,275
Other accrued liabilities ...................... 38,654 15,617 (510)(1) 53,761
-------- -------- -------- ----------
Total current liabilities .................... 279,489 373,382 27,490 680,361
Long-term obligations -- less current portion .. 109,509 78,999 188,508
Redeemable preferred stock ..................... 20,400 (20,400)(1)
Deferred income taxes and other liabilities .... 2,305 862 3,167
Shareholders' equity
Common shares ................................ 244,181 4,214 236 (2) 248,631
Retained earnings ............................ 99,521 585 (28,000)(3) 72,106
Common shares in treasury, at cost ........... (3,083) (3,083)
Unamortized restricted stock awards .......... (2,905) (2,905)
-------- -------- -------- ----------
Total shareholders' equity ................. 337,714 4,799 (27,764) 314,749
-------- -------- -------- ----------
Total ...................................... $729,017 $478,442 $(20,674) $1,186,785
======== ======== ======== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
26
UNAUDITED PRO FORMA COMBINED STATEMENTS OF EARNINGS
The following unaudited pro forma combined statements of earnings
present, under the pooling-of- interests accounting method, the consolidated
statements of earnings of Cardinal for the fiscal years ended March 31, 1993,
March 31, 1992 and March 31, 1991 and for the six months ended September 30,
1993 and September 30, 1992 combined with the statements of earnings of
Whitmire for the fiscal years ended July 3, 1993, June 27, 1992 and June 29,
1991, and for the six months ended October 2, 1993 and September 26, 1992.
The estimated Merger expenses ($28 million, net of tax) as discussed in Note
3 have not been considered in the following unaudited pro forma combined
statements of earnings.
YEAR ENDED
----------------------------------
WHITMIRE
DISTRIBUTION
CARDINAL CORPORATION
DISTRIBUTION, INC. JULY 3, PRO FORMA PRO FORMA
MARCH 31, 1993 1993 ADJUSTMENTS RESULTS (4)
------------------ ------------- -------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales .......................................... $1,966,546 $2,666,829 $ $4,633,375
Cost of products sold .............................. 1,839,728 2,531,427 33,239 (5) 4,404,394
---------- ---------- --------- ----------
Gross margin ....................................... 126,818 135,402 (33,239) 228,981
Selling, general and administrative expenses ....... (67,760) (100,907) 33,239 (5) (135,428)
Unusual items
Termination fee .................................. 13,466 13,466
Nonrecurring charges ............................. (9,882) (9,022) (18,904)
---------- ---------- --------- ----------
Operating earnings ................................. 62,642 25,473 88,115
Other income (expense):
Interest expense ................................. (13,357) (13,266) (26,623)
Other, net ....................................... 4,765 (575) (1) 4,190
---------- ---------- --------- ----------
Earnings before income taxes and cumulative effect
of change in accounting principle ............... 54,050 12,207 (575) 65,682
Provision for income taxes ......................... 20,418 5,292 25,710
---------- ---------- --------- ----------
Net earnings before cumulative effect of change in
accounting principle (7) ......................... 33,632 6,915 (575) 39,972
Preferred dividends declared/accretion ............. 2,876 (2,876) (1)
---------- ---------- --------- ----------
Net earnings available for common shares before
cumulative effect of change in accounting
principle, excluding estimated nonrecurring Merger
expenses ......................................... $33,632 $4,039 $2,301 $39,972
========== ========== ========= ==========
Net earnings per common share before cumulative
effect of change in accounting principle, excluding
estimated nonrecurring Merger expenses (6)(7)
Primary .......................................... $1.77 $1.46
========== ==========
Fully diluted .................................... $1.63 $1.40
========== ==========
Weighted average shares outstanding (6)
Primary .......................................... 18,990 27,449
========== ==========
Fully diluted .................................... 22,645 30,893
========== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
27
YEAR ENDED
------------------------------------
WHITMIRE
CARDINAL DISTRIBUTION
DISTRIBUTION, INC. CORPORATION PRO FORMA PRO FORMA
MARCH 31, 1992 JUNE 27, 1992 ADJUSTMENTS RESULTS (4)
------------------ --------------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales .......................................... $1,647,611 $2,033,067 $ $3,680,678
Cost of products sold .............................. 1,537,719 1,916,880 29,269 (5) 3,483,868
---------- ---------- -------- ----------
Gross margin ....................................... 109,892 116,187 (29,269) 196,810
Selling, general and administrative expenses ....... (62,522) (91,247) 29,269 (5) (124,500)
---------- ---------- -------- ----------
Unusual Item:
Nonrecurring charge ............................. (1,973) (1,973)
---------- ---------- -------- ----------
Operating earnings ................................. 47,370 22,967 70,337
Other income (expense):
Interest expense ............................. (11,796) (16,277) (28,073)
Other, net ................................... 5,389 (1,083) (1) 4,306
---------- ---------- -------- ----------
Earnings before income taxes ....................... 40,963 6,690 (1,083) 46,570
Provision for income taxes ......................... 15,771 3,520 19,291
---------- ---------- -------- ----------
Net earnings ....................................... 25,192 3,170 (1,083) 27,279
Preferred dividends declared/accretion ............. 2,840 (2,840) (1)
---------- ---------- -------- ----------
Net earnings available for common shares,
excluding estimated nonrecurring Merger
expenses ......................................... $25,192 $330 $1,757 $27,279
========== ========== ======== ==========
Net earnings per common share, excluding
estimated nonrecurring Merger
expenses (6)
Primary ................................... $1.34 $0.99
========== ==========
Fully diluted ............................. $1.26 $0.99
========== ==========
Weighted average shares outstanding (6)
Primary ................................... 18,763 27,433
========== ==========
Fully diluted ............................. 22,584 30,857
========== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
28
YEAR ENDED
----------------------------------
WHITMIRE
CARDINAL DISTRIBUTION
DISTRIBUTION, INC. CORPORATION PRO FORMA PRO FORMA
MARCH 31, 1991 JUNE 29, 1991 ADJUSTMENTS RESULTS
------------------ ------------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ......................................... $1,184,300 $1,618,811 $ $2,803,111
Cost of product sold .............................. 1,101,811 1,518,472 26,544 (5) 2,646,827
Gross margin ...................................... 82,489 100,339 (26,544) 156,284
Selling, general and administrative expenses ...... (47,832) (81,568) 26,544 (5) (102,856)
---------- ---------- ------- ----------
Operating earnings ................................ 34,657 18,771 53,428
Other income (expense):
Interest expense ............................... (10,591) (16,479) (27,070)
Other, net ..................................... 4,454 (1,291) (1) 3,163
---------- ---------- ------- ----------
Earnings before income taxes ...................... 28,520 2,292 (1,291) 29,521
Provision for income taxes ........................ 11,123 11,123
---------- ---------- ------- ----------
Net earnings ...................................... 17,397 2,292 (1,291) 18,398
Preferred dividends declared/accretion ............ 2,840 (2,840) (1)
---------- ---------- ------- ----------
Net earnings available for common shares,
excluding estimated nonrecurring Merger
expenses ....................................... $ 17,397 $ (548) $ 1,549 $ 18,398
========== ========== ======= ==========
Net earnings per common share, excluding
estimated nonrecurring Merger
expenses (6)
Primary ...................................... $1.04 $0.73
========== ==========
Fully diluted ................................ $1.01 $0.73
========== ==========
Weighted average shares outstanding (6)
Primary ...................................... 16,663 25,265
========== ==========
Fully diluted ................................ 19,446 27,753
========== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
29
SIX MONTHS ENDED
------------------------------------
CARDINAL
DISTRIBUTION, WHITMIRE
INC. DISTRIBUTION
SEPTEMBER 30, CORPORATION PRO FORMA PRO FORMA
1993 OCTOBER 2, 1993 ADJUSTMENTS RESULTS (4)
------------- --------------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ...................................... $1,147,412 $1,457,270 $ $2,604,682
Cost of products sold .......................... 1,078,971 1,386,726 17,396 (5) 2,483,093
---------- ---------- -------- ----------
Gross margin ................................... 68,441 70,544 (17,396) 121,589
Selling, general and administrative expenses ... (37,234) (51,294) 17,396 (5) (71,132)
---------- ---------- -------- ----------
Operating earnings ............................. 31,207 19,250 50,457
Other income (expense):
Interest expense ............................ (5,374) (5,362) (10,736)
Other, net .................................. 2,213 (250) (1) 1,963
---------- ---------- -------- ----------
Earnings before income taxes ................... 28,046 13,888 (250) 41,684
Provision for income taxes ..................... 11,045 6,053 17,098
---------- ---------- -------- ----------
Net earnings ................................... 17,001 7,835 (250) 24,586
Preferred dividends declared/accretion ......... 1,239 (1,239) (1)
---------- ---------- -------- ----------
Net earnings available for common shares,
excluding estimated nonrecurring Merger
expenses .................................... $ 17,001 $ 6,596 $ 989 $ 24,586
========== ========== ======== ==========
Net earnings per common share, excluding
estimated nonrecurring Merger
expenses (6)
Primary ................................... $0.81 $0.84
========== ==========
Fully diluted ............................. $0.78 $0.81
========== ==========
Weighted average shares outstanding (6)
Primary ................................... 20,978 29,398
========== ==========
Fully diluted ............................. 22,934 31,203
========== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
30
SIX MONTHS ENDED
--------------------------------
CARDINAL WHITMIRE
DISTRIBUTION, DISTRIBUTION
INC. CORPORATION
SEPTEMBER 30, SEPTEMBER 26, PRO FORMA PRO FORMA
1992 1992 ADJUSTMENTS RESULTS (4)
------------- ------------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales ..................................... $956,017 $1,108,905 $ $2,064,922
Cost of products sold ......................... 896,140 1,050,020 14,529 (5) 1,960,689
-------- ---------- -------- ----------
Gross margin .................................. 59,877 58,885 (14,529) 104,233
Selling, general and administrative expenses .. (34,224) (47,930) 14,529 (5) (67,625)
Unusual items
Termination fee ............................. 13,466 13,466
Nonrecurring charges ........................ (9,882) (1,973) (11,855)
-------- ---------- -------- ----------
Operating earnings ............................ 29,237 8,982 38,219
Other income (expense):
Interest expense ............................ (7,149) (8,441) (15,590)
Other, net .................................. 2,261 (280) (1) 1,981
-------- ---------- -------- ----------
Earnings before income taxes and
cumulative effect of change in
accounting principle ........................ 24,349 541 (280) 24,610
Provision for income taxes .................... 9,280 148 9,428
-------- ---------- -------- ----------
Net earnings before cumulative effect of
change in accounting principle (7) .......... 15,069 393 (280) 15,182
Preferred dividends declared/accretion ........ 1,429 (1,429) (1)
-------- ---------- -------- ----------
Net earnings available for common shares
before cumulative effect of change in
accounting principle, excluding estimated
nonrecurring Merger expenses ................ $ 15,069 $ (1,036) $ 1,149 $ 15,182
======== ========== ======== ==========
Net earnings per common share before
cumulative effect of change in
accounting principle, excluding estimated
nonrecurring Merger expenses (6)(7)
Primary ..................................... $0.80 $0.55
======== ==========
Fully diluted ............................... $0.74 $0.55
======== ==========
Weighted average shares outstanding (6)
Primary ..................................... 18,932 27,435
======== ==========
Fully diluted ............................... 22,626 30,870
======== ==========
<FN>
See accompanying notes to the unaudited pro forma combined financial information.
31
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
(1) WHITMIRE PREFERRED STOCK
Adjustment to reflect the redemption of Whitmire Preferred Stock
immediately prior to the Effective Time pursuant to the Reorganization
Agreement; such redemption will be funded by borrowings under Whitmire's
revolving credit agreement. These borrowings are assumed to have been repaid
from the liquidation of Cardinal's investments in tax-exempt marketable
securities immediately following the Effective Time. Accordingly, pro forma
adjustments of tax-exempt investment income included in the caption "Other,
net" in the unaudited pro forma combined statements of earnings have been
calculated based on the weighted average rate of return on tax-exempt
investments in the range of 2.45% for the six months ended September 30, 1993
to 6.33% for the year ended March 31, 1991.
(2) STOCK WARRANTS
Adjustment to reflect the issuance of 271,229 Whitmire Common Shares upon
the exercise of all issued and outstanding stock warrants at an average
exercise price of $0.87 per share immediately prior to the Effective Time.
(3) MERGER EXPENSES
Adjustment to reflect the estimated expense ($28 million, net of tax) of:
(a) fees and other transaction costs related to the Merger, and (b) other
nonrecurring costs expected to be incurred in connection with the subsequent
integration of the two companies' business operations. These estimated expenses
include approximately $7 million for anticipated investment banking, legal,
accounting, and other related transaction fees and costs associated with the
Merger; $13 million for corporate restructuring and distribution rationaliza-
tion; $6 million for integration of information systems; and $2 million for
restructuring Whitmire's revolving credit agreement. Of these estimated
expenses, approximately $7 million pertain to the revaluation of certain
operating assets and $2 million pertain to employee relocation, retraining and
termination costs.
These amounts are based on a preliminary estimate of the expenses to be
incurred by Whitmire and Cardinal, and actual expenses may differ from such
estimate. These expenses are considered to be nonrecurring and will be
reflected in the actual earnings of the combined company.
(4) WHITMIRE OVERLAPPING PERIODS
Due to the different fiscal year ends of Cardinal and Whitmire, Whitmire's
results for the three months ended July 3, 1993, and the three months ended
June 27, 1992, have been included in both the respective fiscal years and the
interim periods presented. The operating results for these two periods are
summarized as follows:
THREE MONTHS ENDED
--------------------------------
JULY 3, 1993 JUNE 27, 1992
------------ -------------
(IN THOUSANDS)
Net sales ....................................... $763,178 $541,977
Net earnings (loss) ............................. 4,739 (691)
Preferred dividends declared/accretion .......... (719) (710)
Net earnings (loss) available for common ........ 4,020 (1,401)
32
(5) CONFORMITY OF REPORTING
Adjustment to conform with Cardinal's reporting presentation of certain
customer service costs. The pro forma effect of this adjustment on Whitmire's
historical gross margin as a percentage of net sales is summarized as follows:
HISTORICAL PRO FORMA
---------- ---------
Year Ended July 3, 1993 ................... 5.08% 3.83%
June 27, 1992 ................... 5.71% 4.28%
June 29, 1991 ................... 6.20% 4.56%
Six Months Ended October 2, 1993 ................. 4.84% 3.65%
September 26, 1992 .............. 5.31% 4.00%
The decline in gross margins is offset by a corresponding decrease in
selling, general and administrative expenses.
(6) PER SHARE AMOUNTS
The pro forma net earnings per share reflect: (a) the weighted average
number of Cardinal Common Shares that would have been outstanding had the
Merger occurred at the beginning of the earliest period presented based on an
exchange ratio of 8.35 Cardinal Common Shares to be issued for each Whitmire
Common Share outstanding, and (b) the dilutive impact of Cardinal and Whitmire
stock options and warrants computed using the treasury stock method. (All
Whitmire options and warrants are assumed to be converted into options and
warrants for Cardinal Common Shares at an exchange ratio of 8.35 Cardinal
Common Shares for each Whitmire Common Share before application of the treasury
stock method.) In addition, the pro forma fully diluted net earnings per share
reflect the assumed conversion of all of Cardinal's 7 1/4% Convertible
Subordinated Debentures due 2015 from the date of issuance in July 1990 through
the date of their call for redemption, effective July 2, 1993.
(7) EFFECT OF UNUSUAL ITEMS
The unaudited pro forma combined financial information includes the
following unusual items: (a) equity transaction costs of $1,973,000 recorded by
Whitmire in its fiscal quarter ended June 27, 1992, (b) a termination fee of
approximately $13,466,000 recorded by Cardinal in its fiscal quarter ended
September 30, 1992, resulting from the termination by Durr-Fillauer Medical,
Inc. of its agreement to merge with Cardinal, (c) certain nonrecurring charges
of $9,882,000 recorded by Cardinal in its fiscal quarter ended September 30,
1992, and (d) restructuring charges of $3,775,000 and a stock option
compensation charge of $5,247,000 recorded by Whitmire in its fiscal quarter
ended March 27, 1993. The following supplemental information summarizes the
Cardinal and unaudited pro forma combined results excluding the impact of the
unusual items:
CARDINAL PRO FORMA COMBINED
--------------------------------------- -------------------------------------
TWELVE TWELVE TWELVE TWELVE
MONTHS MONTHS SIX MONTHS MONTHS MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH 31, MARCH 31, SEPTEMBER 30, MARCH 31, MARCH 31, SEPTEMBER 30,
1993 1992 1992 1993 1992 1992
--------- --------- ------------- --------- --------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net earnings before cumulative effect of change
in accounting principle, excluding estimated
nonrecurring Merger expenses ................. $31,403 $25,192 $12,829 $42,865 $29,252 $13,990
Net earnings per common share before
cumulative effect of change in accounting
principle, excluding estimated nonrecurring
Merger expenses:
Primary ...................................... $ 1.65 $ 1.34 $ 0.68 $ 1.56 $ 1.07 $ 0.51
Fully diluted ................................ 1.53 1.26 0.64 1.49 1.05 0.51
33
Item 6. Exhibits and Reports on Form 8-K.
(a) Listing of Exhibits:
Exhibit 2.01 - Agreement and Plan of Reorganization dated as of
October 11, 1993, by and among Registrant,
Cardinal Merger Corp., Whitmire Distribution
Corporation, and certain other persons named
therein.(1)
Exhibit 10.01 - Employment Agreement dated October 11, 1993,
by and among Whitmire Distribution Corporation,
Melburn G. Whitmire, and Cardinal Distribution,
Inc., as amended.
Exhibit 10.02 - Employment Agreement dated October 11, 1993,
by and among Whitmire Distribution Corporation,
Gary E. Close, and Cardinal Distribution, Inc.,
as amended.
Exhibit 10.03 - Employment Agreement dated January 1, 1994, by
and among Gerald W. Medlin and Cardinal
Distribution, Inc.
Exhibit 10.04 - Registration Rights Agreement dated October 11,
1993.(2)
Exhibit 11.01 - Computation of Fully Diluted Earnings Per
Share.
Exhibit 23.01 - Consent of Arthur Andersen.
(1) Included as an Exhibit to Registrant's Report on Form 10-Q
for the quarter ended September 30, 1993 (No. 0-12591) and
incorporated herein by reference.
(2) Included as an Exhibit to Registrants Report on Form S-4,
as amended (No. 33-51581) and incorporated herein by reference.
(b) Reports on Form 8-K:
(i) On October 18, 1993, the Company filed a current report on
From 8-K reporting that on October 11, 1993, the Company had
entered into a definitive agreement to acquire Whitmire
Distribution Corporation in a merger transaction.
34
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: February 8, 1994 By: /s/ Robert D. Walter
------------------------------------
Robert D. Walter
Chairman and Chief Executive Officer
By: /s/ David Bearman
------------------------------------
David Bearman
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
#v###
35
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
-----------------------
CARDINAL HEALTH, INC.
(Exact name of Registrant as specified in its charter)
-----------------------
EXHIBIT VOLUME
-----------------------
36
Exhibit Index
Exhibit
Number Exhibit Description
2.01 Agreement and Plan of Reorganization dated as of
October 11, 1993, by and among Registrant, Cardinal
Merger Corp., Whitmire Distribution Corporation,
and certain other persons named therein.(1)
10.01 Employment Agreement dated October 11, 1993, by and
among Whitmire Distribution Corporation, Melburn G.
Whitmire, and Cardinal Distribution, Inc. as amended.
10.02 Employment Agreement dated October 11, 1993, by and
among Whitmire Distribution Corporation, Gary E. Close,
and Cardinal Distribution, Inc., as amended.
10.03 Employment Agreement dated January 1, 1994 by and
among Gerald W. Medlin and Cardinal Distribution, Inc.
10.04 Registration Rights Agreement dated October 11, 1993.(2)
11.01 Computation of Fully Diluted Earnings Per Share.
23.01 Consent of Arthur Andersen.
<FN>
(1) Included as an Exhibit to Registrant's Report on Form 10-Q for the quarter ended September 30, 1993
(No. 0-12591) and incorporated herein by reference.
(2) Included as an Exhibit to Registrant's Report on Form S-4, as amended
(No. 33-51581) and incorporated herein by reference.