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 March 31, 1994 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
--------------------------------
Class A 27,659,355 (Outstanding at April 12, 1994)
Class B 2,377,100 (Outstanding at April 12, 1994)
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PART I. FINANCIAL INFORMATION
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In Thousands)
March 31, 1994 June 30, 1993
-------------- -------------
ASSETS
- - - ------
Current Assets:
Cash and equivalents $ 311 $ 61,210
Marketable securities 71,988
Trade receivables 326,149 257,901
Merchandise inventories 909,391 628,566
Prepaid expenses and other 9,482 13,237
----------- -----------
Total 1,245,333 1,032,902
Property and Equipment - at cost 115,384 107,326
Accumulated depreciation and amortization (55,511) (45,731)
----------- -----------
Property and equipment-net 59,873 61,595
Other assets 50,485 55,926
----------- -----------
Total $ 1,355,691 $1,150,423
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - ------------------------------------
Current Liabilities:
Notes payable - banks $ 92,300 $
Current portion of long-term obligations 3,188 3,733
Accounts payable 624,360 524,617
Other accrued liabilities 75,171 65,838
----------- -----------
Total 795,019 594,188
Long - term obligations - less current portion 210,277 274,908
Other liabilities 2,464 3,010
Redeemable preferred stock 20,400
Shareholders Equity:
Common shares-without par value 250,451 175,200
Retained earnings 104,668 88,866
Common shares in treasury, at cost (3,283) (3,083)
Unamortized restricted stock award (3,905) (3,066)
----------- -----------
Total shareholders' equity 347,931 257,917
----------- -----------
Total $ 1,355,691 $1,150,423
=========== ===========
<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
--------------------------- ---------------------------
March 31, March 31, March 31, March 31,
1994 1993 1994 1993
----------- ----------- ----------- -----------
NET SALES $1,510,674 $ 1,205,873 $4,199,913 $ 3,395,873
COST OF PRODUCTS SOLD 1,412,303 1,123,514 3,940,455 3,176,501
--------- --------- --------- ---------
GROSS MARGIN 98,371 82,359 259,458 219,372
SELLING, GENERAL & ADMINISTRATIVE
EXPENSES (61,531) (51,664) (169,942) (150,526)
UNUSUAL ITEMS
Merger costs (35,880) (35,880)
Termination fee 13,466
Nonrecurring charges (9,022) (18,904)
--------- --------- --------- ---------
OPERATING EARNINGS 960 21,673 53,636 63,408
OTHER INCOME (EXPENSE):
Interest expense (5,255) (7,371) (13,793) (19,665)
Other, net 441 1,002 2,702 4,076
--------- --------- --------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES (3,854) 15,304 42,545 47,819
PROVISION FOR INCOME TAXES (5,076) (5,643) (24,056) (18,155)
--------- --------- --------- ---------
NET EARNINGS (LOSS) (8,930) 9,661 18,489 29,664
PREFERRED DIVIDENDS DECLARED/ACCRETION (166) (719) (1,205) (2,157)
--------- --------- --------- ---------
NET EARNINGS (LOSS) AVAILABLE
FOR COMMON SHARES $ (9,096) $ 8,942 $ 17,284 $ 27,507
========= ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE:
Primary $ (.29) $ .33 $ .55 $1.00
Fully diluted $ (.29) $ .32 $ .55 $ .97
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Primary 31,704 27,473 31,453 27,460
Fully diluted 31,704 30,928 31,516 30,906
<FN>
See notes to consolidated financial statements.
4
CARDINAL HEALTH, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
9-Months Ended
------------------------------------
March 31, March, 31
1994 1993
------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 18,489 $ 29,664
Adjustments to reconcile net earnings
to net cash provided by operations:
Depreciation and amortization 12,319 13,020
Stock compensation charge 5,247
Provision for bad debts 5,372 3,059
Change in operating assets and liabilities
net of effects from acquisitions:
Trade receivables (65,554) (30,021)
Merchandise inventories (273,361) (152,741)
Accounts payable 89,038 84,893
Other operating items 15,193 (3,249)
--------- ---------
Net cash used in operating activities (198,504) (50,128)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 952 94
Additions to property and equipment (7,389) (9,757)
Purchase of marketable securities (115,241) (233,465)
Proceeds from sale of marketable securities 187,229 251,203
--------- ---------
Net cash provided by investing activities 65,551 8,075
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowings 92,300
Reduction of short-term borrowings of an acquired subsidiary (5,226)
Proceeds from long-term obligations 100,000 59,448
Reduction of long-term obligations (91,774) (3,697)
Proceeds from issuance of common shares 403 1,018
Dividends paid (3,036) (2,763)
Redemption of preferred stock (20,400)
Purchase of treasury shares (200) (690)
Debenture conversion costs charged to common shares (13)
--------- ---------
Net cash provided by financing activities 72,054 53,316
--------- ---------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (60,899) 11,263
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 61,210 55,465
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 311 $ 66,728
========= =========
Supplemental Disclosure of Noncash Investing &
Financing Activities:
Capital lease obligations incurred $ 830 $ 2,351
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 of Cardinal
Health, Inc. (formerly known as Cardinal Distribution, Inc.) and
subsidiaries, all collectively referred to as "Cardinal" or the
"Company", have been prepared to give retroactive effect to the
merger of a wholly owned subsidiary of Cardinal with and into
Whitmire Distribution Corporation ("Whitmire") on February 7, 1994
(see Note 3). On March 1, 1994, the Company made the decision to
change its fiscal year end from March 31 to June 30. As such, the
prior period comparative unaudited consolidated balance sheet
presented herein combines the consolidated balance sheet of
Cardinal as of June 30, 1993, with the balance sheet of Whitmire
as of July 3, 1993. The prior period comparative unaudited
consolidated statements of earnings presented herein combine the
consolidated statements of earnings of Cardinal for the three and
nine months ended March 31, 1993, with the statements of earnings
of Whitmire for the three and nine months ended March 27, 1993.
The prior period comparative unaudited statement of cash flows
presented herein combines the statement of cash flows of Cardinal
for the nine months ended March 31, 1993, with the statement of
cash flows of Whitmire for the nine months ended March 27, 1993.
The 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.
Certain customer service costs, historically reported by Cardinal
in Cost of Products Sold, have been reclassified to Selling,
General, and Administrative Expenses in the consolidated
statements of earnings in order to conform with Whitmire's
presentation.
Note 2. Primary earnings per common share are based on the weighted
average number of shares outstanding during each period and the
dilutive effect of stock options and warrants from the date of
grant computed using the treasury stock method.
Fully diluted earnings per common share reflect: (a) the dilutive
effect of stock options and warrants from the date of grant
computed using the treasury stock method; and (b) the full
conversion of the 7 1/4% Convertible Subordinated Debentures due
2015 (the "Subordinated Debentures") since issuance in July 1990
(see Note 6).
Note 3. On January 27, 1994, shareholders of Cardinal and Whitmire
approved and adopted the Agreement and Plan of Reorganization
dated October 11, 1993 (the "Reorganization Agreement"), pursuant
to which Cardinal Merger Corporation, a wholly owned subsidiary of
Cardinal, was merged with and into Whitmire effective February 7,
1994 (the "Effective Time"). In the merger, which was accounted
for as a pooling of interests, holders of outstanding Whitmire
stock at the Effective Time received an aggregate of approximately
5,442,000 Cardinal common shares, without par value ("Common
Shares"), and approximately 1,488,000 shares of Cardinal's newly
authorized Class b common shares, without par value ("Class B
Shares"), 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 Cardinal Common
Shares pursuant to the terms of the Reorganization Agreement.
Note 4. In the three-month period ended September 30, 1992, Cardinal
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.
6
Cardinal recorded nonrecurring charges of approximately $9,882,000
in the three-month period ended September 30, 1992, and Whitmire
recorded nonrecurring charges of approximately $3,775,000 in the
three-month period ended March 27, 1993. The nonrecurring charges
primarily related to the closing of certain non-core operations
and the rationalization of selected distribution operations,
information systems and support functions and included the
write-down of certain assets, moving costs and other costs
associated with the affected operations, and modification costs
necessary to centralize and standardize certain information
systems and support functions.
In the three-month period ended March 27, 1993, Whitmire recorded
a one-time stock option compensation charge of approximately
$5,247,000 related to the modification of the terms of certain of
its stock options.
In the three-month period ended March 31, 1994, the Company
recorded a nonrecurring charge to reflect the estimated Whitmire
merger costs of approximately $28.2 million (net ot tax). The
merger costs include (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 rationalization; $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 expenses to be
incurred by Whitmire and Cardinal, and actual expenses may differ
from such estimate.
The following supplemental information summarizes the results of
operations of the Company, adjusted on a pro forma combined basis
to reflect (a) the elimination of the effect of the unusual items
discussed above, and (b) the redemption of Whitmire's preferred
stock pursuant to the terms of the Reorganization Agreement.
Solely for purposes of the summary presented below, such
redemption is assumed to have been funded from the liquidation of
Cardinal's investments in tax-exempt marketable securities.
3-Months Ended 9-Months Ended
------------------------------------------- ---------------------------------------
March 31, March 31, March 31, March
1994 1993 1994 1993
----------------- ----------------- ------------------ ----------------
Operating earnings $ 36,840 $ 30,695 $ 89,516 $ 68,846
Net earnings $ 19,228 $ 14,650 $ 46,397 $ 32,125
Net earnings per common share
Primary $ .61 $ .53 $ 1.48 $ 1.17
Fully Diluted $ .61 $ .50 $ 1.47 $ 1.12
Note 5. On May 4, 1993, Cardinal acquired all of the outstanding capital
stock of Solomons Company, a wholesale drug distributor based in
Savannah, Georgia, in exchange for 849,358 of the Company's Common
Shares. The Solomons 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, Cardinal 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 Cardinal. The
7
remaining $80,000 of Subordinated Debentures outstanding as of
March 31, 1993 were redeemed for cash. The pro forma primary net
earnings per share of the Company, as if the above conversion and
redemption had occurred at July 1, 1992 (the beginning of Fiscal
1993), would have been $0.32 and $0.97 for the three and nine
months ended March 31, 1993.
Note 7. On December 17, 1993, Cardinal 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 PRN 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 8. On February 23, 1994, the Company sold $100 million of 6 1/2%
Notes Due 2004 (the "Notes"). The Company used the proceeds of
this sale for general corporate purposes, including the repayment
of bank lines of credit incurred as part of the Whitmire merger.
In anticipation of the sale of the Notes, the Company entered into
an interest rate hedge agreement, which was terminated at the
approximate time of the issuance of the Notes, resulting in a
deferred gain of approximately $1.3 million which will be
amortized as a reduction of interest expense over the period the
Notes are outstanding.
Note 9. On April 27, 1994, the Company entered into an agreement to
acquire all of the capital stock of Humiston-Keeling, Inc. in a
cash purchase transaction. Humiston-Keeling is a Calumet City,
Illinois, based wholesale drug distributor serving independent and
retail chain pharmacies, hospitals, and managed care facilities
located in Illinois, Indiana, Wisconsin, Michigan, and portions of
adjoining states. The Humiston-Keeling transaction is currently
expected to be completed by July, 1994.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management's discussion and analysis presented below is for Cardinal
Health, Inc. (formerly known as Cardinal Distribution, Inc.) and subsidiaries,
all collectively referred to as "Cardinal" or the "Company", and has been
prepared to give retroactive effect to the merger of a wholly owned subsidiary
of Cardinal with and into Whitmire Distribution Corporation ("Whitmire") on
February 7, 1994 (see Note 3 of "Notes to Consolidated Financial Statements").
The discussion and analysis presented below is concerned with material changes
in financial condition and results of operations for the Company's consolidated
balance sheets as of March 31, 1994 and June 30, 1993, and for the consolidated
statements of earnings for the three and nine months ended March 31, 1994 and
March 31, 1993. On March 1, 1994, the Company made the decision to change its
fiscal year end from March 31 to June 30. As such, the prior period
comparative unaudited consolidated balance sheet presented herein combines the
consolidated balance sheet of Cardinal as of June 30, 1993, with the balance
sheet of Whitmire as of July 3, 1993. The prior period comparative unaudited
consolidated statements of earnings presented herein combine the consolidated
statements of earnings of Cardinal for the three and nine months ended March
31, 1993, with the statements of earnings of Whitmire for the three and nine
months ended March 27, 1993. The prior period comparative unaudited statement
of cash flows presented herein combines the statement of cash flows of Cardinal
for the nine months ended March 31, 1993 with the statement of cash flows of
Whitmire for the nine months ended March 27, 1993. Unless indicated to the
contrary for purposes of this discussion, all references to "1994" and "1993"
shall mean the three and nine-month periods ended June 30, 1994 and June 30,
1993, respectively.
NET SALES. Net sales increased 25% for the third quarter of 1994 and
24% for the nine-month period. The increase in the third quarter was due to
internal growth of 20% and sales resulting from the acquisitions of Solomons
Company ("Solomons") on May 4, 1993 (see Note 5 of "Notes to Consolidated
Financial Statements"), and PRN Services, Inc. ("PRN") on December 17, 1993.
(See Note 7 of "Notes to Consolidated Financial Statements"). The increase in
the nine-month period was due to internal business growth of 19% and sales
resulting from the acquisitions of Solomons and PRN. 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), increased sales to existing customers and price increases.
GROSS MARGIN. As a percentage of net sales, gross margin for the
third quarter was 6.51% versus 6.83% last year. For the nine-month period,
gross margin was 6.18% versus 6.46% 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. The Company expects the decline in
gross margin rates to be a continuing trend in the immediate but not the
long-term future.
The above gross margin percentages reflect the fact that certain
customer service costs, historically reported by Cardinal in Cost of Products
Sold, have been reclassified to Selling, General, and Administrative expenses
in the consolidated statements of earnings in order to conform with Whitmire's
presentation (see "Selling, General, and Administrative Expenses" below).
9
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES. For the third quarter,
selling, general, and administrative expenses improved as a percentage of net
sales to 4.07% from 4.28%. For the nine-month period, selling, general and
administrative expenses improved to 4.05% from 4.43% last year. The
improvements are due primarily to economies associated with the Company's
significant sales growth, particularly with major customers where support costs
are generally lower, and to productivity improvements.
The above selling, general, and administrative expenses percentages
reflect the fact that certain customer service costs, historically reported by
Cardinal in Cost of Products Sold, have been reclassified to Selling, General,
and Administrative Expenses in the consolidated statements of earnings in order
to conform with Whitmire's presentation.
UNUSUAL ITEMS. In the three-month period ended March 31, 1994, the
Company recorded a nonrecurring charge to reflect estimated Whitmire merger and
subsequent integration costs of approximately $28.2 million (net of tax).
These costs include (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 rationalization; $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 expenses to be incurred by Whitmire and Cardinal, and
actual expenses may differ from such estimate. (See Note 4 of "Notes to
Consolidated Financial Statements").
In the three-month period ended September 30, 1992, Cardinal received
a termination fee of approximately $13.5 million, resulting from the
termination by Durr-Fillauer Medical, Inc. of its agreement to merge with the
Company.
Cardinal recorded nonrecurring charges of approximately $9.9 million
in the three-month period ended September 30, 1992, and Whitmire recorded
nonrecurring charges of approximately $3.8 million in the three-month period
ended March 27, 1993. The nonrecurring charges primarily related to the
closing of certain non-core operations and the rationalization, standardization
and improvement of selected distribution operations, information systems and
support functions. The charges include the write-down of certain assets,
moving costs and other costs associated with the affected operations, and
modification costs necessary to centralize and standardize certain information
systems and support functions.
In the three-month period ended March 27, 1993, Whitmire also recorded
a one-time stock option compensation charge of approximately $5.2 million
related to the modification of the terms of certain of its stock options.
INTEREST EXPENSE. The decrease in interest expense of $2.1 and $5.9
million in the third quarter and nine-month period of 1994, respectively, was
due primarily to (a) the 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"), and
(b) reduced borrowings under Whitmire's revolving credit arrangements. The
reductions in interest expense as discussed above were partially offset by
increased interest expense resulting from the sale by the Company of $100
million of 6 1/2% Notes Due 2004 (the "Notes") on February 23, 1994. (See Note
8 of "Notes to Consolidated Financial Statements").
PROVISION FOR INCOME TAXES. The Company's provision for income taxes
relative to pretax earnings increased significantly in both the third quarter
and nine month-period of 1994 versus the same periods of 1993. The increase in
both the third quarter and nine-month period was primarily due to (a) the 1993
Omnibus Budget Reconciliation Act's 1% tax rate increase enacted on August 11,
1993 retroactive to
10
January 1, 1993, (b) the reduction of income from tax-advantaged investments in
1994 versus 1993, and (c) certain nondeductible merger costs recorded in the
third quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES. Net working capital increased to
$450.3 million at March 31, 1994, from $438.7 million at June 30, 1993, and
included increased investments in merchandise inventories and trade receivables
of $273.4 million and $60.2 million respectively, offset primarily by (a) a
reduction in cash and equivalents and marketable securities of $132.9 million,
(b) an increase in notes payable-banks of $92.3 million, and (c) an increase in
accounts payable of $89.0 million. The increases in merchandise inventories
and accounts payable reflect the timing of seasonal purchases and related
payments. The increase in trade receivables was due primarily to increased
sales. The decrease in cash and marketable securities and the increase in
notes payable-banks resulted primarily from (a) the increased investments in
merchandise inventories and trade receivables (net of the increase in accounts
payable) as described above, (b) the repayment of amounts outstanding under
Whitmire's revolving credit arrangements at the time of the merger
(approximately $120 million, including a prepayment penalty of approximately
$1.2 million), and (c) the redemption of Whitmire's preferred stock
(approximately $20.4 million).
Long-term obligations decreased from $274.9 million at June 30, 1993,
to $210.3 million at March 31, 1994, due primarily to (a) the conversion of
debt to equity following the call for redemption, effective July 2, 1993, of
the $75 million Subordinated Debentures, and (b) the repayment of amounts
outstanding under Whitmire's revolving credit arrangements, offset primarily by
the sale of the $100 million Notes described above.
Shareholders' equity increased to $347.9 million at March 31, 1994,
from $257.9 million at June 30, 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, and (b) net earnings of
approximately $18.5 million, offset by dividends paid of approximately $3.0
million.
The Company has line-of-credit agreements with various bank sources
aggregating $326 million, of which $95 million is represented by committed
line-of-credit agreements and the balance is uncommitted. The Company drew
upon $92.3 million of the available lines-of-credit at March 31, 1994, leaving
$233.7 million available under the Company's existing lines-of-credit
agreements.
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 securiities (the "Debt Securities") issuable in one or more series
in an aggregate principal amount not to exceed $150 million. On February 23,
1994, the Company sold $100 million of the Notes (see Note 8 of "Notes to
Consolidated Financial Statements"), the net proceeds of which were used for
general corporate purposes, including the repayment of bank lines of credit
incurred as part of the Whitmire merger. At March 31, 1994, $50 million of the
Debt Securities remain issuable.
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 recent and prospective business
combinations.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As disclosed in the Company's Report on 10-Q for the quarter ended
December 31, 1993 (No. 0-12591), in November 1993, the Company and
Whitmire Distribution Corporation, a wholly-owned subsidiary of the
Company ("Whitmire"), were each named as defendants in a series of
nine purported class action 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 Southern
District of New York cases were very similar to over 50 other cases
filed throughout the United States. Only the Southern District of New
York cases named wholesalers as defendants. The Judicial Panel for
Multi-District Litigation has ordered all of the cases consolidated
and transferred to the United States District Court for the Northern
District of Illinois. Subsequent to the consolidation, a new
consolidated complaint was filed which included allegations that the
wholesaler defendants, including the Company and Whitmire, conspired
with manufacturers to inflate prices by using a chargeback pricing
system. The Company and Whitmire have filed answers denying the
allegations in the complaint. The Company and Whitmire believe that
the allegations are without merit, and they intend to contest such
allegations vigorously.
Item 4. Submission of Matters to Security Holders.
(a) A Special Meeting of the Company's shareholders was held on
January 27, 1994.
(b) Proxies were solicited by the Company's management pursuant to
Regulation 14 under the Securities Exchange Act of 1934; there was
no solicitation in opposition to management's nominees as listed
in the proxy statement, and all director nominees were elected
pursuant to the vote of the Company's shareholders.
(c) Matters voted on at the Special Meeting were as follows:
(1) Approval and adoption of the Agreement and Plan of
Reorganization dated as of October 11, 1993, by and among the
Company, Cardinal Merger Corp. ("Subcorp."), Whitmire
Distribution Corporation ("Whitmire"), and the other persons
named therein providing for the merger of Subcorp with and
into Whitmire (the "Merger"). The results of the shareholder
vote on this proposal were: 20,157,359 for; 20,476 against;
91,558 abstained; and 959,435 broker non-vote.
(2) Approval of three proposals to amend the Company's Articles of
Incorporation, as Amended and Restated, as follows:
(i) To establish the terms and preferences of the new
Class B Common Shares issuable in the Merger. The
results of the shareholder vote on this proposal were:
20,061,520 for; 100,571 against; 107,301 abstained;
and 959,436 broker non-vote.
(ii) To increase the number of the Company's authorized
Common Shares, without par value, from 40 million to
60 million. The results of the shareholder vote on
this proposal were: 20,834,064 for; 300,123 against;
94,641 abstained; and 0 broker non-vote.
(iii) To change the Company's name to Cardinal Health, Inc.
The results of the shareholder vote on this proposal
were: 21,137,888 for; 22,781 against; 68,159
abstained; and 0 broker non-vote.
12
(3) Approval of a proposal to amend the Company's Restated Code
of Regulations, as amended, to increase the size of the
Company's Board of Directors from ten to fourteen members and
to authorize the Company's Board of Directors to establish
from time to time the size of the Company's Board of
Directors between nine and fourteen members. The results of
the shareholder vote on this proposal were: 21,072,960 for;
128,167 against; 72,701 abstained; and 0 broker non-vote.
(4) Election of Mitchell J. Blutt, M.D., John F. Finn, Michael S.
Gross, and Melburn G. Whitmire to the Company's Board of
Directors. The results of the shareholder vote on this
proposal were: Dr. Blutt, 21,173,952 for, 54,876 withheld,
and 0 broker non-vote; Mr. Finn, 21,176,463 for, 52,365
withheld, and 0 broker non-vote; Mr. Gross, 21,175,970 for,
52,858 withheld, and 0 broker non-vote; and Mr.Whitmire,
21,175,751 for, 53,077 withheld, and 0 broker non-vote.
Item 6. Exhibits and reports on Form 8-K
(a) Listing of Exhibits:
Exhibit 3.01 Amended and Restated Articles of Incorporation of
the Company, as amended.
Exhibit 3.02 Restated Code of Regulations of the Company, as
amended.
Exhibit 4.01 See Exhibit 3.01, Amended and Restated Articles of
Incorporation, as amended, for the terms and
preferences of the new Class B Common Shares of
the Company.
Exhibit 4.02 Indenture between the Company and Bank One
Indianapolis, NA relating to the Company's
6 1/2% Notes Due 2004.
Exhibit 10.01 Employment Agreement dated October 11, 1993, among
Whitmire, James Clare, and the Company.
Exhibit 10.02 Form of Amended and Restated Stock Option
Agreement entered into February 7, 1994, by the
Company, Whitmire, and certain officers of the
Company.
Exhibit 10.03 Form of Amended and Restated Stock Option
Agreement entered into February 7, 1994, by the
Company, Melco Managers, a California corporation,
and certain officers of the Company.
Exhibit 11.01 Computation of Fully Diluted Earnings Per Share.
(b) Reports on Form 8-K:
(i) On February 11, 1994, the Company filed a current report on
Form 8-K containing restated supplemental consolidated
financial statements of the Company pursuant to Part I Item
II (b) (iii) of Form S-3 in conjunction with the Company's
shelf registration statement previously filed on Form S-3
(file No. 33-62198).
(ii) On March 8, 1994, the Company filed a current report on Form
8-K reporting that on March 1, 1994, the Company made the
decision to change its fiscal year end to June 30.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARDINAL HEALTH, INC.
Date: May 9, 1994 By: /s/ Robert D. Walter
--------------------------
Robert D. Walter
Chairman and Chief Executive Officer
By: /s/ David Bearman
--------------------------
David Bearman
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
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
___________________
15
Exhibit Index
-------------
Exhibit
Number Exhibit Description
------ -------------------
3.01 Amended and Restated Articles of Incorporation of the Company, as amended.
3.02 Restated Code of Regulations of the Company, as amended.
4.01 See Exhibit 3.01, Amended and Restated Articles of Incorporation, as
amended, for the terms and preferences of the new Class B Common Shares of
the Company.
4.02 Indenture between the Company and Bank One Indianapolis, NA relating to the
Company's 6 1/2% Notes Due 2004.
10.01 Employment Agreement dated October 11, 1993, among Whitmire, James Clare,
and the Company.
10.02 Form of Amended and Restated Stock Option Agreement entered into February
7, 1994, by the Company, Whitmire, and certain officers of the Company.
10.03 Form of Amended and Restated Stock Option Agreement entered into February
7, 1994, by the Company, Melco Managers, a California corporation, and
certain officers of the Company.
11.01 Computation of Fully Diluted Earnings Per Share.