DUBLIN, Ohio, April 29 /PRNewswire-FirstCall/ -- Cardinal Health, Inc. , the leading provider of products and services supporting the health-care industry, today announced that revenue in its fiscal third quarter rose 17 percent over the prior year to $19.1 billion, while earnings from continuing operations declined 15 percent to $368 million, or $0.84 per share.
Consolidated results for the quarter ended March 31 continued to improve sequentially due to revenue and earnings growth within Cardinal Health’s pharmaceutical distribution and medical products businesses, which were partially offset by earnings declines in sterile manufacturing and Pyxis products. Excluding special items of $28.5 million for the quarter, earnings from continuing operations decreased 9 percent to $396 million from $435 million in the prior year. Diluted earnings per share from continuing operations before special items declined 10 percent to $0.90 versus $1.00 last year. These results include non-recurring charges for the quarter of $16 million or $0.04 per share. Non-recurring charges had no effect on earnings per share in the year-earlier quarter.
“Results for our third quarter showed strong improvement within drug distribution and medical products and services, while earnings growth continued to be offset by issues within sterile manufacturing and Pyxis,” said Robert D. Walter, chairman and chief executive officer of Cardinal Health. “We remain committed to our long-term growth goals and took actions during the quarter to help both businesses reach their potential during fiscal 2006. We also made steady progress in transitioning pharmaceutical manufacturers to non-contingent distribution-service agreements and remain on schedule to convert the substantial majority of fiscal 2006 branded vendor margin by the end of the fiscal year.”
Year-to-date revenues climbed 15 percent to $55.5 billion, while ongoing margin pressures caused earnings from continuing operations to decline 30 percent to $789 million. Excluding special items, earnings from continuing operations for the fiscal year declined 20 percent to $909 million. Diluted earnings per share from continuing operations were $1.81, or $2.08 excluding special items, compared to $2.56 for the year-to-date period of fiscal 2004, or $2.58 excluding special items. These results include non-recurring charges of $88 million or $0.20 per share compared to a $0.01 non-recurring gain during the first nine-months of fiscal 2004.
Segment and Operational Results
Restructuring and efficiency programs initiated during fiscal 2005 continued to improve Cardinal Health’s cost structure during the quarter. The company remains on schedule to realize $125 million of operating-earnings improvements during fiscal 2005 and $200 million during fiscal 2006.
Cash flow from operations reached $532 million during the quarter and was approximately $2 billion for the fiscal year. Free cash flow was $460 million during the quarter and reached $1.7 billion for the year. Year-to-date free cash flow includes net proceeds of $800 million through an accounts-receivable securitization program.
As part of a previously announced $500 million share-repurchase program, 4.2 million common shares were bought during the quarter at an average price of $57.29. Under the program’s authorization, $258.1 million remains to repurchase additional shares.
(See the attached financial table for a reconciliation of the non-GAAP measures to their GAAP equivalents and a schedule of non-recurring items. Tables with specific segment results for the third quarter and fiscal 2005 year-to-date are also attached and available at the Investors page on http://www.cardinalhealth.com/ . )
Pharmaceutical Distribution and Provider Services
Revenue increased at its fastest rate in four quarters and earnings showed strong improvement within the Pharmaceutical Distribution and Provider Services segment. Revenue during the quarter rose 18 percent to $15.6 billion, driven by an increase in sales to health systems and retail chains. Operating earnings climbed 8 percent over the prior year to $344 million, the result of growth in generics, stabilizing sell margins and ongoing expense control measures. Selling, general and administrative expenses as a percent of sales again declined from the prior year. Earnings for the fiscal year continued to be negatively affected by branded vendor margins below fiscal 2003 and fiscal 2004 levels.
During the quarter, Cardinal Health continued to make progress in reaching new distribution service agreements with branded pharmaceutical manufacturers. These agreements are expected to create stronger, more predictable earnings growth for fiscal 2006 by establishing distribution fees based on services provided by Cardinal Health, and not primarily contingent on pharmaceutical price increases. To date, agreements have been reached to convert more than half of the company’s branded vendor margin for fiscal 2006 to non-contingent sources, and the company remains on schedule to convert the substantial majority by the end of the current fiscal year.
Medical Products and Services
Medical Products and Services revenue increased 7 percent over the prior year to $2.5 billion, and operating earnings grew 3 percent to $200 million. Recent hospital and group purchase organization contracts, as well as an increase in the distribution of specialty pharmaceuticals, drove the revenue increase. Earnings growth continued to be negatively affected by competitive pricing and rising costs of raw materials and fuel. Ongoing expense control and raw-material sourcing initiatives helped offset margin pressure during the quarter. Selling, general and administrative expenses as a percent of sales were again below prior-year levels.
Sales and earnings growth in Europe and Canada continued as important contributors for the segment, in part due to the strong Euro. New product sales were again led by growth of Cardinal Health’s Neu-Thera(TM) surgeon gloves. Continued emphasis on integrated offerings for hospitals and health systems, new products, international growth and operating efficiencies are expected to continue to contribute to earnings growth in the fourth quarter and fiscal 2006.
Pharmaceutical Technologies and Services
Pharmaceutical Technologies and Services revenue increased 3 percent during the quarter to $729 million, while operating earnings declined 28 percent to $82 million. The consistent performance of Cardinal Health’s Oral Technologies and Nuclear Pharmacy Services businesses, which both increased earnings over the prior year, continued to be offset by earnings declines in sterile manufacturing. Sterile-manufacturing earnings were again negatively affected by costs associated with delays in opening new facilities and from existing facilities operating below their planned capacity.
Positive developments during the quarter included an increase in sales of softgel products, particularly Wyeth’s Advil(R) and Abbott’s Kaletra(R), strong demand at the company’s sterile manufacturing facility in Albuquerque, N.M., the launch of branded pharmaceuticals using Cardinal Health’s Zydis(R) quick dissolve formulation, and ongoing productivity improvements.
Following the end of the quarter, the company decided to discontinue pharmaceutical manufacturing in Humacao, Puerto Rico as part of a previously announced company-wide restructuring program. These operations have underperformed relative to company expectations, due in part to continued regulatory issues at the facility. Cardinal Health is working with customers in an effort to transition projects to other manufacturing sites. The decision does not affect the company’s other operations in Puerto Rico or at other locations worldwide.
Clinical Technologies and Services
(Results for this segment, which include Cardinal Health’s Alaris(R) products, Pyxis(R) products and Clinical Services and Consulting organizations, are being reported for the first time this fiscal year. Prior- year results used in comparisons have been adjusted to include Pyxis and Clinical Services and Consulting, but not Alaris, which was acquired by Cardinal Health in July 2004.)
Revenue for the Clinical Technologies and Services segment increased 32 percent to $522 million for the quarter, while operating earnings decreased 25 percent to $65 million. A lengthening sales and installation cycle for Pyxis products continued to offset growth for the segment, while Alaris and Clinical Services and Consulting again made strong contributions to earnings. Excluding Alaris, which Cardinal Health acquired in July 2004, revenue declined 8 percent and operating earnings declined 57 percent.
Over the long term, earnings in the segment are expected to increase as additional efficiencies are gained from the formation of the segment, greater efficiency is realized in the installation process for new Pyxis products, and as lean manufacturing initiatives implemented during the second quarter begin to lower costs. The segment remains well positioned for growth with market- leading products and the clinical expertise to help customers with their expanding patient-safety and efficiency initiatives.
Outlook
Cardinal Health expects full-year earnings per share to be in line with previously issued guidance, in a range of $3.10 to $3.20, excluding special items and non-recurring charges. Fourth-quarter earnings are expected to be negatively affected by the ongoing business transition and seasonal, sequential trends in Pharmaceutical Distribution and Provider Services, partially offset by sequential improvements in the Pharmaceutical Technologies and Services, Clinical Technologies and Services and Medical Products and Services segments.
Conference Call
Cardinal Health has scheduled a conference call at 11 a.m. Eastern Daylight Time to discuss its third-quarter results. To access the call and corresponding slide presentation, go to the Investors page at http://www.cardinalhealth.com/ . The conference call also may be accessed by calling 706-634-5100, passcode 4978287. An audio replay will be available until 11:00 p.m. on May 4 at 706-645-9291, passcode 4978287. A transcript and audio replay will also be available at http://www.cardinalhealth.com/ .
About Cardinal Health
Cardinal Health, Inc. ( http://www.cardinalhealth.com/ ) is the leading provider of products and services supporting the health-care industry. Cardinal Health develops, manufactures, packages and markets products for patient care; develops drug-delivery technologies; distributes pharmaceuticals and medical, surgical and laboratory supplies; and offers consulting and other services that improve quality and efficiency in health care. Headquartered in Dublin, Ohio, Cardinal Health employs more than 55,000 people on six continents and produces annual revenues of more than $65 billion.
Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Cardinal Health’s Form 10-K, Form 8-K and Form 10-Q reports (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the costs, difficulties, and uncertainties related to the integration of acquired businesses, the loss of one or more key customer or supplier relationships or changes to the terms of those relationships, changes in the distribution patterns or reimbursement rates for health-care products and/or services, the results, consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal and administrative proceedings, the impact of previously announced restatements, difficulties in opening new facilities or fully utilizing existing capacity, difficulties and uncertainties associated with business model transitions, including the conversion of margin generated from branded pharmaceutical manufacturers to non-contingent consideration, and general economic and market conditions. Cardinal Health undertakes no obligation to update or revise any forward- looking statement.
CARDINAL HEALTH, INC. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (in millions, except per share amounts) THIRD QUARTER March March 2005 2004 % Change Revenue $19,103.0 $16,391.8 17 % Cost of products sold 17,756.2 15,108.4 18 % Gross margin 1,346.8 1,283.4 5 % Selling, general and administrative expenses 703.1 608.9 15 % Impairment charges and other 16.2 (0.6) N.M. Special items - restructuring charges 25.8 4.9 N.M. - merger charges 10.4 7.2 N.M. - other 7.1 (3.8) N.M. Operating earnings 584.2 666.8 (12)% Interest expense and other 40.8 28.2 45 % Earnings before income taxes and discontinued operations 543.4 638.6 (15)% Provision for income taxes 175.8 208.5 (16)% Earnings from continuing operations 367.6 430.1 (15)% Loss from discontinued operations (net of tax $1.2 and $0.6 for the quarters ending March 31, 2005 and 2004, respectively) (1.9) (0.8) N.M. Net earnings $365.7 $429.3 N.M. Basic earnings per Common Share: Continuing operations $0.85 $1.00 (15)% Discontinued operations - (0.01) N.M. Net basic earnings per Common Share $0.85 $0.99 N.M. Diluted earnings per Common Share: Continuing operations $0.84 $0.99 (15)% Discontinued operations - (0.01) N.M. Net diluted earnings per Common Share $0.84 $0.98 N.M. Weighted average number of shares outstanding: Basic 431.8 433.4 Diluted 437.8 439.0 The following table summarizes the impact of special items on net earnings and diluted earnings per Common Share in the quarters in which they were recorded: Current Year Prior Year Net Diluted Net Diluted Earnings EPS Earnings EPS Impact of special items - restructuring charges $(17.1) $(0.04) $(3.1) $(0.01) - merger charges (7.0) (0.01) (4.5) (0.01) - other (4.4) (0.01) 2.7 0.01 Impact of special items $(28.5) $(0.06) $(4.9) $(0.01) CARDINAL HEALTH, INC. CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (in millions, except per share amounts) YEAR-TO-DATE March March 2005 2004 % Change Revenue $55,453.6 $48,130.8 15 % Cost of products sold 51,813.8 44,613.6 16 % Gross margin 3,639.8 3,517.2 3 % Selling, general and administrative expenses 2,095.8 1,744.5 20 % Impairment charges and other 103.0 (7.0) N.M. Special items - restructuring charges 138.4 25.1 N.M. - merger charges 37.5 23.6 N.M. - other 2.4 (30.7) N.M. Operating earnings 1,262.7 1,761.7 (28)% Interest expense and other 95.1 82.1 16 % Earnings before income taxes, discontinued operations and cumulative effect of change in accounting 1,167.6 1,679.6 (30)% Provision for income taxes 378.4 552.4 (31)% Earnings from continuing operations before cumulative effect of change in accounting 789.2 1,127.2 (30)% Earnings/(loss) from discontinued operations (net of tax $(2.5) and $4.8 for the nine months ended March 31, 2005 and 2004, respectively) 3.8 (7.7) N.M. Cumulative effect of change in accounting - (38.5) N.M. Net earnings $793.0 $1,081.0 N.M. Basic earnings per Common Share: Continuing operations $1.83 $2.59 (29)% Discontinued operations 0.01 (0.02) N.M. Cumulative effect of change in accounting - (0.09) N.M. Net basic earnings per Common Share $1.84 $2.48 N.M. Diluted earnings per Common Share: Continuing operations $1.81 $2.56 (30)% Discontinued operations 0.01 (0.02) N.M. Cumulative effect of change in accounting - (0.09) N.M. Net diluted earnings per Common Share $1.82 $2.45 N.M. Weighted average number of shares outstanding: Basic 431.7 435.7 Diluted 436.7 441.3 The following table summarizes the impact of special items on net earnings and diluted earnings per Common Share in the quarters in which they were recorded: Current Year Prior Year Net Diluted Net Diluted Earnings EPS Earnings EPS Impact of special items - restructuring charges $(94.2) $(0.22) $(16.4) $(0.04) - merger charges (23.9) (0.05) (14.5) (0.03) - other (1.5) - 20.6 0.05 Impact of special items $(119.6) $(0.27) $(10.3) $(0.02) CARDINAL HEALTH, INC. CONSOLIDATED BALANCE SHEETS (in millions) (unaudited) March 31, June 30, March 31, 2005 2004 2004 ASSETS CURRENT ASSETS Cash and equivalents $1,549.5 $1,096.0 $527.2 Trade receivables, net 3,293.0 3,432.7 3,496.8 Current portion of investment in sales-type leases 215.3 202.1 256.1 Inventories 7,771.3 7,471.3 8,522.5 Prepaid expenses and other 871.9 795.4 739.6 Assets held for sale from discontinued operations 28.2 60.4 139.0 Total current assets 13,729.2 13,057.9 13,681.2 Property and equipment - net 2,372.0 2,364.0 2,233.5 Investment in sales-type leases, less current portion 640.9 546.0 538.4 Other assets 5,396.4 5,401.2 3,369.8 TOTAL ASSETS $22,138.5 $21,369.1 $19,822.9 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Notes payable - banks and current portion of long-term obligations $438.6 $860.6 $54.5 Accounts payable 7,613.1 6,432.4 6,998.6 Other accrued liabilities 1,890.6 2,021.3 1,670.8 Liabilities from discontinued operations 44.6 55.1 60.9 Total current liabilities 9,986.9 9,369.4 8,784.8 Long-term obligations, less current portion 2,365.2 2,834.7 2,477.0 Deferred taxes and other liabilities 1,112.2 1,188.7 1,038.8 Total shareholders’ equity 8,674.2 7,976.3 7,522.3 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $22,138.5 $21,369.1 $19,822.9 CARDINAL HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in millions) Three Months Ended Nine Months Ended March 31, March 31, 2005 2004 2005 2004 Cash Flows From Operating Activities: Earnings from continuing operations before cumulative effect of change in accounting $367.6 $430.1 $789.2 $1,127.2 Adjustments to reconcile earnings from continuing operations before cumulative effect of change in accounting to net cash from operations: Depreciation and amortization 102.7 77.2 300.9 220.4 Asset impairments 17.1 0.8 172.9 5.5 Change in operating assets and liabilities, net of effects from acquisitions: (Increase)/decrease in trade receivables (471.2) (121.3) 151.9 (612.3) (Increase)/decrease in inventories 406.3 (102.4) (301.2) (943.8) Increase in net investment in sales-type leases (12.7) (87.4) (108.1) (65.4) Increase in accounts payable 381.2 647.6 1,175.2 1,611.9 Other operating items - net (259.2) (57.6) (129.9) (8.1) Net cash provided by operating activities 531.8 787.0 2,050.9 1,335.4 Cash Flows From Investing Activities: Acquisition of subsidiaries, net of cash acquired - (62.1) (273.2) (561.2) Proceeds from sale of property, equipment, and other assets 14.4 3.1 18.7 8.3 Additions to property and equipment (73.7) (107.9) (288.3) (272.0) Proceeds from sale of discontinued operations - 5.1 39.5 5.1 Net cash used in investing activities (59.3) (161.8) (503.3) (819.8) Cash Flows From Financing Activities: Net change in commercial paper and short-term debt 4.5 (1.5) (558.1) (0.9) Net change in long-term obligations 0.8 (231.8) (355.8) (356.1) Proceeds from issuance of Common Shares 39.4 64.3 87.2 144.3 Purchase of Treasury Shares (228.5) (460.3) (228.5) (1,460.3) Dividends on Common Shares (12.9) (13.0) (38.9) (39.4) Net cash used in financing activities (196.7) (642.3) (1,094.1) (1,712.4) Net Increase/(Decrease) in Cash and Equivalents 275.8 (17.1) 453.5 (1,196.8) Cash and Equivalents at Beginning of Period 1,273.7 544.3 1,096.0 1,724.0 Cash and Equivalents at End of Period $1,549.5 $527.2 $1,549.5 $527.2 CARDINAL HEALTH, INC. - THIRD QUARTER FY 2005 BUSINESS ANALYSIS ($ millions) PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES 2005 2004 - REVENUE - Amount $15,608 $13,177 - Growth Rate 18% 14% - Mix 80% 80% - OPERATING EARNINGS - Amount $344 $320 - Growth Rate 8% 10% - Mix 50% 45% - Ratio to Revenue 2.20% 2.43% MEDICAL PRODUCTS AND SERVICES 2005 2004 - REVENUE - Amount $2,473 $2,304 - Growth Rate 7% 15% - Mix 13% 14% - OPERATING EARNINGS - Amount $200 $193 - Growth Rate 3% 9% - Mix 29% 27% - Ratio to Revenue 8.07% 8.38% PHARMACEUTICAL TECHNOLOGIES AND SERVICES 2005 2004 - REVENUE - Amount $729 $710 - Growth Rate 3% 9% - Mix 4% 4% - OPERATING EARNINGS - Amount $82 $114 - Growth Rate (28)% 20% - Mix 12% 16% - Ratio to Revenue 11.31% 16.04% CLINICAL TECHNOLOGIES AND SERVICES 2005 2004 - REVENUE - Amount $522 $395 - Growth Rate 32% 12% - Mix 3% 2% - OPERATING EARNINGS - Amount $65 $86 - Growth Rate (25)% 10% - Mix 9% 12% - Ratio to Revenue 12.50% 21.89% CARDINAL HEALTH, INC. - THIRD QUARTER FY 2005 BUSINESS ANALYSIS ($ millions) TOTAL 2005 2004 - REVENUE Excluding - Amount $19,103 $16,392 Special Items - Growth Rate 17% 14% 2005 2004 - OPERATING EARNINGS - Amount $584 $667 $628 $675 - Growth Rate (12)% 14% (7)% 13% - RATIO TO REVENUE - Gross Margin 7.05% 7.83% - Expenses 3.68% 3.71% - Impairment Charges and Other 0.08% - - Special Items 0.23% 0.05% - Operating Earnings 3.06% 4.07% 3.29% 4.12% - NET EARNINGS * - Amount $368 $430 $396 $435 - Growth Rate (15)% 16% (9)% 15% - Ratio to Revenue 1.92% 2.62% 2.07% 2.65% - PRODUCTIVITY - Margin per Expense Dollar $1.92 $2.11 - ASSET MANAGEMENT - Operating Cash Flow $532 $787 - Free Cash Flow $460 $669 - Return on Invested Capital 7.48% 9.07% 8.02% 9.16% * The net earnings section is presented before discontinued operations - Margin per expense dollar = Ratio of gross margin to expenses See the GAAP/Non-GAAP reconciliation for the calculations and definitions supporting the balances excluding special items. CARDINAL HEALTH, INC. - FIRST NINE MONTHS OF FY 2005 BUSINESS ANALYSIS ($ millions) PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES 2005 2004 - REVENUE - Amount $45,068 $38,769 - Growth Rate 16% 15% - Mix 80% 80% - OPERATING EARNINGS - Amount $721 $785 - Growth Rate (8)% (2)% - Mix 43% 41% - Ratio to Revenue 1.60% 2.02% MEDICAL PRODUCTS AND SERVICES 2005 2004 - REVENUE - Amount $7,292 $6,738 - Growth Rate 8% 14% - Mix 13% 14% - OPERATING EARNINGS - Amount $508 $524 - Growth Rate (3)% 10% - Mix 31% 28% - Ratio to Revenue 6.96% 7.78% PHARMACEUTICAL TECHNOLOGIES AND SERVICES 2005 2004 - REVENUE - Amount $2,194 $2,064 - Growth Rate 6% 34% - Mix 4% 4% - OPERATING EARNINGS - Amount $252 $334 - Growth Rate (24)% 32% - Mix 15% 18% - Ratio to Revenue 11.49% 16.16% CLINICAL TECHNOLOGIES AND SERVICES 2005 2004 - REVENUE - Amount $1,593 $1,126 - Growth Rate 41% 10% - Mix 3% 2% - OPERATING EARNINGS - Amount $187 $250 - Growth Rate (25)% 15% - Mix 11% 13% - Ratio to Revenue 11.75% 22.19% CARDINAL HEALTH, INC. - FIRST NINE MONTHS OF FY 2005 BUSINESS ANALYSIS ($ millions) TOTAL 2005 2004 - REVENUE Excluding - Amount $55,454 $48,131 Special Items - Growth Rate 15% 16% 2005 2004 - OPERATING EARNINGS - Amount $1,263 $1,762 $1,441 $1,780 - Growth Rate (28)% 7% (19)% 9% - RATIO TO REVENUE - Gross Margin 6.56% 7.31% - Expenses 3.78% 3.62% - Impairment Charges and Other 0.18% (0.01)% - Special Items 0.32% 0.04% - Operating Earnings 2.28% 3.66% 2.60% 3.70% - NET EARNINGS * - Amount $789 $1,127 $909 $1,138 - Growth Rate (30)% 10% (20)% 11% - Ratio to Revenue 1.42% 2.34% 1.64% 2.36% - PRODUCTIVITY - Margin per Expense Dollar $1.74 $2.02 - ASSET MANAGEMENT - Operating Cash Flow $2,051 $1,335 - Free Cash Flow $1,742 $1,032 - Return on Invested Capital 5.37% 7.97% 6.12% 8.04% * The net earnings section is presented before discontinued operations and cumulative effect of change in accounting. - Margin per expense dollar = Ratio of gross margin to expenses See the GAAP/Non-GAAP reconciliation for the calculations and definitions supporting the balances excluding special items. CARDINAL HEALTH, INC. - QUARTERLY FY 2005 BUSINESS ANALYSIS ($ millions) PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES Q1 Q2 Q3 Q4 TOTAL - REVENUE - Amount $14,402 $15,059 $15,608 - Growth Rate 16% 15% 18% - Mix 80% 80% 80% - OPERATING EARNINGS - Amount $163 $213 $344 - Growth Rate (29)% (9)% 8 % - Mix 38% 39% 50% - Ratio to Revenue 1.13% 1.42% 2.20% MEDICAL PRODUCTS AND SERVICES Q1 Q2 Q3 Q4 TOTAL - REVENUE - Amount $2,393 $2,427 $2,473 - Growth Rate 11% 6% 7% - Mix 13% 13% 13% - OPERATING EARNINGS - Amount $138 $170 $200 - Growth Rate (14)% - 3 % - Mix 32% 31% 29% - Ratio to Revenue 5.78% 7.00% 8.07% PHARMACEUTICAL TECHNOLOGIES AND SERVICES Q1 Q2 Q3 Q4 TOTAL - REVENUE - Amount $705 $760 $729 - Growth Rate 9% 7% 3% - Mix 4% 4% 4% - OPERATING EARNINGS - Amount $81 $89 $82 - Growth Rate (24)% (22)% (28)% - Mix 19% 16% 12% - Ratio to Revenue 11.46% 11.68% 11.31% CLINICAL TECHNOLOGIES AND SERVICES Q1 Q2 Q3 Q4 TOTAL - REVENUE - Amount $524 $547 $522 - Growth Rate 57% 38% 32% - Mix 3% 3% 3% - OPERATING EARNINGS - Amount $46 $76 $65 - Growth Rate (32)% (21)% (25)% - Mix 11% 14% 9% - Ratio to Revenue 8.76% 13.89% 12.50% CARDINAL HEALTH, INC. - QUARTERLY FY 2005 BUSINESS ANALYSIS ($ millions) TOTAL (EXCLUDING SPECIAL ITEMS) Q1 Q2 Q3 Q4 TOTAL - REVENUE - Amount $17,796 $18,555 $19,103 - Growth Rate 16% 13% 17% - OPERATING EARNINGS - Amount $390 $424 $628 - Growth Rate (26)% (27)% (7)% - RATIO TO REVENUE - Gross Margin 6.10% 6.50% 7.05% - Expenses 3.89% 3.77% 3.68% - Impairment Charges and Other 0.02% 0.45% 0.08% - Operating Earnings 2.19% 2.28% 3.29% - NET EARNINGS* - Amount $238 $275 $396 - Growth Rate (28)% (26)% (9)% - Ratio to Revenue 1.34% 1.48% 2.07% - PRODUCTIVITY - Margin Per Expense Dollar $1.57 $1.72 $1.92 - ASSET MANAGEMENT - Operating Cash Flow $893 $626 $532 - Free Cash Flow $777 $506 $460 - Return on Invested Capital 4.95% 5.42% 8.02% * The net earnings section is presented before discontinued operations. - Margin Per Expense Dollar = Ratio of gross margin to expenses See the GAAP/Non-GAAP reconciliation for the calculations and definitions supporting the balances excluding special items. CARDINAL HEALTH, INC. - FIRST NINE MONTHS FISCAL 2005 AND 2004 ASSET MANAGEMENT ANALYSIS ($ millions) 2005 Q1 Q2 Q3 YTD - RECEIVABLE DAYS 16.4 13.3 14.8 - DAYS INVENTORY ON HAND 39 38 35 - CASH $1,152 $1,274 $1,550 - DEBT $3,255 $2,820 $2,804 - EQUITY $8,219 $8,559 $8,674 - NET DEBT/TOTAL CAPITAL 20% 15% 13% - TANGIBLE NET WORTH $3,200 $3,519 $3,676 - RETURN ON EQUITY 10.8% 9.7% 17.1% 12.6% EXCLUDING SPECIAL ITEMS 11.7% 13.0% 18.3% 14.4% - TAX RATE FROM CONTINUING OPERATIONS 32.0% 32.9% 32.3% 32.4% EXCLUDING SPECIAL ITEMS 32.5% 32.5% 32.5% 32.5% 2004 Q1 Q2 Q3 YTD - RECEIVABLE DAYS 17.5 17.4 17.5 - DAYS INVENTORY ON HAND 45 44 45 - CASH $992 $544 $527 - DEBT $2,724 $2,726 $2,532 - EQUITY $6,993 $7,456 $7,522 - NET DEBT/TOTAL CAPITAL 20% 23% 21% - TANGIBLE NET WORTH $4,653 $4,558 $4,520 - RETURN ON EQUITY 17.6% 20.7% 23.0% 20.3% EXCLUDING SPECIAL ITEMS 18.1% 20.5% 23.2% 20.4% - TAX RATE FROM CONTINUING OPERATIONS 33.2% 32.9% 32.7% 32.9% EXCLUDING SPECIAL ITEMS 33.2% 33.1% 32.8% 33.0% CARDINAL HEALTH, INC. - BUSINESS ANALYSIS RECONCILIATION ($ millions) THIRD QUARTER FISCAL 2005 GAAP* Special Excluding Basis Items Special Items - SPECIAL ITEMS - Restructuring related costs $26 $26 - - Merger related costs $11 $11 - - Other $7 $7 - - OPERATING EARNINGS - Amount $584 $44 $628 - Growth rate (12)% (7)% - Ratio to revenue (Return on Sales) 3.06% 3.29% - NET EARNINGS** - Amount $368 $28 $396 - Growth rate (15)% (9)% - Ratio to revenue 1.92% 2.07% - Diluted EPS $0.84 $0.06 $0.90 - INCOME TAX PROVISION - Income tax provision $176 $16 $192 THIRD QUARTER FISCAL 2004 GAAP* Special Excluding Basis Items Special Items - SPECIAL ITEMS - Restructuring related costs $5 $5 - - Merger related costs $7 $7 - - Other ($4) ($4) - - OPERATING EARNINGS - Amount $667 $8 $675 - Growth rate 14% 13% - Ratio to revenue (Return on Sales) 4.07% 4.12% - NET EARNINGS** - Amount $430 $5 $435 - Growth rate 16% 15% - Ratio to revenue 2.62% 2.65% - Diluted EPS $0.99 $0.01 $1.00 - INCOME TAX PROVISION - Income tax provision $209 $3 $212 FIRST NINE MONTHS FISCAL 2005 GAAP* Special Excluding Basis Items Special Items - SPECIAL ITEMS - Restructuring related costs $138 $138 - - Merger related costs $38 $38 - - Other $2 $2 - - OPERATING EARNINGS - Amount $1,263 $178 $1,441 - Growth rate (28)% (19)% - Ratio to revenue (Return on Sales) 2.28% 2.60% - NET EARNINGS** - Amount $789 $120 $909 - Growth rate (30)% (20)% - Ratio to revenue 1.42% 1.64% - Diluted EPS $1.81 $0.27 $2.08 - INCOME TAX PROVISION - Income tax provision $378 $58 $436 FIRST NINE MONTHS FISCAL 2004 GAAP* Special Excluding Basis Items Special Items - SPECIAL ITEMS - Restructuring related costs $25 $25 - - Merger related costs $24 $24 - - Other ($31) ($31) - - OPERATING EARNINGS - Amount $1,762 $18 $1,780 - Growth rate 7% 9% - Ratio to revenue (Return on Sales) 3.66% 3.70% - NET EARNINGS** - Amount $1,127 $11 $1,138 - Growth rate 10% 11% - Ratio to revenue 2.34% 2.36% - Diluted EPS $2.56 $0.02 $2.58 - INCOME TAX PROVISION - Income tax provision $552 $7 $559 * GAAP - Amounts that conform with generally accepted accounting principles. ** The net earnings section is presented before discontinued operations and cumulative effect of change in accounting. DEFINITIONS: Return on equity (excluding special items) = (Earnings from continuing operations + special items after tax) / average shareholders’ equity Note: Average shareholders’ equity used in the return on equity calculation was $8.7 billion and $7.4 billion in the third quarter of fiscal 2005 and 2004, respectively, and $8.4 billion and $7.4 billion for year to date of fiscal 2005 and 2004, respectively. Effective tax rate (excluding special items) = (Income tax provision + tax effect of special items) / (earnings before income taxes + special items) Growth rate (excluding special items) = (Current quarter earnings excluding special items - prior year quarter earnings excluding special items) / prior year quarter earnings excluding special items Ratio to revenue (excluding special items) = Current quarter earnings excluding special items / operating revenue Free cash flow = Operating cash flow - net property activity - dividends Return on invested capital (excluding special items) = [Operating earnings excluding special items annualized x (1-effective tax rate, excluding special items)] / average (equity + debt + unrecorded goodwill) Note: Average unrecorded goodwill used in return on invested capital calculation was $9.7 billion in fiscal 2005 and fiscal 2004. Net debt to total capital = Net debt / (net debt + shareholders’ equity) Note: Net debt = long-term obligations + short-term obligations + notes payable banks - cash CARDINAL HEALTH, INC. - RECONCILIATION OF NON-RECURRING CHARGES ($ millions) Q3 FY05 YTD FY05 Impairment charges and other $(16.2) $(103.0) Less: minority interest and realized currency translation adjustment - 19.4 Net impairment charges (16.2) (83.6) Alaris inventory adjustment - (23.6) Latex litigation - (16.4) Inventory adjustment - SKU rationalization (7.2) (7.2) Total non-recurring charges (23.4) (130.8) Tax impact 7.6 42.4 Impact on net earnings $(15.8) $(88.4) Weighted average diluted number of shares outstanding 437.8 436.7 Impact on EPS $(0.04) $(0.20) Q3 FY04 YTD FY04 Impairment charges and other $0.6 $7.0 Tax impact (0.2) (2.3) Impact on net earnings $0.4 $4.7 Weighted average diluted number of shares outstanding 439.0 441.3 Impact on EPS $0.00 $0.01
Cardinal Health, Inc.
CONTACT: Media, Jim Mazzola, +1-614-757-3690, orjim.mazzola@cardinal.com , or Investors, Jim Hinrichs, +1-614-757-7828, orjim.hinrichs@cardinal.com , both of Cardinal Health, Inc.
Web site: http://www.cardinalhealth.com/