Cardinal Health Reports Strong Q4 And Fiscal Year 2012; Provides Fiscal 2013 Outlook
August 2, 2012
DUBLIN, Ohio, Aug. 2, 2012 /PRNewswire/ — Cardinal Health today reported fourth-quarter fiscal year 2012 revenues of $26.8 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $0.73, up 22 percent. The company reported fiscal year 2012 revenues increased 5 percent to $108 billion, and non-GAAP diluted EPS from continuing operations increased 15 percent to $3.21.
“We finished our fiscal year with a strong fourth quarter, growing our non-GAAP EPS by 22 percent,” said George Barrett, chairman and chief executive officer of Cardinal Health. “Our Pharmaceutical segment continued its strong momentum, and, as expected, our Medical segment finished the year with profit growth in the fourth quarter and is well-positioned as we begin FY 2013.
“Overall, fiscal 2012 was another strong year, meeting virtually all of our financial goals, including revenues, margin growth, operating earnings, EPS and cash flow. It was also a year in which we made great strides on our strategic priorities – including expansion of our retail independent customer base, improved generic contribution, build out of our Positron Emission Tomography capabilities, accelerating penetration of our specialty solutions, growth in preferred medical products, expansion of our ambulatory franchise and excellent growth in China.”
The outlook for non-GAAP diluted EPS from continuing operations in fiscal 2013 is $3.35 to $3.50 and incorporates the previously announced non-renewal of the Express Scripts contract.
Q4 and Fiscal Year Summary
Q4 FY12 Q4 FY11 Y/Y FY12 FY11 Y/Y
------- ------- --- ---- ---- ---
Revenue $26.8 billion $26.8 billion 0% $107.6 billion $102.6 billion 5%
------- ------------- ------------- --- -------------- -------------- ---
Operating
Earnings $403 million $359 million 12% $1.8 billion $1.5 billion 18%
--------- ------------ ------------ --- ------------ ------------ ---
Non-
GAAP
Operating
Earnings
$425 million $375 million 13% $1.9 billion $1.6 billion 13%
--- ------------ ------------ --- ------------ ------------ ---
Earnings
from
Continuing
Operations
$236 million $207 million 14% $1.1 billion $966 million 11%
--- ------------ ------------ --- ------------ ------------ ---
Non-
GAAP
Earnings
from
Continuing
Operations
$255 million $214 million 19% $1.1 billion $988 million 13%
--- ------------ ------------ --- ------------ ------------ ---
Diluted
EPS
from
Continuing
Operations
$0.68 $0.58 17% $3.06 $2.74 12%
--- ----- ----- --- ----- ----- ---
Non-
GAAP
Diluted
EPS
from
Continuing
Operations
$0.73 $0.60 22% $3.21 $2.80 15%
--- ----- ----- --- ----- ----- ---
SEGMENT RESULTS
Pharmaceutical Segment
Fourth-quarter revenue for the Pharmaceutical segment decreased 1 percent to $24.3 billion. The decrease, primarily due to brand-to-generic conversions, was mostly offset by revenue from new customers. Segment profit for the quarter increased 15 percent to $354 million, driven by the overall strong performance of generic programs and the benefits of expanded business with new and existing customers, including strong contributions from retail independents. Segment profit also benefited from performance under branded agreements.
For the full year, revenue for the Pharmaceutical segment increased 4 percent to $97.9 billion, and segment profit increased 17 percent to $1.6 billion.
Q4 FY12 Q4 FY11 Y/Y FY12 FY11 Y/Y
------- ------- --- ---- ---- ---
Revenue $24.3 billion $24.5 billion (1%) $97.9 billion $93.7 billion 4%
------- ------------- ------------- --- ------------- ------------- ---
Segment Profit $354 million $308 million 15% $1.6 billion $1.3 billion 17%
-------------- ------------ ------------ --- ------------ ------------ ---
Medical Segment
Fourth-quarter revenue for the Medical segment increased 5 percent to $2.4 billion. Segment profit increased 2 percent to $79 million, primarily driven by increased sales of preferred products, offset by expenses related to the new systems implementation. In addition, the negative impact of commodities and foreign exchange moderated to $8 million in the quarter versus prior year.
For the full year, Medical segment revenue increased 8 percent to $9.6 billion, and segment profit decreased 11 percent to $332 million.
Q4 FY12 Q4 FY11 Y/Y FY12 FY11 Y/Y
------- ------- --- ---- ---- ---
Revenue $2.4 billion $2.3 billion 5% $9.6 billion $8.9 billion 8%
------- ------------ ------------ --- ------------ ------------ ---
Segment Profit $79 million $78 million 2% $332 million $373 million (11%)
-------------- ----------- ----------- --- ------------ ------------ ----
ADDITIONAL YEAR-END AND RECENT HIGHLIGHTS
- Increased the regular quarterly dividend by 10.5 percent to $0.2375 per share, effective July 15
- Closed several acquisitions in China, notably Da Sheng Group, significantly expanding the Cardinal Health footprint in Ningbo, a city of 7.6 million people
- Selected as the primary healthcare solutions partner by the Medical Oncology Association of Southern California Purchasing Network, Inc.
- Completed the acquisition of Dik Drug, an Illinois-based pharmaceutical distributor with more than 500 retail independent pharmacy customers
CONFERENCE CALL
Cardinal Health will host a webcast and conference call today at 8:00 a.m. Eastern Daylight Time to discuss fourth-quarter and full-year results and its future outlook. To access the call and corresponding slide presentation, go to the Investors page at cardinalhealth.com. The call also can be accessed by dialing 224.357.2209. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will also be available until Sept. 2 by dialing 855.859.2056 or 404.537.3406, access code 98065830.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $108 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers and physician offices focus on patient care while reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 60,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation’s largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #21 on the Fortune 500, Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com and @CardinalHealth on Twitter.
(1) See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.
Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at cardinalhealth.com.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” “likely,” and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health’s various lines of business; the loss of one or more key customer or supplier relationships or changes to the terms of those relationships; the timing of generic and branded pharmaceutical introductions and the frequency or rate of pharmaceutical price appreciation or deflation; uncertainties due to government health care reform including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel; and uncertainties concerning Cardinal Health’s ability to achieve the expected benefits of its Medical segment’s business transformation project. Cardinal Health is subject to additional risks and uncertainties described in Cardinal Health’s Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This news release reflects management’s views as of Aug. 2, 2012. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Schedule 1
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
Fourth Quarter
(in millions, except per Common
Share amounts) 2012 2011 % Change
------------------------------- ---- ---- --------
Revenue $26,764 $26,764 0 %
Cost of products sold 25,628 25,720 (0)%
Gross margin 1,136 1,044 9 %
------------ ----- ----- ---
Operating expenses:
Distribution, selling, general and
administrative expenses 712 671 6 %
Restructuring and employee
severance 9 5 N.M.
Acquisition-related costs 11 15 N.M.
Impairments and loss on disposal of
assets 1 - N.M.
Litigation (recoveries)/charges,
net - (6) N.M.
Operating earnings 403 359 12 %
------------------ --- --- ---
Other (income)/expenses, net 1 (2) N.M.
Interest expense, net 25 24 4 %
Gain on sale of investment in
CareFusion - (4) N.M.
Earnings before income taxes and
discontinued operations 377 341 11 %
-------------------------------- --- --- ---
Provision for income taxes 141 134 5 %
Earnings from continuing operations 236 207 14 %
----------------------------------- --- --- ---
Loss from discontinued operations,
net of tax - (4) N.M.
Net earnings $236 $203 17 %
------------ ---- ---- ---
Basic earnings/(loss) per Common Share:
Continuing operations $0.68 $0.59 15 %
Discontinued operations - (0.01) N.M.
Net basic earnings per Common Share $0.68 $0.58 17 %
----------------------------------- ----- ----- ---
Diluted earnings/(loss) per Common Share:
Continuing operations $0.68 $0.58 17 %
Discontinued operations - (0.01) N.M.
Net diluted earnings per Common
Share $0.68 $0.57 19 %
------------------------------- ----- ----- ---
Weighted average number of Common Shares outstanding:
Basic 345 349
Diluted 349 355
Schedule 2
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
Fiscal Year
(in millions, except per Common
Share amounts) 2012 2011 % Change
------------------------------- ---- ---- --------
(Unaudited)
Revenue $107,552 $102,644 5 %
Cost of products sold 103,011 98,482 5 %
Gross margin 4,541 4,162 9 %
------------ ----- ----- ---
Operating expenses:
Distribution, selling, general and
administrative expenses 2,677 2,528 6 %
Restructuring and employee
severance 21 15 N.M.
Acquisition-related costs 33 90 N.M.
Impairments and loss on disposal of
assets 21 9 N.M.
Litigation (recoveries)/charges,
net (3) 6 N.M.
Operating earnings 1,792 1,514 18 %
------------------ ----- ----- ---
Other income, net (1) (22) N.M.
Interest expense, net 95 93 2 %
Gain on sale of investment in
CareFusion - (75) N.M.
Earnings before income taxes and
discontinued operations 1,698 1,518 12 %
-------------------------------- ----- ----- ---
Provision for income taxes 628 552 14 %
Earnings from continuing operations 1,070 966 11 %
----------------------------------- ----- --- ---
Loss from discontinued operations,
net of tax (1) (7) N.M.
Net earnings $1,069 $959 11 %
------------ ------ ---- ---
Basic earnings/(loss) per Common Share:
Continuing operations $3.10 $2.77 12 %
Discontinued operations - (0.02) N.M.
Net basic earnings per Common Share $3.10 $2.75 13 %
----------------------------------- ----- ----- ---
Diluted earnings/(loss) per Common Share:
Continuing operations $3.06 $2.74 12 %
Discontinued operations - (0.02) N.M.
Net diluted earnings per Common
Share $3.06 $2.72 13 %
------------------------------- ----- ----- ---
Weighted average number of Common Shares outstanding:
Basic 345 349
Diluted 349 353
Schedule 3
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, June 30,
(in millions) 2012 2011
------------ ---- ----
(Unaudited)
Assets
Cash and
equivalents $2,274 $1,929
Trade
receivables,
net 6,355 6,156
Inventories 7,864 7,334
Prepaid
expenses and
other 1,017 897
Total current
assets 17,510 16,316
------------- ------ ------
Property and
equipment,
net 1,551 1,512
Goodwill and
other
intangibles,
net 4,392 4,259
Other assets 807 759
Total assets $24,260 $22,846
------------ ------- -------
Liabilities and Shareholders' Equity
Accounts
payable $11,726 $11,332
Current
portion of
long-term
obligations
and other
short-term
borrowings 476 327
Other accrued
liabilities 1,972 1,711
Total current
liabilities 14,174 13,370
------------- ------ ------
Long-term
obligations,
less current
portion 2,418 2,175
Deferred
income taxes
and other
liabilities 1,424 1,452
Total
shareholders'
equity 6,244 5,849
-------------- ----- -----
Total
liabilities
and
shareholders'
equity $24,260 $22,846
-------------- ------- -------
Schedule 4
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Fourth Quarter Fiscal Year
-----------
(in millions) 2012 2011 2012 2011
------------ ---- ---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
Cash Flows from Operating Activities:
Net earnings $236 $203 $1,069 $959
Loss from
discontinued
operations - 4 1 7
Earnings from
continuing
operations 236 207 1,070 966
------------- --- --- ----- ---
Adjustments to reconcile earnings from continuing
operations to net cash from operations:
Depreciation and
amortization 86 74 325 313
Gain on sale of
investment in
CareFusion - (4) - (75)
Impairments and loss
on disposal of
assets 1 - 21 9
Share-based
compensation 22 19 85 80
Provision for
deferred income
taxes 158 128 158 128
Provision for bad
debts 7 5 22 27
Change in fair value
of contingent
consideration
obligation (18) (6) (71) (7)
Change in operating assets and liabilities, net of
effects from acquisitions:
Decrease/(increase)
in trade receivables 190 122 (129) (457)
Decrease/(increase)
in inventories 375 384 (495) (665)
Increase/(decrease)
in accounts payable (893) (630) 319 1,356
Other accrued
liabilities and
operating items, net (271) (179) (129) (280)
Net cash provided by/
(used in) operating
activities (107) 120 1,176 1,395
--------------------- ---- --- ----- -----
Cash Flows from Investing Activities:
Acquisition of
subsidiaries, net of
cash acquired (31) (5) (174) (2,300)
Purchase of held-to-
maturity securities
and other
investments (25) - (35) (156)
Additions to property
and equipment (100) (105) (263) (291)
Proceeds from
divestitures and
sale of property and
equipment (1) - 3 3
Proceeds from sale of
CareFusion - - - 706
Proceeds from
maturities of held-
to-maturity
securities 46 10 92 10
Net cash used in
investing activities (111) (100) (377) (2,028)
--------------------- ---- ---- ---- ------
Cash Flows from Financing Activities:
Payment of contingent
consideration - (10) - (10)
Net change in short-
term borrowings 5 5 13 46
Reduction of long-
term obligations (206) (1) (251) (229)
Proceeds from long-
term obligations,
net of issuance
costs 496 - 496 495
Proceeds from
issuance of Common
Shares 19 27 42 63
Tax disbursements
from exercises of
stock options (8) (5) (4) (14)
Dividends on Common
Shares (74) (68) (300) (274)
Purchase of treasury
shares (150) - (450) (270)
Net cash provided by/
(used in) financing
activities 82 (52) (454) (193)
--------------------- --- --- ---- ----
Net increase/
(decrease) in cash
and equivalents (136) (32) 345 (826)
Cash and equivalents
at beginning of
period 2,410 1,961 1,929 2,755
Cash and equivalents
at end of period $2,274 $1,929 $2,274 $1,929
-------------------- ------ ------ ------ ------
Schedule 5
----------
Cardinal Health, Inc. and Subsidiaries
Total Company Business Analysis
Non-GAAP
Fourth Quarter Fourth Quarter
(in millions) 2012 2011 2012 2011
------------ ---- ---- ---- ----
Revenue
Amount $26,764 $26,764
Growth rate 0 % 9 %
Operating earnings
Amount $403 $359 $425 $375
Growth rate 12 % 7 % 13 % 17 %
Earnings from continuing operations
Amount $236 $207 $255 $214
Growth rate 14 % 7 % 19 % 17 %
Non-GAAP
Fiscal Year Fiscal Year
(in millions) 2012 2011 2012 2011
------------ ---- ---- ---- ----
Revenue
Amount $107,552 $102,644
Growth rate 5 % 4 %
Operating earnings
Amount $1,792 $1,514 $1,866 $1,644
Growth rate 18 % 16 % 13 % 18 %
Earnings from continuing operations
Amount $1,070 $966 $1,119 $988
Growth rate 11 % 65 % 13 % 22 %
Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.
Schedule 6
----------
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
Fourth Quarter Fourth Quarter
(in millions) 2012 2011 (in millions) 2012 2011
------------ ---- ---- ------------ ---- ----
Pharmaceutical Medical
Revenue Revenue
Amount $24,335 $24,458 Amount $2,432 $2,312
Growth rate (1)% 10 % Growth rate 5 % 7 %
Mix 91 % 91 % Mix 9 % 9 %
Segment profit Segment profit
Amount $354 $308 Amount $79 $78
Growth rate 15 % 34 % Growth rate 2 % (24)%
Mix 82 % 80 % Mix 18 % 20 %
Segment profit margin 1.46 % 1.26 % Segment profit margin 3.27 % 3.38 %
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months
ended June 30, 2012 was $26,764 million, which
included total segment revenue of $26,767 million
and Corporate revenue of $(3) million. Total
consolidated revenue for the three months ended
June 30, 2011 was $26,764 million, which included
total segment revenue of $26,770 million and
Corporate revenue of $(6) million. Corporate
revenue consists primarily of elimination of
inter-segment revenue.
Total consolidated operating earnings for the
three months ended June 30, 2012 were $403
million, which included total segment profit of
$433 million and Corporate costs of $(30)
million. Total consolidated operating earnings
for the three months ended June 30, 2011 were
$359 million, which included total segment profit
of $386 million and Corporate costs of $(27)
million. Corporate includes, among other things,
restructuring and employee severance,
acquisition-related costs (including
amortization of acquisition-related intangible
assets and changes in the fair value of
contingent consideration obligations),
impairments and loss on disposal of assets,
litigation (recoveries)/charges, net and certain
investment spending that are not allocated to the
segments.
Schedule 7
----------
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
Fiscal Year Fiscal Year
(in millions) 2012 2011 (in millions) 2012 2011
------------ ---- ---- ------------ ---- ----
Pharmaceutical Medical
Revenue Revenue
Amount $97,925 $93,744 Amount $9,642 $8,922
Growth rate 4 % 4 % Growth rate 8 % 2 %
Mix 91 % 91 % Mix 9 % 9 %
Segment profit Segment profit
Amount $1,558 $1,329 Amount $332 $373
Growth rate 17 % 31 % Growth rate (11)% (13)%
Mix 82 % 78 % Mix 18 % 22 %
Segment profit margin 1.59 % 1.42 % Segment profit margin 3.45 % 4.18 %
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the fiscal year
ended June 30, 2012 was $107,552 million, which
included total segment revenue of $107,567
million and Corporate revenue of $(15) million.
Total consolidated revenue for the fiscal year
ended June 30, 2011 was $102,644 million, which
included total segment revenue of $102,666
million and Corporate revenue of $(22) million.
Corporate revenue consists primarily of
elimination of inter-segment revenue.
Total consolidated operating earnings for the
fiscal year ended June 30, 2012 were $1,792
million, which included total segment profit of
$1,890 million and Corporate costs of $(98)
million. Total consolidated operating earnings
for the fiscal year ended June 30, 2011 were
$1,514 million, which included total segment
profit of $1,702 million and Corporate costs of
$(188) million. Corporate includes, among other
things, restructuring and employee severance,
acquisition-related costs (including
amortization of acquisition-related intangible
assets and changes in the fair value of
contingent consideration obligations),
impairments and loss on disposal of assets,
litigation (recoveries)/charges, net and certain
investment spending that are not allocated to the
segments.
Schedule 8
----------
Cardinal Health, Inc. and Subsidiaries
Schedule of Notable Items
Fourth Quarter Fiscal Year
-----------
(in millions, except per Common Share
amounts) 2012 2011 2012 2011
-------------------------------------- ---- ---- ---- ----
Restructuring and employee severance
Restructuring and employee severance $(9) $(5) $(21) $(15)
Tax benefit 3 2 8 5
Restructuring and employee severance,
net of tax $(6) $(3) $(13) $(10)
-------------------------------------- --- --- ---- ----
Decrease to diluted EPS from
continuing operations $(0.02) $(0.01) $(0.04) $(0.03)
----------------------------- ------ ------ ------ ------
Acquisition-related costs
Amortization of acquisition-related
intangible assets $(20) $(14) $(78) $(67)
Tax benefit 8 8 29 21
Amortization of acquisition-related
intangible assets, net of tax $(12) $(6) $(49) $(46)
------------------------------------ ---- --- ---- ----
Decrease to diluted EPS from
continuing operations $(0.03) $(0.02) $(0.14) $(0.13)
----------------------------- ------ ------ ------ ------
Other acquisition-related costs (1) $9 $(1) $45 $(23)
Tax benefit/(expense) (1) (10) (2) (20) 1
Other acquisition-related costs, net
of tax $(1) $(3) $25 $(22)
------------------------------------- --- --- --- ----
Increase/(decrease) to diluted EPS
from continuing operations (1) $ - $(0.01) $0.07 $(0.06)
----------------------------------- -------------------- ------ ----- ------
Total acquisition-related costs $(11) $(15) $(33) $(90)
Tax benefit/(expense) (2) 6 9 22
Total acquisition-related costs, net
of tax $(13) $(9) $(24) $(68)
------------------------------------- ---- --- ---- ----
Decrease to diluted EPS from
continuing operations (2) $(0.04) $(0.03) $(0.07) $(0.19)
----------------------------- ------ ------ ------ ------
Impairments and loss on disposal of
assets
Impairments and loss on disposal of
assets $(1) $ - $(21) $(9)
Tax benefit 1 - 8 3
Impairments and loss on disposal of
assets, net of tax $ - $ - $(13) $(6)
------------------------------------ -------------------- -------------------- ---- ---
Decrease to diluted EPS from
continuing operations $ - $ - $(0.04) $(0.02)
----------------------------- -------------------- -------------------- ------ ------
Litigation recoveries/(charges), net
Litigation recoveries/(charges), net $ - $6 $3 $(6)
Tax expense - (3) (1) (1)
Litigation recoveries/(charges), net,
net of tax $ - $3 $2 $(7)
-------------------------------------- -------------------- --- --- ---
Increase/(decrease) to diluted EPS
from continuing operations $ - $0.01 $0.01 $(0.02)
----------------------------------- -------------------- ----- ----- ------
Other Spin-Off costs
Other spin-off costs $ - $(3) $(2) $(10)
Tax benefit - 1 1 4
Other spin-off costs, net of tax $ - $(2) $(1) $(6)
-------------------------------- -------------------- --- --- ---
Decrease to diluted EPS from
continuing operations $ - $ - $ - $(0.02)
----------------------------- -------------------- -------------------- -------------------- ------
Gain on sale of CareFusion stock
Gain on sale of CareFusion stock $ - $4 $ - $75
Tax benefit - - - -
Gain on sale of CareFusion stock, net
of tax $ - $4 $ - $75
-------------------------------------- -------------------- --- -------------------- ---
Increase to diluted EPS from
continuing operations $ - $0.01 $ - $0.21
----------------------------- -------------------- ----- -------------------- -----
Weighted average number of diluted
shares outstanding 349 355 349 353
We apply varying tax rates depending on the item's nature and tax jurisdiction
where it is incurred.
(1) Includes a $71 million decrease in the fair value of the total contingent
consideration obligation related to
the P4 Healthcare acquisition for the fiscal year. The related tax expense was $29
million and diluted EPS from continuing operations increased $0.13.
(2) The sum of the components may not equal the total due to rounding.
Schedule 9
----------
Cardinal Health, Inc. and Subsidiaries
Asset Management Analysis
Fourth Quarter Fiscal Year
-----------
2012 2011 2012 2011
---- ---- ---- ----
Days sales outstanding 22.3 20.3
Days inventory on hand 23.9 22.5
Days payable outstanding 35.6 34.8
Net working capital days(1) 10.5 8.0
Debt to total capital 32 % 30 %
Net debt to capital 9 % 9 %
Return on equity 15.1 % 14.1 % 17.8 % 17.5 %
Non-GAAP return on equity 16.3 % 14.9 % 18.6 % 18.0 %
Effective tax rate from
continuing operations 37.4 % 39.3 % 37.0 % 36.4 %
Non-GAAP effective tax rate
from continuing operations 36.0 % 39.6 % 36.8 % 37.2 %
(1) The sum of the components may not equal the total due to
rounding.
Refer to the GAAP/Non-GAAP reconciliation for Non-GAAP
calculations. Refer to DSO, DIOH and DPO for definitions
and calculations.
Schedule 10
-----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Fourth Quarter 2012
-------------------
(in millions, except per Common
Share amounts) Operating Earnings Provision Earnings Earnings Diluted Diluted
Earnings Operating Before for from from EPS from EPS from
Earnings Income Income Continuing Continuing Operations Growth Continuing Continuing
Growth Taxes and Taxes Operations Rate Operations Operations
Rate Discontinued Growth Rate
Operations
---
GAAP $403 12 % $377 $141 $236 14 % $0.68 17 %
---- ---- --- ---- ---- ---- --- ----- ---
Restructuring and employee
severance 9 9 3 6 0.02
Acquisition-related costs 11 11 (2) 13 0.04
Impairments and loss on disposal of
assets 1 1 1 - -
Litigation (recoveries)/charges,
net - - - - -
Other Spin-Off costs - - - - -
Gain on sale of CareFusion stock - - - - -
Non-GAAP $425 13 % $398 $143 $255 19 % $0.73 22 %
-------- ---- --- ---- ---- ---- --- ----- ---
Fourth Quarter 2011
-------------------
GAAP $359 7 % $341 $134 $207 7 % $0.58 7 %
---- ---- --- ---- ---- ---- --- ----- ---
Restructuring and employee
severance 5 5 2 3 0.01
Acquisition-related costs 15 15 6 9 0.03
Impairments and loss on disposal of
assets - - - - -
Litigation (recoveries)/charges,
net (6) (6) (3) (3) (0.01)
Other Spin-Off costs 3 3 1 2 -
Gain on sale of CareFusion stock - (4) - (4) (0.01)
Non-GAAP $375 17 % $354 $140 $214 17 % $0.60 20 %
-------- ---- --- ---- ---- ---- --- ----- ---
Fiscal Year 2012
----------------
(in millions, except per Common
Share amounts) Operating Operating Earnings Provision Earnings Earnings Diluted Diluted
Earnings Earnings Before for from from EPS from EPS from
Growth Rate Income Income Continuing Continuing Continuing Continuing
Taxes and Taxes Operations Operations Operations Operations
Discontinued Growth Rate Growth Rate
Operations
---
GAAP $1,792 18 % $1,698 $628 $1,070 11 % $3.06 12 %
---- ------ --- ------ ---- ------ --- ----- ---
Restructuring and employee
severance 21 21 8 13 0.04
Acquisition-related costs 33 33 9 24 0.07
Impairments and loss on disposal of
assets 21 21 8 13 0.04
Litigation (recoveries)/charges,
net (3) (3) (1) (2) (0.01)
Other Spin-Off costs 2 2 1 1 -
Gain on sale of CareFusion stock - - - - -
Non-GAAP $1,866 13 % $1,772 $653 $1,119 13 % $3.21 15 %
-------- ------ --- ------ ---- ------ --- ----- ---
Fiscal Year 2011
----------------
GAAP $1,514 16 % $1,518 $552 $966 65 % $2.74 69 %
---- ------ --- ------ ---- ---- --- ----- ---
Restructuring and employee
severance 15 15 5 10 0.03
Acquisition-related costs 90 90 22 68 0.19
Impairments and loss on disposal of
assets 9 9 3 6 0.02
Litigation (recoveries)/charges,
net 6 6 (1) 7 0.02
Other Spin-Off costs 10 10 4 6 0.02
Gain on sale of CareFusion stock - (75) - (75) (0.21)
Non-GAAP $1,644 18 % $1,573 $585 $988 22 % $2.80 25 %
-------- ------ --- ------ ---- ---- --- ----- ---
The sum of the components may not equal the total due to rounding.
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
Schedule 11
-----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Fourth Quarter
(in millions) 2012 2011
------------
GAAP return on equity 15.1 % 14.1 %
--------------------- ----- -----
Non-GAAP return on equity
Net earnings $236 $203
Restructuring and employee
severance, net of tax, in
continuing operations 6 3
Acquisition-related costs,
net of tax, in continuing
operations 13 9
Impairments and loss on
disposal of assets, net of
tax, in continuing
operations - -
Litigation
(recoveries)/charges, net,
net of tax, in continuing
operations - (3)
Other spin-off costs, net
of tax, in continuing
operations - 2
Gain on sale of CareFusion
stock, net of tax - (4)
CareFusion net loss in
discontinued operations (1) - 4
Adjusted net earnings $255 $214
--------------------- ---- ----
Annualized $1,020 $856
---------- ------ ----
Fourth Third Fourth Third
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2012 2012 2011 2011
---- ---- ---- ----
Total shareholders' equity $6,244 $6,240 $5,849 $5,657
Divided by average
shareholders' equity $6,242 $5,753
--------------------- ------ ------
Non-GAAP return on equity 16.3 % 14.9 %
------------------------- ----- -----
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
(1) To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings
included in
discontinued operations are excluded from adjusted net earnings for all periods presented.
Schedule 12
-----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Fiscal Year Fiscal Year
----------- -----------
(in millions) 2012 2011
------------
GAAP return on equity 17.8 % 17.5 %
--------------------- ----- -----
Non-GAAP return on equity
Net earnings $1,069 $959
Restructuring and employee severance, net of tax,
in continuing operations 13 10
Acquisition-related costs, net of tax, in
continuing operations 24 68
Impairments and loss on disposal of assets, net of
tax, in continuing operations 13 6
Litigation (recoveries)/charges, net, net of tax,
in continuing operations (2) 7
Other spin-off costs, net of tax, in continuing
operations 1 6
Gain on sale of CareFusion stock, net of tax - (75)
CareFusion net loss in discontinued operations (1) - 7
Adjusted net earnings $1,118 $988
--------------------- ------ ----
Fourth Third Second First Fourth Fourth Third Second First Fourth
Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter Quarter
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
2012 2012 2012 2012 2011 2011 2011 2011 2011 2010
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total shareholders' equity $6,244 $6,240 $5,928 $5,714 $5,849 $5,849 $5,657 $5,421 $5,239 $5,276
Divided by average shareholders' equity $5,995 $5,488
--------------------------------------- ------ ------
Non-GAAP return on equity 18.6 % 18.0 %
------------------------- ----- -----
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
(1) To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded
from adjusted net earnings for all periods presented.
Schedule 13
-----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
Fourth Quarter Fiscal Year
-----------
(in millions) 2012 2011 2012 2011
------------
GAAP effective tax rate from
continuing operations 37.4 % 39.3 % 37.0 % 36.4 %
---------------------------- ----- ----- ----- -----
Non-GAAP effective tax rate from continuing operations
Earnings before income taxes and
discontinued operations $377 $341 $1,698 $1,518
Restructuring and employee
severance 9 5 21 15
Acquisition-related costs 11 15 33 90
Impairments and loss on disposal of
assets 1 - 21 9
Litigation (recoveries)/charges,
net - (6) (3) 6
Other Spin-Off costs - 3 2 10
Gain on sale of CareFusion stock - (4) - (75)
Adjusted earnings before income
taxes and discontinued operations $398 $354 $1,772 $1,573
---------------------------------- ---- ---- ------ ------
Provision for income taxes $141 $134 $628 $552
Restructuring and employee
severance tax benefit 3 2 8 5
Acquisition-related costs tax
benefit/(expense) (2) 6 9 22
Impairments and loss on disposal of
assets tax benefit 1 - 8 3
Litigation (recoveries)/charges,
net tax expense - (3) (1) (1)
Other spin-off costs tax benefit - 1 1 4
Gain on sale of CareFusion stock
tax benefit - - - -
Adjusted provision for income taxes $143 $140 $653 $585
----------------------------------- ---- ---- ---- ----
Non-GAAP effective tax rate from
continuing operations 36.0 % 39.6 % 36.8 % 37.2 %
-------------------------------- ----- ----- ----- -----
Fourth Quarter
2012 2011
Debt to total capital 32 % 30 %
--------------------- --- ---
Net debt to capital
Current portion of long-term
obligations and other short-term
borrowings $476 $327
Long-term obligations, less
current portion 2,418 2,175
Debt $2,894 $2,502
---- ------ ------
Cash and equivalents (2,274) (1,929)
Net Debt $620 $573
-------- ---- ----
Total shareholders' equity 6,244 5,849
Capital $6,864 $6,422
------- ------ ------
Net debt to capital 9 % 9 %
------------------- --- ---
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
Forward-Looking Non-GAAP Financial Measures
-------------------------------------------
We present non-GAAP earnings from continuing operations and non-GAAP effective tax rate from continuing
operations (and presentations derived from these financial measures, including per share calculations) on a
forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from
continuing operations and effective tax rate from continuing operations. We are unable to provide a quantitative
reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking
GAAP measures because we cannot reliably forecast restructuring and employee severance, acquisition-related
costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net, and
other spin-off costs, which are difficult to predict and estimate and are primarily dependent on future events.
Please note that the unavailable reconciling items could significantly impact our future financial results.
Schedule 14
Cardinal Health, Inc. and Subsidiaries
Fourth Quarter
(in millions) 2012 2011
------------
Days Sales Outstanding 22.3 20.3
---------------------- ---- ----
Days Inventory on Hand
Inventories $7,864 $7,334
Cost of products sold $25,628 $25,720
Chargeback billings 3,984 3,556
Adjusted cost of products sold $29,612 $29,276
Adjusted cost of products sold
divided by 90 days $329 $325
Days Inventory on Hand 23.9 22.5
---------------------- ---- ----
Days Payable Outstanding
Accounts payable $11,726 $11,332
Cost of products sold $25,628 $25,720
Chargeback billings 3,984 3,556
Adjusted cost of products sold $29,612 $29,276
Adjusted cost of products sold
divided by 90 days $329 $325
Days Payable Outstanding 35.6 34.8
------------------------ ---- ----
Net Working Capital Days(1) 10.5 8.0
-------------------------- ---- ---
(1) The sum of the components may not
equal the total due to rounding.
Days Sales Outstanding: trade
receivables, net divided by
(monthly revenue divided by 30
days).
Days Inventory on Hand: inventory
divided by ((quarterly cost of
products sold plus chargeback
billings)
divided by 90 days). Chargeback
billings are the difference
between a product's wholesale
acquisition
cost and the contract price
established between
pharmaceutical manufacturers and
the end customer.
Days Payable Outstanding:
accounts payable divided by
((quarterly cost of products
sold plus
chargeback billings) divided by
90 days).
Net Working Capital Days: days
sales outstanding plus days
inventory on hand less days
payable
outstanding.
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
------------------------
This earnings
release contains
financial measures
that are not
calculated in
accordance with
U.S. generally
accepted accounting
principles
("GAAP"). In
general, the
measures exclude
items and charges
that (i) management
does not believe
reflect Cardinal
Health, Inc.'s (the
"Company") core
business and relate
more to strategic,
multi-year
corporate
activities; or (ii)
relate to
activities or
actions that may
have occurred over
multiple or in
prior periods
without predictable
trends. Management
uses these non-
GAAP financial
measures internally
to evaluate the
Company's
performance,
evaluate the
balance sheet,
engage in financial
and operational
planning and
determine incentive
compensation.
Management provides
these non-GAAP
financial measures
to investors as
supplemental
metrics to assist
readers in
assessing the
effects of items
and events on its
financial and
operating results
and in comparing
the Company's
performance to that
of its competitors.
However, the non-
GAAP financial
measures used by
the Company may be
calculated
differently from,
and therefore may
not be comparable
to, similarly
titled measures
used by other
companies.
The non-GAAP
financial measures
disclosed by the
Company should not
be considered a
substitute for, or
superior to,
financial measures
calculated in
accordance with
GAAP, and the
financial results
calculated in
accordance with
GAAP and
reconciliations to
those financial
statements set
forth above should
be carefully
evaluated.
Definitions
-----------
Debt: long-term
obligations plus
short-term
borrowings.
Debt to Total
Capital: debt
divided by (debt
plus total
shareholders'
equity).
Net Debt: a Non-
GAAP measure
defined as debt
minus (cash and
equivalents).
Net Debt to Capital:
a Non-GAAP measure
defined as net debt
divided by (net
debt plus total
shareholders'
equity).
Non-GAAP Diluted
EPS from Continuing
Operations and
growth rate
calculation (1):
non-GAAP earnings
from continuing
operations divided
by diluted weighted
average shares
outstanding.
Non-GAAP Earnings
from Continuing
Operations and
growth rate
calculation:
earnings from
continuing
operations
excluding (1)
restructuring and
employee severance
(2), (2)
acquisition-
related costs (3),
(3) impairments and
loss on disposal of
assets 4, (4)
litigation
(recoveries)/charges,
net 5, (5) Other
Spin-Off Costs and
(6) gain on sale of
CareFusion stock,
each net of tax.
Non-GAAP Effective
Tax Rate from
Continuing
Operations:
(provision for
income taxes
adjusted for (1)
restructuring and
employee severance,
(2) acquisition-
related costs, (3)
impairments and
loss on disposal of
assets, (4)
litigation
(recoveries)/charges,
net, (5) Other
Spin-Off Costs and
(6) gain on sale of
CareFusion stock)
divided by
(earnings before
income taxes and
discontinued
operations adjusted
for the same six
items).
Non-GAAP Operating
Earnings and growth
rate calculation:
operating earnings
excluding (1)
restructuring and
employee severance,
(2) acquisition-
related costs, (3)
impairments and
loss on disposal of
assets, (4)
litigation
(recoveries)/charges,
net and (5) Other
Spin-Off Costs.
Non-GAAP Return on
Equity: (annualized
current period net
earnings excluding
(1) restructuring
and employee
severance, (2)
acquisition-
related costs, (3)
impairments and
loss on disposal of
assets, (4)
litigation
(recoveries)/charges,
net, (5) Other
Spin-Off Costs,
(6) gain on sale of
CareFusion stock
and (7) CareFusion
net loss in
discontinued
operations, each
net of tax) and
divided by average
shareholders'
equity.
Other Spin-Off
Costs: costs
incurred in
connection with our
Spin-Off of
CareFusion which
are included in
distribution,
selling, general
and administrative
expenses.
Return on Equity:
annualized current
period net earnings
divided by average
shareholders'
equity.
Revenue Mix: segment
revenue divided by
total segment
revenue for all
segments.
Segment Profit:
segment revenue
minus (segment cost
of products sold
and segment
distribution,
selling, general
and administrative
expenses).
Segment Profit
Margin: segment
profit divided by
segment revenue.
Segment Profit Mix:
segment profit
divided by total
segment profit for
all segments.
In this earnings
release growth
rates are
determined by
dividing the
difference between
current period
results and prior
period results by
prior period
(1) results.
Programs whereby the
Company
fundamentally
changes its
operations such as
closing and
consolidating
certain
manufacturing and
distribution
facilities, moving
manufacturing of a
product to another
location,
outsourcing the
production of a
product, employee
severance
(including
rationalizing
headcount or other
significant changes
in personnel) and
realigning
operations
(including
substantial
realignment of the
management
structure of a
business unit in
response to
changing market
(2) conditions).
Costs that consist
primarily of
transaction costs,
integration costs,
changes in the fair
value of contingent
consideration
obligations and
amortization of
acquisition-
related intangible
(3) assets.
Asset impairments
and losses from the
disposal of assets
not eligible to be
classified as
discontinued
operations are
classified within
impairments and
loss on disposal of
assets within the
consolidated
statements of
4 earnings.
Loss contingencies
related to
litigation and
regulatory matters
and income from
favorable
resolution of legal
5 matters.
SOURCE Cardinal Health
Source: PR Newswire
