EX-99.1 2 a13q2_8kx123112xexhibit991.htm NEWS RELEASE 13Q2_8K_12.31.12_Exhibit 99.1_News Release
Exhibit 99.1




FOR IMMEDIATE RELEASE

Media:    Debbie Mitchell
(614)757-6225
debbie.mitchell@cardinalhealth.com
 

Investors:    Sally Curley
(614) 757-7115
sally.curley@cardinalhealth.com

CARDINAL HEALTH REPORTS FISCAL 2013 SECOND-QUARTER RESULTS
Operating earnings increase 13 percent to $506 million, or 11 percent to $525 million on a non-GAAP basis1 
Diluted earnings per share from continuing operations increase 16 percent to $0.88, or 15 percent to $0.93 on a non-GAAP basis
Fiscal 2013 non-GAAP earnings per share guidance tightened to $3.42 to $3.50, representing top half of prior range
DUBLIN, Ohio, Feb 5, 2013 - Cardinal Health today reported fiscal year 2013 second-quarter revenue of $25.2 billion and a 15 percent increase in non-GAAP diluted earnings per share (EPS) from continuing operations to $0.93.
In addition, the company tightened its fiscal 2013 outlook for non-GAAP diluted EPS from continuing operations to $3.42 to $3.50, which represents the top half of the prior guidance range.
“We've now completed a strong first half to our fiscal 2013 with a good second-quarter performance. While continued brand-to-generic conversions and the previously announced movement of the Express Scripts contract drove a revenue decline in the Pharmaceutical segment, excellent performance from our generic programs and new customer wins fueled profit gains,” said George Barrett, chairman and chief executive officer of Cardinal Health. “And, despite continued procedural softness in the industry, our Medical segment reported double-digit growth this quarter. With our performance in the first six months of fiscal 2013, we are now guiding to the top half of our prior non-GAAP EPS range.”
Q2 FY13 SUMMARY
 
Q2 FY13
 
Q2 FY12
 
Y/Y
Revenue
$
25.2
 billion
 
$
27.1
 billion
 
(7)%
Operating earnings
$
506
 million
 
$
449
 million
 
13%
Non-GAAP operating earnings
$
525
 million
 
$
475
 million
 
11%
Earnings from continuing operations
$
303
 million
 
$
264
 million
 
15%
Non-GAAP earnings from continuing operations
$
317
 million
 
$
281
 million
 
13%
Diluted EPS from continuing operations
$
0.88

 
$
0.76

 
16%
Non-GAAP diluted EPS from continuing operations
$
0.93

 
$
0.81

 
15%
SEGMENT RESULTS
Pharmaceutical segment
Revenue for the Pharmaceutical segment decreased 8 percent to $22.7 billion due to the previously announced non-renewal of the Express Scripts contract as well as expected conversions from branded pharmaceuticals to lower-priced generics. The decline was partially offset by revenues from new pharmaceutical distribution customers. Segment profit increased 12 percent to $441 million, largely from overall strong performance from generics programs and benefits of customer and product mix within pharmaceutical distribution, partially offset by the impact of continued market softness in our nuclear business.
 
Q2 FY13
 
Q2 FY12
 
Y/Y
Revenue
$
22.7
 billion
 
$
24.7
 billion
 
(8)%
Segment profit
$
441
 million
 
$
394
 million
 
12%
Medical segment
Revenue for the Medical segment increased 3 percent to $2.5 billion, reflecting the benefits of last year's acquisition of FutureMed and one additional sales day year-on-year. Excluding these drivers, year-on-year revenue growth was flat, reflecting continued softness in key U.S. markets, particularly as it relates to procedural volume. Segment profit increased 11 percent to $94 million driven by the favorable impact of commodities, acquisitions and preferred product mix. The increase was partially offset by customer mix and continued volume softness.
The overall profit impact of our Medical Business Transformation for the quarter was slightly negative, including year-over-year incremental depreciation and program expenses, realized benefits, and a $5 million favorable out-of-period adjustment as part of continued cleanup from the conversion to the new platform.
 
Q2 FY13
 
Q2 FY12
 
Y/Y
Revenue
$
2.5
 billion
 
$
2.4
 billion
 
3%
Segment profit
$
94
 million
 
$
85
 million
 
11%


Cardinal Health
Page 2

ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS
Retained the No. 1 slot in the Gartner Fourth Annual Healthcare Supply Chain Top 25 ranking
Established Cardinal Health Specialty Solutions pathways program with Blue Cross Blue Shield of Louisiana and expanded Cardinal Health Specialty Solutions pathways program with Aetna to include oncologists in Michigan
Launched Cardinal Health Specialty Solutions VitalPath™ Integrated Dispensing Solution, VitalSource™ GPO Regimen Analyzer, and PathWare™ Decision Transaction Solutions to help improve physician practice efficiencies
Named one of 40 of the 2013 Best Companies for Leaders by Chief Executive magazine
Named one of the 2012 Working Mother 100 Best Companies by Working Mother magazine
CONFERENCE CALL
Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss second-quarter results. 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, using conference ID 81032416.
There is no pre-registration for the call; however, participants are advised to dial into the call at least 10 minutes prior to the start time. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will be available until March 5 by dialing 855.859.2056 or 404.537.3406, using conference ID 81032416.
UPCOMING EVENTS
Leerink Swann Global Healthcare Conference on Feb. 13 at 10:30 a.m. Eastern in New York
Cowen and Co. 33rd Annual Health Care Conference on March 5 at 8:40 a.m. Eastern in Boston
Barclays Global Healthcare Conference on March 13 at 9:30 a.m. Eastern in Miami
At these events, Cardinal Health will discuss the company’s diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, go to the Investors page at cardinalhealth.com.
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, including our relationships with CVS Caremark Corporation and Walgreen Co.; 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 Feb. 5, 2013. 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)
 
Second Quarter
 
 
(in millions, except per Common Share amounts)
2013
 
2012
 
% Change
Revenue
$
25,232

 
$
27,078

 
(7
)%
Cost of products sold
24,008

 
25,964

 
(8
)%
Gross margin
1,224

 
1,114

 
10
 %
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Distribution, selling, general and administrative expenses
699

 
640

 
9
 %
Restructuring and employee severance
1

 
2

 
N.M.

Acquisition-related costs
25

 
22

 
N.M.

Impairments and loss on disposal of assets
5

 
1

 
N.M.

Litigation (recoveries)/charges, net
(12
)
 

 
N.M.

Operating earnings
506

 
449

 
13
 %
 
 
 
 
 
 
Other income, net
(4
)
 

 
N.M.

Interest expense, net
27

 
23

 
18
 %
Earnings before income taxes and discontinued operations
483

 
426

 
14
 %
 
 
 
 
 
 
Provision for income taxes
180

 
162

 
11
 %
Earnings from continuing operations
303

 
264

 
15
 %
 
 
 
 
 
 
Loss from discontinued operations, net of tax

 
(2
)
 
N.M.

Net earnings
$
303

 
$
262

 
16
 %
 
 
 
 
 
 
Basic earnings/(loss) per Common Share:
 
 
 
 
 
Continuing operations
$
0.89

 
$
0.77

 
16
 %
Discontinued operations

 
(0.01
)
 
N.M.

Net basic earnings per Common Share
$
0.89

 
$
0.76

 
17
 %
 
 
 
 
 
 
Diluted earnings/(loss) per Common Share:
 
 
 
 
 
Continuing operations
$
0.88

 
$
0.76

 
16
 %
Discontinued operations

 
(0.01
)
 
N.M.

Net diluted earnings per Common Share
$
0.88

 
$
0.75

 
17
 %
 
 
 
 
 
 
Weighted-average number of Common Shares outstanding:
 
 
 
 
 
Basic
340

 
345

 
 
Diluted
343

 
349

 
 




Schedule 2
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
 
Year-to-Date
 
 
(in millions, except per Common Share amounts)
2013
 
2012
 
% Change
Revenue
$
51,121

 
$
53,870

 
(5
)%
Cost of products sold
48,739

 
51,672

 
(6
)%
Gross margin
2,382

 
2,198

 
8
 %
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Distribution, selling, general and administrative expenses
1,388

 
1,283

 
8
 %
Restructuring and employee severance
6

 
5

 
N.M.

Acquisition-related costs
53

 
49

 
N.M.

Impairments and loss on disposal of assets
6

 
2

 
N.M.

Litigation (recoveries)/charges, net
(34
)
 
(3
)
 
N.M.

Operating earnings
963

 
862

 
12
 %
 
 
 
 
 
 
Other (income)/expense, net
(12
)
 
5

 
N.M.

Interest expense, net
53

 
46

 
14
 %
Earnings before income taxes and discontinued operations
922

 
811

 
14
 %
 
 
 
 
 
 
Provision for income taxes
347

 
310

 
12
 %
Earnings from continuing operations
575

 
501

 
15
 %
 
 
 
 
 
 
Loss from discontinued operations, net of tax

 
(2
)
 
N.M.

Net earnings
$
575

 
$
499

 
15
 %
 
 
 
 
 
 
Basic earnings/(loss) per Common Share:
 
 
 
 
 
Continuing operations
$
1.69

 
$
1.45

 
17
 %
Discontinued operations

 
(0.01
)
 
N.M.

Net basic earnings per Common Share
$
1.69

 
$
1.44

 
17
 %
 
 
 
 
 
 
Diluted earnings/(loss) per Common Share:
 
 
 
 
 
Continuing operations
$
1.67

 
$
1.44

 
16
 %
Discontinued operations

 
(0.01
)
 
N.M.

Net diluted earnings per Common Share
$
1.67

 
$
1.43

 
17
 %
 
 
 
 
 
 
Weighted-average number of Common Shares outstanding:
 
 
 
 
 
Basic
340

 
345

 
 
Diluted
344

 
349

 
 




Schedule 3
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions)
December 31,
2012
 
June 30,
2012
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and equivalents
$
2,255

 
$
2,274

Trade receivables, net
6,158

 
6,355

Inventories
8,452

 
7,864

Prepaid expenses and other
996

 
1,017

Total current assets
17,861

 
17,510

 
 
 
 
Property and equipment, net
1,475

 
1,551

Goodwill and other intangibles, net
4,428

 
4,392

Other assets
878

 
807

Total assets
$
24,642

 
$
24,260

 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
11,796

 
$
11,726

Current portion of long-term obligations and other short-term borrowings
474

 
476

Other accrued liabilities
1,932

 
1,972

Total current liabilities
14,202

 
14,174

 
 
 
 
Long-term obligations, less current portion
2,423

 
2,418

Deferred income taxes and other liabilities
1,475

 
1,424

Total shareholders’ equity
6,542

 
6,244

Total liabilities and shareholders’ equity
$
24,642

 
$
24,260





Schedule 4
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
Second Quarter
 
Year-to-Date
(in millions)
2013
 
2012
 
2013
 
2012
Cash flows from operating activities:
 
 
 
 
 
 
 
Net earnings
$
303

 
$
262

 
$
575

 
$
499

Loss from discontinued operations, net of tax

 
2

 

 
2

Earnings from continuing operations
303

 
264

 
575

 
501

 
 
 
 
 
 
 
 
Adjustments to reconcile earnings from continuing operations to net cash provided by/(used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
88

 
78

 
176

 
156

Impairments and loss on disposal of assets
5

 
1

 
6

 
2

Share-based compensation
22

 
22

 
46

 
42

Provision for bad debts
8

 
1

 
9

 
2

Change in operating assets and liabilities, net of effects from acquisitions:
 
 
 
 
 
 
 
Decrease in trade receivables
299

 
236

 
228

 
167

Increase in inventories
(329
)
 
(1,392
)
 
(536
)
 
(1,553
)
Increase/(decrease) in accounts payable
(433
)
 
708

 
31

 
1,118

Other accrued liabilities and operating items, net
(93
)
 
(32
)
 
(97
)
 
(45
)
Net cash provided by/(used in) operating activities
(130
)
 
(114
)
 
438

 
390

 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
Acquisition of subsidiaries, net of cash acquired
(26
)
 

 
(126
)
 
(7
)
Additions to property and equipment
(36
)
 
(57
)
 
(62
)
 
(101
)
Proceeds from maturities of held-to-maturity securities
48

 
25

 
71

 
35

Purchase of held-to-maturity securities and other investments

 
(11
)
 

 
(11
)
Net cash used in investing activities
(14
)
 
(43
)
 
(117
)
 
(84
)
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
Net change in short-term borrowings
27

 
9

 
17

 
4

Reduction of long-term obligations
(2
)
 
(1
)
 
(6
)
 
(1
)
Proceeds from issuance of Common Shares
25

 
14

 
26

 
11

Tax disbursements from share-based compensation
(10
)
 
(4
)
 
(12
)
 

Dividends on Common Shares
(81
)
 
(74
)
 
(165
)
 
(152
)
Purchase of treasury shares

 

 
(200
)
 
(300
)
Net cash used in financing activities
(41
)
 
(56
)
 
(340
)
 
(438
)
 
 
 
 
 
 
 
 
Net decrease in cash and equivalents
(185
)
 
(213
)
 
(19
)
 
(132
)
Cash and equivalents at beginning of period
2,440

 
2,011

 
2,274

 
1,930

Cash and equivalents at end of period
$
2,255

 
$
1,798

 
$
2,255

 
$
1,798






Schedule 5
Cardinal Health, Inc. and Subsidiaries
Total Company Business Analysis
 
 
 
Non-GAAP
 
Second Quarter
 
Second Quarter
(in millions)
2013
 
2012
 
2013
 
2012
Revenue
 
 
 
 
 
 
 
Amount
$
25,232

 
$
27,078

 
 
 
 
Growth rate
(7
)%
 
7
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating earnings
 
 
 
 
 
 
 
Amount
$
506

 
$
449

 
$
525

 
$
475

Growth rate
13
 %
 
31
 %
 
11
%
 
21
%
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
 
 
 
 
 
 
Amount
$
303

 
$
264

 
$
317

 
$
281

Growth rate
15
 %
 
23
 %
 
13
%
 
10
%
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP
 
Year-to-Date
 
Year-to-Date
(in millions)
2013
 
2012
 
2013
 
2012
Revenue
 
 
 
 
 
 
 
Amount
$
51,121

 
$
53,870

 
 
 
 
Growth rate
(5
)%
 
8
 %
 
 
 
 
 
 
 
 
 
 
 
 
Operating earnings
 
 
 
 
 
 
 
Amount
$
963

 
$
862

 
$
995

 
$
917

Growth rate
12
 %
 
22
 %
 
8
%
 
18
%
 
 
 
 
 
 
 
 
Earnings from continuing operations
 
 
 
 
 
 
 
Amount
$
575

 
$
501

 
$
598

 
$
537

Growth rate
15
 %
 
(2
)%
 
11
%
 
10
%
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
 
Second Quarter
 
 
Second Quarter
(in millions)
2013
 
2012
 
(in millions)
2013
 
2012
Pharmaceutical
 
 
 
 
Medical
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
Revenue
 
 
 
Amount
$
22,747

 
$
24,665

 
Amount
$
2,487

 
$
2,416

Growth rate
(8
)%
 
6
%
 
Growth rate
3
%
 
9
 %
Mix
90
 %
 
91
%
 
Mix
10
%
 
9
 %
 
 
 
 
 
 
 
 
 
Segment profit
 
 
 
 
Segment profit
 
 
 
Amount
$
441

 
$
394

 
Amount
$
94

 
$
85

Growth rate
12
 %
 
30
%
 
Growth rate
11
%
 
(18
)%
Mix
83
 %
 
82
%
 
Mix
17
%
 
18
 %
Segment profit margin
1.94
 %
 
1.60
%
 
Segment profit margin
3.76
%
 
3.50
 %
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the three months ended December 31, 2012 was $25,232 million, which included total segment revenue of $25,234 million and Corporate revenue of $(2) million. Total consolidated revenue for the three months ended December 31, 2011 was $27,078 million, which included total segment revenue of $27,081 million and Corporate revenue of $(3) million. Corporate revenue consists primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the three months ended December 31, 2012 were $506 million, which included total segment profit of $535 million and Corporate costs of $(29) million. Total consolidated operating earnings for the three months ended December 31, 2011 were $449 million, which included total segment profit of $479 million and Corporate costs of $(30) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Medical segment profit includes a $5 million favorable out-of-period adjustment to reflect certain vendor chargeback billings that were delayed when we implemented our medical business transformation.



Schedule 7
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
 
Year-to-Date
 
 
Year-to-Date
(in millions)
2013
 
2012
 
(in millions)
2013
 
2012
Pharmaceutical
 
 
 
 
Medical
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
Revenue
 
 
 
Amount
$
46,244

 
$
49,083

 
Amount
$
4,879

 
$
4,796

Growth rate
(6
)%
 
8
%
 
Growth rate
2
%
 
10
 %
Mix
90
 %
 
91
%
 
Mix
10
%
 
9
 %
 
 
 
 
 
 
 
 
 
Segment profit
 
 
 
 
Segment profit
 
 
 
Amount
$
841

 
$
757

 
Amount
$
168

 
$
164

Growth rate
11
 %
 
24
%
 
Growth rate
3
%
 
(12
)%
Mix
83
 %
 
82
%
 
Mix
17
%
 
18
 %
Segment profit margin
1.82
 %
 
1.54
%
 
Segment profit margin
3.44
%
 
3.41
 %
Refer to definitions for an explanation of calculations.
Total consolidated revenue for the six months ended December 31, 2012 was $51,121 million, which included total segment revenue of $51,123 million and Corporate revenue of $(2) million. Total consolidated revenue for the six months ended December 31, 2011 was $53,870 million, which included total segment revenue of $53,879 million and Corporate revenue of $(9) million. Corporate revenue consists primarily of elimination of inter-segment revenue.
Total consolidated operating earnings for the six months ended December 31, 2012 were $963 million, which included total segment profit of $1,009 million and Corporate costs of $(46) million. Total consolidated operating earnings for the six months ended December 31, 2011 were $862 million, which included total segment profit of $921 million and Corporate costs of $(59) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Medical segment profit includes an $8 million favorable out-of-period adjustment to reflect certain vendor chargeback billings that were delayed when we implemented our medical business transformation. The $5 million out-of-period adjustment recorded during the three months ended December 31, 2012 included $2 million related to the three months ended September 30, 2012.



Schedule 8
Cardinal Health, Inc. and Subsidiaries
Schedule of Notable Items
 
Second Quarter
 
Year-to-Date
(in millions, except per Common Share amounts)
2013
 
2012
 
2013
 
2012
Restructuring and employee severance
$
(1
)
 
$
(2
)
 
$
(6
)
 
$
(5
)
Tax benefit
1

 
1

 
2

 
2

Restructuring and employee severance, net of tax
$

 
$
(1
)
 
$
(4
)
 
$
(3
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations
$

 
$

 
$
(0.01
)
 
$
(0.01
)
 
 
 
 
 
 
 
 
Acquisition-Related Costs
 
 
 
 
 
 
 
Amortization of acquisition-related intangible assets
$
(22
)
 
$
(19
)
 
$
(43
)
 
$
(38
)
Tax benefit
8

 
7

 
15

 
14

Amortization of acquisition-related intangible assets, net of tax
$
(14
)
 
$
(12
)
 
$
(28
)
 
$
(24
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations
$
(0.04
)
 
$
(0.03
)
 
$
(0.08
)
 
$
(0.07
)
 
 
 
 
 
 
 
 
Other acquisition-related costs
$
(4
)
 
$
(3
)
 
$
(10
)
 
$
(12
)
Tax benefit
1

 
1

 
3

 
4

Other acquisition-related costs, net of tax
$
(3
)
 
$
(2
)
 
$
(7
)
 
$
(8
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations
$
(0.01
)
 
$
(0.01
)
 
$
(0.02
)
 
$
(0.02
)
 
 
 
 
 
 
 
 
Total acquisition-related costs1
$
(25
)
 
$
(22
)
 
$
(53
)
 
$
(49
)
Tax benefit1
9

 
8

 
19

 
17

Total acquisition-related costs, net of tax1
$
(16
)
 
$
(14
)
 
$
(34
)
 
$
(32
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations1
$
(0.05
)
 
$
(0.04
)
 
$
(0.10
)
 
$
(0.09
)
 
 
 
 
 
 
 
 
Impairments and loss on disposal of assets
$
(5
)
 
$
(1
)
 
$
(6
)
 
$
(2
)
Tax benefit

 

 
1

 
1

Impairments and loss on disposal of assets, net of tax
$
(5
)
 
$
(1
)
 
$
(5
)
 
$
(1
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations
$
(0.01
)
 
$

 
$
(0.01
)
 
$

 
 
 
 
 
 
 
 
Litigation recoveries/(charges), net
$
12

 
$

 
$
34

 
$
3

Tax expense
(5
)
 

 
(14
)
 
(1
)
Litigation recoveries/(charges), net, net of tax
$
7

 
$

 
$
20

 
$
2

 
 
 
 
 
 
 
 
Increase to diluted EPS from continuing operations
$
0.02

 
$

 
$
0.06

 
$
0.01

 
 
 
 
 
 
 
 
Other Spin-Off Costs
$

 
$
(1
)
 
$

 
$
(2
)
Tax benefit

 

 

 

Other Spin-Off Costs, net of tax
$

 
$
(1
)
 
$

 
$
(2
)
 
 
 
 
 
 
 
 
Decrease to diluted EPS from continuing operations
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
Weighted-average number of diluted shares outstanding
343
 
349
 
344
 
349
1 
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 9
Cardinal Health, Inc. and Subsidiaries
Asset Management Analysis
 
Second Quarter
 
Year-to-Date
 
2013
 
2012
 
2013
 
2012
Days sales outstanding1
22.0

 
19.9

 
 
 
 
Days inventory on hand
27.0

 
27.0

 
 
 
 
Days payable outstanding
37.8

 
37.9

 
 
 
 
Net working capital days2
11.3

 
9.1

 
 
 
 

 
 
 
 
 
 
 
Debt to total capital
31
%
 
30
%
 
 
 
 
Net debt to capital
9
%
 
11
%
 
 
 
 
 
 
 
 
 
 
 
 
Return on equity
18.9
%
 
18.0
%
 
18.1
%
 
17.1
%
Non-GAAP return on equity
19.8
%
 
19.1
%
 
18.8
%
 
18.3
%
 
 
 
 
 
 
 
 
Effective tax rate from continuing operations
37.2
%
 
37.9
%
 
37.6
%
 
38.1
%
Non-GAAP effective tax rate from continuing operations
36.8
%
 
37.8
%
 
37.3
%
 
37.9
%
1 
We changed our method of calculating days sales outstanding and have revised prior-year information to conform, refer to Schedule 14.
2 
The sum of the components may not equal the total due to rounding.
Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances. Refer to DSO, DIOH and DPO for definitions and calculations.



Schedule 10
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
 
Second Quarter 2013
 
 
Operating
Earnings Before
Provision
Earnings
Earnings from
Diluted EPS
Diluted EPS
 
 
Earnings
Income Taxes
for
from
Continuing
from
from Continuing
 
Operating
Growth
and Discontinued
Income
Continuing
Operations
Continuing
Operations
(in millions, except per Common Share amounts)
Earnings
Rate
Operations
Taxes
Operations
Growth Rate
Operations
Growth Rate
GAAP
$
506

13
%
$
483

$
180

$
303

15
 %
$
0.88

16
 %
Restructuring and employee severance
1

 
1

1


 

 
Acquisition-related costs
25

 
25

9

16

 
0.05

 
Impairments and loss on disposal of assets
5

 
5


5

 
0.01

 
Litigation (recoveries)/charges, net
(12
)
 
(12
)
(5
)
(7
)
 
(0.02
)
 
Other Spin-Off Costs

 



 

 
Non-GAAP
$
525

11
%
$
502

$
185

$
317

13
 %
$
0.93

15
 %
 
 
 
 
 
 
 
 
 
 
Second Quarter 2012
GAAP
$
449

31
%
$
426

$
162

$
264

23
 %
$
0.76

25
 %
Restructuring and employee severance
2

 
2

1

1

 

 
Acquisition-related costs
22

 
22

8

14

 
0.04

 
Impairments and loss on disposal of assets
1

 
1


1

 

 
Litigation (recoveries)/charges, net

 



 

 
Other Spin-Off Costs
1

 
1


1

 

 
Non-GAAP
$
475

21
%
$
452

$
171

$
281

10
 %
$
0.81

11
 %
 
 
 
 
 
 
 
 
 
 
Year-to-Date 2013
 
 
Operating
Earnings Before
Provision
Earnings
Earnings from
Diluted EPS
Diluted EPS
 
 
Earnings
Income Taxes
for
from
Continuing
from
from Continuing
 
Operating
Growth
and Discontinued
Income
Continuing
Operations
Continuing
Operations
(in millions, except per Common Share amounts)
Earnings
Rate
Operations
Taxes
Operations
Growth Rate
Operations
Growth Rate
GAAP
$
963

12
%
$
922

$
347

$
575

15
 %
$
1.67

16
 %
Restructuring and employee severance
6

 
6

2

4

 
0.01

 
Acquisition-related costs
53

 
53

19

34

 
0.10

 
Impairments and loss on disposal of assets
6

 
6

1

5

 
0.01

 
Litigation (recoveries)/charges, net
(34
)
 
(34
)
(14
)
(20
)
 
(0.06
)
 
Other Spin-Off Costs

 



 

 
Non-GAAP
$
995

8
%
$
953

$
355

$
598

11
 %
$
1.74

13
 %
 
 
 
 
 
 
 
 
 
 
Year-to-Date 2012
GAAP
$
862

22
%
$
811

$
310

$
501

(2
)%
$
1.44

(1
)%
Restructuring and employee severance
5

 
5

2

3

 
0.01

 
Acquisition-related costs
49

 
49

17

32

 
0.09

 
Impairments and loss on disposal of assets
2

 
2

1

1

 

 
Litigation (recoveries)/charges, net
(3
)
 
(3
)
(1
)
(2
)
 
(0.01
)
 
Other Spin-Off Costs
2

 
2


2

 

 
Non-GAAP
$
917

18
%
$
866

$
329

$
537

10
 %
$
1.54

11
 %
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
 
Second Quarter
 
 
(in millions)
2013
 
 
 
2012
 
 
GAAP return on equity
18.9
%
 
 
 
18.0
%
 
 
 
 
 
 
 
 
 
 
Non-GAAP return on equity
 
 
 
 
 
 
 
Net earnings
$
303

 
 
 
$
262

 
 
Restructuring and employee severance, net of tax, in continuing operations

 
 
 
1

 
 
Acquisition-related costs, net of tax, in continuing operations
16

 
 
 
14

 
 
Impairments and loss on disposal of assets, net of tax, in continuing operations
5

 
 
 
1

 
 
Litigation (recoveries)/charges, net, net of tax, in continuing operations
(7
)
 
 
 

 
 
Other Spin-Off Costs, net of tax, in continuing operations

 
 
 
1

 
 
Adjusted net earnings
$
317

 
 
 
$
279

 
 
Annualized
$
1,268

 
 
 
$
1,116

 
 
 
 
 
 
 
 
 
 
 
Second
 
First
 
Second
 
First
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
2013
 
2013
 
2012
 
2012
Total shareholders' equity
$
6,542

 
$
6,281

 
$
5,928

 
$
5,714

Divided by average shareholders' equity
$
6,411

 
 
 
$
5,821

 
 
Non-GAAP return on equity
19.8
%
 
 
 
19.1
%
 
 
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.



Schedule 12
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
 
Year-to-Date
 
 
 
 
(in millions)
2013
 
 
 
 
 
2012
 
 
 
 
GAAP return on equity
18.1
%
 
 
 
 
 
17.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-GAAP return on equity
 
 
 
 
 
 
 
 
 
 
 
Net earnings
$
575

 
 
 
 
 
$
499

 
 
 
 
Restructuring and employee severance, net of tax, in continuing operations
4

 
 
 
 
 
3

 
 
 
 
Acquisition-related costs, net of tax, in continuing operations
34

 
 
 
 
 
32

 
 
 
 
Impairments and loss on disposal of assets, net of tax, in continuing operations
5

 
 
 
 
 
1

 
 
 
 
Litigation (recoveries)/charges, net, net of tax, in continuing operations
(20
)
 
 
 
 
 
(2
)
 
 
 
 
Other Spin-Off Costs, net of tax, in continuing operations

 
 
 
 
 
2

 
 
 
 
Adjusted net earnings
$
598

 
 
 
 
 
$
535

 
 
 
 
Annualized
$
1,196

 
 
 
 
 
$
1,070

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Second
 
First
 
Fourth
 
Second
 
First
 
Fourth
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
Quarter
 
2013
 
2013
 
2012
 
2012
 
2012
 
2011
Total shareholders' equity
$
6,542

 
$
6,281

 
$
6,244

 
$
5,928

 
$
5,714

 
$
5,849

Divided by average shareholders' equity
$
6,355

 
 
 
 
 
$
5,830

 
 
 
 
Non-GAAP return on equity
18.8
%
 
 
 
 
 
18.3
%
 
 
 
 
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.



Schedule 13
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
 
Second Quarter
 
Year-to-Date
(in millions)
2013
 
2012
 
2013
 
2012
GAAP effective tax rate from continuing operations
37.2
%
 
37.9
%
 
37.6
%
 
38.1
%
 
 
 
 
 
 
 
 
Non-GAAP effective tax rate from continuing operations
 
 
 
 
 
 
 
Earnings before income taxes and discontinued operations
$
483

 
$
426

 
$
922

 
$
811

Restructuring and employee severance
1

 
2

 
6

 
5

Acquisition-related costs
25

 
22

 
53

 
49

Impairments and loss on disposal of assets
5

 
1

 
6

 
2

Litigation (recoveries)/charges, net
(12
)
 

 
(34
)
 
(3
)
Other Spin-Off Costs

 
1

 

 
2

Adjusted earnings before income taxes and discontinued operations
$
502

 
$
452

 
$
953

 
$
866

 
 
 
 
 
 
 
 
Provision for income taxes
$
180

 
$
162

 
$
347

 
$
310

Restructuring and employee severance tax benefit
1

 
1

 
2

 
2

Acquisition-related costs tax benefit
9

 
8

 
19

 
17

Impairments and loss on disposal of assets tax benefit

 

 
1

 
1

Litigation (recoveries)/charges, net tax expense
(5
)
 

 
(14
)
 
(1
)
Other Spin-Off Costs tax benefit

 

 

 

Adjusted provision for income taxes
$
185

 
$
171

 
$
355

 
$
329

 
 
 
 
 
 
 
 
Non-GAAP effective tax rate from continuing operations
36.8
%
 
37.8
%
 
37.3
%
 
37.9
%
 
 
 
 
 
 
 
 
 
Second Quarter
 
 
 
 
 
2013
 
2012
 
 
 
 
Debt to total capital
31
%
 
30
%
 
 
 
 
 
 
 
 
 
 
 
 
Net debt to capital
 
 
 
 
 
 
 
Current portion of long-term obligations and other short-term borrowings
$
474

 
$
342

 
 
 
 
Long-term obligations, less current portion
2,423

 
2,211

 
 
 
 
Debt
$
2,897

 
$
2,553

 
 
 
 
Cash and equivalents
(2,255
)
 
(1,798
)
 
 
 
 
Net debt
$
642

 
$
755

 
 
 
 
Total shareholders' equity
6,542

 
5,928

 
 
 
 
Capital
$
7,184

 
$
6,683

 
 
 
 
Net debt to capital
9
%
 
11
%
 
 
 
 
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 and litigation (recoveries)/charges, net, 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

 
Second Quarter
(in millions)
2013
 
2012
Days sales outstanding
22.0

 
19.9

 
 
 
 
Days inventory on hand
 
 
 
Inventories
$
8,452

 
$
8,889

 
 
 
 
Cost of products sold
$
24,008

 
$
25,964

Chargeback billings
4,113

 
3,627

Adjusted cost of products sold
$
28,121

 
$
29,591

Adjusted cost of products sold divided by 90 days
$
312

 
$
329

Days inventory on hand
27.0

 
27.0

 
 
 
 
Days payable outstanding
 
 
 
Accounts payable
$
11,796

 
$
12,457

 
 
 
 
Cost of products sold
$
24,008

 
$
25,964

Chargeback billings
4,113

 
3,627

Adjusted cost of products sold
$
28,121

 
$
29,591

Adjusted cost of products sold divided by 90 days
$
312

 
$
329

Days payable outstanding
37.8

 
37.9

 
 
 
 
Net working capital days1
11.3

 
9.1

1 
The sum of the components may not equal the total due to rounding.
Days Sales Outstanding (DSO): trade receivables, net divided by (quarterly revenue divided by 90 days). Beginning in the first quarter of fiscal 2013, we changed our method of calculating DSO in order to align it with the 90-day convention that we use in the calculation of Days Inventory on Hand and Days Payable Outstanding. Prior to this change we calculated DSO by dividing trade receivable, net by (monthly revenue divided by 30 days). In connection with this change, we have revised prior year information to conform to the new method of calculating DSO.
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 the vendors 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. To conform to the new method of calculating DSO, we have revised prior year information.




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: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding.
Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) acquisition-related costs2, (3) impairments and loss on disposal of assets3, (4) litigation (recoveries)/charges, net4 and (5) Other Spin-Off Costs, 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 and (5) Other Spin-Off Costs) divided by (earnings before income taxes and discontinued operations adjusted for the same five items).
Non-GAAP Operating Earnings: 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 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 and (5) Other Spin-Off Costs, 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 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.
1 
Programs whereby the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, 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 conditions).
2 
Costs that consist primarily of transaction costs, integration costs, changes in the fair value of contingent consideration obligations and amortization of acquisition-related intangible assets.
3 
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 condensed consolidated statements of earnings.
4 
Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.