-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Zv7irFUOiU9Uppw6KjDLKErqYoLFqsasX7GyF4uvrMmSEM9PgMDdDk9SF7X6l55C EsIaLbyEgWoaCF198gw4HQ== 0000950152-94-001109.txt : 19941116 0000950152-94-001109.hdr.sgml : 19941116 ACCESSION NUMBER: 0000950152-94-001109 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941108 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL HEALTH INC CENTRAL INDEX KEY: 0000721371 STANDARD INDUSTRIAL CLASSIFICATION: 5122 IRS NUMBER: 310958666 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11373 FILM NUMBER: 94558125 BUSINESS ADDRESS: STREET 1: 655 METRO PL SOUTH STE 925 CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147618700 MAIL ADDRESS: STREET 1: 655 METRO PLACE SOUTH STREET 2: SUITE 925 CITY: DUBLIN STATE: OH ZIP: 43017 FORMER COMPANY: FORMER CONFORMED NAME: CARDINAL DISTRIBUTION INC DATE OF NAME CHANGE: 19920703 10-Q 1 CARDINAL HEALTH, INC. 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1994 Commission File Number 0-12591 ------------------ ------- CARDINAL HEALTH, INC. --------------------- (Formerly known as Cardinal Distribution, Inc.) (Exact name of registrant as specified in its charter) Ohio 31-0958666 ---- ----------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 655 METRO PLACE SOUTH, SUITE 925, DUBLIN, OHIO 43017 (Address of principal executive offices and zip code) Registrant's telephone number, including area code (614) 761-8700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------------ ------------ The number of Registrant's Common Shares outstanding at November 2, 1994 was as follows: common shares, without par value ("Class A Common Shares") 41,717,532 2 Page 2 of 13 CARDINAL HEALTH, INC. AND SUBSIDIARIES Index
Page No. Part I. Financial Information: --------------------- Item 1. Financial Statements Consolidated Balance Sheets at September 30, 1994 and June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Earnings for the Three Months Ended September 30, 1994 and September 30, 1993 . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1994 and September 30, 1993 . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . 6-7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . 8-9 Part II. Other Information: ----------------- Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 10-13
3 Page 3 of 13 PART I. FINANCIAL INFORMATION CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In thousands)
September 30, 1994 June 30, 1994 ------------------ ------------- (Unaudited) ASSETS Current assets: Cash and equivalents $ 126,781 $ 54,941 Trade receivables 473,137 340,911 Merchandise inventories 962,251 868,210 Prepaid expenses and other 26,656 23,062 ----------- ----------- Total current assets 1,588,825 1,287,124 Property and equipment - at cost: 145,300 119,375 Accumulated depreciation and amortization (72,839) (59,346) ----------- ------------ Property and equipment-net 72,461 60,029 Other assets 65,867 48,449 ----------- ----------- Total $1,727,153 $1,395,602 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable - banks $ $ 25,000 Current portion of long-term obligations 3,517 2,929 Accounts payable 937,215 705,702 Other accrued liabilities 93,753 82,411 ----------- ----------- Total current liabilities 1,034,485 816,042 Long-term obligations - less current portion 211,491 210,086 Other liabilities 143 980 Shareholders' equity: Common Shares-without par value 343,574 255,458 Retained earnings 144,623 120,399 Common Shares in treasury, at cost (3,438) (3,390) Unamortized restricted stock awards (3,725) (3,973) ----------- ----------- Total shareholders' equity 481,034 368,494 ----------- ----------- Total $1,727,153 $ 1,395,602 =========== =========== See notes to consolidated financial statements.
4 Page 4 of 13 CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) (In thousands, except per share amounts)
Three Months Ended ------------------------------------- September 30, September 30, 1994 1993 ------------ ------------- Net sales $1,818,687 $1,291,470 Cost of products sold 1,715,330 1,213,695 ---------- ---------- Gross margin 103,357 77,775 Selling, general & administrative expenses (72,201) (53,556) ---------- ---------- Operating earnings 31,156 24,219 Other income (expense): Interest expense (3,856) (4,227) Other, net 401 1,242 ---------- ---------- Earnings before income taxes 27,701 21,234 Provision for income taxes (11,676) (8,908) ---------- ---------- Net earnings 16,025 12,326 Preferred dividends declared/accretion (520) ---------- ---------- Earnings available for Common Shares $ 16,025 $ 11,806 ========== ========== Earnings per Common Share: Primary $ 0.39 $ 0.30 Fully diluted $ 0.39 $ 0.30 Weighted average number of Common Shares outstanding: Primary 40,614 39,028 Fully diluted 40,678 39,109 See notes to consolidated financial statements.
5 Page 5 of 13 CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Three Months Ended ------------------------------------- September 30, September 30, 1994 1993 --------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 16,025 $ 12,326 Adjustments to reconcile net earnings to net cash from operations: Depreciation and amortization 5,166 4,181 Provision for bad debts 1,650 933 Change in operating assets and liabilities net of effects from acquisitions: Increase in trade receivables (78,421) (20,238) Increase in merchandise inventories (48,552) (70,893) Increase in accounts payable 139,706 70,659 Other operating items - net (1,586) (13,762) --------- --------- Net cash provided by (used in) operating activities 33,988 (16,794) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired (15,784) Additions to property and equipment (6,833) (2,577) Purchase of marketable securities (56,095) Proceeds from sale of marketable securities 75,195 --------- --------- Net cash provided by (used in) investing activities (22,617) 16,523 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term activity (25,000) (408) Reduction of long-term obligations (1,012) (11,573) Proceeds from issuance of Common Shares 70,792 54 Income tax credited to shareholders' equity 16,872 Dividends on common and preferred shares and cash paid in lieu of fractional shares (1,135) (1,086) Purchase of treasury shares (48) Debenture conversion costs charged to shareholders' equity (13) --------- --------- Net cash provided by (used in) financing activities 60,469 (13,026) --------- --------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 71,840 (13,297) CASH AND EQUIVALENTS AT BEGINNING OF YEAR 54,941 61,210 --------- --------- CASH AND EQUIVALENTS AT END OF YEAR $ 126,781 $ 47,913 ========= ========== Supplemental Disclosure of Noncash Investing & Financing Activities: Debentures converted to Common Shares $ 74,920 Unamortized debenture offering costs charged to Common Shares (1,767) See notes to consolidated financial statements.
6 Page 6 of 13 CARDINAL HEALTH, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) Note 1. The consolidated financial statements of the Company include the accounts of all majority-owned subsidiaries and all significant intercompany amounts have been eliminated. The consolidated financial statements have been prepared to give retroactive effect to the pooling-of-interests business combination with Whitmire Distribution Corporation ("Whitmire") on February 7, 1994 (see Note 3). The term "Cardinal", as used herein, refers to Cardinal Health, Inc. and its subsidiaries prior to the Whitmire Merger. The consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q, and include all of the information and disclosures required by generally accepted accounting principles for interim reporting. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes of the Company contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1994. Note 2. Earnings per Common Share are based on the weighted average number of Common Shares outstanding during each period and the dilutive effect of stock options and warrants from the date of grant computed using the treasury stock method. The Company paid a 25% stock dividend on June 30, 1994, to effect a five-for-four split of the Company's Common Shares. All share and per share amounts included in the consolidated financial statements have been adjusted to reflect this stock split. Note 3. On January 27, 1994, shareholders of Cardinal and Whitmire approved and adopted the Agreement and Plan of Reorganization dated October 11, 1993 (the "Reorganization Agreement"), pursuant to which Cardinal Merger Corp., a wholly owned subsidiary of Cardinal, was merged with and into Whitmire effective February 7, 1994. In the merger, which was accounted for as a pooling-of-interests business combination, holders of outstanding Whitmire common stock received an aggregate of approximately 6,802,000 Class A Common Shares and approximately 1,861,000 Class B common shares, without par value, in exchange for all of the previously outstanding common stock of Whitmire. In addition, Whitmire's outstanding stock options were converted into options to purchase an aggregate of approximately 1,721,000 additional Class A Common Shares pursuant to the terms of such options and the Reorganization Agreement. Note 4. On July 1, 1994, the Company purchased all of the common stock of Humiston-Keeling, Inc., a Calumet City, Illinois-based wholesale drug distributor, in a transaction accounted for by the purchase method. Had the purchase occurred at the beginning of Fiscal 1994, operating results on a pro forma basis would not have been significantly different. Note 5. On July 18, 1994, the Company issued Class A Common Shares in exchange for all of the common shares of Behrens Inc., a Waco, Texas- based wholesale drug distributor, in a transaction accounted for as a pooling-of-interests business combination. The impact of the Behrens combination, on both an historical and pro forma basis, is not significant. Accordingly, prior periods have not been restated for the Behrens combination. 7 Page 7 of 13 Note 6. On September 26, 1994, 8,050,000 of the Company's Common Shares were sold pursuant to a public offering. Approximately 1,867,000 Common Shares (the "New Shares") were sold by the Company, and approximately 6,183,000 Common Shares (the "Existing Shares") were sold by certain shareholders of the Company. Net proceeds received by the Company of approximately $70 million from the sale of the New Shares will be used to finance working capital growth and for other general corporate purposes. The Company did not receive any of the proceeds from the sale of the Existing Shares. Note 7. The net earnings and earnings per Common Share, adjusted on a pro forma basis to reflect the redemption of Whitmire's preferred stock pursuant to the terms of the Reorganization Agreement (see Note 3), would have been $12,201,000 and $0.31, respectively, for the three months ended September 30, 1993. Such redemption is assumed to have been funded from the liquidation of investments in tax-exempt marketable securities. 8 Page 8 of 13 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's discussion and analysis presented below has been prepared to give retroactive effect to the pooling-of-interests business combination with Whitmire on February 7, 1994 (see Note 3 of "Notes to Consolidated Financial Statements"). The discussion and analysis presented below is concerned with material changes in financial condition and results of operations for the Company's consolidated balance sheets as of September 30, 1994 and June 30, 1994, and for the consolidated statements of earnings for the three months ended September 30, 1994 and September 30, 1993. Unless indicated to the contrary for purposes of this discussion, all references to "1995" and "1994" shall mean the Company's fiscal years ending June 30, 1995 and June 30, 1994, respectively. NET SALES. Net sales for the first quarter of Fiscal 1995 increased 41% compared to the same period last year. The increase was due to internal business growth of 30% and sales resulting from the acquisitions of Humiston-Keeling, Inc. (see Note 4 of "Notes to Consolidated Financial Statements"), Behrens Inc. (see Note 5 of "Notes to Consolidated Financial Statements"), and PRN Services, Inc. The internal business growth in the first quarter resulted primarily from the addition of new customers (partially as a result of expanded sales territories), increased sales to existing customers and price increases. GROSS MARGIN. As a percentage of net sales, gross margin declined to 5.68% in the first quarter of Fiscal 1995 from 6.02% in the first quarter of Fiscal 1994. The decrease in the gross margin percentage was due to (a) lower selling margin rates, reflecting a more competitive market and a greater mix of higher volume customers, where a lower cost of distribution and better asset management and cash flow enabled the Company to offer lower selling margins, and (b) reduced purchasing gains associated with lower drug price inflation. The reduced purchasing gains were partially offset by a lower LIFO charge. The Company expects the decline in gross margin rates to continue, but at a more moderate rate. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses improved as a percentage of net sales to 3.97% in the first quarter of Fiscal 1995 versus 4.15% in the prior year. The improvements are due primarily to economies associated with the Company's significant sales growth, particularly with major customers where support costs are generally lower, and to productivity improvements. LIQUIDITY AND CAPITAL RESOURCES. Net working capital increased to $554.3 million at September 30, 1994 from $471.1 million at June 30, 1994, and included increased investments in trade receivables, merchandise inventories, and cash and equivalents of $132.2 million, $94.0 million and $71.8 million respectively, and a reduction of notes payable - banks of $25 million, offset primarily by an increase in accounts payable of $231.5 million. The increase in trade receivables was due primarily to internal business growth (see "Net Sales" above) and the acquisitions of Humiston-Keeling and Behrens (see Notes 4 and 5 of "Notes to Consolidated Financial Statements"). The increases in merchandise inventories and accounts payable reflect the timing of seasonal purchases and related payments and the acquisitions of Humiston-Keeling and Behrens. The increase in cash and equivalents was due primarily to (a) the net proceeds received from the issuance of the Company's Common Shares pursuant to a public offering (see Note 6 of "Notes to Consolidated Financial Statements"), and (b) the increase in accounts payable offset by (i) the increased investments in merchandise inventories and trade receivables, as described above, (ii) the repayment of $25 million outstanding under the Company's line-of-credit arrangements, and (iii) net cash paid of approximately $15.8 million to acquire all of the common stock of Humiston-Keeling. 9 Page 9 of 13 Shareholders' equity increased to $481.0 million at September 30, 1994 from $368.5 million at June 30, 1994 due primarily to (a) the issuance of approximately 1,867,000 of the Company's Common Shares pursuant to a public offering (see Note 6 of "Notes to Consolidated Financial Statements"), (b) the recording of tax benefits related to the exercise of stock options of approximately $16.9 million, (c) net earnings of approximately $16.0 million in the first quarter of Fiscal 1995, and (d) the addition of Behrens shareholders' equity of approximately $9.8 million at July 18, 1994 (the date of the pooling-of-interests business combination) (see Note 5 of "Notes to Consolidated Financial Statements"), less dividends paid by the Company of approximately $1.1 million. The Company has line-of-credit arrangements with various bank sources aggregating $315 million, of which $100 million is represented by committed line-of-credit arrangements and the balance is uncommitted. None of the available lines-of-credit of $315 million were in use at September 30, 1994. On May 6, 1993, the Company filed with the Securities and Exchange Commission a Registration Statement for the public offering, from time-to-time, of its debt securities (the "Debt Securities") issuable in one or more series in an aggregate principal amount not to exceed $150 million. On February 23, 1994, the Company sold $100 million of 6.5% Notes due 2004, the net proceeds of which were used for general corporate purposes, including the repayment of bank lines of credit incurred as part of the Whitmire Merger. At September 30, 1994, $50 million of the Debt Securities remain issuable. The Company believes that it has adequate resources at its disposal to meet currently anticipated capital expenditures, routine business growth and expansion, and current and projected debt service, including the additional liquidity and capital requirements associated with recent business combinations (see Notes 3, 4 and 5 of "Notes to Consolidated Financial Statements"). 10 Page 10 of 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings. In November 1993, Cardinal and Whitmire were each named as defendants in a series of purported class action antitrust lawsuits which were later consolidated and transferred by the Judicial Panel for Multi District Litigation to the United States District Court for the Northern District of Illinois (the "Brand Name Prescription Drug Litigation"). Subsequent to the consolidation, a new consolidated complaint ("amended complaint") was filed which included allegations that the wholesaler defendants, including Cardinal and Whitmire, conspired with manufacturers to inflate prices by using a chargeback pricing system. Cardinal and Whitmire have filed an answer denying the allegations in the amended complaint. In addition to the federal court case described above, Whitmire has been named as a defendant in a series of state court cases alleging similar claims under various state laws regarding the sale of Brand Name Prescription Drugs. Effective October 26, 1994, the Company entered into a Judgment Sharing Agreement in the Brand Name Prescription Drug Litigation with other wholesaler and pharmaceutical manufacturer defendants. Under the Judgment Sharing Agreement: (A) the manufacturer defendants agreed to reimburse the wholesaler defendants for litigation costs incurred, up to an aggregate of $9 million; and (B) if a judgment is entered into against both manufacturers and wholesalers, the total exposure for joint and several liability of the Company is limited to the lesser of 1% of such judgment or one million dollars. In addition, the Company has released any claims which it might have had against the manufacturers for the claims presented by the plaintiffs in the Brand Name Prescription Drug Litigation. The Judgment Sharing Agreement covers the federal court litigation as well as the cases which have been filed in various state courts. The Company believes that both the federal and state court allegations against Cardinal and Whitmire are without merit, and it intends to contest such allegations vigorously. Item 6. Exhibits and Reports on Form 8-K. (a) Listing of Exhibits: Exhibit 11.01 Computation of Fully Diluted Earnings Per Share Exhibit 27.01 Financial Data Table (b) Reports on Form 8-K: (i) On September 13, 1994, the Company filed a current report on Form 8-K stating that on July 18, 1994, it issued common shares, without par value, in exchange for all of the common shares of Behrens Inc. ("Behrens") in a transaction accounted for as a pooling-of-interests business combination. Included in the Form 8-K were unaudited financial results combining the operating results of the Company and Behrens for the thirty days ended August 17, 1994, in order to satisfy the requirements for publication of combined results of operations with respect to affiliate trading restrictions as specified in such accounting treatment. 11 Page 11 of 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CARDINAL HEALTH, INC. Date: November 2, 1994 By: /s/ Robert D. Walter ------------------------------ Robert D. Walter Chairman and Chief Executive Officer By: /s/ David Bearman ------------------------------- David Bearman Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) EX-11.01 2 CARDINAL HEALTH EX 11.01 1 Page 12 of 13 Exhibit 11.01 CARDINAL HEALTH, INC. COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE (In thousands, except per share amounts)
Three Months Ended --------------------------------------- September 30, September 30, 1994 1993 ------------- --------------- FULLY DILUTED - - ------------- Average shares outstanding 39,076 34,341 Net effect of dilutive stock options and warrants based on the treasury stock method using the higher of the average or end of period market price 1,602 4,768 ------ ------ Total 40,678 39,109 ====== ====== Earnings available for Common Shares $16,025 $11,806 ====== ====== Earnings per Common Share $0.39 $0.30 ===== =====
EX-27 3 CARDINAL HEALTH EXHIBIT 27
5 1,000 3-MOS JUN-30-1994 JUL-1-1994 SEP-30-1994 126,781 0 497,478 (24,341) 962,251 1,588,825 145,300 (72,839) 1,727,153 1,034,485 211,491 343,574 0 0 137,460 1,727,153 1,818,687 1,818,687 (1,715,330) (1,715,330) (72,201) 0 (3,856) 27,701 (11,676) 16,025 0 0 0 16,025 .39 .39
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