-----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, tG96Y01JqqtKELsHkEzssHMryQGH/USYwC2/Nj7MwSN8pjliOBvH0qjDBTGUgP13 dnTD+7Wi5ugtXFIZ/SDbWQ== 0000950152-95-000106.txt : 19950515 0000950152-95-000106.hdr.sgml : 19950515 ACCESSION NUMBER: 0000950152-95-000106 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950208 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARDINAL HEALTH INC CENTRAL INDEX KEY: 0000721371 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [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: 95506453 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 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 December 31, 1994 Commission File Number 0-12591 ----------------- ------- CARDINAL HEALTH, INC. -------------------- (Formerly known as Cardinal Distribution, Inc.) (Exact name of registrant as specified in its charter) Ohio 31-0958666 ---- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 655 METRO PLACE SOUTH, SUITE 925, DUBLIN, OHIO 43017 (Address of principal executive offices and zip code) Registrant's telephone number, including area code (614) 761-8700 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------- ------- The number of Registrant's Common Shares outstanding at January 27, 1995 was as follows: common shares, without par value ("Class A Common Shares") 41,869,453 2 CARDINAL HEALTH, INC. Page 2 of 13 AND SUBSIDIARIES Index Page No. Part I. Financial Information: Item 1. Financial Statements Consolidated Balance Sheets at December 31, 1994 and June 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Earnings for the Three and Six Months Ended December 31, 1994 and December 31, 1993 . . . . . . . 4 Consolidated Statements of Cash Flows for the Six Months Ended December 31, 1994 and December 31, 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 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 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)
December 31, 1994 June 30, 1994 ----------------- ------------- (Unaudited) ASSETS Current assets: Cash and equivalents $ 53,632 $ 54,941 Marketable securities 46,803 Trade receivables 511,254 340,911 Merchandise inventories 1,117,587 868,210 Prepaid expenses and other 21,912 23,062 ----------- ----------- Total current assets 1,751,188 1,287,124 Property and equipment - at cost: 150,326 119,375 Accumulated depreciation and amortization (76,069) (59,346) ------------ ------------ Property and equipment - net 74,257 60,029 Other assets 74,144 48,449 ----------- ----------- Total $ 1,899,589 $ 1,395,602 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable - banks $ 77,800 $ 25,000 Current portion of long-term obligations 3,490 2,929 Accounts payable 1,009,019 705,702 Other accrued liabilities 99,047 82,411 ----------- ----------- Total current liabilities 1,189,356 816,042 Long-term obligations - less current portion 209,806 210,086 Other liabilities 980 Shareholders' equity: Common Shares-without par value 343,237 255,458 Retained earnings 164,245 120,399 Common Shares in treasury, at cost (3,567) (3,390) Unamortized restricted stock awards (3,488) (3,973) ---------- ---------- Total shareholders' equity 500,427 368,494 ---------- ----------- Total $ 1,899,589 $ 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 Six Months Ended ------------------------------- ------------------------------ December 31, December 31, December 31, December 31, 1994 1993 1994 1993 ------------ ------------ ----------- ----------- Net sales $1,985,863 $1,397,769 $3,804,550 $2,689,239 Cost of products sold 1,873,388 1,314,457 3,588,718 2,528,152 ----------- ----------- ----------- ----------- Gross margin 112,475 83,312 215,832 161,087 Selling, general & administrative exp. (73,800) (54,855) (146,001) (108,411) ----------- ----------- ----------- ----------- Operating earnings 38,675 28,457 69,831 52,676 Other income (expense): Interest expense (4,390) (4,311) (8,246) (8,538) Other, net 1,765 1,019 2,166 2,261 ----------- ----------- ----------- ----------- Earnings before income taxes 36,050 25,165 63,751 46,399 Provision for income taxes (15,173) (10,072) (26,849) (18,980) ----------- ----------- ----------- ---------- Net earnings 20,877 15,093 36,902 27,419 Preferred dividends declared/accretion (519) (1,039) ----------- ----------- ----------- ----------- Earnings available for Common Shares $ 20,877 $ 14,574 $ 36,902 $ 26,380 =========== ============ =========== =========== Earnings per Common Share: Primary $ 0.49 $ 0.37 $ 0.89 $ 0.67 Fully Diluted $ 0.49 $ 0.37 $ 0.88 $ 0.67 Weighted average number of Common Shares outstanding: Primary 42,660 39,283 41,637 39,155 Fully diluted 42,693 39,345 41,728 39,227
See notes to consolidated financial statements. 5 Page 5 of 13 CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Six Months Ended ------------------------------------- December 31, December 31, 1994 1993 ------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 36,902 $ 27,419 Adjustments to reconcile net earnings to net cash from operations: Depreciation and amortization 10,282 8,228 Provision for bad debts 4,989 1,751 Change in operating assets and liabilities net of effects from acquisitions: Increase in trade receivables (120,377) (58,962) Increase in merchandise inventories (204,813) (247,157) Increase in accounts payable 211,509 265,734 Other operating items - net 1,082 (18,915) ----------- ---------- Net cash used in operating activities (60,426) (21,902) ----------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired (15,784) Additions to property and equipment (13,137) (4,416) Purchase of marketable securities (144,628) (115,241) Proceeds from sale of marketable securities 97,825 148,960 ----------- ---------- Net cash provided by (used in) investing activities (75,724) 29,303 ----------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Reduction of short-term borrowings of an acquired subsidiary (5,226) Net short-term activity 52,800 Reduction of long-term obligations (2,724) (1,074) Proceeds from long-term obligations 11,338 Proceeds from issuance of Common Shares 70,966 353 Income tax credited to shareholders' equity 16,362 Dividends on common and preferred shares and cash paid in lieu of fractional shares (2,386) (2,175) Purchase of treasury shares (177) (58) Debenture conversion costs charged to shareholders' equity (13) ---------- ---------- Net cash provided by financing activities 134,841 3,145 --------- ---------- NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (1,309) 10,546 CASH AND EQUIVALENTS AT BEGINNING OF YEAR 54,941 61,210 ---------- ---------- CASH AND EQUIVALENTS AT END OF YEAR $ 53,632 $ 71,756 ========== ========== 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 were 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 (on both a primary and fully diluted basis), 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 $14,968,000 and $0.38, respectively, for the three months ended December 31, 1993 and $27,169,000 and $0.69, respectively, for the six months ended December 31, 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 December 31, 1994, and June 30, 1994, and for the consolidated statements of earnings for the three and six month periods ended December 31, 1994 and December 31, 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 increased 42% for the second quarter of Fiscal 1995, and 41% for the six-month period ended December 31, 1994, compared to the same period last year. The increases in both the second quarter and six-month period were due to internal business growth of 31% 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 resulted primarily from the addition of new customers and increased sales to existing customers. GROSS MARGIN. As a percentage of net sales, gross margin declined to 5.66% in the second quarter of Fiscal 1995 from 5.96% in the second quarter of Fiscal 1994. The gross margin percentage for the six month period declined to 5.67% versus 5.99% last year. The decreases in the gross margin percentage in both the second quarter and six-month period were primarily due to 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. 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 3.72% in the second quarter and 3.84% for the six month period of Fiscal 1995 versus 3.92% and 4.03% for the same periods 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, including the consolidation of several distribution centers and the ongoing modernization of existing facilities. LIQUIDITY AND CAPITAL RESOURCES. Net working capital increased to $561.8 million at December 31, 1994 from $471.1 million at June 30, 1994, and included increased investments in merchandise inventories, trade receivables, and cash and equivalents and marketable securities of $249.4 million, $170.3 million and $45.5 million respectively, offset primarily by increases in accounts payable and notes payable - banks of $303.3 million and $52.8 million, respectively. The increases in merchandise inventories, accounts payable and notes payable - banks reflect the timing of seasonal purchases and related payments and the acquisitions of Humiston-Keeling and Behrens. 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 increase in cash and equivalents and marketable securities was due primarily to 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). 9 Page 9 of 13 Shareholders' equity increased to $500.4 million at December 31, 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) net earnings of approximately $36.9 million in the six months ended December 31, 1994, (c) the recording of tax benefits related to the exercise of stock options of approximately $16.4 million, 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"), offset primarily by (i) dividends paid by the Company of approximately $2.4 million. The Company has line-of-credit arrangements with various bank sources aggregating $310 million, of which $100 million is represented by committed line-of-credit arrangements and the balance is uncommitted. The amount outstanding under such arrangement as of December 31, 1994 was $77.8 million. 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 "Existing 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 December 31, 1994, $50 million of the Existing Debt Securities remain issuable. On January 10, 1995, the Company filed with the Securities and Exchange Commission a Registration Statement for the public offering, from time-to-time, of an additional $150 million of its debt securities (the "New Debt Securities"). As of January 27, 1995, the Registration Statement for the public offering of the New Debt Securities had not yet been declared effective by the Securities and Exchange Commission. 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. On December 15, 1994, the plaintiffs filed a motion to declare the Judgment Sharing Agreement unenforceable. The Company believes that the plaintiff's motion is without merit and, together with the other parties to the Judgment Sharing Agreement, has filed a memorandum against the plaintiff's motion. The court is not expected to rule on the plaintiff's motion prior to the third week of February, 1995. 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 4. Submission of Matters to a Vote of Security Holders. (a) Registrant's 1994 Annual Meeting of Shareholders was held on November 8, 1994. (b) Proxies were solicited by Registrant's management pursuant to Regulation 14 under the Securities Exchange Act of 1934; there was no solicitation in opposition to management's nominees as listed in the proxy statement; and all director nominees were elected to the class indicated in the proxy statement pursuant to the vote of the Registrant's shareholders. (c) Matters voted upon at the Annual Meeting were as follows: (1) Election of John F. Finn, John F. Havens, L. Jack Van Fossen, and Robert D. Walter as directors of the Company. The results of the shareholder vote were as follows: Mr. Finn, 25,864,940 for, 16,058 against, 2,538 withheld, and 14,433,783 broker non- vote; Mr. Havens, 25,854,563 for, 16,058 against, 12,915 withheld, and 14,433,783 broker non-vote; Mr. Van Fossen, 24,212,951 for, 16,058 against, 1,654,527 withheld, and 14,433,783 broker non-vote; Mr. Walter 25,865,375 for, 16,058 against, 2,103 withheld, and 14,433,783 broker non-vote. 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: None 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: January 30, 1995 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 10-Q EXHIBIT 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 Six Months Ended ----------------------------------- ----------------------------------- December 31, December 31, December 31, December 31, 1994 1993 1994 1993 -------------- --------------- -------------- --------------- FULLY DILUTED Average shares outstanding 41,726 34,430 40,401 34,385 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 967 4,915 1,327 4,842 ------ ------- ------- ------- Total 42,693 39,345 41,728 39,227 ====== ====== ====== ====== Earnings available for Common Shares $20,877 $14,574 $ 36,902 $26,380 ====== ====== ====== ====== Earnings per Common Share $ 0.49 $ 0.37 $ .88 $ 0.67 ====== ====== ====== ======
EX-27 3 CARDINAL 10-Q EXHIBIT 27
5 1,000 6-MOS JUN-30-1995 JUL-01-1994 DEC-31-1994 53,632 46,803 538,124 (26,870) 1,117,587 1,751,188 150,326 (76,069) 1,899,589 1,189,356 209,806 343,237 0 0 157,190 1,899,589 3,804,550 3,804,550 (3,588,718) (3,588,718) (146,001) 0 (8,246) 63,751 (26,849) 36,902 0 0 0 36,902 0.89 0.88
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