-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V/TS+ZjdAnI721Y14NDmjE4dEi1yCc3f0zwuyjusfMMfPf4FhdKCbqQpAVFnsRnk N2xiHZynvkLL4cb4KvTQxA== 0000950152-95-002495.txt : 19951107 0000950152-95-002495.hdr.sgml : 19951107 ACCESSION NUMBER: 0000950152-95-002495 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951106 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: 95587481 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 Page 1 of 11 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, 1995 Commission File Number 0-12591 Cardinal Health, 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 October 31, 1995 was as follows: Common Shares, without par value: 42,199,518 ---------- 2 Page 2 of 11 CARDINAL HEALTH, INC. AND SUBSIDIARIES Index* Page No. Part I. Financial Information: --------------------- Item 1. Financial Statements Consolidated Statements of Earnings for the Three Months Ended September 30, 1995 and September 30, 1994 . . . . . . . . . . . . . . . 3 Consolidated Balance Sheets at September 30, 1995 and June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows for the Three Months Ended September 30, 1995 and September 30, 1994 . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 9-11 * Items deleted are inapplicable.
3 Page 3 of 11 PART I. FINANCIAL INFORMATION CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Statements of Earnings (Unaudited) (In thousands, except per share amounts)
Three Months Ended --------------------------------- September 30, September 30, 1995 1994 ------------- ----------- Net sales $2,033,034 $ 1,818,687 Cost of products sold 1,914,787 1,715,330 --------- --------- Gross margin 118,247 103,357 Selling, general and administrative expenses (79,840) (72,201) ---------- --------- Operating earnings 38,407 31,156 Other income (expense): Interest expense (4,140) (3,856) Other, net -- primarily interest income 1,119 401 ------- -------- Earnings before income taxes 35,386 27,701 Provision for income taxes (14,859) (11,676) --------- -------- Net earnings $ 20,527 $ 16,025 ======= ======= Net earnings per Common Share: Primary $ 0.48 $ 0.39 Fully diluted $ 0.48 $ 0.39 Weighted average number of Common Shares outstanding: Primary 42,796 40,614 Fully diluted 42,876 40,678
See notes to consolidated financial statements. 4 Page 4 of 11 CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (In thousands)
September 30, 1995 June 30, 1995 ------------------ ------------- ASSETS Current assets: Cash and equivalents $ 42,729 $ 40,619 Marketable securities available for sale 19,501 22,576 Trade receivables 568,269 516,262 Merchandise inventories 1,120,739 1,071,811 Prepaid expenses and other 24,892 23,446 ----------- ----------- Total current assets 1,776,130 1,674,714 ----------- ----------- Property and equipment, at cost 186,667 177,284 Accumulated depreciation and amortization (86,867) (82,056) ----------- ------------ Property and equipment, net 99,800 95,228 Other assets 71,617 71,862 ----------- ----------- Total $1,947,547 $1,841,804 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable, banks $ 19,800 $ 3,000 Current portion of long-term obligations 2,102 2,083 Accounts payable 1,021,894 949,992 Other accrued liabilities 115,477 118,295 ----------- ----------- Total current liabilities 1,159,273 1,073,370 ----------- ----------- Long-term obligations, less current portion 208,179 209,202 Deferred tax and other liabilities 11,364 11,035 Shareholders' equity: Common Shares, without par value 347,047 345,538 Retained earnings 229,073 209,804 Common Shares in treasury, at cost (4,189) (4,011) Unamortized restricted stock awards (3,200) (3,134) ----------- ----------- Total shareholders' equity 568,731 548,197 ----------- ----------- Total $1,947,547 $ 1,841,804 =========== ===========
See notes to consolidated financial statements. 5 Page 5 of 11 CARDINAL HEALTH, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (Unaudited) (In thousands)
Three Months Ended ----------------------------------- September 30, September 30, 1995 1994 ------------ ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 20,527 $ 16,025 Adjustments to reconcile net earnings to net cash from operations: Depreciation and amortization 5,888 5,166 Provision for bad debts 1,749 1,650 Change in operating assets and liabilities, net of effects from acquisitions: Increase in trade receivables (53,756) (78,421) Increase in merchandise inventories (48,928) (48,552) Increase in accounts payable 71,902 139,706 Other operating items -- net (3,872) (1,586) ------- --------- Net cash provided by (used in) operating activities (6,490) 33,988 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiary, net of cash acquired (15,784) Additions to property and equipment (10,101) (6,833) Purchase of marketable securities available for sale (20,000) Proceeds from sale of marketable securities available for sale 23,075 -------- ------ Net cash used in investing activities (7,026) (22,617) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Net short-term borrowing activity 16,800 (25,000) Reduction of long-term obligations (1,004) (1,012) Proceeds from issuance of Common Shares 1,252 70,792 Tax benefit of stock options 16,872 Dividends paid on Common Shares (1,258) (1,135) Purchase of treasury shares (164) (48) -------- ----------- Net cash provided by financing activities 15,626 60,469 ------- -------- NET INCREASE IN CASH AND EQUIVALENTS 2,110 71,840 CASH AND EQUIVALENTS AT BEGINNING OF YEAR 40,619 54,941 ------- --------- CASH AND EQUIVALENTS AT END OF YEAR $ 42,729 $ 126,781 ======== =======
See notes to consolidated financial statements. 6 Page 6 of 11 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. These 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 necessary for a fair presentation have been included. All such adjustments are of a normal, recurring nature. Certain reclassifications have been made to the comparative period's amounts to conform with the classifications at September 30, 1995. The consolidated financial statements included herein should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995. 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 from the date of grant computed using the treasury stock method. Note 3. During the three months ended September 30, 1995, the Company incurred merger costs related to the Whitmire Distribution Corporation ("Whitmire") merger of approximately $3.0 million and as of September 30, 1995 has incurred aggregate costs of approximately $29.9 million. The estimated remaining merger costs to be incurred totaled $6.0 million at September 30, 1995, and the Company's current estimates of the merger costs ultimately to be incurred are not materially different than the amounts originally recorded. The Company anticipates that the remainder of these costs will be expended during fiscal 1996. 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 for cash of $33,334,000, in a transaction accounted for by the purchase method. Note 5. On July 18, 1994, the Company issued approximately 944,000 Common Shares in a merger transaction 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, the prior period has not been restated for the Behrens combination. 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. 7 Page 7 of 11 Note 7. On August 26, 1995, the Company signed a definitive merger agreement with Medicine Shoppe International, Inc. ("Medicine Shoppe"), a franchisor of independent retail pharmacies. Under the terms of the transaction, shareholders of Medicine Shoppe will receive Cardinal Common Shares in exchange for common shares of Medicine Shoppe. The Company expects to issue between 6.0 million and 6.8 million Common Shares in the transaction, depending, in part, upon the average closing price of Cardinal Common Shares over a specified period. Under certain circumstances, the Company could issue up to approximately 7.2 million Common Shares in the transaction. The transaction is subject to certain conditions including approval by Medicine Shoppe shareholders and is expected to be accounted for as a pooling-of-interests. On October 10, 1995 the Company filed a Registration Statement on Form S-4 with the Securities and Exchange Commission to register the Common Shares to be issued to Medicine Shoppe shareholders upon consummation of the merger. On October 11, 1995, the Registration Statement was declared effective and a vote on the transaction by Medicine Shoppe shareholders is scheduled for November 13, 1995. 8 Page 8 of 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's discussion and analysis is presented below with regard to material changes in financial condition and results of operations for the Company's consolidated balance sheets as of September 30, 1995 and June 30, 1995, and for the consolidated statements of earnings for the three months ended September 30, 1995 and September 30, 1994. NET SALES. Net sales for the first quarter of fiscal 1996 increased 12% compared to the same period last year. The increase was entirely due to internal business growth resulting from increased sales to existing customers as well as the addition of new customers and price increases. The sales growth rate continues to be above industry levels but is lower than reported in prior periods because focus has been placed on achieving a better balance between volume growth and margin improvement (see "Gross Margin" below). GROSS MARGIN. As a percentage of net sales, gross margin increased to 5.82% in the first quarter of fiscal 1996 from 5.68% in the first quarter of fiscal 1995. The increase in the gross margin percentage was primarily due to growth in the Company's higher margin specialty businesses and expanded marketing programs with existing customers and manufacturers. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses improved as a percentage of net sales to 3.93% in the first quarter of fiscal 1996 versus 3.97% in the prior year. The improvement is primarily due to economies associated with the Company's sales growth, particularly with major customers where support costs are generally lower, and to consolidating distribution and administrative functions. LIQUIDITY AND CAPITAL RESOURCE. Net working capital increased to $616.9 million at September 30, 1995 from $601.3 million at June 30, 1995, and included increased investments in trade receivables and merchandise inventories of $52.0 million and $48.9 million, respectively, offset by an increase in notes payable, banks of $16.8 million and accounts payable of $71.9 million. The increase in trade receivables was due primarily to internal business growth (see "Net Sales" above). The increases in merchandise inventories, notes payable, banks and accounts payable reflect the timing of seasonal purchases and related payments. Property and equipment, at cost increased by $9.4 million from June 30, 1995. The property acquired included increased investment in management information systems, customer support systems, and automation of distribution facilities. During the three months ended September 30, 1995, the Company incurred merger costs related to the Whitmire merger of approximately $3.0 million (see Note 3 of "Notes to Consolidated Financial Statements" for additional information). Shareholders' equity increased to $568.7 million at September 30, 1995 from $548.2 million at June 30, 1995 due primarily to net earnings of approximately $20.5 million in the first quarter of fiscal 1996, less dividends paid by the Company of approximately $1.3 million. The Company has line-of-credit arrangements with various bank sources aggregating $325 million, of which $100 million is represented by committed line-of-credit arrangements and the balance is uncommitted. The amount outstanding under such arrangements was $19.8 million and $3.0 million at September 30, 1995 and June 30, 1995, respectively. On August 26, 1995, the Company signed a definitive merger agreement with Medicine Shoppe International, Inc. (see Note 7 of "Notes to Consolidated Financial Statements" for additional information). If this transaction is consummated, the Company expects to issue between 6.0 and 6.8 million Cardinal Common Shares. At September 30, 1995, the Company has the capacity to offer to the public debt securities of up to $200 million pursuant to Shelf Registrations filed with the Securities and Exchange Commission. 9 Page 9 of 11 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. PART II. OTHER INFORMATION Item 1: Legal Proceedings As described in Item 3 of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1995, 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"). No material developments occurred in connection with the Brand Name Prescription Drug Litigation during the first quarter of fiscal 1996. The Company believes that both Federal and state allegations against Cardinal and Whitmire are without merit, and it intends to contest such allegations vigorously. The Company does not believe that the outcome of these lawsuits will have a material adverse effect on the Company's financial condition or results of operations. The Company also becomes involved from time to time in ordinary routine litigation incidental to its business, none of which is expected to have any material adverse effect on the Company's financial condition or results of operations. Item 6: Exhibits and Reports on Form 8-K: (a) Listing of Exhibits: Exhibit 11.01: Computation of Per Share Earnings Exhibit 27.01: Financial Data Schedule (b) Reports on Form 8-K: The Company filed a Report on Form 8-K on August 30, 1995, reporting under Item 5 the announcement that the Company, Arch Merger Corp., a wholly-owned subsidiary of the Company,and Medicine Shoppe International, Inc. had entered into an Agreement and Plan of Merger . 10 Page 10 of 11 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 3, 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 2 CARDINAL HEALTH EX-11 1 Page 11 of 11 Exhibit 11.01 CARDINAL HEALTH, INC. COMPUTATION OF PER SHARE EARNINGS (In thousands, except per share amounts)
Three Months Ended -------------------------------------------- September 30, September 30, 1995 1994 ----------- ------------ PRIMARY - ------- Net earnings $20,527 $16,025 ====== ====== Average shares outstanding 42,010 39,076 Dilutive effect of stock options 786 1,538 ------ ------- Total 42,796 40,614 ====== ====== Primary earnings per Common Share $0.48 $0.39 ====== ====== FULLY DILUTED - ------------- Net earnings $20,527 $16,025 ====== ====== Average shares outstanding 42,010 39,076 Dilutive effect of stock options 866 1,602 ------- ------- Total 42,876 40,678 ====== ====== Fully diluted earnings per Common Share $0.48 $0.39 ====== ======
EX-27 3 CARDINAL HEALTH EX-27
5 1,000 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 42,729 19,501 596,613 (28,344) 1,120,739 1,776,130 186,667 (86,867) 1,947,547 1,159,273 208,179 347,047 0 0 221,684 1,947,547 2,033,034 2,033,034 1,914,787 1,914,787 (79,840) 0 (4,140) 35,386 (14,859) 20,527 0 0 0 20,527 .48 .48
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