-----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, SX7tucCcvwiqBR39bULNYN/4tm0V0nDzqcAPDOIJG+G+d/jkv9BtmR5LHEtL9DGs bmSuh1jgOyO4P1HUmGtfDg== 0000950152-01-001103.txt : 20010223 0000950152-01-001103.hdr.sgml : 20010223 ACCESSION NUMBER: 0000950152-01-001103 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 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: SEC FILE NUMBER: 001-11373 FILM NUMBER: 1545281 BUSINESS ADDRESS: STREET 1: 7000 CARDINAL PL CITY: DUBLIN STATE: OH ZIP: 43017 BUSINESS PHONE: 6147175000 MAIL ADDRESS: STREET 1: 5555 GLEDNON COURT CITY: DUBLIN STATE: OH ZIP: 43016 FORMER COMPANY: FORMER CONFORMED NAME: CARDINAL DISTRIBUTION INC DATE OF NAME CHANGE: 19920703 10-Q 1 l86087ae10-q.txt CARDINAL HEALTH, INC. 10-Q 1 UNITED STATES 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 The Quarter Ended December 31, 2000 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.) 7000 CARDINAL PLACE, DUBLIN, OHIO 43017 (Address of principal executive offices and zip code) (614) 757-5000 (Registrant's telephone number, including area code) 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 the close of business on January 31, 2001 was as follows: Common Shares, without par value: 280,367,358 ------------- 2 CARDINAL HEALTH, INC. AND SUBSIDIARIES Index *
Page No. -------- Part I. Financial Information: --------------------- Item 1. Financial Statements: Condensed Consolidated Statements of Earnings for the Three and Six Months Ended December 31, 2000 and 1999 (unaudited)....................................... 3 Condensed Consolidated Balance Sheets at December 31, 2000 and June 30, 2000 (unaudited).......................................................... 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 31, 2000 and 1999 (unaudited)............................................. 5 Notes to Condensed Consolidated Financial Statements............................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition............................................................ 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 14 Part II. Other Information: ----------------- Item 1. Legal Proceedings.................................................................. 14 Item 4. Submission of Matters to a Vote of Security Holders................................ 15 Item 6. Exhibits and Reports on Form 8-K................................................... 15
* Items not listed are inapplicable. Page 2 3 PART I. FINANCIAL INFORMATION CARDINAL HEALTH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, ----------------------- ------------------------- 2000 1999 2000 1999 -------- -------- --------- --------- Revenue: Operating revenue $7,745.1 $6,254.3 $14,728.3 $12,083.6 Bulk deliveries to customer warehouses 1,892.8 1,145.2 3,644.2 2,099.6 -------- -------- --------- --------- Total revenue 9,637.9 7,399.5 18,372.5 14,183.2 Cost of products sold: Operating cost of products sold 6,936.1 5,532.7 13,182.9 10,707.2 Cost of products sold - bulk deliveries 1,892.8 1,144.9 3,644.2 2,099.3 -------- -------- --------- --------- Total cost of products sold 8,828.9 6,677.6 16,827.1 12,806.5 Gross margin 809.0 721.9 1,545.4 1,376.7 Selling, general and administrative expenses 445.4 415.3 871.5 806.6 Merger-related costs 7.0 5.5 24.3 42.3 -------- -------- --------- --------- Operating earnings 356.6 301.1 649.6 527.8 Interest expense and other (30.5) (26.8) (57.5) (51.7) -------- -------- --------- --------- Earnings before income taxes 326.1 274.3 592.1 476.1 Provision for income taxes 116.9 100.8 209.7 180.6 -------- -------- --------- --------- Net earnings $ 209.2 $ 173.5 $ 382.4 $ 295.5 ======== ======== ========= ========= Earnings per Common Share: Basic $ 0.75 $ 0.62 $ 1.37 $ 1.05 Diluted $ 0.73 $ 0.61 $ 1.34 $ 1.03 Weighted average number of Common Shares outstanding: Basic 279.3 280.4 278.5 280.2 Diluted 286.4 285.1 285.5 285.8 Cash dividends declared per Common Share $ 0.030 $ 0.025 $ 0.060 $ 0.050
See notes to condensed consolidated financial statements. Page 3 4 CARDINAL HEALTH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN MILLIONS)
DECEMBER 31, JUNE 30, 2000 2000 ------------ --------- ASSETS Current assets: Cash and equivalents $ 416.2 $ 504.6 Trade receivables, net 2,225.3 1,677.0 Current portion of net investment in sales-type leases 218.4 187.7 Inventories 5,206.8 3,865.3 Prepaid expenses and other 707.9 636.0 --------- --------- Total current assets 8,774.6 6,870.6 --------- --------- Property and equipment, at cost 3,084.0 2,937.8 Accumulated depreciation and amortization (1,395.9) (1,310.9) --------- --------- Property and equipment, net 1,688.1 1,626.9 Other assets: Net investment in sales-type leases, less current portion 600.8 578.6 Goodwill and other intangibles 1,022.2 961.7 Other 240.7 227.1 --------- --------- Total $12,326.4 $10,264.9 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable, banks $ 20.6 $ 19.1 Current portion of long-term obligations 7.6 9.3 Accounts payable 4,350.0 3,030.9 Other accrued liabilities 976.9 1,202.2 --------- --------- Total current liabilities 5,355.1 4,261.5 --------- --------- Long-term obligations, less current portion 1,980.5 1,485.8 Deferred income taxes and other liabilities 659.0 536.4 Shareholders' equity: Common Shares, without par value 1,363.4 1,227.9 Retained earnings 3,537.6 3,173.4 Common Shares in treasury, at cost (453.6) (329.1) Other comprehensive income (108.8) (81.9) Other (6.8) (9.1) --------- --------- Total shareholders' equity 4,331.8 3,981.2 --------- --------- Total $12,326.4 $10,264.9 ========= =========
See notes to condensed consolidated financial statements. Page 4 5 CARDINAL HEALTH, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN MILLIONS)
SIX MONTHS ENDED DECEMBER 31, 2000 1999 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 382.4 $ 295.5 Adjustments to reconcile net earnings to net cash from operating activities: Depreciation and amortization 130.7 125.3 Provision for bad debts 8.0 14.0 Change in operating assets and liabilities, net of effects from acquisitions: Increase in trade receivables (458.4) (301.4) Increase in inventories (1,237.1) (1,102.3) Increase in net investment in sales-type leases (52.9) (65.8) Increase in accounts payable 1,252.3 675.5 Other operating items, net (147.5) 76.5 ---------- ---------- Net cash used in operating activities (122.5) (282.7) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of subsidiaries, net of cash acquired (262.3) (62.6) Proceeds from sale of property and equipment 3.6 14.5 Additions to property and equipment (129.0) (149.3) Other -- 48.3 ---------- ---------- Net cash used in investing activities (387.7) (149.1) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in commercial paper and short-term debt 96.9 693.8 Reduction of long-term obligations (12.1) (140.8) Proceeds from long-term obligations, net of issuance costs 409.2 -- Common shares issued under employee benefit plans 84.1 20.6 Dividends on Common Shares and cash paid in lieu of fractional shares (16.7) (14.1) Purchase of treasury shares (138.1) (22.6) Other (1.5) -- ---------- ---------- Net cash provided by financing activities 421.8 536.9 ---------- ---------- NET INCREASE/(DECREASE) IN CASH AND EQUIVALENTS (88.4) 105.1 CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 504.6 185.4 ---------- ---------- CASH AND EQUIVALENTS AT END OF PERIOD $ 416.2 $ 290.5 ========== ==========
See notes to condensed consolidated financial statements. Page 5 6 CARDINAL HEALTH, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. The condensed consolidated financial statements of Cardinal Health, Inc. (the "Company") include the accounts of all majority-owned subsidiaries and all significant intercompany amounts have been eliminated. These condensed 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. Except as disclosed elsewhere herein, all such adjustments are of a normal and recurring nature. The condensed 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, 2000 (the "2000 Form 10-K"). Without limiting the generality of the foregoing, Note 1 of the "Notes to Consolidated Financial Statements" from the 2000 Form 10-K is specifically incorporated herein by reference. Note 2. Basic earnings per Common Share ("Basic") is computed by dividing net earnings (the numerator) by the weighted average number of Common Shares outstanding during each period (the denominator). Diluted earnings per Common Share is similar to the computation for Basic, except that the denominator is increased by the dilutive effect of stock options outstanding, computed using the treasury stock method. In March 2000, the Company's Board of Directors authorized the repurchase of Common Shares up to an aggregate amount of $750 million. Through December 31, 2000, 7 million Common Shares, having an aggregate cost of approximately $440.2 million had been repurchased via an accelerated share repurchase program and placed into treasury shares. In connection with the proposed merger with Bindley Western Industries, Inc. ("Bindley") (see Note 10), the Company's Board of Directors rescinded the remainder of this repurchase program. On November 1, 2000, the shareholders of the Company approved, and the Company's articles of incorporation were amended to effect, an increase in the number of authorized Common Shares, without par value, from 500 million to 750 million. Note 3. The Company's comprehensive income consists of net earnings, foreign currency translation adjustments, unrealized loss on investment and net unrealized loss on derivative instruments as follows:
For the three months ended For the six months ended (in millions) December 31, December 31, 2000 1999 2000 1999 ------ ------ ------ ------ Net earnings $209.2 $173.5 $382.4 $295.5 Foreign currency adjustments (0.7) (1.2) (21.0) 0.7 Unrealized loss on investment -- -- (5.4) -- Net unrealized loss on derivative instruments (0.3) -- (0.5) -- ------ ------ ------ ------ Total comprehensive income $208.2 $172.3 $355.5 $296.2 ====== ====== ====== ======
Note 4. On August 16, 2000, the Company completed the purchase of Bergen Brunswig Medical Corporation ("BBMC") for approximately $180 million, subject to post-closing adjustments. BBMC distributes medical, surgical and laboratory supplies to doctors' offices, long-term care and nursing centers, hospitals and other providers of care. In addition, the Company also completed several other individually immaterial acquisitions during the quarter and six months ended December 31, 2000. These transactions were accounted for under the purchase method of accounting. The condensed consolidated financial statements include the results of operations from each of these business combinations as of the date of acquisition. Had the transactions occurred on July 1, 1999, results of operations would not have differed materially from reported results. Page 6 7 Note 5. Costs of effecting mergers and subsequently integrating the operations of the various merged companies are recorded as merger-related costs when incurred. The merger-related costs currently being recognized are primarily a result of the merger transactions with Automatic Liquid Packaging, Inc. ("ALP"), Allegiance Corporation ("Allegiance") and R.P. Scherer Corporation ("Scherer"). The following is a summary of the merger-related costs for the three and six-month periods ended December 31, 2000 and 1999.
Three months ended Six months ended December 31, December 31, ------------------------------------------------------------------------------------------------------ (in millions) 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------------ Transaction and employee-related costs $(2.8) $(0.4) $(10.7) $(21.7) Exit costs (0.1) (0.5) (0.2) (4.8) Restructuring costs -- (0.1) (1.6) (7.0) Other integration costs (4.1) (4.5) (11.8) (8.8) ------------------------------------------------------------------------------------------------------ Total merger related costs $(7.0) $(5.5) $(24.3) $(42.3) Tax effect of merger related costs 1.6 2.1 7.9 9.2 ------------------------------------------------------------------------------------------------------ Net effect of special charges $(5.4) $(3.4) $(16.4) $(33.1) ======================================================================================================
During the above stated periods, the Company incurred direct transaction costs related to its merger transactions. These expenses primarily include investment banking, legal, accounting and other professional fees associated with the respective merger transaction. In addition, the Company incurred employee-related costs, which consist primarily of severance and transaction/stay bonuses as a result of the ALP, Allegiance and Scherer merger transactions. Partially offsetting the transaction and employee-related costs recorded during the first quarter of fiscal 2000 was a $10.3 million credit recorded to adjust the estimated transaction and employee-related costs previously recorded in connection with the Allegiance merger transaction. Actual billings and employee-related costs were less than the amounts originally anticipated, resulting in a reduction of the merger-related costs. Exit costs relate primarily to costs associated with lease terminations and moving expenses as a direct result of the merger transactions with ALP, Allegiance and Scherer. Other integration costs include charges related to integrating the operations of previous merger transactions. The Company recorded charges of $1.6 million and $7.0 million during the six months ended December 31, 2000 and 1999, respectively, associated with the business restructuring as a result of the Company's merger transaction with Scherer. As part of the business restructuring, the Company is closing certain facilities. In connection with such closings, the Company has incurred employee-related costs, asset impairment charges and exit costs related to the termination of contracts and lease agreements. The net of tax effect of the various merger-related costs recorded during the three months ended December 31, 2000 and 1999 was to reduce net earnings by $5.4 million to $209.2 million and by $3.4 million to $173.5 million, respectively, and to reduce reported diluted earnings per Common Share by $0.02 per share to $0.73 per share and by $0.01 per share to $0.61 per share, respectively. The net of tax effect of the various merger-related costs recorded during the six months ended December 31, 2000 and 1999 was to reduce net earnings by $16.4 million to $382.4 million and by $33.1 million to $295.5 million, respectively, and to reduce reported diluted earnings per Common Share by $0.06 per share to $1.34 per share and by $0.12 per share to $1.03 per share, respectively. Note 6. The Company is organized based on the products and services it offers. Under this organizational structure, the Company operates in four business segments: Pharmaceutical Distribution and Provider Services, Medical-Surgical Products and Services, Pharmaceutical Technologies and Services and Automation and Information Services. The Company has not made any significant changes in the segments reported or the basis of measurement of segment profit or loss from the information provided in the Company's 2000 Form 10-K. The Pharmaceutical Distribution and Provider Services segment involves the distribution of a broad line of pharmaceuticals, healthcare and beautycare products, therapeutic plasma and other specialty pharmaceutical products and other items typically sold by hospitals, retail drug stores and other healthcare providers. In addition, this segment provides services to the healthcare industry through integrated pharmacy management, temporary pharmacy staffing, as well as franchising of apothecary-style retail pharmacies. Page 7 8 The Medical-Surgical Products and Services segment involves the manufacture of medical, surgical and laboratory products and the distribution of these and other products to hospitals, physician offices, surgery centers and other healthcare providers, as well as providing healthcare consulting services. The Pharmaceutical Technologies and Services segment provides services to the pharmaceutical manufacturing industry through the design of unique drug delivery systems, liquid fill contract manufacturing and comprehensive packaging services. The Automation and Information Services segment provides services to hospitals and other healthcare providers through pharmacy automation equipment and clinical information system services. The Company evaluates the performance of the segments based on operating earnings after the corporate allocation of administrative expenses. Special charges are not allocated to the segments. The following table includes revenue and operating earnings for the three and six-month periods ended December 31, 2000 and 1999 for each segment and reconciling items necessary to equal amounts reported in the condensed consolidated financial statements:
For the three months ended For the six months ended December 31, December 31, -------------------------- ------------------------ (in millions) Net Revenue Net Revenue ----------------------- ------------------------ 2000 1999 2000 1999 -------- -------- --------- --------- Operating revenue: Pharmaceutical Distribution and Provider Services $5,885.3 $4,607.9 $11,137.3 $ 8,897.6 Medical-Surgical Products and Services 1,473.7 1,279.2 2,852.2 2,492.0 Pharmaceutical Technologies and Services 286.6 262.7 558.7 521.6 Automation and Information Services 119.5 104.1 209.6 173.9 Other (20.0) 0.4 (29.5) (1.5) -------- -------- --------- --------- Total operating revenue 7,745.1 6,254.3 14,728.3 12,083.6 Bulk deliveries to customer warehouses: Pharmaceutical Distribution and Provider Services 1,892.8 1,145.2 3,644.2 2,099.6 -------- -------- --------- --------- Total net revenue $9,637.9 $7,399.5 $18,372.5 $14,183.2 ======== ======== ========= =========
Operating Earnings Operating Earnings --------------------- --------------------- 2000 1999 2000 1999 ------ ------ ------ ------ Operating earnings: Pharmaceutical Distribution and Provider Services $174.6 $135.1 $325.7 $259.4 Medical-Surgical Products and Services 105.0 88.9 207.6 175.5 Pharmaceutical Technologies and Services 58.9 51.3 108.8 96.3 Automation and Information Services 45.4 38.9 68.5 56.0 Corporate (1) (27.3) (13.1) (61.0) (59.4) ------ ------ ------ ------ Total operating earnings $356.6 $301.1 $649.6 $527.8 ====== ====== ====== ======
(1) Corporate - operating earnings primarily consist of special charges of $7.0 million and $5.5 million for the three months ended December 31, 2000 and 1999, respectively, and $24.3 million and $42.3 million for the six months ended December 31, 2000 and 1999, respectively, and unallocated corporate depreciation and amortization and administrative expenses. Note 7. On September 30, 1996, Baxter International Inc. ("Baxter") and its subsidiaries transferred to Allegiance and its subsidiaries their U.S. Healthcare distribution business, surgical and respiratory therapy business and healthcare cost-saving business, as well as certain foreign operations (the "Allegiance Business") in connection with a spin-off of the Allegiance Business by Baxter. In connection with this spin-off, Allegiance, which was acquired by the Company on February 3, 1999, assumed the defense of litigation Page 8 9 involving claims related to the Allegiance Business from Baxter Healthcare Corporation ("BHC"), including certain claims of alleged personal injuries as a result of exposure to natural rubber latex gloves. Allegiance will be defending and indemnifying BHC, as contemplated by the agreements between Baxter and Allegiance, for all expenses and potential liabilities associated with claims pertaining to the litigation assumed by Allegiance. As of December 31, 2000, there were approximately 571 lawsuits involving BHC and/or Allegiance containing allegations of sensitization to natural rubber latex products. Some of the cases are now proceeding to trial. Because of the increase in claims filed and the ongoing defense costs that will be incurred, the Company believes it is probable that it will continue to incur significant expenses related to the defense of cases involving natural rubber latex gloves. At this time, the Company is unable to evaluate the extent of any potential liability, and unable to estimate any potential loss. AEIA, one of the insurers for the latex glove litigation, has advised the Company of its intent to resolve through arbitration the extent of its obligation to reimburse the Company for certain defense costs and loss expenses incurred in connection with the litigation. The Company believes a substantial portion of any liability will be covered by insurance, subject to self-insurance retentions, exclusions, conditions, coverage gaps, policy limits and insurer solvency. The Company also becomes involved from time-to-time in other litigation incidental to its business, including without limitation inclusion of certain of its subsidiaries as a potentially responsible party for environmental clean-up costs. Although the ultimate resolution of the litigation referenced herein cannot be forecast with certainty, the Company intends to vigorously defend itself and does not believe that the outcome of any pending litigation will have a material adverse effect on the Company's condensed consolidated financial statements. Note 8. As of July 1, 2000, the Company adopted the Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as amended in June 2000 by Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which requires companies to recognize all derivatives as either assets or liabilities in the balance sheet and measure such instruments at fair value. The adoption of these statements did not have a material impact on the Company's consolidated financial statements. In September 2000, the Financial Accounting Standards Board issued the Statement of Financial Accounting Standards No. 140 ("SFAS 140"), "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities," which is effective for any activities occurring after March 31, 2001. SFAS 140 replaces SFAS 125 "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities", therefore revising the disclosure for securitizations and other transfers of financial assets or collateral. The Company does not anticipate that the adoption of SFAS 140 will have a material impact on the consolidated financial statements. On December 3, 1999, the SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements" which requires adoption during the fourth quarter of fiscal 2001. At this time, the Company does not anticipate that the adoption of SAB 101 will have a material impact on the consolidated financial statements. The Company will continue to analyze the impact of SAB 101, including any amendments or further interpretation, based upon the relevant facts and circumstances at the time of adoption. Note 9. The Company periodically sells trade receivables to a special purpose accounts receivable and financing entity ("SPE"), which is exclusively engaged in purchasing trade receivables from, and making loans to, the Company. During the quarter ended December 31, 2000, the SPE, which is consolidated by the Company, issued $400 million in preferred debt securities to parties not affiliated with the Company. Those preferred securities must be retired or redeemed before the Company can have access to the SPE's receivables. Note 10. On December 4, 2000, the Company announced that it had entered into a definitive merger agreement with Bindley, pursuant to which Bindley will become a wholly owned subsidiary of the Company in a stock-for-stock merger. This merger transaction is expected to be accounted for as a pooling-of-interests for financial reporting purposes. Under the terms of the proposed merger, shareholders of Bindley will receive 0.4275 of a Company common share in exchange for each outstanding common share of Bindley. The Bindley shareholders have approved the merger, which will become effective at 5:00 pm on February 14, 2001. Page 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's discussion and analysis is concerned with material changes in financial condition and results of operations for the Company's condensed consolidated balance sheets as of December 31, 2000 and June 30, 2000, and for the condensed consolidated statements of earnings for the three and six-month periods ended December 31, 2000 and 1999. This discussion and analysis should be read together with management's discussion and analysis included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2000. Portions of management's discussion and analysis presented below include "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "anticipate", "project", and similar expressions, among others, identify "forward-looking statements", which speak only as of the date the statement was made. Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to materially differ from those made, projected or implied. The most significant of such risks, uncertainties and other factors are described in Exhibit 99.01 to this Form 10-Q and are incorporated herein by reference. The Company disclaims any obligation to update any forward-looking statement. GENERAL The Company operates within four operating business segments: Pharmaceutical Distribution and Provider Services, Medical-Surgical Products and Services, Pharmaceutical Technologies and Services and Automation and Information Services. See Note 6 of "Notes to Condensed Consolidated Financial Statements" for a description of these segments. RESULTS OF OPERATIONS
Operating Revenue Three months ended Six months ended December 31, 2000 December 31, 2000 -------------------------------------------------------------------- Percent of Total Percent of Total Growth (1) Operating Revenues Growth (1) Operating Revenues - --------------------------------------------------------------------------------------------------------------------- Pharmaceutical Distribution and Provider Services 28% 76% 25% 76% Medical-Surgical Products and Services 15% 19% 14% 19% Pharmaceutical Technologies and Services 9% 4% 7% 4% Automation and Information Services 15% 1% 21% 1% Total Company 24% 100% 22% 100% - -------------------------------------------------------------------------------- ----------------------------------
(1) The growth rate applies to the applicable three and six-month periods ended December 31, 2000 compared to the corresponding periods of the prior year. Total operating revenue for the three and six months ended December 31, 2000 increased 24% and 22%, respectively, compared to the same period of the prior year. The majority of the operating revenue increase came from existing customers in the form of increased volume and price increases. A portion of the growth was a result of acquisitions during the six months ended December 31, 2000 (see Note 4 of "Notes to Condensed Consolidated Financial Statements"). The remainder of the growth came from the addition of new customers. The Pharmaceutical Distribution and Provider Services segment's operating revenue growth during the three and six months ended December 31, 2000 was primarily due to strong sales to all customer segments, especially pharmacy chain stores. All operating revenue growth for this segment was internal and was the result of increased volume to existing customers and new contracts. The increase in the Medical-Surgical Products and Services segment's operating revenue over the quarter and six months ended December 31, 1999 was mainly due to an increase in sales of distributed products. Bergen Brunswig Medical Corporation ("BBMC") was acquired in the first quarter of fiscal 2001 and accounted for as a purchase transaction. As prior year revenues for this segment were not restated, the inclusion of BBMC revenues for the three Page 10 11 and six months ended December 31, 2000 significantly increased revenues over the prior year for distributed products. The growth in operating revenue for the Pharmaceutical Technologies and Services segment during the second quarter and first six months of fiscal 2001 was the result of higher sales volume in each of the businesses in the segment, led by liquid fill contract manufacturing. The growth was attributable to a mix of new products and customers and increased volume from existing customers. The liquid fill contract manufacturing business' revenue growth was primarily a result of increased volume from existing customers. In addition, cross-selling opportunities among the businesses within this segment contributed to the increase in operating revenue. The increase in operating revenue for the Automation and Information Services segment during the three and six months ended December 31, 2000 was primarily due to sales of new products and further penetration of the market with existing automation products. Bulk Deliveries to Customer Warehouses. The Company reports as revenue bulk deliveries made to customers' warehouses, whereby the Company acts as an intermediary in the ordering and subsequent delivery of pharmaceutical products. Fluctuations in bulk deliveries result largely from circumstances that are beyond the control of the Company, including consolidation within customers' industries, decisions by customers to either begin or discontinue warehousing activities, and changes in policies by manufacturers related to selling directly to customers. Due to the lack of margin generated through bulk deliveries, fluctuations in their amount have no significant impact on the Company's operating earnings.
Gross Margin Three months ended Six months ended December 31, December 31, - -------------------------------------------------------------------------------------------------------------------- (as a percentage of operating revenue) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Pharmaceutical Distribution and Provider Services 5.31% 5.69% 5.33% 5.71% Medical-Surgical Products and Services 21.60% 22.97% 22.03% 22.99% Pharmaceutical Technologies and Services 35.77% 34.96% 34.15% 33.39% Automation and Information Services 68.30% 69.94% 66.59% 69.48% Total Company 10.44% 11.54% 10.49% 11.39% - --------------------------------------------------------------------------------------------------------------------
The decrease in consolidated gross margin as a percentage of operating revenue during the three and six months ended December 31, 2000 was due primarily to a greater mix of lower margin pharmaceutical distribution during the quarter and six-month periods ended December 31, 2000, as well as a decrease in margins for the Medical-Surgical Products and Services and Automation and Information Services segments. The Pharmaceutical Distribution and Provider Services segment's mix increased to 76% of total operating revenues for both the three and six months ended December 31, 2000 from 74% during each of the comparable periods of the prior year. The Pharmaceutical Distribution and Provider Services segment's gross margin as a percentage of operating revenue decreased primarily as a result of lower selling margins due to a greater mix of sales to retail pharmacy chains. Such customers have a relatively lower margin in connection with a lower cost of service (see discussion in selling, general and administrative expenses). This decrease was partially offset by higher vendor margins from favorable price increases and manufacturer marketing programs. The decrease in the Medical-Surgical Products segment's gross margin during the three and six-month periods ended December 31, 2000 over the comparable periods of prior year was primarily due to the purchase of BBMC. As expected, this transaction shifted product mix toward lower margin distributed products. Excluding the impact of the BBMC acquisition, segment gross margin was relatively unchanged from the prior year. The increase in the Pharmaceutical Technologies and Services segment's gross margin was due primarily to the continued focus on higher margin pharmaceutical products and services, especially in liquid fill contract manufacturing, which had the strongest growth in this segment. Gross margin was also favorably impacted by better profitability on certain vitamin products, as well as an improvement in manufacturing processes as a result of improved productivity and ongoing plant modernization. The decrease in gross margin for the Automation and Information Services segment for the periods ended December 31, 2000 was primarily due to product mix with the "supply" product line (which carries a lower margin, as well as a lower cost to service) growing faster than the "medication" product line. Page 11 12
Selling, General & Administrative Expenses Three months ended Six months ended December 31, December 31, - -------------------------------------------------------------------------------------------------------------------- (as a percentage of operating revenue) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Pharmaceutical Distribution and Provider Services 2.34% 2.76% 2.41% 2.80% Medical-Surgical Products and Services 14.43% 16.02% 14.74% 15.95% Pharmaceutical Technologies and Services 15.22% 15.41% 14.67% 14.91% Automation and Information Services 30.31% 32.54% 33.91% 37.25% Total Company 5.75% 6.64% 5.92% 6.67% - --------------------------------------------------------------------------------------------------------------------
The improvement in selling, general and administrative expenses as a percentage of operating revenue for the three and six-month periods ended December 31, 2000 reflects economies of scale associated with the Company's revenue growth, as well as significant productivity gains resulting from continued cost control efforts and the consolidation and selective automation of operating facilities. In addition, the Company is continuing to take advantage of synergies from recent acquisitions to decrease selling, general and administrative expenses as a percentage of operating revenue. The overall increase of 7% and 8% in selling, general and administrative expenses experienced in the three and six months ended December 31, 2000 compared to the respective periods a year ago, was due primarily to increases in personnel costs and depreciation expense. The increase in selling, general and administrative expenses compares favorably to the 24% and 22% growth in operating revenue for the three and six months ended December 31, 2000. Merger-Related Costs. Costs of effecting mergers and subsequently integrating the operations of the various merged companies are recorded as merger-related costs when incurred. The merger-related costs currently being recognized are primarily a result of the merger transactions with Automatic Liquid Packaging, Inc. ("ALP"), Allegiance Corporation ("Allegiance") and R.P. Scherer Corporation ("Scherer"). The following is a summary of the merger-related costs for the three and six-month periods ended December 31, 2000 and 1999.
Three months ended Six months ended December 31, December 31, ------------------------------------------------------------------------------------------------------------ (in millions) 2000 1999 2000 1999 ------------------------------------------------------------------------------------------------------------ Transaction and employee-related costs $(2.8) $(0.4) $(10.7) $(21.7) Exit costs (0.1) (0.5) (0.2) (4.8) Restructuring costs -- (0.1) (1.6) (7.0) Other integration costs (4.1) (4.5) (11.8) (8.8) ------------------------------------------------------------------------------------------------------------ Total merger related costs $(7.0) $(5.5) $(24.3) $(42.3) Tax effect of merger related costs 1.6 2.1 7.9 9.2 ------------------------------------------------------------------------------------------------------------ Net effect of special charges $(5.4) $(3.4) $(16.4) $(33.1) ============================================================================================================
During the above stated periods, the Company incurred direct transaction costs related to its merger transactions. These expenses primarily include investment banking, legal, accounting and other professional fees associated with the respective merger transaction. In addition, the Company incurred employee-related costs, which consist primarily of severance and transaction/stay bonuses as a result of the ALP, Allegiance and Scherer merger transactions. Partially offsetting the transaction and employee-related costs recorded during the first quarter of fiscal 2000 was a $10.3 million credit recorded to adjust the estimated transaction and employee-related costs previously recorded in connection with the Allegiance merger transaction. Actual billings and employee-related costs were less than the amounts originally anticipated, resulting in a reduction of the merger-related costs. Exit costs relate primarily to costs associated with lease terminations and moving expenses as a direct result of the merger transactions with ALP, Allegiance and Scherer. Other integration costs include charges related to integrating the operations of previous merger transactions. The Company recorded charges of $1.6 million and $7.0 million during the six months ended December 31, 2000 and 1999, respectively, associated with the business restructuring as a result of the Company's merger transaction with Scherer. As part of the business restructuring, the Company is closing certain facilities. In connection with such closings, the Company has incurred employee-related costs, asset impairment charges and exit costs related to the termination of contracts and lease agreements. Page 12 13 The net of tax effect of the various merger-related costs recorded during the three months ended December 31, 2000 and 1999 was to reduce net earnings by $5.4 million to $209.2 million and by $3.4 million to $173.5 million, respectively, and to reduce reported diluted earnings per Common Share by $0.02 per share to $0.73 per share and by $0.01 per share to $0.61 per share, respectively. The net of tax effect of the various merger-related costs recorded during the six months ended December 31, 2000 and 1999 was to reduce net earnings by $16.4 million to $382.4 million and by $33.1 million to $295.5 million, respectively, and to reduce reported diluted earnings per Common Share by $0.06 per share to $1.34 per share and by $0.12 per share to $1.03 per share, respectively. The Company estimates that it will incur additional merger-related costs and integration expenses associated with the various mergers it has completed to date (primarily related to the Allegiance, ALP and BBMC mergers) of approximately $65.7 million ($42.7 million, net of tax) in future periods (primarily fiscal 2001 and 2002) related to the exit of contractual arrangements, employee-related costs, and costs to properly integrate operations and implement efficiencies. Such amounts will be charged to expense when incurred. Provision for Income Taxes. The Company's provision for income taxes relative to pre-tax earnings was 35.8% and 36.8%, respectively for the second quarters of fiscal 2001 and 2000 and 35.4% and 37.9%, respectively for the six-month periods ending December 31, 2000 and 1999. The decrease in the effective tax rate for the periods was primarily the result of two factors. First, the tax rate decreased due to lower nondeductible items associated with the business combinations in the current year as compared to the prior year. The second factor resulting in a decrease in the effective tax rate was the favorable mix of international and domestic business. The provision for income taxes excluding the impact of merger-related charges was 35.5% and 36.8%, respectively, for the quarters ended December 31, 2000 and 1999 and 35.3% and 36.6%, respectively, for the six months ended December 31, 2000 and 1999. LIQUIDITY AND CAPITAL RESOURCES Working capital increased to $3.4 billion at December 31, 2000 from $2.6 billion at June 30, 2000. This increase from June 30, 2000 included additional investments in inventories and trade receivables of $1.3 billion and $0.5 billion, respectively. Offsetting the increases in current assets was an increase in accounts payable of $1.3 billion. The Company's trade receivable and inventory levels have risen due to the higher volume of current business in pharmaceutical distribution activities. A portion of the inventory increase can also be attributed to the Company investing in inventories in conjunction with various vendor-margin programs. In addition, the change in accounts payable is due primarily to the timing of inventory purchases and related payments. During the first quarter of fiscal 2001, the Company increased the capacity under its commercial paper program from $1.0 billion to $1.5 billion in aggregate maturity value. At December 31, 2000, commercial paper with an aggregate maturity value of $0.6 billion was outstanding with a market interest rate based upon LIBOR. The Company also maintains a $1.5 billion unsecured bank credit facility. This credit facility exists largely to support issuance of commercial paper and other short-term borrowings. The Company periodically sells trade receivables to a special purpose accounts receivable and financing entity ("SPE"), which is exclusively engaged in purchasing trade receivables from, and making loans to, the Company. During the quarter ended December 31, 2000, the SPE, which is consolidated by the Company, issued $400 million in preferred debt securities to parties not affiliated with the Company. Those preferred securities must be retired or redeemed before the Company can have access to the SPE's receivables (see Note 9 of "Notes to Condensed Consolidated Financial Statements"). Property and equipment, at cost, increased by $146.2 million from June 30, 2000. The increase was the result of two main factors. First, the Company is involved in ongoing plant expansion and manufacturing equipment purchases in certain businesses, as well as additional investments made for management information systems and upgrades to distribution facilities. Second, the Company completed several acquisitions in the first six months of fiscal year 2001 that were accounted for as purchase transactions (see Note 4 of "Notes to Condensed Consolidated Financial Statements"). Shareholders' equity increased to $4.3 billion at December 31, 2000 from $4.0 billion at June 30, 2000, primarily due to net earnings of $382.4 million and the investment of $84.1 million by employees of the Company through various employee stock benefit plans. These increases were offset by an increase in treasury stock due to the settlement of the accelerated share repurchase program in the amount of $137.4 million (see Note 2 of "Notes to Condensed Consolidated Financial Statements"). In addition, shareholders' equity decreased due to dividends paid of $16.7 million. Page 13 14 The Company filed a combination shelf debt and equity registration statement on Form S-3 with the Securities and Exchange Commission, which was declared effective on September 29, 2000. The registration increases the Company's shelf common shares and debt capacity for general corporate purposes to an aggregate of $1.0 billion as of December 31, 2000. During February 2001, the Company issued 500,000 Common Shares for aggregate proceeds of $47.7 million which are to be used for general corporate purposes. The common shares were issued in order for the Company to be able to satisfy all the conditions to consummation of the merger recently announced by the Company pursuant to which Bindley Western Industries Inc. ("Bindley") will become a subsidiary of the Company. In addition, during February 2001, the Company issued $500 million of 6.75% Notes due 2011, the proceeds of which are to be used for early redemption of Bindley debt and any remaining proceeds to be used for repayment of a portion of the Company's commercial paper and general corporate purposes, which may include working capital, capital expenditures, repayment or refinancing of indebtedness, acquisitions and investments. The Company believes that it has adequate capital resources at its disposal to fund currently anticipated capital expenditures, business growth and expansion, and current and projected debt service requirements. OTHER On December 4, 2000, the Company announced that it had entered into a definitive merger agreement with Bindley, pursuant to which Bindley will become a wholly owned subsidiary of the Company in a stock-for-stock merger. This merger transaction is expected to be accounted for as a pooling-of-interests for financial reporting purposes. Under the terms of the proposed merger, shareholders of Bindley will receive 0.4275 of a Company common share in exchange for each outstanding common share of Bindley. The Bindley shareholders have approved the merger, which will become effective at 5:00 pm on February 14, 2001. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company believes there has been no material change in its exposure to market risk from that discussed in the Company's Form 10-K for the fiscal year ended June 30, 2000. PART II. OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS The following disclosure should be read together with the disclosure set forth in the Company's Form 10-K for the fiscal year ended June 30, 2000, and to the extent any such statements constitute "forward looking statements" reference is made to Exhibit 99.01 of this Form 10-Q. On September 30, 1996, Baxter International Inc. ("Baxter") and its subsidiaries transferred to Allegiance and its subsidiaries their U.S. Healthcare distribution business, surgical and respiratory therapy business and healthcare cost-saving business, as well as certain foreign operations (the "Allegiance Business") in connection with a spin-off of the Allegiance Business by Baxter. In connection with this spin-off, Allegiance, which was acquired by the Company on February 3, 1999, agreed to indemnify certain claims related to the Allegiance Business from Baxter Healthcare Corporation ("BHC"), including certain claims of alleged personal injuries as a result of exposure to natural rubber latex gloves. Allegiance will be defending and indemnifying BHC, as contemplated by the agreements between Baxter and Allegiance, for all expenses and potential liabilities associated with claims pertaining to the litigation assumed by Allegiance. As of December 31, 2000, there were approximately 571 lawsuits involving BHC and/or Allegiance containing allegations of sensitization to natural rubber latex products. Some of the cases are now proceeding to trial. Because of the increase in claims filed and the ongoing defense costs that will be incurred, the Company believes it is probable that it will continue to incur significant expenses related to the defense of cases involving natural rubber latex gloves. At this time, the Company is unable to evaluate the extent of any potential liability, and unable to estimate any potential loss. AEIA, one of the insurers for the latex glove litigation, has advised the Company of its intent to resolve through arbitration the extent of its obligation to reimburse the Company for certain defense costs and loss expenses incurred in connection with the litigation. The Company believes a substantial portion of any liability will be covered by insurance, subject to self-insurance retentions, exclusions, conditions, coverage gaps, policy limits and insurer solvency. The Company also becomes involved from time-to-time in other litigation incidental to its business, including without limitation inclusion of certain of its subsidiaries as a potentially responsible party for environmental clean-up costs. Although the ultimate resolution of the litigation referenced herein cannot be forecast with certainty, the Page 14 15 Company intends to vigorously defend itself and does not believe that the outcome of any pending litigation will have a material adverse effect on the Company's condensed consolidated financial statements. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. (a) Registrant's 2000 Annual Meeting of Shareholders was held on November 1, 2000. (b) Proxies were solicited by Registrant's management pursuant to Regulation 14A 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: (i) Election of Dave Bing, John F. Finn, John F. Havens and Robert D. Walter. The results of the shareholder vote were as follows: Mr. Bing - 236,911,651 for, 0 against, 5,527,121 withheld, and 0 broker non-votes; Mr. Finn - 237, 971,531 for, 0 against, 4,467,241 withheld, and 0 broker non-votes; Mr. Havens - 237,834,077 for, 0 against, 4,604,695 withheld, and 0 broker non-votes; Mr. Walter - 237,966,746 for, 0 against, 4,472,026 withheld, and 0 broker non-votes. (ii) Adoption of an Amendment to the Company's Articles of Incorporation to Increase the Number of Authorized Common Shares. The results of the shareholder vote were as follows: 238,305,832 for, 3,364,681 against, 768,259 withheld, and 0 broker non-votes. (iii) Re-approval of the Material Terms of the Performance Goals under the Cardinal Health, Inc. Performance-Based Incentive Compensation Plan. The results of the shareholder vote were as follows: 237,831,944 for, 3,593,321 against, 1,103,507 withheld, and 0 broker non-votes. (iv) Proposal from Shareholders to Phase Out PVC Use in Manufacture of Medical Supplies. The results of the shareholder vote were as follows: 6,547,936 for, 205,384,515 against, 7,162,217 withhold, and 23,344,104 broker non-votes. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K: (a) Listing of Exhibits: Exhibit Number Exhibit Description -------------- ------------------- 2.01 Agreement and Plan of Merger, dated as of December 2, 2000, among the Registrant, Brick Merger Corp. and Bindley Western Industries, Inc. (1) 2.02 Stock Option Agreement, dated as of December 2, 2000, between the Registrant and Bindley Western Industries, Inc. (1) 2.03 Voting/Support Agreement, dated as of December 2, 2000, between the Registrant and William E. Bindley (1) 2.04 Voting/Support Agreement, dated as of December 2, 2000, between the Registrant and Thomas J. Salentine (1) 2.05 Voting/Support Agreement, dated as of December 2, 2000, between the Registrant and Michael D. McCormick (1) 2.06 Voting/Support Agreement, dated as of December 2, 2000, between the Registrant and Keith W. Burks (1) 3.01 Amended and Restated Articles of Incorporation of the Registrant, as amended. (1) and (2) Page 15 16 Exhibit Number Exhibit Description -------------- ------------------- 10.01 Extendible Commercial Notes Dealer Agreement 4(2) Program, dated as of November 1, 2000, between the Registrant, as Issuer, and Goldman, Sachs & Co., as Dealer; and Issuing and Paying Agent Agreement dated as of November 1, 2000, between the Registrant, as Issuer, and Bank One, N.A., as Issuing and Paying Agent. 10.02 Change in Control Severance Agreement, by and among the Registrant, Allegiance Corporation, and Kathy Brittain White; Agreement, dated February 9, 2000 (the "2000 Agreement"), between the Registrant and Kathy Brittain White.* ((3), except for the 2000 Agreement, which is included as an Exhibit to this Report on Form 10-Q) 10.03 Change in Control Severance Agreement, by and among the Registrant, Allegiance Corporation and Ronald K. Labrum.* (3) 27.01 Financial Data Schedule - Six months ended December 31, 2000 99.01 Statement Regarding Forward-Looking Information - ------------ (1) Included as an exhibit to the Registrant's Registration Statement on Form S-4 (No. 333-53394) and incorporated herein by reference. (2) Included as an exhibit to the Registrant's Current Report on Form 8-K filed November 24, 1998 (File No. 0-12591) and incorporated herein by reference. (3) Included as an exhibit to Allegiance Corporation's Form S-1/A filed with the Commission on September 30, 1996 (File No. 333-12525) and incorporated herein by reference. * Management contract or compensation plan or arrangement. (b) Reports on Form 8-K: None Page 16 17 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: February 14, 2001 By: /s/ Robert D. Walter -------------------------------------- Robert D. Walter Chairman and Chief Executive Officer By: /s/ Richard J. Miller -------------------------------------- Richard J. Miller Executive Vice President and Chief Financial Officer Page 17 EX-10.01 2 l86087aex10-01.txt EXHIBIT 10.01 1 Extendible Commercial Notes Announcement [GOLDMAN SACHS LOGO] - -------------------------------------------------------------------------------- DRAFT\CARDINAL-ECN 11-14-00 CARDINAL HEALTH, INC. PRIVATE PLACEMENT OF EXTENDIBLE COMMERCIAL NOTES THE NOTES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY OTHER APPLICABLE SECURITIES LAW, AND OFFERS AND SALES THEREOF MAY BE MADE ONLY IN COMPLIANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER WILL BE DEEMED TO REPRESENT THAT IT HAS BEEN AFFORDED AN OPPORTUNITY TO INVESTIGATE MATTERS RELATING TO THE ISSUER AND THE NOTES, THAT IT IS NOT ACQUIRING SUCH NOTE WITH A VIEW TO ANY DISTRIBUTION THEREOF AND THAT IT IS (A) AN INSTITUTIONAL INVESTOR THAT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501(a) UNDER THE ACT (AN "INSTITUTIONAL ACCREDITED INVESTOR") AND THAT EITHER IS PURCHASING NOTES FOR ITS OWN ACCOUNT, IS A U.S. BANK (AS DEFINED IN SECTION 3(a)(2) OF THE ACT) OR A SAVINGS AND LOAN ASSOCIATION OR OTHER INSTITUTION (AS DEFINED IN SECTION 3(a)(5)(A) OF THE ACT) ACTING IN ITS INDIVIDUAL OR FIDUCIARY CAPACITY OR IS A FIDUCIARY OR AGENT (OTHER THAN A U.S. BANK OR SAVINGS AND LOAN ASSOCIATION) PURCHASING NOTES FOR ONE OR MORE ACCOUNTS EACH OF WHICH IS SUCH AN INSTITUTIONAL ACCREDITED INVESTOR OR (B) A QUALIFIED INSTITUTIONAL BUYER ("QIB") WITHIN THE MEANING OF RULE 144A UNDER THE ACT THAT IS ACQUIRING NOTES FOR ITS OWN ACCOUNT OR FOR ONE OR MORE OTHER ACCOUNTS, EACH OF WHICH IS A QIB AND WITH RESPECT TO EACH OF WHICH THE PURCHASER HAS SOLE INVESTMENT DISCRETION; AND THE PURCHASER ACKNOWLEDGES THAT IT IS AWARE THAT THE SELLER MAY RELY UPON THE EXEMPTION FROM THE REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT PROVIDED BY RULE 144A. BY ITS ACCEPTANCE OF A NOTE, THE PURCHASER THEREOF SHALL ALSO BE DEEMED TO AGREE THAT ANY RESALE OR OTHER TRANSFER THEREOF WILL BE MADE ONLY (A) IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE ACT, EITHER (1) TO THE ISSUER OR TO GOLDMAN, SACHS & CO. OR ANOTHER PERSON DESIGNATED BY THE ISSUER AS A PLACEMENT AGENT FOR THE NOTES (COLLECTIVELY, THE "PLACEMENT AGENTS"), NONE OF WHICH SHALL HAVE ANY OBLIGATION TO ACQUIRE SUCH NOTE, (2) THROUGH A PLACEMENT AGENT TO AN INSTITUTIONAL ACCREDITED INVESTOR OR A QIB OR (3) TO A QIB IN A TRANSACTION THAT MEETS THE REQUIREMENTS OF RULE 144A AND (B) IN MINIMUM AMOUNTS OF $250,000. RATINGS: AS OF NOVEMBER __, 2000
Extendible Commercial Notes Commercial Paper Long-Term Debt S&P A-1 A-1 A Moody's P-1 P-1 A2 Fitch F1 F1 A
Ratings are not a recommendation to purchase, hold or sell Notes, inasmuch as the ratings do not comment as to market price or suitability for a particular investor. The ratings are based on current information furnished to the rating agencies by the Company and information obtained by the rating agencies from other sources. The ratings are only accurate as of the date above and may be changed, superseded or withdrawn as a result of changes in, or unavailability of, such information, and therefore, a prospective purchaser should check the current ratings before purchasing Notes. Goldman, Sachs & Co. November 2000 - -------------------------------------------------------------------------------- -1- 2 CARDINAL HEALTH, INC. TERMS OF EXTENDIBLE COMMERCIAL NOTES - ------------------------------------ Issuer: Cardinal Health, Inc. (the "Company")is a leading provider of services supporting healthcare. The Company and its subsidiaries provide a broad array of complementary products and services to health care providers and manufacturers to help them improve the efficiency and quality of health care, including pharmaceutical distribution, health care product manufacturing, distribution and consulting services, drug delivery systems development, pharmaceutical packaging and repackaging, automated dispensing systems, manufacturing, hospital pharmacy management, retail pharmacy franchising, and health care information systems development. Incorporated in: Ohio Securities: Unsecured notes (the "Notes"). Offering Price: Par less a discount representing an interest factor for the period from the date of issue to (but excluding) the Initial Redemption Date, as defined below. Minimum Purchase: $250,000 minimum principal amount. Initial Redemption Date: Not more than 90 days from date of issue. Final Maturity Date: 390 days from date of issue, or if such day is not a Business Day (as defined in the Notes), on the next succeeding Business Day. Initial Redemption: Notes may not be redeemed prior to the Initial Redemption Date. The Notes will be redeemed (in whole but not in part) by the Company on the Initial Redemption Date at 100% of principal amount, unless the Company delivers to the issuing and paying agent for the Notes (the "Paying Agent") by 11:00 a.m. on the Initial Redemption Date a notice that it has elected not to redeem the Notes. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL REDEEM THE NOTES ON THE INITIAL REDEMPTION DATE OR AT ANY OTHER TIME PRIOR TO THE FINAL MATURITY DATE. Interest: The Notes will not bear interest from the date of issue to the Initial Redemption Date. If Notes are not redeemed on the Initial Redemption Date, such Notes will bear interest from the Initial Redemption Date at a floating rate of interest (the "Reset Rate") calculated as set forth below under "Reset Rate". For each Interest Period, interest will accrue from (and including) the first day of such Interest Period to (but excluding) the last day of such Interest Period at the Reset Rate for such Interest Period. Interest Period: Each successive one month period following the Initial Redemption Date. Interest Payment Dates: The first day of each next succeeding Interest Period. Reset Rate: The Reset Rate for each Interest Period will be a per annum rate equal to the greater of (1) the Specified Percentage (set forth in the table below) of LIBOR (as defined below) for such Interest Period and (2) LIBOR for such Interest Period plus the Minimum Margin (set forth in the table below). The Specified Percentage and Minimum Margin will be determined based on the Prevailing Ratings (as defined below), as follows: Prevailing Rating -----------------
Standard Specified Minimum & Poor's Moody's Percentage Margin ------------- ------------- ---------- ------- A-1+ P-1 110% 0.25% A-1 P-1 115% 0.50% A-2 P-2 130% 1.50% A-3 P-3 150% 2.50% Lower than A-3 Lower than P-3 175% 4.00% (or rating (or rating discontinued) discontinued)
- -------------------------------------------------------------------------------- -2- 3 CARDINAL HEALTH, INC. If the Prevailing Ratings would indicate different Specified Percentages and Minimum Margins as a result of split ratings assigned to the Company, the Specified Percentage and Minimum Margin shall be the arithmetic average thereof. Prevailing Ratings: The Company's short-term debt ratings assigned by Standard and Poor's ("S&P") and Moody's Investors Service, Inc. ("Moody's") or any comparable future designation by any successor rating agency; provided, however, that, if at the time of any determination S&P or Moody's has announced that the Company's short-term debt ratings are on S&P's CreditWatch (negative) or on review for downgrade by Moody's, then the Prevailing Rating from such agency shall not be the rating then assigned by such agency but instead will be the next lower rating of such agency. The Prevailing Ratings for each Interest Period will be the ratings assigned to the Company as of 11:00 a.m. on the first day of such Interest Period. LIBOR: One month LIBOR, as defined in the Notes. LIBOR for each Interest Period will be determined by the Calculation Agent on the second LIBOR Business Day (as defined in the Notes) prior to the first day of such Interest Period. Subsequent Redemption: After the Initial Redemption Date, Notes will be redeemable at the option of the Company at any time on not less than five nor more than 25 days' notice at a redemption price equal to 100% of the principal amount together with accrued and unpaid interest to the date of redemption. Events of Default: In the event of the occurrence, on or after the Initial Redemption Date, of (i) default in any payment of principal of or interest on a Note (including on a redemption of a Note on the Initial Redemption Date); or (ii) certain events involving bankruptcy, insolvency or reorganization of the Company, then in any such case the principal amount of each obligation evidenced by such Note (together with any accrued and unpaid interest thereon) shall be due and payable immediately. Settlement: Unless otherwise agreed to, same day basis, in immediately available funds. Issuing and Paying Agent: Bank One, N.A. - -------------------------------------------------------------------------------- -3- 4 CARDINAL HEALTH, INC. HOW TO GET INFORMATION ABOUT THE COMPANY - ---------------------------------------- The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files reports, proxy statements and certain other public information ("SEC Filings") with the Securities and Exchange Commission (the "SEC"). Certain SEC Filings are available via electronic means including the Internet (http://www.sec.gov/cgi-bin/srch-edgar) and Bloomberg Business News. All SEC Filings can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain Regional Offices of the SEC. Copies of SEC Filings can be obtained by mail from the Public Reference Section of the SEC, Washington, D.C. 20549 at prescribed rates. The Company is offering the opportunity to each prospective purchaser, prior to purchasing any Notes, to ask questions of, and receive answers from, the Company and to obtain relevant information to the extent the Company possesses the same or can acquire it without unreasonable effort or expense. To ask any such questions or request additional information regarding the offering or the Company contact: Donna Brandin, Treasurer, Cardinal Health, Inc., 7000 Cardinal Place, Dublin, Ohio 43017, (614) 757-5505. To ask any other questions, contact the Money Markets Investor Services Group at Goldman, Sachs & Co., (212) 902-8470. IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEITHER GOLDMAN, SACHS & CO. NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION OR WARRANTY AS TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR REFERRED TO HEREIN. - -------------------------------------------------------------------------------- -4- EX-10.02 3 l86087aex10-02.txt EXHIBIT 10.02 1 Exhibit A --------- RESTRICTED SHARES AGREEMENT --------------------------- Cardinal Health, Inc., an Ohio corporation (the "Company"), hereby grants, pursuant to the Cardinal Health, Inc. Amended and Restated Equity Incentive Plan, as amended (the "Plan"), to Kathy Brittain WHITE (the "Executive") that number of common shares in the Company (the "Additional Incentive Shares") equal to the quotient of (a) the sum of (i) one half of the Executive's Base Salary as in effect on February 9, 2000 and (ii) one half of the Executive's target annual bonus for fiscal year 2000 under the Bonus Plan calculated on a full year basis based upon the target bonus percentage in effect on February 9, 2000, divided by (b) the closing NYSE sales price per common share on the Grant Date (rounded down to the nearest whole share). The Additional Incentive Shares are subject to all provisions of the Plan, which are hereby incorporated herein by reference, and shall be subject to the provisions of this Agreement. This Agreement also hereby incorporates by reference the Agreement of the Executive and the Company, dated as of February 9, 2000 (the "Agreement"), and any reference to "this Agreement" herein includes this Restricted Shares Agreement and the Agreement. Any capitalized terms used in this Restricted Shares Agreement that are not specifically defined herein shall have the meanings ascribed to such terms in the Agreement. 1. VESTING. Except as otherwise provided in this Agreement, 100% of the Additional Incentive Shares shall vest on February 9, 2002 (which date shall be the "Vesting Date"). 2. PURCHASE PRICE. The purchase price of Additional Incentive Shares shall be $0.00. 3. TRANSFERABILITY. Prior to the Vesting Date, the Executive shall not be permitted to sell, transfer, pledge, assign or otherwise encumber the Additional Incentive Shares. The Additional Incentive Shares will be held by the Company; provided, however, that the Company will deliver certificates representing those Additional Incentive Shares that have fully vested within a reasonable time after being requested in writing to do so. 4. TERMINATION OF SERVICE. If the Executive's employment with the Cardinal Group terminates prior to the Vesting Date, all of the Restricted Shares shall be forfeited. Notwithstanding the foregoing, if the Executive's employment with the Company is terminated before the end of the Employment Period by the Company without Cause or by the Executive for Good Reason, the Additional Incentive Shares shall nevertheless vest on the Vesting Date unless the Executive has violated any of the provisions of Section 4 of the Participant Agreement. If the Executive's employment with the Company terminates prior to the vesting of the Additional Incentive Shares by reason of the Executive's death or disability, then the restrictions with respect to a ratable portion of the Additional Incentive Shares shall lapse and such shares shall not be forfeited, unless the Executive has violated any of the provisions of Section 4 of the Participant Agreement. Such ratable portion shall be an amount equal to the number of Additional Incentive Shares multiplied by the portion of the period between February 9, 2000 and the second anniversary thereof that has expired at the date of the Executive's death or disability. *** 2 5. SPECIAL FORFEITURE/CLAWBACK RULES. Notwithstanding the foregoing, if at any time prior to the Vesting Date, the Executive violates any of the provisions of Section 4 of the Participant Agreement, the Additional Incentive Shares shall be forfeited by the Executive. In addition, if at any time the Executive violates any of the provisions of Section 4 of the Participant Agreement, the Executive is subject to being required to pay the Clawback Amount to the Company, as more fully set forth in Section 2(c) of the Agreement. No provision of this Agreement shall diminish, negate, or otherwise affect any separate noncompete agreement to which the Executive may be a party. The Executive acknowledges and agrees that the provisions contained in this item 5 are being made for the benefit of the Cardinal Group in consideration of the Executive's receipt of the Additional Incentive Shares, in consideration of employment, in consideration of exposing the Executive to the Cardinal Group's business operations and confidential information, and for other good and valuable consideration, the adequacy of which consideration is hereby expressly confirmed. The Executive further acknowledges that the receipt of the Additional Incentive Shares and execution of this Agreement are voluntary actions on the part of the Executive, and that the Company is unwilling to provide the Additional Incentive Shares to the Executive without their being subject to this item 5. 6. RIGHT OF SET-OFF. By accepting these Additional Incentive Shares, the Executive consents to a deduction from and set-off against any amounts owed to the Executive by the Cardinal Group from time to time (including but not limited to amounts owed to the Executive as wages, severance payments, or other fringe benefits) to the extent of the amounts so owed. 7. SHAREHOLDER RIGHTS AND RESTRICTIONS. Except with regard to the disposition of Additional Incentive Shares, the Executive shall generally have all rights of a shareholder with respect to the Additional Incentive Shares from the date of grant, including, without limitation, the right to receive dividends with respect to the Additional Incentive Shares and the right to vote the Additional Incentive Shares, but subject, however, to those restrictions in this Agreement or in the Plan. 8. WITHHOLDING TAX. The Company shall have the right to require the Executive to pay to the Company the amount of any taxes which the Company determines that it is required to withhold with respect to the Additional Incentive Shares (including the amount of any taxes which the Company is required to withhold with respect to dividends on the Additional Incentive Shares) or, in lieu thereof, to retain, or sell without notice, a sufficient number of Additional Incentive Shares to cover the amount required to be withheld. The Company shall also have the right to facilitate withholding by any other method permitted by the Plan. 9. GOVERNING LAW/VENUE. This Agreement shall be governed by the laws of the State of Ohio, without regard to principles of conflicts of law, except to the extent superseded by the laws of the United States of America. In addition, all legal actions or proceedings relating to this Restricted Shares Agreement shall be brought in state or federal courts located in Franklin County, Ohio, and the parties executing this Agreement hereby consent to the personal jurisdiction of such courts. The Executive acknowledges that the covenants contained in item 5 of this Restricted Shares Agreement and in Section 4 of the Participant Agreement are reasonable in nature, are fundamental for the protection of the Cardinal Group's legitimate business and proprietary interests, and do not adversely affect the Executive's ability to earn a living in any capacity that does not violate such covenants. The parties further agree that, in the event of any -2- 3 violation by the Executive of any such covenants, the Cardinal Group will suffer immediate and irreparable injury for which there is no adequate remedy at law. In the event of any violation or attempted violations of such covenants, the Cardinal Group shall be entitled to specific performance and injunctive relief or other equitable relief without any showing of irreparable harm or damage, and the Executive hereby waives any requirement for the securing or posting of any bond in connection with such remedy, without prejudice to the rights and remedies afforded the Cardinal Group hereunder or by law. In the event that it becomes necessary for the Cardinal Group to institute legal proceedings under this Agreement, the Executive shall be responsible to the Cardinal Group for all costs and reasonable legal fees incurred by the Cardinal Group with regard to such proceedings. Any provision of this Agreement that is determined by a court of competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner that is valid and enforceable and that comes closest to the business objectives intended by such provision, without invalidating or rendering unenforceable the remaining provisions of this Agreement. 10. PROMPT ACCEPTANCE OF AGREEMENT. The Additional Incentive Shares grant evidenced by this Agreement shall, at the discretion of the Committee, be forfeited if this Agreement is not executed by the Executive and returned to the Company within sixty days of the grant date set forth below. CARDINAL HEALTH, INC. DATE OF GRANT: February 9, 2000 By: ---------------- -------------------------- Steven Alan Bennett Executive Vice President -3- 4 ACCEPTANCE OF AGREEMENT ----------------------- The Executive hereby: (a) acknowledges that the Executive has received a copy of (i) the attached Restricted Shares Agreement, (ii) the Company's most recent Annual Report and other communications routinely distributed to the Company's shareholders, (iii) the Agreement, (iv) the Plan, and (vi) the most recent summary description of the Plan issued by the Company; and (b) accepts this Agreement and the Additional Incentive Shares granted to the Executive under this Agreement subject to all provisions of the Restricted Shares Agreement, the Plan, and the Agreement; (c) represents and warrants to the Company that the Executive is purchasing the Additional Incentive Shares for the Executive's own account, for investment, and not with a view to or any present intention of selling or distributing the Additional Incentive Shares either now or at any specific or determinable future time or period or upon the occurrence or nonoccurrence of any predetermined or reasonably foreseeable event; and (d) agrees that no transfer of the Additional Incentive Shares shall be made unless the Additional Incentive Shares have been duly registered under all applicable federal, state, local and foreign securities laws pursuant to a then-effective registration that contemplates the proposed transfer or unless the Company has received a written opinion of, or satisfactory to, its legal counsel that the proposed transfer is exempt from such registration. ------------------------------------ Executive's Signature ------------------------------------ Executive's Social Security Number ------------------------------------ Date -4- 5 AGREEMENT --------- THIS AGREEMENT, dated and effective as of the 9th day of February, 2000, is made and entered into by and between Cardinal Health, Inc., an Ohio corporation (the "Company"), and Kathy Brittain White (the "Executive"). WHEREAS, the Company and the Executive desire to set forth in a written agreement the terms and conditions under which the Executive will render services to the Company; WHEREAS, the Executive is covered by the Allegiance Change in Control Plan ("Allegiance Plan") and the Executive's Participant Agreement ("Participant Agreement") thereunder (together, the "Allegiance Arrangement") and the Company and the Executive desire to clarify certain aspects of the Allegiance Arrangement; NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants herein contained, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, agree as follows: 1. ADDITIONAL INCENTIVE AWARDS. If the Executive remains employed by the Company through February 9, 2002, the Executive shall be paid an amount (the "Additional Incentive Bonus") equal to one-half of the sum of (i) the Executive's Base Salary as in effect on February 9, 2000 and (ii) the Executive's target annual bonus for fiscal year 2000 under the Company bonus plan for which the Executive is then eligible calculated on a full year basis based upon the target bonus percentage in effect on February 9, 2000. The Additional Incentive Bonus, if payable, shall be paid as soon as administratively practicable but in no case later than March 31, 2002. In addition, the Executive is simultaneously herewith being granted restricted stock (the "Additional Incentive Shares"), pursuant to the Restricted Shares Agreement attached to this Agreement as Exhibit A (the "Restricted Shares Agreement"). 2. EMPLOYMENT TERMINATION. (a) CONSEQUENCES OF TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY THE EXECUTIVE FOR GOOD REASON. If, at any time prior to February 9, 2002, the Executive's employment is terminated by the Company without Cause or by the Executive for Good Reason (each within the meaning of Section 7 of the Participant Agreement), the Executive shall not be entitled to any further compensation or benefits provided for under this Agreement except as provided in the Restricted Shares Agreement and the Allegiance Arrangement, if any, and except for any unpaid portion of the Additional Incentive Bonus, provided that the Executive has complied with all of the Executive's obligations under Section 4 of the Participant Agreement. (b) OTHER EMPLOYMENT TERMINATIONS. If the Executive's employment is terminated for any reason other than by the Company without Cause or by the Executive for Good Reason, the Executive shall not be entitled to any compensation provided for under this *** 6 Agreement, other than, in the case of termination because of disability or death, the benefits provided for in the Allegiance Arrangement and the Restricted Shares Agreement, if any. (c) ACKNOWLEDGMENT AND ENFORCEMENT. (i) The Executive acknowledges and agrees that: (A) the purpose of Section 4 of the Participant Agreement is to protect the goodwill, trade secrets and other confidential information of the Company; (B) because of the nature of the businesses in which the Company and all of its subsidiaries, partnerships, joint ventures, limited liability companies, and other affiliates (collectively, the "Cardinal Group") are engaged and because of the nature of the confidential information to which the Executive has access, the Company would suffer irreparable harm and it would be impractical and excessively difficult to determine the actual damages of the Cardinal Group in the event the Executive breached any of the covenants of Section 4 of the Participant Agreement; and (C) remedies at law (such as monetary damages) for any breach of the Executive's obligations under Section 4 of the Participant Agreement would be inadequate. The Executive therefore agrees and consents that if the Executive commits any breach of a covenant under Section 4 of the Participant Agreement or threatens to commit any such breach, the Company shall have the right (in addition to, and not in lieu of, any other right or remedy that may be available to it) to temporary and permanent injunctive relief from a court of competent jurisdiction, without posting any bond or other security and without the necessity of proof of actual damage. (ii) In addition, in the event of a violation of Section 4 of the Participant Agreement, the Company shall have no obligation to pay the Additional Incentive Bonus, if it has not previously been paid, and shall have the right to cause the Additional Incentive Shares to be forfeited (if they have not previously vested) as provided in the Restricted Shares Agreement and to require the Executive to pay to the Company all or any portion of the Clawback Amount (as defined below) within 30 days following written notice by the Company to the Executive (the "Company Notice") that it is imposing such requirement. The "Clawback Amount" means the sum of: A. the Additional Incentive Bonus, if it has previously been paid; B. the amount equal to the gross gain realized or obtained by the Executive resulting from the vesting of the Additional Incentive Shares, measured at the date of vesting (i.e., the market value of the Additional Incentive Shares on the vesting date); and C. if (x) the Executive has sold or otherwise disposed of any of the Additional Incentive Shares, an amount equal to the excess of (I) the fair market value thereof on the date of the sale or disposition over (II) the fair market value thereof on the date such shares vested, and if (y) the Executive has not sold or otherwise disposed of the Additional Incentive Shares, an amount equal to the excess of (I) the fair market value thereof on the 30th day following the date of the Company Notice over (II) the fair market value thereof on the date such shares vested. -2- 7 (iii) With respect to any provision of this Section 2 finally determined by a court of competent jurisdiction to be unenforceable, the Executive and the Company hereby agree that such court shall have jurisdiction to reform this Agreement or any provision hereof so that it is enforceable to the maximum extent permitted by law, and the parties agree to abide by such court's determination. If any of the covenants of this Section 2 are determined to be wholly or partially unenforceable in any jurisdiction, such determination shall not be a bar to or in any way diminish the Company's right to enforce any such covenant in any other jurisdiction. 3. INTERACTION WITH ALLEGIANCE ARRANGEMENT. This Agreement incorporates by reference the Allegiance Arrangement, and, with regard solely to the Executive, supersedes the Allegiance Arrangement to the extent the Allegiance Arrangement is inconsistent with this Agreement. Any capitalized term used but not defined herein shall have the meaning ascribed to it in the Allegiance Plan. This Agreement is intended to be interpreted and applied consistent with the terms of the Allegiance Arrangement unless specifically indicated otherwise herein. With respect to the Executive, the employment period covered by the Allegiance Arrangement ceases on January 31, 2001 and shall not apply with respect to any Change in Control other than that arising from the merger of Allegiance Corporation with the Company. 4. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Cardinal Group for which the Executive may qualify, nor, subject to Section 3 of this Agreement and Section 4 of the Participant Agreement, shall anything in this Agreement limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Cardinal Group. Vested benefits and other amounts that the Executive is otherwise entitled to receive under any plan, policy, practice or program of, or any contract or agreement with, the Cardinal Group on or after the Date of Termination shall be payable in accordance with such plan, policy, practice, program, contract or agreement, as the case may be, except as explicitly modified by this Agreement. Notwithstanding the foregoing, the Executive waives all of the Executive's rights to receive severance payments and benefits under any severance plan, policy or practice of the Cardinal Group or any entity merged with or into the Cardinal Group (or any part thereof), except for those severance benefits, if any, provided for under the Allegiance Arrangement. 5. ENTIRE AGREEMENT. This Agreement, together with the Allegiance Arrangement to the extent it is not inconsistent with this Agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior agreements, arrangements, or understandings with respect thereto. -3- 8 IN WITNESS WHEREOF, the Executive has hereunto set her hand and, pursuant to the authorization of its Board of Directors, the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written. EXECUTIVE ------------------------------ Kathy Brittain White CARDINAL HEALTH, INC. By ---------------------------- Robert D. Walter Chief Executive Officer -4- EX-27.01 4 l86087aex27-01.txt EXHIBIT 27.01
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL HEALTH INC.'S FORM 10-Q FOR THE PERIOD ENDED DECEMBER 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS JUN-30-2001 JUL-01-2000 DEC-31-2000 416 0 2,299 (74) 5,207 8,775 3,084 (1,396) 12,326 5,355 1,981 0 0 1,363 2,968 12,326 18,373 18,373 16,827 16,827 872 0 (64) 592 210 382 0 0 0 382 1.37 1.34
EX-99.01 5 l86087aex99-01.txt EXHIBIT 99.01 1 EXHIBIT 99.01 The Private Securities Litigation Reform Act of 1995 (the "Act") provides a "safe harbor" for "forward-looking statements" (as defined in the Act). The Company's Form 10-K, the Company's Annual Report to Shareholders, any Form 10-Q or any Form 8-K of the Company, the Company's press releases, or any other written or oral statements made by or on behalf of the Company, may include or incorporate by reference forward-looking statements which reflect the Company's current view (as of the date such forward-looking statement is first made) with respect to future events, prospects, projections or financial performance. These forward-looking statements are subject to certain uncertainties and other factors that could cause actual results to differ materially from those made, implied or projected in such statements. These uncertainties and other factors include, but are not limited to: - - uncertainties relating to general economic conditions; - - the loss of one or more key customer or supplier relationships, such as pharmaceutical and medical-surgical manufacturers for which alternative supplies may not be available; - - challenges associated with integrating our information systems with those of our customers; - - potential liabilities associated with warranties of our information systems, and the malfunction or failure of our information systems or those of third parties with whom we do business, such as malfunctions or failures associated with date-related issues and disruption to internet-related operations; - - the costs and difficulties related to the integration of recently acquired businesses; - - changes to the presentation of financial results and position resulting from adoption of new accounting principles or upon the advice of our independent auditors or the staff of the SEC; - - changes in the distribution or outsourcing pattern for pharmaceutical and medical-surgical products and services, including an increase in direct distribution or a decrease in contract packaging by pharmaceutical manufacturers; - - changes in government regulations or our failure to comply with those regulations; - - the costs and other effects of legal and administrative proceedings; - - injury to person or property resulting from our manufacturing, packaging, repackaging, drug delivery system development and manufacturing, information systems, or pharmacy management services; - - competitive factors in our healthcare service businesses, including pricing pressures; - - unforeseen changes in our existing agency and distribution arrangements; - - the continued financial viability and success of our customers, suppliers, and franchisees; - - changes in customer purchasing patterns; - - shifts in growth rates among segments driven by various factors; - - difficulties encountered by our competitors, whether or not we face the same or similar issues; - - technological developments and products offered by competitors; - - failure to retain or continue to attract senior management or key personnel; - - risks associated with international operations, including fluctuations in currency exchange ratios and impact of the Euro currency; - - costs associated with protecting our trade secrets and enforcing our patent, copyright and trademark rights, and successful challenges to the validity of our patents, copyrights or trademarks; - - difficulties or delays in the development, production, manufacturing, and marketing of new products and services; - - strikes or other labor disruptions; - - labor and employee benefit costs; - - pharmaceutical and medical-surgical manufacturers' pricing policies and overall drug price inflation; - - changes in hospital buying groups or hospital buying practices; and - - other factors described in this Form 10-Q or the documents we file with the Securities and Exchange Commission. The words "believe", "expect", "anticipate", "project", and similar expressions identify "forward-looking statements", which speak only as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----