8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): January 25, 2007

Cardinal Health, Inc.

(Exact Name of Registrant as Specified in its Charter)

Ohio

(State or Other Jurisdiction of Incorporation)

1-11373	31-0958666
(Commission File Number)	(IRS Employer Identification Number)

7000 Cardinal Place, Dublin, Ohio 43017

(Address of Principal Executive Offices, Including Zip Code)

(614) 757-5000

(Registrant’s Telephone Number, Including Area Code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01    Regulation FD Disclosure

During a conference call scheduled to be held at 11:00 a.m. EST on January 25, 2007, Cardinal Health, Inc.’s (the “Company’s”) Chief Financial Officer, Jeffrey W. Henderson, will discuss the Company’s results for the quarter and six months ended December 31, 2006. The Company is furnishing Mr. Henderson’s slide presentation for the conference call as Exhibit 99.01 to this report.

On January 25, 2007, the Company issued a press release announcing that it has reached an agreement to sell its Pharmaceutical Technologies and Services segment to The Blackstone Group. A copy of the press release is furnished under this report as Exhibit 99.02.

Item 9.01    Financial Statements and Exhibits

(c) Exhibits

99.01 Slide presentation furnished under this report.

99.02 Press release issued by the Company on January 25, 2007, and furnished under this report.

-2-

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 hereunto duly authorized.

	Cardinal Health, Inc. (Registrant)
Date: January 25, 2007	By:	/s/ Jeffrey W. Henderson
	Name:	Jeffrey W. Henderson
	Title:	Chief Financial Officer

-3-

EXHIBIT INDEX

99.01        Slide presentation furnished under this report.

99.02        Press release issued by the Company on January 25, 2007, and furnished under this report.

-4-

EX-99.01

2007

January 25, 2007

Second Quarter Earnings

Exhibit 99.01

2

Forward-Looking Statements and GAAP Reconciliation

Except

for

historical

information,

all

other

information

in

this

presentation

consists

of

forward-

looking

statements

within

the

meaning

of

the

Private

Securities

Litigation

Reform

Act

of

1995,

as amended.  These forward-looking statements are subject to risks and uncertainties that could

cause actual results to differ materially from those projected, anticipated or implied.  The most

significant of these uncertainties are described in Cardinal Health's Form 10-K, Form 10-Q and

Form 8-K reports (including all amendments to those reports) and exhibits to those reports, and

include (but are not limited to) the following: competitive pressures in its various lines of

businesses; the loss of one or more key customer or supplier relationships or changes to the

terms of those relationships; changes in the distribution patterns or reimbursement rates for

health-care products and/or services; the results, consequences, effects or timing of any inquiry

or investigation by or settlement discussions with any regulatory authority or any legal and

administrative proceedings, including shareholder litigation; uncertainties related to divesting the

PTS segment, including uncertainties as to the amount of proceeds and timing; the costs,

difficulties and uncertainties related the integration of acquired businesses; with respect to

future dividends, the decision by the board of directors to declare such dividends, which is

expected to consider Cardinal Health’s surplus, earnings, cash flows, financial condition and

prospects at the time any such action is considered; with respect to future share repurchases,

the approval of the board of directors, which is expected to consider Cardinal Health’s then-

current stock price, earnings, cash flows, financial condition and prospects as well as

alternatives available to Cardinal Health at the time any such action is considered; and general

economic and market conditions.  Except to the extent required by applicable law, Cardinal

Health undertakes no obligation to update or revise any forward-looking statement.  In addition,

this presentation includes non-GAAP financial measures.  Cardinal Health provides definitions

and a reconciliation between GAAP and non-GAAP financial information at the end of this

presentation and on its investor relations page at www.cardinalhealth.com.

3

Today’s Agenda

Opening remarks

Kerry Clark

President & Chief

Executive Officer

Financial overview

Jeff Henderson

Chief Financial

Officer

Q&A

4

Financial Overview

•

FY 2007 Q2 Results –

Consolidated

•

FY 2007 Q2 Results –

Segments

•

Key Value Drivers

•

FY 2007 Financial Targets and Goals

•

Historical M&A update

•

Other Items

5

Revenue

Operating earnings

Earnings from continuing

operations

Diluted EPS from continuing

operations

Operating cash flow

Return on equity ²

Q2 FY 2007 Recap

$ M

% Change

1

$21,785

13%

$     512

12%

$     316

10%

$    0.77

17%

$     (52)

34.1%

$ M

% Change

1

$     544

16%

$     341

15%

$    0.83

20%

15.2%

GAAP Basis

Note:  1  % change over prior year quarter

2 

See definitions for an explanation of changes in

calculating Return on Equity from prior periods

Non-GAAP Basis

6

Q2 Operating Earnings and EPS

6

Operating Earnings

($M)

Diluted EPS from

Continuing

Operations

Operating Earnings

($M)

Diluted EPS from

Continuing

Operations

GAAP Consolidated

$512

$0.77

$457

$0.66

Special Items

$20

$0.03

$14

$0.03

Impairment Charges

& Other

$13

$0.03

($3)

$0.00

Non-GAAP

Consolidated

$544

$0.83

$469

$0.69

Non-Recurring &

Other Items

($3)

($0.01)

Q2 FY 2007

Q2 FY 2006

7

Cardinal Health Business Analysis

Healthcare Supply Chain Services -

Pharmaceutical

Q2 FY ‘07        Q2 FY ‘06

$ M                  $ M

% change        

Revenue                      

$  19,238

$ 16,977            13%

Operating earnings                        

$       328          $      276            19%

Non-recurring and other items                                      $

(3)

Highlights:

•

Economic profit margin   increased 9 basis points to 0.82% vs. prior year

•

Direct-store-door

(DSD)

pharmaceutical

sales

grew

14%

and

bulk

customer

sales

grew

22%

•

Strong

growth

in

generics

driven

by

recent

new

item

launches

and

strategic

sourcing

•

Earnings

growth

partially

offset

by

lower

pricing

in

the

renewal

of

several

large

customer

agreements

•

Integration of F. Dohmen

Co. and Parmed

progressing well

•

Strong earnings growth from nuclear pharmacy services

•

Q2’

07 equity compensation expense of $13.7 million vs. $15.3 million in prior year

Note: 

Non-GAAP financial measure

1

1

8

Cardinal Health Business Analysis

Healthcare Supply Chain Services -

Medical

Q2 FY ‘07        Q2 FY ‘06

$ M                  $ M

% change        

Revenue                      

$   1,872

$   1,770            6%

Operating earnings                        

$        78          $        70          12%

Highlights:

•

Economic profit margin

declined 6 basis points to 1.12%  vs. prior year

•

Revenue growth driven by strong sales in laboratory business, private brand product portfolio and

continued momentum with surgery center customers and within the Canadian operations

•

SG&A growth moderating due to focused cost controls and One Cardinal Health benefits

•

Customer service transition metrics improving; however, still negatively impacting results

•

Q2 ’07 equity compensation expense of $8.1 million vs. $9.9 million in prior year

Note: 

Non-GAAP financial measure

1

1

9

Cardinal Health Business Analysis

Clinical Technologies and Services

Q2 FY ‘07        Q2 FY ‘06

$ M                  $ M

% change        

Revenue                      

$      662          $      603           10%

Operating earnings                           

$        92          $        79

16%

Highlights:

•

New product release of upgraded Pyxis MedStation 3500

•

Strong demand for both Pyxis and Alaris products as committed contracts were up significantly

over prior year and sequentially

•

Good progress with integrated medication safety and management offering (Alaris, Pyxis and Care

Fusion)

•

Continued

investments

in

international

markets

to

support

future

growth

•

Continued investments in product quality and customer service resulting in improved customer

service ratings

•

Q2 ’07 equity compensation expense of $10.7 million vs. $12.4 million in prior year

10

Cardinal Health Business Analysis

Medical Products Manufacturing

Q2 FY ‘07        Q2 FY ‘06

$ M                  $ M

% change        

Revenue                      

$      455

$      397           15%

Operating earnings                        

$        51          $        42           21%

Highlights:

•

Solid demand across the segment contributed to revenue growth, including infection prevention

products, medical specialties and in international markets

•

Raw material cost pressures offset by contract and pricing discipline

•

Operating margin improvements driven by manufacturing improvements, facility restructurings and

other One Cardinal initiatives

•

Product

innovation

–

synthetic

gloves,

respiratory

and

interventional

radiology

•

Continued investment in international markets and R&D spending

•

Q2 ’07 equity compensation expense of $7.7 million vs. $9.1 million in prior year

11

FY 2007 –

Key Value Drivers

Operating Growth

–

Strong demand for products and services drive revenue growth

–

Within Healthcare Supply Chain Services, leverage of scale, capital

efficiency and operational excellence should drive economic profit

margin expansion

–

Within Pharmaceutical and Medical Products, operational excellence,

product innovation and international expansion should drive operating

margin expansion

–

SG&A moderation, including declining equity compensation expense

Balance sheet management

–

Focus on return on capital, economic profit margin and economic profit

–

Continued portfolio optimization

Disciplined capital deployment

13

Acquisition Scorecard

Acquisition

Date

Results

Care Fusion (CTS)

October ’06

(+)

MedMined (CTS)

July ’06

(+)

Dohmen

(HSCS-P)

June ’06

(+)

Denver Biomedical (MPM)

May ’06

(+)

Parmed

(HSCS-P)

March ’06

(+)

Source Medical (HSCS-M)

November ’05

(+)

Geodax

(HSCS-P)

July ’04

(+)

Alaris (CTS)

June ’04

(+)

Snowden Pencer

(MPM)

March ’04

(–)

14

Other Items

PTS Update

–

Impact on FY 2007 EPS

–

Timing

–

Tax basis

Segment reporting changes

–

Re-class of PTS corporate expense allocation

–

Equity compensation allocation

15

Q&A

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(1)  Tangible

Capital

is

a

quarterly

average

calculated

as

total

assets

allocated

to

the

segment

less

(total

liabilities

allocated

to

the

segment,

goodwill

and

intangibles,

cash and equivalents and short term investments available for sale)

(2)  The sum of the components may not equal due to rounding

(in millions)

HEALTHCARE SUPPLY CHAIN SERVICES

Fiscal 2007

Pharmaceutical

July

August

September

Total

October

November

December

Total

YTD

Economic Profit Margin

Operating earnings

288.7

$         

328.0

$         

616.7

$          

Effective tax rate from continuing operations

36.2%

36.2%

36.2%

Net operating earnings, after-tax (NOPAT)

184.2

$         

209.3

$         

393.5

$          

Total assets

11,549.8

$ 

12,206.9

$ 

11,527.6

$    

11,781.8

$ 

11,624.6

$   

11,663.1

$   

Less:  assets from discontinued operations

107.5

109.4

-

-

-

-

Less:  accounts payable

6,644.9

7,115.6

6,979.1

6,897.3

6,836.3

6,912.9

Less:  other accrued liabilities

1,069.5

1,088.6

942.2

1,092.8

1,100.2

1,036.3

Less:  liabilities from businesses held for sale

-

-

-

-

-

-

Less:  deferred income taxes and other liabilities

82.1

82.1

52.8

89.3

89.7

71.6

Less:  goodwill and other intangibles, net

1,354.5

1,361.8

1,332.4

1,328.7

1,335.0

1,335.7

Less:  cash and equivalents

42.2

57.4

75.0

91.3

102.7

113.6

Less:  short-term investments available for sale

-

-

-

-

-

-

Tangible capital

2,249.1

$   

2,392.0

$   

2,146.1

$      

2,262.4

$      

2,282.4

$   

2,160.7

$     

2,193.0

$     

2,212.0

$      

2,237.2

$       

Multiplied by weighted average cost of capital

2.3%

2.3%

2.3%

Capital charge

52.0

$           

50.9

$           

51.5

$            

Economic profit

132.2

$         

158.4

$         

342.0

$          

Revenue

18,532.8

$    

19,237.6

$    

37,770.4

$     

Economic profit margin

0.71%

0.82%

0.91%

First Quarter Fiscal 2007

Second Quarter Fiscal 2007

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(1)  Tangible

Capital

is

a

quarterly

average

calculated

as

total

assets allocated to the segment less (total liabilities allocated to the segment,  goodwill and intangibles,

cash and equivalents and short term investments available for sale)

(2)  The sum of the components may not equal due to rounding

(in millions)

HEALTHCARE SUPPLY CHAIN SERVICES

Fiscal 2006

Pharmaceutical

July

August

September

Total

October

November

December

Total

YTD

Economic Profit Margin

Operating earnings

225.1

$         

276.0

$         

501.1

$          

Effective tax rate from continuing operations

36.8%

36.8%

36.8%

Net operating earnings, after-tax (NOPAT)

142.3

$         

174.4

$         

316.7

$          

Total assets

10,521.1

$ 

10,384.3

$ 

11,050.2

$    

10,499.1

$ 

10,379.0

$   

10,760.7

$   

Less:  assets from discontinued operations

173.1

188.3

191.0

197.3

190.6

178.1

Less:  accounts payable

5,506.3

5,692.3

6,238.9

5,626.8

5,867.5

6,167.7

Less:  other accrued liabilities

970.8

912.7

890.1

929.7

899.0

847.0

Less:  liabilities from businesses held for sale

222.9

222.9

222.9

186.3

186.3

186.3

Less:  deferred income taxes and other liabilities

109.1

106.4

44.5

107.6

107.7

43.6

Less:  goodwill and other intangibles, net

962.4

958.6

1,168.0

959.5

958.1

1,157.3

Less:  cash and equivalents

59.2

66.6

70.3

80.3

88.9

108.2

Less:  short-term investments available for sale

-

-

-

-

-

-

Tangible capital

2,517.3

$   

2,236.5

$   

2,224.5

$      

2,326.1

$      

2,411.6

$   

2,080.9

$     

2,072.5

$     

2,188.3

$      

2,257.2

$       

Multiplied by weighted average cost of capital

2.3%

2.3%

2.3%

Capital charge

53.5

$           

50.3

$           

51.9

$            

Economic profit

88.8

$           

124.1

$         

264.8

$          

Revenue

16,532.8

$    

16,977.2

$    

33,510.0

$     

Economic profit margin

0.54%

0.73%

0.79%

Second Quarter Fiscal 2006

First Quarter Fiscal 2006

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(1)  Tangible Capital is a quarterly average calculated as total

assets allocated to the segment less (total liabilities allocated to the segment,  goodwill and intangibles,

cash and equivalents and short term investments available for sale)

(2)  The sum of the components may not equal due to rounding

(in millions)

HEALTHCARE SUPPLY CHAIN SERVICES

Fiscal 2006

Medical

July

August

September

Total

October

November

December

Total

YTD

Economic Profit Margin

Operating earnings

62.8

$           

69.6

$           

132.5

$          

Effective tax rate from continuing operations

30.1%

30.1%

30.1%

Net operating earnings, after-tax (NOPAT)

43.9

$           

48.7

$           

92.6

$            

Total assets

2,259.7

$   

2,197.7

$   

2,255.0

$      

2,315.9

$   

2,357.9

$     

2,379.9

$     

Less:  assets from discontinued operations

-

-

-

-

-

-

Less:  accounts payable

496.2

439.0

534.4

530.4

481.4

498.2

Less:  other accrued liabilities

186.0

182.9

143.5

167.9

174.1

138.9

Less:  liabilities from businesses held for sale

-

-

-

-

-

-

Less:  deferred income taxes and other liabilities

74.1

74.9

69.5

75.6

58.5

52.6

Less:  goodwill and other intangibles, net

396.5

397.6

396.8

396.8

415.9

416.2

Less:  cash and equivalents

8.4

8.0

8.5

8.4

9.1

10.0

Less:  short-term investments available for sale

-

-

-

-

-

-

Tangible capital

1,098.5

$   

1,095.3

$   

1,102.3

$      

1,098.7

$      

1,136.8

$   

1,218.9

$     

1,264.0

$     

1,206.6

$      

1,152.6

$       

Multiplied by weighted average cost of capital

2.3%

2.3%

2.3%

Capital charge

25.3

$           

27.8

$           

26.5

$            

Economic profit

18.6

$           

20.9

$           

66.1

$            

Revenue

1,762.6

$      

1,770.2

$      

3,532.8

$       

Economic profit margin

1.06%

1.18%

1.87%

First Quarter Fiscal 2006

Second Quarter Fiscal 2006

(in millions)

2007

2006

Non-GAAP Operating Margin

Operating earnings

512.1

$          

457.1

$          

Special items

19.6

14.3

Impairment charges and other

12.6

(2.6)

  Non-GAAP operating earnings

544.3

$          

468.8

$          

Revenue

21,784.6

$     

19,346.9

$     

Non-GAAP operating margin

2.50%

2.42%

Second Quarter

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

EX-99.02

Exhibit 99.02

7000 Cardinal Place

Dublin,OH 43017

www.cardinalhealth.com

FOR IMMEDIATE RELEASE

Contacts:

Media:	Jim Mazzola, Cardinal Health (614) 757-3690 jim.mazzola@cardinal.com	Investors:	Jason Strohm, Cardinal Health (614) 757-7542 jason.strohm@cardinal.com
	Chinh Chu, The Blackstone Group (212) 583-5872 chu@blackstone.com

CARDINAL HEALTH TO SELL PHARMACEUTICAL TECHNOLOGIES AND SERVICES

SEGMENT TO THE BLACKSTONE GROUP FOR $3.3 BILLION

Leading contract-manufacturing, development and packaging business for the

pharmaceutical and biotechnology industries to broaden Blackstone’s health-care presence

DUBLIN, Ohio, Jan. 25, 2007 — Cardinal Health, the leading provider of products and services supporting the health-care industry, today announced it has reached an agreement to sell its Pharmaceutical Technologies and Services (PTS) segment to The Blackstone Group for approximately $3.3 billion in cash.

Cardinal Health and Blackstone have signed a definitive agreement for Blackstone to acquire the PTS businesses that develop, manufacture and package medication and other products for pharmaceutical and biotech firms, employ approximately 10,000 at more than 30 facilities worldwide and generate approximately $1.8 billion in annual revenue. Cardinal Health announced on Nov. 30, 2006 that it planned to divest the segment to focus resources on its four remaining segments serving health-care provider customers, such as hospitals and pharmacies.

“We made very rapid progress in less than two months to reach an agreement with such a quality organization as The Blackstone Group,” said R. Kerry Clark, president and chief executive officer of Cardinal Health. “The move allows us to accelerate the repurchase of Cardinal Health shares and focus our full attention on our mission to help make health care safer and more productive through our supply-chain and clinical products businesses.”

Chinh Chu, Senior Managing Director of The Blackstone Group and Alex Erdeljan, Senior Advisor to The Blackstone Group stated, “We are attracted to the strong industry fundamentals and leadership market positions of PTS in contract manufacturing, drug development, and packaging and printing services. We will work in concert with PTS’ proven and experienced management

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Cardinal Health to Sell Pharmaceutical Technologies and Services Segment to The Blackstone Group for $3.3 billion

Page 2

team to build upon and strengthen their platform of competitive offerings, in order both to accelerate and enhance the growth and profitability of the PTS businesses.”

As previously announced, Cardinal Health plans to use the net proceeds from the sale to repurchase shares. The sale is expected to generate approximately $3.1 billion in after-tax proceeds. The net book value of the PTS segment is approximately $2 billion. The sale is expected to close early in Cardinal Health’s fiscal fourth quarter and is subject to customary closing conditions, including regulatory approvals.

Cardinal Health will retain Martindale and Beckloff Associates, two businesses that support the generic pharmaceutical market. Martindale develops generic, intravenous medicine that is complementary to Cardinal Health’s hospital business and generics strategy. Beckloff provides pharmaceutical regulatory consulting, including services for Cardinal Health generic products. Combined, these businesses have approximately 400 employees at two primary locations in the United States and United Kingdom.

PTS is the leading contract manufacturing and service provider for the pharmaceutical industry. Among its core offerings, it develops and manufactures oral and sterile medication in nearly all dosage forms, and holds patents for softgel and Zydis^® fast-dissolve technologies used in many popular prescription and over-the-counter medicine. The segment is also the largest contract packager of pharmaceuticals.

Blackstone has been a leader in the field of private equity investing since 1987, managing $28 billion through its Blackstone Capital Partners I, II, III, IV, and V and Blackstone Communications Partners funds.

About Cardinal Health

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is an $81 billion, global company serving the health-care industry with a broad portfolio of products and services. Through its diverse offerings, Cardinal Health delivers health-care solutions that help customers reduce their costs, improve safety and productivity, and deliver better care to patients. The company manufactures, packages and distributes pharmaceuticals and medical supplies, offers a range of clinical services and develops automation products that improve the management and delivery of supplies and medication for hospitals, physician offices and pharmacies. Ranked No. 19 on the Fortune 500, Cardinal Health employs more than 55,000 people on six continents. More information about the company may be found at www.cardinalhealth.com.

About The Blackstone Group

The Blackstone Group, a global private investment and advisory firm, was founded in 1985. The firm has raised approximately $75 billion for alternative asset investing since its formation of which over $30 billion has been for private equity investing. Blackstone has a significant commitment to the healthcare sector with investments in Biomet (orthopedics and dental, pending investment), Emcure (pharmaceuticals), Encore Medical (rehabilitation products), Gerresheimer (healthcare packaging), Health Markets (health insurance), Southern Cross (nursing homes), Team Health (ambulatory care), and Vanguard (hospitals). Blackstone’s other core businesses include Private Real Estate Investing, Corporate Debt Investing, Hedge Funds, Mutual Fund Management, Private Placement, Marketable Alternative Asset Management and Investment Banking Advisory Services. Further information is available at http://www.blackstone.com.

###

Cardinal Health to Sell Pharmaceutical Technologies and Services Segment to The Blackstone Group for $3.3 billion

Page 3

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in Cardinal Health’s Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the following: competitive pressures in its various lines of business; the loss of one or more key customer or supplier relationships or changes to the terms of those relationships; changes in the distribution patterns or reimbursement rates for health-care products and/or services; the results, consequences, effects or timing of any inquiry or investigation by or settlement discussions with any regulatory authority or any legal and administrative proceedings, including shareholder litigation; uncertainties related to completing the divestiture of the PTS segment, including the fulfillment or waiver of conditions to closing under the acquisition agreement and any adjustments as to the amount of actual proceeds to be received; the costs, difficulties and uncertainties related to the integration of acquired businesses; with respect to future share repurchases, the approval of the board of directors, which is expected to consider Cardinal Health’s then-current stock price, earnings, cash flows, financial condition and prospects as well as alternatives available to Cardinal Health at the time any such action is considered; and general economic and market conditions. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.