EX-99.3 5 dex993.htm SLIDE PRESENTATION Slide presentation
Essential to care
Q1
FY
2008
Earnings
Call
FY 2008
November 5, 2007
Exhibit 99.3


2
Forward-looking statements and
GAAP
reconciliation
This
presentation
contains
forward-looking
statements
addressing
expectations,
prospects,
estimates
and
other
matters
that
are
dependent
upon
future
events
or
developments.
These
matters
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;
uncertainties
relating
to
the
timing
of
generic
introductions
and
the
frequency
or
rate
of
branded pharmaceutical
price
appreciation or generic pharmaceutical price
deflation;
changes
in
the
distribution
patterns
or reimbursement
rates
for
healthcare
products
and/or
services;
the
results,
consequences,
effects
or
timing
of
any
inquiry
or
investigation
by
any
regulatory
authority
or
any
legal
and
administrative
proceedings;
successful
integration
of
Cardinal
Health
and
VIASYS
Healthcare
and
the
ability
to
achieve
synergies
from
the
acquisition;
uncertainties
relating
to
the
amount
of
future
share
repurchases
by
Cardinal
Health,
which
can
be
affected
by
Cardinal
Health's
then
current
stock
price,
regulatory
restraints
on
share
repurchases,
cash
flows,
financial
condition
and
alternative
uses
of
cash
available
to
Cardinal
Health
at
the
time,
as
well
as
by
the
amount
of
any
additional
share
repurchases
authorized
by the
board
of
directors;
and
general
economic
and
market
conditions.
This
presentation
reflects
management’s
views
as
of
November
5,
2007.
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
reconciling
information
at
the
end
of
this
presentation
and
on
its
investor
relations
page
at
www.cardinalhealth.com.


3
Agenda
Opening remarks
Kerry Clark
Chief Executive
Officer
Financial overview
Jeff Henderson
Chief Financial
Officer
Q&A


4
Financial Overview
FY 2008 Q1 Results –
Consolidated
FY 2008 Q1 Results –
Business Segments
Key
Financial
Value
Drivers
FY 2008 Financial Targets and Goals
HSCS
Priorities


5
Q1 FY 2008 Recap
$21,973
$490
$303
$0.82
$409
16.7%
($M)
5%
9%
4%
15%
%
Change¹
GAAP Basis
$512
$318
$0.86
17.5%
($M)
8%
3%
15%
%
Change¹
Non-GAAP Basis
1
% change over prior year quarter
Revenue
Operating Earnings
Earnings from continuing ops
Diluted EPS from continuing ops
Operating cash flow
Return on equity


6
Operating
Earnings/(Loss)
($M)
Diluted EPS from
Continuing
Operations
Operating
Earnings/(Loss)
($M)
Diluted EPS from
Continuing
Operations
GAAP Consolidated
$490
$0.82
$451
$0.71
Special Items
($23)
($0.04)
($22)
($0.04)
Impairment Charges
& Other
$0
$0.00
($2)
$0.00
Non-GAAP
Consolidated
$512
$0.86
$475
$0.75
Q1 FY 2008
Q1 FY 2007
Q1 Operating Earnings and EPS


7
Healthcare Supply Chain Services –
Pharmaceutical
Business Analysis
Highlights:
Q1
revenue
up
4%
on
new
bulk
revenue
from
existing
customers
and
branded
price
inflation,
partially
offset
by
pharma
market
growth
moderation,
FY07
customer
losses
and
soft
nuclear
market
Segment
profit
growth
positively
impacted
by
brand
price
inflation,
improved
operating
leverage,
and a
$14M vendor related reserve reduction
Q1
segment
profit
negatively
impacted
by
revenue
growth/mix,
fewer
generic
launches
vs.
last
year
and generic deflation
Corporate
allocation
change
positively
impacted
segment
profit
growth
by
~2
pps
Economic profit margin¹
increased 3 basis points vs. prior year to 0.88%
Revenue
Segment Profit
19,221
305
Q1 FY08
($M)
18,553
289
Q1 FY07
($M)
4%
6%
% Change
1
Non-GAAP financial measure


8
Healthcare
Supply
Chain
Services
Medical
Business Analysis
Highlights:
Q1
revenue
up
6%
on
new
customer
sales
and
improving
demand
from
hospital,
laboratory,
and
ambulatory customers, somewhat offset by demand in kitting products
Segment
profit
down
10%,
driven
by
refined
corporate
allocation,
operational
investments
(e.g.,
customer service), and higher costs within kitting
McGaw
Park transition is on track with minimal business interruption
Corporate allocation change negatively impacted segment profits by ~9 pps
Revenue
Segment Profit
1,921
58
Q1 FY08
($M)
1,806
64
Q1 FY07
($M)
6%
(10%)
% Change


9
Medical Products and Technologies
Business Analysis
Highlights:
Q1
revenue
up
47%
driven
by
the
VIASYS
acquisition,
new
product
launches,
increased
penetration
of
existing customers, and foreign exchange
Segment profit up 24%, with margin dampened by purchase accounting impact from VIASYS
acquisition
Overall VIASYS integration on-track; FY08 synergy capture ahead of schedule
Revenue
Segment Profit
623
57
Q1 FY08
($M)
424
46
Q1 FY07
($M)
47%
24%
% Change


10
Clinical Technologies and Services
Business Analysis
Highlights:
Q1 revenue up 9% on continued strong demand for infusion and dispensing products
Segment profit up 91%, driven by favorable product mix driving higher gross margins and improved
operating leverage
Favorable
compare
vs.
Q1
FY07
due
to
SE
recall
related
charge
of
$13.5M
in
prior
year
Segment profit margin up 640 bps vs. Q1 FY07
Revenue
Segment Profit
649
98
Q1 FY08
($M)
594
51
Q1 FY07
($M)
9%
91%
% Change


11
Key Financial Value Drivers
Balance sheet management
Days of inventory on hand declined from 30 to 28 days Q1 FY08 vs. Q1 FY07
Portfolio optimization process ongoing
Non-GAAP ROIC up 157 bps vs. Q1 last year
Capital deployment
$592M
in
share
buyback
completed
in
Q1,
$720M
since
July
1st
Capital structure
Debt to total capital increased from 26% in Q1 FY07 to 35% in Q1
FY08
Net
debt
to
capital¹
increased
to
26%
vs.
11%
in
Q1
last
year
Non-GAAP effective tax rate for the quarter was 32.25% vs. 29.4% last year
Non-GAAP
Return
on
Equity
increased
390
bps
to
17.5%
1
Non-GAAP financial measure


12
Outlook
Reconfirming overall Non-GAAP EPS guidance of $3.95 to $4.15
3
of
4
segments
on-track
no
change
Lowering guidance
on
Supply
Chain
Pharma
to
“Below
range”
Profit
growth
significantly
weighted
toward
latter
part
of
2
nd
half
Difficult Q2 compare in Pharma


November 5, 2007
Financial targets and goals
In-line
Strong investment grade
Credit Rating:
Completed $3.1B PTS-related share repurchase in
July 2007; Announced new 2-year, $2B authorization
-
Quarterly dividend $0.12 per share
-
up to 50% of OCF, via share
repurchase and dividends
Cash Returned to
Shareholders:
In line with long-term goal
> 100% of net earnings
Operating Cash Flow:
In line with long-term goal
15% -
20%
Return
on
Equity
4
:
In range
+ 20 -
25%
+ 10 -
15%
CTS
Above range
+ 25 -
30%
+ 8 -
12%
MPT
Below range³
+ 6 -
9%
+ 4 -
7%
HSCS -
Medical
Below range³
+ 7 -
10%
+ 7 -
10%
HSCS -
Pharma
FY08 profit growth vs. long-term goal
Segment
Profit
Revenue
Segment
$3.95 -
$4.15 per share
+ 12 -
16%
EPS²:
In range
+ 10 -
13%
Op Earnings¹:
In range
+ 8 -
10%
Revenue:
Fiscal Year 2008
Over FY'08 -
FY'10 3 Year Period:
One Year Targets
Long-Term Financial Goals
1
Non-GAAP operating earnings
2
Non-GAAP diluted EPS from continuing operations
3
Refined methodology for allocation of corporate costs within HSCS in FY08 positively impacts HSCS-P profit growth by 1.8 percentage points, and negatively impacts
HSCS-M profit growth by 7.3 percentage points
4
Non-GAAP return on equity


14
HSCS Priorities
HSCS –
Medical:
Focus on acute care revenue growth and profitability
Leverage scale to lower product costs; expand off-shore sourcing
Continuing
focusing
on
operational
improvements
in
Presource
®
kitting
business
Complete McGaw Park transition
HSCS –
Pharmaceutical:
Drive initiatives in place to improve operational performance within core pharma distribution
Deliver on planned cost reductions
Revitalize retail selling organization and product capabilities
Execute strategy to enhance customer profitability through contract/generic compliance
Continue to drive generic sourcing and customer offering strategies
Within nuclear pharmacy services, adjust operating model to offset short-term market volatility
Longer-term, leverage Cardiolite generic event
Accelerate restructuring to improve operating leverage and to better align resources


Q&A


*
*
*


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(in millions)

HEALTHCARE SUPPLY CHAIN SERVICES

Pharmaceutical

 

     First Quarter Fiscal 2008     First Quarter Fiscal 2007  
     July    August    September    Total     July    August    September    Total  

Economic Profit Margin

                      

Segment profit

            $ 305.4              $ 288.7  

Effective tax rate from continuing operations

              35.9 %              35.1 %
                                  

Net operating earnings, after-tax (NOPAT)

            $ 195.6              $ 187.5  

Total assets

   $ 11,591.6    $ 11,719.5    $ 11,574.7      $ 11,549.8    $ 12,206.9    $ 11,620.0   

Less: assets from discontinued operations

     —        —        —          107.5      109.4      —     

Less: accounts payable

     7,350.3      7,948.1      8,344.0        7,488.3      8,027.1      8,101.0   

Less: other accrued liabilities

     1,211.8      1,173.2      1,130.7        1,069.5      1,088.6      1,016.3   

Less: liabilities from businesses held for sale

     —        —        —          —        —        —     

Less: deferred income taxes and other liabilities

     88.8      86.7      35.0        82.1      82.1      71.0   

Less: goodwill and other intangibles, net

     1,351.2      1,344.9      1,345.2        1,354.5      1,361.8      1,332.4   

Less: cash and equivalents

     65.4      51.4      38.3        42.2      57.4      75.0   

Less: short-term investments available for sale

     —        —        —          —        —        —     
                                              

Tangible capital

   $ 1,524.1    $ 1,115.2    $ 681.5    $ 1,106.9     $ 1,405.7    $ 1,480.5    $ 1,024.3    $ 1,303.5  

Multiplied by weighted average cost of capital

              2.3 %              2.3 %
                                  

Capital charge

            $ 25.5              $ 30.0  

Economic profit

            $ 170.1              $ 157.5  

Revenue

            $ 19,220.8              $ 18,532.8  

Economic profit margin

              0.88 %              0.85 %

(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 the total due to rounding

(3)

Healthcare Supply Chain Services—Pharmaceutical Tangible Capital calculated for both current and prior fiscal year includes an allocation of payables previously held at Corporate to more accurately reflect the payable balance of the segment.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(in millions)

HEALTHCARE SUPPLY CHAIN SERVICES

Medical

 

      First Quarter Fiscal 2008     First Quarter Fiscal 2007  
     July    August    September    Total     July    August    September    Total  

Economic Profit Margin

                      

Segment profit

            $ 57.5              $ 64.1  

Effective tax rate from continuing operations

              29.3 %              29.8 %
                                  

Net operating earnings, after-tax (NOPAT)

            $ 40.6              $ 45.0  

Total assets

   $ 2,481.8    $ 2,515.4    $ 2,552.6      $ 2,442.1    $ 2,437.6    $ 2,456.6   

Less: assets from discontinued operations

     —        —        —          —        —        —     

Less: accounts payable

     539.0      581.0      615.0        534.8      478.7      510.4   

Less: other accrued liabilities

     67.0      71.7      53.5        71.1      78.1      49.4   

Less: liabilities from businesses held for sale

     —        —        —          —        —        —     

Less: deferred income taxes and other liabilities

     54.6      55.4      61.3        58.2      58.1      53.0   

Less: goodwill and other intangibles, net

     386.0      385.9      388.2        378.8      377.8      377.7   

Less: cash and equivalents

     24.4      25.7      21.6        2.9      3.0      4.1   

Less: short-term investments available for sale

     —        —        —          —        —        —     
                                              

Tangible capital

   $ 1,410.8    $ 1,395.7    $ 1,413.0    $ 1,406.5     $ 1,396.3    $ 1,441.9    $ 1,462.0    $ 1,433.4  

Multiplied by weighted average cost of capital

              2.3 %              2.3 %
                                  

Capital charge

            $ 32.3              $ 33.0  

Economic profit

            $ 8.3              $ 12.0  

Revenue

            $ 1,920.7              $ 1,806.1  

Economic profit margin

              0.43 %              0.66 %

(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 the total due to rounding


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(in millions)

CLINICAL AND MEDICAL PRODUCTS

Clinical Technologies and Services

 

      First Quarter Fiscal 2008     First Quarter Fiscal 2007  
     July    August    September    Total     July    August    September    Total  

Economic Profit Margin

                      

Segment profit

            $ 98.3              $ 51.5  

Effective tax rate from continuing operations

              24.2 %              29.2 %
                                  

Net operating earnings, after-tax (NOPAT)

            $ 74.5              $ 36.5  

Total assets

   $ 4,375.8    $ 4,301.6    $ 4,262.2      $ 3,916.6    $ 4,012.1    $ 3,880.1   

Less: assets from discontinued operations

     —        —        —          —        —        —     

Less: accounts payable

     82.0      63.3      62.3        91.2      84.7      79.4   

Less: other accrued liabilities

     575.9      592.2      250.3        277.2      287.9      223.4   

Less: liabilities from businesses held for sale

     —        —        —          —        —        —     

Less: deferred income taxes and other liabilities

     238.4      238.9      474.5        577.6      577.0      475.1   

Less: goodwill and other intangibles, net

     2,171.8      2,206.2      2,180.4        2,085.9      2,083.4      2,174.3   

Less: cash and equivalents

     217.3      195.5      175.4        66.2      60.1      82.6   

Less: short-term investments available for sale

     —        —        —          —        —        0.3   
                                              

Tangible capital

   $ 1,090.4    $ 1,005.5    $ 1,119.3    $ 1,071.7     $ 818.5    $ 919.0    $ 845.0    $ 860.8  

Multiplied by weighted average cost of capital

              2.3 %              2.3 %
                                  

Capital charge

            $ 24.6              $ 19.8  

Economic profit

            $ 49.9              $ 16.7  

Revenue

            $ 648.9              $ 594.5  

Economic profit margin

              7.69 %              2.81 %

(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 the total due to rounding


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

(in millions)

CLINICAL AND MEDICAL PRODUCTS

Medical Products and Technologies

 

      First Quarter Fiscal 2008     First Quarter Fiscal 2007  
     July    August    September    Total     July    August    September    Total  

Economic Profit Margin

                      

Segment profit

            $ 56.9              $ 46.0  

Effective tax rate from continuing operations

              13.1 %              7.0 %
                                  

Net operating earnings, after-tax (NOPAT)

            $ 49.4              $ 42.8  

Total assets

   $ 3,645.8    $ 3,661.3    $ 3,601.6      $ 1,455.5    $ 1,453.1    $ 1,506.0   

Less: assets from discontinued operations

     —        —        —          —        —        —     

Less: accounts payable

     123.8      127.9      123.1        107.3      88.5      118.3   

Less: other accrued liabilities

     270.7      266.5      207.0        119.3      124.7      89.1   

Less: liabilities from businesses held for sale

     —        —        —          —        —        —     

Less: deferred income taxes and other liabilities

     203.5      203.9      180.0        46.2      46.6      44.4   

Less: goodwill and other intangibles, net

     1,945.4      1,952.2      1,910.5        454.8      453.7      453.4   

Less: cash and equivalents

     445.7      469.5      503.0        136.9      144.9      197.8   

Less: short-term investments available for sale

     —        —        —          —        —        —     
                                              

Tangible capital

   $ 656.7    $ 641.3    $ 678.0    $ 658.7     $ 591.0    $ 594.7    $ 603.0    $ 596.2  

Multiplied by weighted average cost of capital

              2.3 %              2.3 %
                                  

Capital charge

            $ 15.2              $ 13.7  

Economic profit

            $ 34.2              $ 29.1  

Revenue

            $ 623.2              $ 423.6  

Economic profit margin

              5.49 %              6.87 %

(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 the total due to rounding


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     First Quarter 2008  
(in millions, except per Common Share amounts)    GAAP     Special Items    Impairment
Charges
and Other
   Non-GAAP  

Operating Earnings

          

Amount

   $ 490     $ 23      —      $ 512  

Growth Rate

     9 %           8 %

Provision for Income Taxes

   $ 144     $ 8      —      $ 151  

Earnings from Continuing Operations

          

Amount

   $ 303     $ 15      —      $ 318  

Growth Rate

     4 %           3 %

Diluted EPS from Continuing Operations

          

Amount

   $ 0.82     $ 0.04      —      $ 0.86  

Growth Rate

     15 %           15 %
     First Quarter 2007  
     GAAP     Special Items    Impairment
Charges
and Other
   Non-GAAP  

Operating Earnings

          

Amount

   $ 451     $ 22    $ 2    $ 475  

Growth Rate

     23 %           23 %

Provision for Income Taxes

   $ 122     $ 6    $ 1    $ 128  

Earnings from Continuing Operations

          

Amount

   $ 291     $ 16    $ 1    $ 309  

Growth Rate

     24 %           24 %

Diluted EPS from Continuing Operations

          

Amount

   $ 0.71     $ 0.04      —      $ 0.75  

The sum of the components may not equal the total due to rounding

 

- more -


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     First Quarter  
(in millions)    2008     2007  

GAAP Return on Equity

     16.7 %     12.8 %

Non-GAAP Return on Equity

    

Net earnings

   $ 301.8     $ 270.7  

Special items, net of tax, in continuing operations

     14.8       16.3  

Special items, net of tax, in discontinued operations

     —         1.4  
                

Adjusted net earnings

   $ 316.6     $ 288.4  

Annualized

   $ 1,266.4     $ 1,153.6  

Divided by average shareholders’ equity 1

   $ 7,222.6     $ 8,455.9  

Non-GAAP return on equity

     17.5 %     13.6 %
     First Quarter  
(in millions)    2008     2007  

GAAP Return on Invested Capital

     6.57 %     5.14 %

Non-GAAP Return on Invested Capital

    

Net earnings

   $ 301.8     $ 270.7  

Special items, net of tax, in continuing operations

     14.8       16.3  

Special items, net of tax, in discontinued operations

     —         1.4  

Interest expense and other, net of tax

     27.5       23.6  
                

Adjusted net earnings

   $ 344.1     $ 312.0  

Annualized

   $ 1,376.4     $ 1,248.0  

Divided by average total invested capital 2

   $ 18,365.9     $ 21,050.9  

Non-GAAP return on invested capital

     7.50 %     5.93 %

1

The average shareholders’ equity shown above is calculated using the average of the prior years’ fourth quarter and the current quarter.

2

The average total invested capital shown above is calculated using the average of the prior years’ quarter and the current quarter. Total invested capital is calculated as the sum of the current portion of long-term obligations and other short-term borrowings, long-term obligations, current portion of long-term obligations and other short-term borrowings in discontinued operations, long-term obligations in discontinued operations, total shareholders’ equity and unrecorded goodwill. Unrecorded goodwill is $7.5 billion and $9.7 billion, respectively, for the September 30, 2007 and 2006 calculations. Current portion of long-term obligations and other short-term borrowings in discontinued operations, and long-term obligations in discontinued operations were $59.2 million and $46.6 million at June 30, 2006 and September 30, 2006, respectively.

 

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CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     First Quarter  
(in millions)    2008     2007  

GAAP Effective Tax Rate from Continuing Operations

     32.2 %     29.5 %

Non-GAAP Effective Tax Rate from Continuing Operations

    

Earnings before income taxes and discontinued operations

   $ 446.9     $ 413.4  

Special items

     22.5       22.1  
                

Adjusted earnings before income taxes and discontinued operations

   $ 469.4     $ 435.5  

Provision for income taxes

   $ 143.7     $ 122.0  

Special items tax benefit

     7.7       5.8  
                

Adjusted provision for income taxes

   $ 151.4     $ 127.8  

Non-GAAP effective tax rate from continuing operations

     32.3 %     29.4 %
     First Quarter  
     2008     2007  

Debt to Total Capital

     35 %     26 %

Net Debt to Capital

    

Current portion of long-term obligations and other short-term borrowings

   $ 386.8     $ 280.1  

Long-term obligations, less current portion and other short-term borrowings

     3,347.5       2,616.0  
                

Debt

   $ 3,734.3     $ 2,896.1  

Cash and equivalents

     (1,289.6 )     (1,444.1 )

Short-term investments available for sale

     —         (456.5 )
                

Net debt

   $ 2,444.7     $ 995.5  

Total shareholders’ equity

   $ 7,068.2     $ 8,421.1  

Capital

   $ 9,512.9     $ 9,416.6  

Net debt to capital

     26 %     11 %

Forward-Looking Non-GAAP Financial Measures

The Company presents non-GAAP operating earnings, non-GAAP earnings from continuing operations, non-GAAP return on equity and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are operating earnings, earnings from continuing operations, return on equity and effective tax rate from continuing operations. The Company is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most comparable forward-looking GAAP measures because the Company cannot reliably forecast special items and impairment charges and other, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact the Company’s future financial results.

 

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CARDINAL HEALTH, INC. AND SUBSIDIARIES

DEFINITIONS

GAAP

Debt: long-term obligations plus short-term borrowings

Debt to Total Capital: debt divided by (debt plus total shareholders’ equity)

Diluted EPS from Continuing Operations: earnings from continuing operations divided by diluted weighted average shares outstanding

Effective Tax Rate from Continuing Operations: provision for income taxes divided by earnings before income taxes and discontinued operations

Operating Cash Flow: net cash provided by / (used in) operating activities from continuing operations

Segment Profit: segment revenue minus (segment cost of products sold and segment selling, general and administrative expenses)

Segment Profit Margin: segment profit divided by revenue

Segment Profit Mix: segment profit divided by total segment profit for all operating segments

Return on Equity: annualized net earnings divided by average shareholders’ equity

Return on Invested Capital: annualized net earnings divided by (average total shareholders’ equity plus debt plus unrecorded goodwill)

Revenue Mix: segment revenue divided by total revenue for all segments

NON-GAAP

Economic Profit: segment net operating earnings, after-tax minus (tangible capital multiplied by weighted average cost of capital); Tangible Capital is the 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)

Economic Profit Margin: economic profit divided by revenue

Net Debt to Capital: net debt divided by (net debt plus total shareholders’ equity)

Net Debt: debt minus (cash and equivalents and short-term investments available for sale)

Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding

Non-GAAP Diluted EPS from Continuing Operations Growth Rate: (current period non-GAAP diluted EPS from continuing operations minus prior period non-GAAP diluted EPS from continuing operations) divided by prior period non-GAAP diluted EPS from continuing operations

Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding special items and impairment charges and other, both net of tax

Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period non-GAAP earnings from continuing operations

Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for special items) divided by earnings before income taxes and discontinued operations adjusted for special items)

Non-GAAP Operating Earnings: operating earnings excluding special items and impairment charges and other

Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP operating earnings minus prior period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings

Non-GAAP Return on Equity: (annualized current period net earnings plus special items minus special items tax benefit) divided by average shareholders’ equity

Non-GAAP Return on Invested Capital: (annualized net earnings plus special items minus special items tax benefit plus interest expense and other, net of tax) divided by (average total shareholders’ equity plus debt plus unrecorded goodwill)

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