EX-99.3 4 dex993.htm SLIDE PRESENTATION Slide presentation
Essential to care
Q2 FY2010 
Investor/Analyst Call
January 28, 2010
Exhibit 99.3

2
2
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. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding the
effect
of
the
CareFusion
spinoff
on
Cardinal
Health;
the
performance
of
CareFusion
and
the
proceeds
realized
from
future
sales
of
CareFusion
stock;
competitive
pressures
in
Cardinal
Health’s
various
lines
of
business; the loss of one or more key customer or supplier relationships or changes to the terms of those
relationships; the timing of generic and branded pharmaceutical 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 health care products and/or services; the results,
consequences, effects or timing of any inquiry or investigation by any regulatory authority or any legal or
administrative proceedings; the effects of disruptions in the financial markets, including uncertainties related
to the availability and/or cost of credit on Cardinal Health’s customers and vendors; the ultimate features of
government health care reform initiatives and their enactment and implementation; and conditions in the
pharmaceutical market and general economic and market conditions. In addition, Cardinal Health is subject
to additional risks and uncertainties 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.
This
presentation
reflects
management’s
views
as
of
January
28,
2010.
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. A
transcript
of
the
conference
call
will
be
available
on
the
investor
relations
page
at
www.cardinalhealth.com.

3
Q2 FY2010 Results

4
Q2 FY2010 Business Analysis
1
All
FY09
financial
information
reflects
the
reclassification
of
CareFusion
to
discontinued operations and change in reportable segments.  See the Company’s
Form 8-K filed on November 16, 2009.
1
1
1
Q2 FY10
Q2 FY09
Q2 FY10
Q2 FY09
Revenue
$24,920
$24,118
% change
3%
8%
Operating earnings
$367
$313
$358
$337
% change
17%
(8)%
6%
-
Ratio to revenue
1.47%
1.30%
1.44%
1.40%
Earnings from continuing ops
$230
$169
$207
$183
% change
36%
(21)%
13%
(15)%
Ratio to revenue
0.92%
0.70%
0.83%
0.76%
Diluted EPS from continuing ops
$0.64
$0.47
$0.57
$0.51
% change
36%
(20)%
12%
(14)%
Asset Management
Q2 FY10
Q2 FY09
Operating Cash Flow
$524
$366
Days Receivable
17.5
17.7
Days Inventory on Hand
27
28
Non-GAAP Basis
($M)
GAAP
Basis
($M)

5
Pharmaceutical Segment
Business Analysis
Highlights:
•
Revenue performance was driven by increased sales to existing pharmaceutical distribution customers
–
Revenue for bulk customers was down 1%, primarily due to timing and the loss of a large mail
order customer
–
Revenue from non-bulk customers increased 7% driven by growth in retail chain, hospital and
retail independents
•
Segment profit decrease was due to year-over-year impact of generic launches, customer contract
repricings and planned MSI transition, partially offset by contribution from sourcing initiatives,
compensation under branded manufacturer agreements and disciplined cost control
•
Continued progress made in sourcing, contract compliance and customer-facing IT initiatives
•
Excellent execution in nuclear pharmacy services despite supply shortage
•
Continued strong expense control and working capital management
Revenue
Segment Profit
Segment Profit Margin
$22,695
$260
1.14%
Q2 FY10
($M)
$22,079
$263
1.19%
Q2 FY09
($M)
3%
(1%)
% Change

6
Medical Segment
Business Analysis
Highlights:
•
Revenue increase was driven by organic growth, flu-related sales and foreign exchange
–
Double-digit growth in Canada, lab and ambulatory
•
Segment profit driven by organic growth and commodity cost decreases, partially offset by
investment in the Medical Transformation program
–
Strong performance from clinical/procedural businesses
•
Continued progress made in Medical Transformation and customer-facing IT initiatives
Revenue
Segment Profit
Segment Profit Margin
$2,232
$103
4.59%
Q2 FY10
($M)
$2,057
$75
3.62%
Q2 FY09
($M)
9%
38%
% Change

7
7
7
Operating     
Earnings ($M)
Earnings from
Continuing
Operations ($M)
Diluted EPS from
Continuing
Operations
Operating     
Earnings ($M)
Earnings from
Continuing
Operations ($M)
Diluted EPS from
Continuing
Operations
GAAP
$367
$230
$0.64
$313
$169
$0.47
Restructuring and Employee
Severance (Note)
$11
$8
$0.02
$17
$10
$0.03
Impairments and Loss on Sale of
Assets
-
-
-
$7
$4
$0.01
Litigation (Credits)/Charges, Net
($25)
($16)
($0.04)
-
-
-
Other Spinoff Costs (Note)
$5
$4
$0.01
-
-
-
Gain on Sale of CareFusion Stock
-
($20)
($0.06)
-
-
-
Non-GAAP
$358
$207
$0.57
$337
$183
$0.51
Spinoff Costs Included in
Restructuring and Employee
Severance 
$7
$5
Other Spinoff Costs
$5
$4
Q2 FY 2009
Q2 FY 2010
Q2 GAAP to Non-GAAP Reconciliation
Costs
associated
with
the
CareFusion
spinoff
are
as
follows:
Note:

8
8
Significant Q2 FY10 Items
•
CareFusion
Investment
–
Sold 5.5 million shares for total proceeds of $135.0 million and
pre-tax realized
gain of $20 million
–
No income tax impact
–
Realized gain included in “Other Income”
but excluded from non-GAAP
earnings
–
Remaining 35.9 million shares at 12/31/09 have market value of $897.4 million
–
Unrealized
gain
of
$115.2
million
recognized
in
equity
in
Q2;
no
earnings
impact until shares are sold
•
Other Items
–
$27.2 million cash ($16 million after tax) released from escrow
–
Comprised of $25.7 million insurance recovery excluded from non-GAAP
earnings and $1.5 million interest income included in non-GAAP earnings

9
FY 2010 outlook

10
10
Pharmaceutical Segment
FY10 Business Trends and Expectations
January 28, 2010
•
Market factors:
–
Modest segment revenue growth
–
YoY decline in generic launches (although less significant than expected in H1)
–
Customer contract repricings
–
Earlier impact of compensation under branded manufacturer agreements
•
Key
strategic moves benefiting the longer-term:
–
Portfolio repositioning to focus (divestitures) and optimize existing platforms (MSI)
–
DSA transition timing
–
Sourcing model changes
•
Transformational investments:
–
Investments in customer-facing systems
•
Balance of year forecast assumes nuclear supply shortage resolves in
April 2010
•
Strong working capital management continues

11
11
•
Market factors:
–
Solid segment revenue growth
–
Positive impact from decreases in raw materials/COGS; impact greater in H1
•
Transformational investments:
–
Medical Transformation progressing –
in design moving to build stage
–
Progress in ambulatory care channel –
investments continue
•
Improvement in Presource
performance
•
Lean/operational excellence initiatives improving supply chain 
and working capital
•
Accelerated revenue recognition related to CareFusion
spinoff in Q1
•
Impact of flu moderating
Medical Segment
FY10 Business Trends and Expectations
January
28,
2010

12
12
CAH FY10 Overall Expectations
January 28, 2010
FY10 outlook
FY09
Non-GAAP effective tax
rate
37%+
37%
Diluted weighted average
shares outstanding
~361M
361.5M
Interest and other, net
~$110M
$128M
Capital expenditures
$200M -
$250M
$421M
1
May change due to unique items affecting quarters
2
Includes $150M repurchase of assets under synthetic lease
1
2

13
13
CAH FY10 Financial Expectations
January 28, 2010
FY10 outlook
FY09
Revenue:
Low single digit
growth
$96B
Non-GAAP EPS
:
$2.08 -
$2.18
$2.26
1
Non-GAAP diluted earnings per share from continuing operations
1

Q&A

16
16
16
Q2 FY10 Trailing Five Quarters

17
17
Segment Analysis: Q2 FY10
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Revenue
($M)
22,079
22,118
22,263
22,562
22,695
Segment
Profit ($M)
263
286
273
208
260
Q2FY09
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Revenue
($M)
2,057
1,976
2,090
2,237
2,232
Segment
Profit ($M)
75
129
83
115
103
Pharmaceutical Segment
Medical Segment

18
18
18
GAAP to Non-GAAP
Reconciliation Statements

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

    Second Quarter 2010     Year-To-Date 2010  

(in millions, except per
Common Share
amounts)

   GAAP     Restructuring
and
Employee
Severance		   Impairments
and Loss on
Sale of
Assets		   Litigation
(Credits)/
Charges,
Net		     Other
Spin-Off
Costs		   Gain on
Sale of
CareFusion
Stock		     Non-GAAP     GAAP     Restructuring
and
Employee
Severance		   Impairments
and Loss on
Sale of
Assets		     Litigation
(Credits)/
Charges,
Net		     Other
Spin-Off
Costs		     Gain on
Sale of
CareFusion
Stock		     Non-GAAP  

Operating Earnings

                            

Amount

   $ 367      $ 11     —     $ (25 )    $ 5     —        $ 358      $ 607      $ 70   $ 24      $ (26 )    $ 5        —        $ 681   

Growth Rate

     17 %                6 %      1 %                5 % 

Earnings Before Income Taxes and Discontinued Operations

   $ 365      $ 11     —     $ (25 )    $ 5   $ (20 )    $ 336      $ 540      $ 70   $ 24      $ (26 )    $ 48      $ (20 )    $ 636   

Provision for Income Taxes 1

   $ 135      $ 3     —     $ (10 )    $ 1     —        $ 129      $ 372      $ 20   $ 8      $ (10 )    $ (155 )      —        $ 236   

Earnings from Continuing Operations

                            

Amount

   $ 230      $ 8     —     $ (16 )    $ 4   $ (20 )    $ 207      $ 168      $ 50   $ 16      $ (16 )    $ 202      $ (20 )    $ 401   

Growth Rate

     36 %                13 %      (51 )%                14 % 

Diluted EPS from Continuing Operations

                            

Amount

   $ 0.64      $ 0.02     —     $ (0.04 )    $ 0.01   $ (0.06 )    $ 0.57      $ 0.47      $ 0.14   $ 0.04      $ (0.04 )    $ 0.56      $ (0.06 )    $ 1.11   

Growth Rate

     36 %                12 %      (51 )%                14 % 
    Second Quarter 2009     Year-To-Date 2009  
     GAAP     Restructuring
and
Employee
Severance		   Impairments
and Loss on
Sale of
Assets		   Litigation
(Credits)/
Charges,
Net		     Other
Spin-Off
Costs		   Gain on
Sale of
CareFusion
Stock		     Non-GAAP     GAAP     Restructuring
and
Employee
Severance		   Impairments
and Loss on
Sale of
Assets		     Litigation
(Credits)/
Charges,
Net		     Other
Spin-Off
Costs		     Gain on
Sale of
CareFusion
Stock		     Non-GAAP  

Operating Earnings

                            

Amount

   $ 313      $ 17   $ 7     —          —       —        $ 337      $ 600      $ 38   $ 11        —          —          —        $ 648   

Growth Rate

     (8 )%                —          (11 )%                (6 )% 

Earnings Before Income Taxes and Discontinued Operations

   $ 271      $ 17   $ 7     —          —       —        $ 295      $ 526      $ 38   $ 11        —          —          —        $ 574   

Provision for Income Taxes 1

   $ 102      $ 7   $ 3     —          —       —        $ 112      $ 185      $ 14   $ 24        —          —          —        $ 223   

Earnings from Continuing Operations

                            

Amount

   $ 169      $ 10   $ 4     —          —       —        $ 183      $ 341      $ 24   $ (14 )      —          —          —        $ 351   

Growth Rate

     (21 )%                (15 )%      (20 )%                (20 )% 

Diluted EPS from Continuing Operations

                            

Amount

   $ 0.47      $ 0.03   $ 0.01     —          —       —        $ 0.51      $ 0.95      $ 0.06   $ (0.04 )      —          —          —        $ 0.97   

Growth Rate

     (20 )%                (14 )%      (18 )%                (18 )% 

 

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

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

 

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

(in millions)

    Second Quarter
2010		          Second Quarter
2009		        

GAAP Return on Invested Capital

      7.72 %         7.09 %   

Adjusted Net Earnings

          

Net earnings

    $ 234.5         $ 316.5     

Restructuring and employee severance, net of tax, in continuing operations1

      8.1           10.4     

Impairments and loss on sale of assets, net of tax, in continuing operations1

      0.2           3.5     

Litigation (credits)/charges, net, net of tax, in continuing operations1

      (15.8 )         (0.2 )   

Other spin-off costs, net of tax1

      3.9           —       

Gain on sale of CareFusion stock, net of tax1

      (20.0 )         —       

Other (income)/expense, net, net of tax1

      (3.5 )         12.6     

Interest expense, net, net of tax1

      17.1           14.2     

CareFusion net earnings in discontinued operations2

      (0.3 )         (147.0 )   
                     

Adjusted net earnings

    $ 224.2         $ 210.0     

Annualized

    $ 896.8         $ 840.0     
     Second Quarter
2010		     First Quarter
2010		    Second Quarter
2009		     First Quarter
2009		  

GAAP Total Invested Capital

    $ 12,819.9      $ 12,888.9    $ 19,522.8      $ 19,220.0   

Non-GAAP Total Invested Capital

          

Total shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 8,127.9      $ 7,918.1   

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

      12.7        362.3      459.0        158.0   

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

      2,099.2        2,103.5      3,385.8        3,593.3   

Non-cash dividend related to CareFusion spin-off

      —          —        (3,752.4 )      (3,752.4 ) 

Current portion of long-term obligations and other short-term borrowings in discontinued operations

      —          —        7.2        7.3   

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

      —          —        3.4        3.7   

Unrecorded goodwill3

      5,481.9        5,481.9      5,481.9        5,481.9   
                               

Non-GAAP total invested capital

    $ 12,819.9      $ 12,888.9    $ 13,712.8      $ 13,409.9   
                               

Average non-GAAP total invested capital

    $ 12,854.4         $ 13,561.4     

Non-GAAP Return on Invested Capital

      6.98 %         6.19 %   

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

2

To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented.

3

Unrecorded goodwill is $5.5 billion on a GAAP basis at December 31, 2009 and September 30, 2009, respectively. Unrecorded goodwill is $7.5 billion on a GAAP basis at December 31, 2008 and September 30, 2008, respectively, of which $2.0 billion relates to CareFusion. Accordingly, on a non-GAAP basis, unrecorded goodwill is $5.5 billion for all periods presented.

 

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

(in millions)

    Year-To-Date
2010		                Year-To-Date
2009		              

GAAP Return on Invested Capital

      2.96 %           6.35 %     

Adjusted Net Earnings

              

Net earnings

    $ 196.3           $ 565.6       

Restructuring and employee severance, net of tax, in continuing operations1

      50.4             23.7       

Impairments and loss on sale of assets, net of tax, in continuing operations1

      15.7             (13.8 )     

Litigation (credits)/charges, net, net of tax, in continuing operations1

      (16.1 )           (0.2 )     

Other spin-off costs, net of tax1

      202.1             —         

Gain on sale of CareFusion stock, net of tax1

      (20.0 )           —         

Other (income)/expense, net, net of tax1

      (10.6 )           14.2       

Interest expense, net, net of tax1

      38.2             32.8       

CareFusion net earnings in discontinued operations2

      (20.4 )           (221.0 )     
                         

Adjusted net earnings

    $ 435.6           $ 401.3       

Annualized

    $ 871.2           $ 802.6       
     Second Quarter
2010		     First Quarter
2010		    Fourth Quarter
2009		     Second Quarter
2009		     First Quarter
2009		     Fourth Quarter
2008		  

GAAP Total Invested Capital

    $ 12,819.9      $ 12,888.9    $ 19,911.5      $ 19,522.8      $ 19,220.0      $ 19,133.4   

Non-GAAP Total Invested Capital

              

Total shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 8,724.7      $ 8,127.9      $ 7,918.1      $ 7,747.5   

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

      12.7        362.3      366.2        459.0        158.0        151.6   

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

      2,099.2        2,103.5      3,271.6        3,385.8        3,593.3        3,681.7   

Non-cash dividend related to CareFusion spin-off

      —          —        (3,752.4 )      (3,752.4 )      (3,752.4 )      (3,752.4 ) 

Current portion of long-term obligations and other short-term borrowings in discontinued operations

      —          —        1.1        7.2        7.3        7.4   

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

      —          —        8.4        3.4        3.7        5.7   

Unrecorded goodwill3

      5,481.9        5,481.9      5,481.9        5,481.9        5,481.9        5,481.9   
                                               

Non-GAAP total invested capital

    $ 12,819.9      $ 12,888.9    $ 14,101.5      $ 13,712.8      $ 13,409.9      $ 13,323.4   
                                               

Average non-GAAP total invested capital

    $ 13,270.1           $ 13,482.0       

Non-GAAP Return on Invested Capital

      6.57 %           5.95 %     

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

2

To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented.

3

Unrecorded goodwill is $5.5 billion on a GAAP basis at December 31, 2009 and September 30, 2009, respectively. Unrecorded goodwill is $7.5 billion on a GAAP basis at June 30, 2009, December 31, 2008, September 30, 2008 and June 30, 2008, respectively, of which $2.0 billion relates to CareFusion. Accordingly, on a non-GAAP basis, unrecorded goodwill is $5.5 billion for all periods presented.

 

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

(in millions)

    Second Quarter
2010		          Second Quarter
2009		        

GAAP Return on Equity

      18.5 %         15.8 %   

Non-GAAP Return on Equity

          

Net earnings

    $ 234.5         $ 316.5     

Restructuring and employee severance, net of tax, in continuing operations1

      8.1           10.4     

Impairments and loss on sale of assets, net of tax, in continuing operations1

      0.2           3.5     

Litigation (credits)/charges, net, net of tax, in continuing operations1

      (15.8 )         (0.2 )   

Other spin-off costs, net of tax1

      3.9           —       

Gain on sale of CareFusion stock, net of tax1

      (20.0 )         —       

CareFusion net earnings in discontinued operations1, 2

      (0.3 )         (147.0 )   
                     

Adjusted net earnings

    $ 210.6         $ 183.2     

Annualized

    $ 842.4         $ 732.8     
     Second Quarter
2010		     First Quarter
2010		    Second Quarter
2009		     First Quarter
2009		  

Non-GAAP Shareholders’ Equity

          

Total shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 8,127.9      $ 7,918.1   

Non-cash dividend related to CareFusion spin-off

      —          —        (3,752.4 )      (3,752.4 ) 
                               

Non-GAAP shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 4,375.5      $ 4,165.7   
                               

Average non-GAAP shareholders’ equity

      5,083.7           4,270.6     

Non-GAAP return on equity

      16.6 %         17.2 %   

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

2

To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

(in millions)

    Year-To-Date
2010		                Year-To-Date
2009		              

GAAP Return on Equity

      6.2 %           14.3 %     

Non-GAAP Return on Equity

              

Net earnings

    $ 196.3           $ 565.6       

Restructuring and employee severance, net of tax, in continuing operations1

      50.4             23.7       

Impairments and loss on sale of assets, net of tax, in continuing operations1

      15.7             (13.8 )     

Litigation (credits)/charges, net, net of tax, in continuing operations1

      (16.1 )           (0.2 )     

Other spin-off costs, net of tax1

      202.1             —         

Gain on sale of CareFusion stock, net of tax1

      (20.0 )           —         

CareFusion net earnings in discontinued operations1, 2

      (20.4 )           (221.0 )     
                         

Adjusted net earnings

    $ 408.0           $ 354.3       

Annualized

    $ 816.0           $ 708.6       
     Second Quarter
2010		     First Quarter
2010		    Fourth Quarter
2009		     Second Quarter
2009		     First Quarter
2009		     Fourth Quarter
2008		  

Non-GAAP Shareholders’ Equity

              

Total shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 8,724.7      $ 8,127.9      $ 7,918.1      $ 7,747.5   

Non-cash dividend related to CareFusion spin-off

      —          —        (3,752.4 )      (3,752.4 )      (3,752.4 )      (3,752.4 ) 
                                               

Non-GAAP shareholders’ equity

    $ 5,226.1      $ 4,941.2    $ 4,972.3      $ 4,375.5      $ 4,165.7      $ 3,995.1   
                                               

Average non-GAAP shareholders’ equity

      5,046.5             4,178.8       

Non-GAAP return on equity

      16.2 %           17.0 %     

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

2

To properly reflect the impact of the spin-off, on a non-GAAP basis, CareFusion net earnings included in discontinued operations are excluded from adjusted net earnings for all periods presented.

 

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Second Quarter     Year-to-Date  

(in millions)

    2010     2009     2010     2009  

GAAP Effective Tax Rate from Continuing Operations

      36.9 %      37.7 %      68.8 %      35.1 % 

Non-GAAP Effective Tax Rate from Continuing Operations

         

Earnings before income taxes and discontinued operations

    $ 365.0      $ 271.2      $ 540.0      $ 526.1   

Restructuring and employee severance

      10.7        16.9        70.4        37.6   

Impairments and loss on sale of assets

      0.4        6.9        24.0        10.5   

Litigation (credits)/charges, net

      (25.4 )      (0.3 )      (25.9 )      (0.3 ) 

Other spin-off costs

      5.3        —          47.6        —     

Gain on sale of CareFusion stock

      (20.0 )      —          (20.0 )      —     
                                

Adjusted earnings before income taxes and discontinued operations

    $ 336.0      $ 294.7      $ 636.1      $ 573.9   

Provision for income taxes1

    $ 134.8      $ 102.2      $ 371.6      $ 184.9   

Restructuring and employee severance tax benefit1

      2.6        6.5        20.0        13.9   

Impairments and loss on sale of assets, tax benefit1

      0.2        3.4        8.3        24.3   

Litigation (credits)/charges, net tax expense1

      (9.6 )      (0.1 )      (9.8 )      (0.1 ) 

Other spin-off costs tax expense1

      1.4        —          (154.5 )      —     

Gain on sale of CareFusion stock tax expense1

      —          —          —          —     
                                

Adjusted provision for income taxes

    $ 129.4      $ 112.0      $ 235.6      $ 223.0   

Non-GAAP effective tax rate from continuing operations

      38.5 %      38.0 %      37.0 %      38.9 % 
     Second Quarter        
     2010     2009        

Debt to Total Capital

      29 %      32 %     

Net Debt to Capital

         

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

    $ 12.7      $ 459.0       

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

      2,099.2        3,385.8       
                    

Debt

    $ 2,111.9      $ 3,844.8       

Cash and equivalents

      (1,746.8 )      (582.6 )     
                    

Net debt

    $ 365.1      $ 3,262.2       

Total shareholders’ equity

    $ 5,226.1      $ 8,127.9       

Capital

    $ 5,591.2      $ 11,390.1       

Net Debt to Capital

      7 %      29 %     

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

 

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Second Quarter  

(in millions)

    2010     2009  

Non-GAAP Operating Expenses

    

Distribution, selling, general and administrative expenses

    $ 605.2      $ 578.5   

Restructuring and employee severance

      10.7        16.9   

Impairments and loss on sale of assets

      0.4        6.9   

Litigation (credits)/charges, net

      (25.4 )      (0.3 ) 
                

Total GAAP operating expenses

    $ 590.9      $ 602.0   

Restructuring and employee severance

      (10.7 )      (16.9 ) 

Impairments and loss on sale of assets

      (0.4 )      (6.9 ) 

Litigation credits/(charges), net

      25.4        0.3   

Other spin-off costs

      (5.3 )      —     
                

Total non-GAAP operating expenses

    $ 599.9      $ 578.5   

Growth Rate

      3.7 %   

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Second Quarter    Year-to-Date

(in millions)

    2010     2009    2010     2009

Non-GAAP Other (Income)/Expense, Net

          

Total GAAP other (income)/expense, net

    $ (25.6 )    $ 19.7    $ (34.5 )    $ 22.2

Gain on sale of CareFusion stock

      20.0        —        20.0        —  

Other spin-off costs

      —          —        (2.4 )      —  
                             

Total non-GAAP other (income)/expense, net

    $ (5.6 )    $ 19.7    $ (16.9 )    $ 22.2

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

(in millions)

    Fiscal
2009		  

GAAP Effective Tax Rate from Continuing Operations

      34.6 % 

Non-GAAP Effective Tax Rate from Continuing Operations

   

Earnings before income taxes and discontinued operations

    $ 1,159.8   

Restructuring and employee severance

      107.5   

Impairments and loss on sale of assets

      13.9   

Litigation (credits)/charges, net

      5.2   

Other spin-off costs

      4.5   
        

Adjusted earnings before income taxes and discontinued operations

    $ 1,290.9   

Provision for income taxes1

    $ 401.6   

Restructuring and employee severance tax benefit1

      30.4   

Impairments and loss on sale of assets, tax benefit1

      39.4   

Litigation (credits)/charges, net tax expense1

      1.9   

Other spin-off costs tax expense1

      1.7   
        

Adjusted provision for income taxes

    $ 475.0   

Non-GAAP effective tax rate from continuing operations

      36.8 % 

 

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Fiscal 2009
     GAAP    Restructuring
and Employee
Severance		    Impairments
and Loss on
Sale of Assets		     Litigation
(Credits)/
Charges, Net		    Other Spin-Off
Costs		    Non-GAAP

Diluted EPS from Continuing Operations

                 

Amount

    $ 2.10    $ 0.21    $ (0.07 )    $ 0.01    $ 0.01    $ 2.26

Forward-Looking Non-GAAP Financial Measures

The Company presents non-GAAP earnings from continuing operations and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures, including per share calculations) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from continuing operations 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 directly comparable forward-looking GAAP measures because the Company cannot reliably forecast restructuring and employee severance, impairments and loss on sale of assets, litigation (credits)/charges, net, other spin-off costs and gains or losses on sale of CareFusion stock, 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.

CARDINAL HEALTH, INC. AND SUBSIDIARIES

 

     Second Quarter

(in millions)

    2010    2009

Days Inventory on Hand

      

Inventories

    $ 7,961.0    $ 8,224.5

Cost of products sold

    $ 23,962.0    $ 23,202.7

Chargeback billings

      2,790.8      2,972.4
             

Adjusted cost of products sold

    $ 26,752.8    $ 26,175.1

Adjusted cost of products sold divided by 90 days

    $ 297.3    $ 290.8

Days inventory on hand

      27      28

Days Inventory on Hand: Inventory divided by ((quarterly costs of products sold plus chargeback billings) divided by 90 days). Chargeback billings are the difference between a product’s wholesale acquisition cost and the contract price established between pharmaceutical manufacturers and the end customer.

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

Gain on Sale of CareFusion Stock: realized gains and losses from the sale of the Company’s ownership of CareFusion common stock retained in connection with the spin-off

Operating Expenses: distribution, selling, general and administrative expenses, restructuring and employee severance, impairments and loss on sale of assets, and litigation (credits)/charges, net

Other Spin-Off Costs: costs and tax charges incurred in connection with the Company’s spin-off of CareFusion that are not included in restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net. Other spin-off costs include, among other things, the loss on extinguishment of debt and the income tax charge related to the anticipated repatriation of a portion of cash loaned to the Company’s entities within the United States

Receivable Days: trade receivables, net divided by (monthly revenue divided by 30 days)

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

Segment Profit Margin: segment profit divided by segment revenue

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

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

Return on Invested Capital: annualized net earnings plus other (income)/expense, net plus interest expense, net divided by (average total shareholders’ equity plus debt plus unrecorded goodwill)

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

NON-GAAP

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

Net Debt: debt minus (cash and equivalents)

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 (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock, each 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 (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock) divided by (earnings before income taxes and discontinued operations adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock)

Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs included within distribution, selling, general and administrative expenses

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 Operating Expenses: operating expenses excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs

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

Non-GAAP Other (Income)/Expense, Net: other (income)/expense excluding (1) gain on sale of CareFusion stock and (2) Other Spin-Off Costs

Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) CareFusion net earnings in discontinued operations and (6) gain on sale of CareFusion stock, each net of tax) divided by average shareholders’ equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off

Non-GAAP Return on Invested Capital: (annualized net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) gain on sale of CareFusion stock, (6) other (income)/expense, net, (7) interest expense, net and (8) CareFusion net earnings in discontinued operations, each net of tax) divided by (average total shareholders’ equity adjusted for the $3.7 billion non-cash dividend issued in connection with the spin-off plus debt plus unrecorded goodwill excluding unrecorded goodwill attributed to CareFusion)