Cardinal Health Reports Strong Q4 And Fiscal Year 2012; Provides Fiscal 2013 Outlook

- Fourth-quarter diluted earnings per share from continuing operations increase by 17 percent to $0.68, or 22 percent to $0.73 on a non-GAAP basis(1)

DUBLIN, Ohio, Aug. 2, 2012 /PRNewswire/ -- Cardinal Health today reported fourth-quarter fiscal year 2012 revenues of $26.8 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $0.73, up 22 percent. The company reported fiscal year 2012 revenues increased 5 percent to $108 billion, and non-GAAP diluted EPS from continuing operations increased 15 percent to $3.21.

"We finished our fiscal year with a strong fourth quarter, growing our non-GAAP EPS by 22 percent," said George Barrett, chairman and chief executive officer of Cardinal Health. "Our Pharmaceutical segment continued its strong momentum, and, as expected, our Medical segment finished the year with profit growth in the fourth quarter and is well-positioned as we begin FY 2013.

"Overall, fiscal 2012 was another strong year, meeting virtually all of our financial goals, including revenues, margin growth, operating earnings, EPS and cash flow. It was also a year in which we made great strides on our strategic priorities - including expansion of our retail independent customer base, improved generic contribution, build out of our Positron Emission Tomography capabilities, accelerating penetration of our specialty solutions, growth in preferred medical products, expansion of our ambulatory franchise and excellent growth in China."

The outlook for non-GAAP diluted EPS from continuing operations in fiscal 2013 is $3.35 to $3.50 and incorporates the previously announced non-renewal of the Express Scripts contract.

Q4 and Fiscal Year Summary


Q4 FY12

Q4 FY11

Y/Y

FY12

FY11

Y/Y

Revenue

$26.8 billion

$26.8 billion

0%

$107.6 billion

$102.6 billion

5%








 

Operating Earnings

 

$403 million

 

$359 million

 

12%

 

$1.8 billion

 

$1.5 billion

 

18%

Non-GAAP Operating Earnings

 

$425 million

 

$375 million

 

13%

 

$1.9 billion

 

$1.6 billion

 

13%








Earnings from Continuing Operations

 

$236 million

 

$207 million

 

14%

 

$1.1 billion

 

$966 million

 

11%

Non-GAAP Earnings from Continuing Operations

 

$255 million

 

$214 million

 

19%

 

$1.1 billion

 

$988 million

 

13%








Diluted EPS from Continuing Operations

 

$0.68

 

$0.58

 

17%

 

$3.06

 

$2.74

 

12%

Non-GAAP Diluted EPS from Continuing Operations

 

$0.73

 

$0.60

 

22%

 

$3.21

 

$2.80

 

15%

SEGMENT RESULTS

Pharmaceutical Segment

Fourth-quarter revenue for the Pharmaceutical segment decreased 1 percent to $24.3 billion. The decrease, primarily due to brand-to-generic conversions, was mostly offset by revenue from new customers. Segment profit for the quarter increased 15 percent to $354 million, driven by the overall strong performance of generic programs and the benefits of expanded business with new and existing customers, including strong contributions from retail independents. Segment profit also benefited from performance under branded agreements.

For the full year, revenue for the Pharmaceutical segment increased 4 percent to $97.9 billion, and segment profit increased 17 percent to $1.6 billion.


Q4 FY12

Q4 FY11

Y/Y

FY12

FY11

Y/Y

Revenue

$24.3 billion

$24.5 billion

(1%)

$97.9 billion

$93.7 billion

4%

Segment Profit

$354 million

$308 million

15%

$1.6 billion

$1.3 billion

17%

Medical Segment

Fourth-quarter revenue for the Medical segment increased 5 percent to $2.4 billion. Segment profit increased 2 percent to $79 million, primarily driven by increased sales of preferred products, offset by expenses related to the new systems implementation. In addition, the negative impact of commodities and foreign exchange moderated to $8 million in the quarter versus prior year.

For the full year, Medical segment revenue increased 8 percent to $9.6 billion, and segment profit decreased 11 percent to $332 million.


Q4 FY12

Q4 FY11

Y/Y

FY12

FY11

Y/Y

Revenue

$2.4 billion

$2.3 billion

5%

$9.6 billion

$8.9 billion

8%

Segment Profit

$79 million

$78 million

2%

$332 million

$373 million

(11%)

ADDITIONAL YEAR-END AND RECENT HIGHLIGHTS

  • Increased the regular quarterly dividend by 10.5 percent to $0.2375  per share, effective July 15
  • Closed several acquisitions in China, notably Da Sheng Group, significantly expanding the Cardinal Health footprint in Ningbo, a city of 7.6 million people
  • Selected as the primary healthcare solutions partner by the Medical Oncology Association of Southern California Purchasing Network, Inc.
  • Completed the acquisition of Dik Drug, an Illinois-based pharmaceutical distributor with more than 500 retail independent pharmacy customers

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:00 a.m. Eastern Daylight Time to discuss fourth-quarter and full-year results and its future outlook. To access the call and corresponding slide presentation, go to the Investors page at cardinalhealth.com. The call also can be accessed by dialing 224.357.2209. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will also be available until Sept. 2 by dialing 855.859.2056 or 404.537.3406, access code 98065830.

About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $108 billion health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers and physician offices focus on patient care while  reducing costs, enhancing efficiency and improving quality. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 60,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #21 on the Fortune 500, Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com and @CardinalHealth on Twitter.

1 See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.

Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at cardinalhealth.com.

Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. 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 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 pharmaceutical price appreciation or deflation; uncertainties due to government health care reform including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel; and uncertainties concerning Cardinal Health's ability to achieve the expected benefits of its Medical segment's business transformation project. 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 and exhibits to those reports. This news release reflects management's views as of Aug. 2, 2012. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.

 






Schedule 1







Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings (Unaudited)








Fourth Quarter



(in millions, except per Common Share amounts)

2012


2011


% Change







Revenue

$         26,764


$         26,764


0 %

Cost of products sold

25,628


25,720


(0)%

Gross margin

1,136


1,044


9 %







Operating expenses:






Distribution, selling, general and administrative expenses

712


671


6 %

Restructuring and employee severance

9


5


N.M.

Acquisition-related costs

11


15


N.M.

Impairments and loss on disposal of assets

1


-


N.M.

Litigation (recoveries)/charges, net

-


(6)


N.M.

Operating earnings

403


359


12 %







Other (income)/expenses, net

1


(2)


N.M.

Interest expense, net

25


24


4 %

Gain on sale of investment in CareFusion

-


(4)


N.M.

Earnings before income taxes and discontinued operations

377


341


11 %







Provision for income taxes

141


134


5 %

Earnings from continuing operations

236


207


14 %







Loss from discontinued operations, net of tax

-


(4)


N.M.

Net earnings

$              236


$              203


17 %







Basic earnings/(loss) per Common Share:






Continuing operations

$             0.68


$             0.59


15 %

Discontinued operations

-


(0.01)


N.M.

Net basic earnings per Common Share

$             0.68


$             0.58


17 %







Diluted earnings/(loss) per Common Share:






Continuing operations

$             0.68


$             0.58


17 %

Discontinued operations

-


(0.01)


N.M.

Net diluted earnings per Common Share

$             0.68


$             0.57


19 %







Weighted average number of Common Shares outstanding:






Basic

345


349



Diluted

349


355



 






Schedule 2







Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings








Fiscal Year



(in millions, except per Common Share amounts)

2012


2011


% Change


(Unaudited)











Revenue

$       107,552


$       102,644


5 %

Cost of products sold

103,011


98,482


5 %

Gross margin

4,541


4,162


9 %







Operating expenses:






Distribution, selling, general and administrative expenses

2,677


2,528


6 %

Restructuring and employee severance

21


15


N.M.

Acquisition-related costs

33


90


N.M.

Impairments and loss on disposal of assets

21


9


N.M.

Litigation (recoveries)/charges, net

(3)


6


N.M.

Operating earnings

1,792


1,514


18 %







Other income, net

(1)


(22)


N.M.

Interest expense, net

95


93


2 %

Gain on sale of investment in CareFusion

-


(75)


N.M.

Earnings before income taxes and discontinued operations

1,698


1,518


12 %







Provision for income taxes

628


552


14 %

Earnings from continuing operations

1,070


966


11 %







Loss from discontinued operations, net of tax

(1)


(7)


N.M.

Net earnings

$           1,069


$              959


11 %







Basic earnings/(loss) per Common Share:






Continuing operations

$             3.10


$             2.77


12 %

Discontinued operations

-


(0.02)


N.M.

Net basic earnings per Common Share

$             3.10


$             2.75


13 %







Diluted earnings/(loss) per Common Share:






Continuing operations

$             3.06


$             2.74


12 %

Discontinued operations

-


(0.02)


N.M.

Net diluted earnings per Common Share

$             3.06


$             2.72


13 %







Weighted average number of Common Shares outstanding:






Basic

345


349



Diluted

349


353



 




Schedule 3





Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets






June 30,


June 30,

(in millions)

2012


2011


(Unaudited)



Assets




Cash and equivalents

$           2,274


$           1,929

Trade receivables, net

6,355


6,156

Inventories

7,864


7,334

Prepaid expenses and other

1,017


897

Total current assets

17,510


16,316





Property and equipment, net

1,551


1,512

Goodwill and other intangibles, net

4,392


4,259

Other assets

807


759

Total assets

$         24,260


$         22,846





Liabilities and Shareholders' Equity




Accounts payable

$         11,726


$         11,332

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

476


327

Other accrued liabilities

1,972


1,711

Total current liabilities

14,174


13,370





Long-term obligations, less current portion

2,418


2,175

Deferred income taxes and other liabilities

1,424


1,452

Total shareholders' equity

6,244


5,849

Total liabilities and shareholders' equity

$         24,260


$         22,846





 








Schedule 4









Cardinal Health, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows










Fourth Quarter


Fiscal Year

(in millions)

2012


2011


2012


2011


(Unaudited)


(Unaudited)


(Unaudited)



Cash Flows from Operating Activities:








Net earnings

$              236


$              203


$           1,069


$              959

Loss from discontinued operations

-


4


1


7

Earnings from continuing operations

236


207


1,070


966

Adjustments to reconcile earnings from continuing operations to net cash from operations:








Depreciation and amortization

86


74


325


313

Gain on sale of investment in CareFusion

-


(4)


-


(75)

Impairments and loss on disposal of assets

1


-


21


9

Share-based compensation

22


19


85


80

Provision for deferred income taxes

158


128


158


128

Provision for bad debts

7


5


22


27

Change in fair value of contingent consideration obligation

(18)


(6)


(71)


(7)

Change in operating assets and liabilities, net of effects from acquisitions:








Decrease/(increase) in trade receivables

190


122


(129)


(457)

Decrease/(increase) in inventories

375


384


(495)


(665)

Increase/(decrease) in accounts payable

(893)


(630)


319


1,356

Other accrued liabilities and operating items, net

(271)


(179)


(129)


(280)

Net cash provided by/(used in) operating activities

(107)


120


1,176


1,395









Cash Flows from Investing Activities:








Acquisition of subsidiaries, net of cash acquired

(31)


(5)


(174)


(2,300)

Purchase of held-to-maturity securities and other investments

(25)


-


(35)


(156)

Additions to property and equipment

(100)


(105)


(263)


(291)

Proceeds from divestitures and sale of property and equipment

(1)


-


3


3

Proceeds from sale of CareFusion

-


-


-


706

Proceeds from maturities of held-to-maturity securities

46


10


92


10

Net cash used in investing activities

(111)


(100)


(377)


(2,028)









Cash Flows from Financing Activities:








Payment of contingent consideration

-


(10)


-


(10)

Net change in short-term borrowings

5


5


13


46

Reduction of long-term obligations

(206)


(1)


(251)


(229)

Proceeds from long-term obligations, net of issuance costs

496


-


496


495

Proceeds from issuance of Common Shares

19


27


42


63

Tax disbursements from exercises of stock options

(8)


(5)


(4)


(14)

Dividends on Common Shares

(74)


(68)


(300)


(274)

Purchase of treasury shares

(150)


-


(450)


(270)

Net cash provided by/(used in) financing activities

82


(52)


(454)


(193)









Net increase/(decrease) in cash and equivalents

(136)


(32)


345


(826)

Cash and equivalents at beginning of period

2,410


1,961


1,929


2,755

Cash and equivalents at end of period

$           2,274


$           1,929


$           2,274


$           1,929









 








Schedule 5









Cardinal Health, Inc. and Subsidiaries

Total Company Business Analysis














Non-GAAP


Fourth Quarter


Fourth Quarter

(in millions)

2012


2011


2012


2011

Revenue








Amount

$         26,764


$         26,764





Growth rate

0 %


9 %













Operating earnings








Amount

$              403


$              359


$              425


$              375

Growth rate

12 %


7 %


13 %


17 %









Earnings from continuing operations








Amount

$              236


$              207


$              255


$              214

Growth rate

14 %


7 %


19 %


17 %














Non-GAAP


Fiscal Year


Fiscal Year

(in millions)

2012


2011


2012


2011

Revenue








Amount

$       107,552


$       102,644





Growth rate

5 %


4 %













Operating earnings








Amount

$           1,792


$           1,514


$           1,866


$           1,644

Growth rate

18 %


16 %


13 %


18 %









Earnings from continuing operations








Amount

$           1,070


$              966


$           1,119


$              988

Growth rate

11 %


65 %


13 %


22 %









Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.

 









Schedule 6










Cardinal Health, Inc. and Subsidiaries

Segment Business Analysis











Fourth Quarter



Fourth Quarter

(in millions)

2012


2011


(in millions)

2012


2011

Pharmaceutical





Medical













Revenue





Revenue




Amount

$         24,335


$         24,458


Amount

$           2,432


$           2,312

Growth rate

(1)%


10 %


Growth rate

5 %


7 %

Mix

91 %


91 %


Mix

9 %


9 %










Segment profit





Segment profit




Amount

$              354


$              308


Amount

$                79


$                78

Growth rate

15 %


34 %


Growth rate

2 %


(24)%

Mix

82 %


80 %


Mix

18 %


20 %

Segment profit margin

1.46 %


1.26 %


Segment profit margin

3.27 %


3.38 %










Refer to definitions for an explanation of calculations.


Total consolidated revenue for the three months ended June 30, 2012 was $26,764 million, which included total segment revenue of $26,767 million and Corporate revenue of $(3) million. Total consolidated revenue for the three months ended June 30, 2011 was $26,764 million, which included total segment revenue of $26,770 million and Corporate revenue of $(6) million. Corporate revenue consists primarily of elimination of inter-segment revenue.


Total consolidated operating earnings for the three months ended June 30, 2012 were $403 million, which included total segment profit of $433 million and Corporate costs of $(30) million. Total consolidated operating earnings for the three months ended June 30, 2011 were $359 million, which included total segment profit of $386 million and Corporate costs of $(27) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs (including amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration obligations), impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.

 









Schedule 7










Cardinal Health, Inc. and Subsidiaries

Segment Business Analysis











Fiscal Year



Fiscal Year

(in millions)

2012


2011


(in millions)

2012


2011

Pharmaceutical





Medical













Revenue





Revenue




Amount

$         97,925


$         93,744


Amount

$           9,642


$           8,922

Growth rate

4 %


4 %


Growth rate

8 %


2 %

Mix

91 %


91 %


Mix

9 %


9 %










Segment profit





Segment profit




Amount

$           1,558


$           1,329


Amount

$              332


$              373

Growth rate

17 %


31 %


Growth rate

(11)%


(13)%

Mix

82 %


78 %


Mix

18 %


22 %

Segment profit margin

1.59 %


1.42 %


Segment profit margin

3.45 %


4.18 %










Refer to definitions for an explanation of calculations.


Total consolidated revenue for the fiscal year ended June 30, 2012 was $107,552 million, which included total segment revenue of $107,567 million and Corporate revenue of $(15) million. Total consolidated revenue for the fiscal year ended June 30, 2011 was $102,644 million, which included total segment revenue of $102,666 million and Corporate revenue of $(22) million. Corporate revenue consists primarily of elimination of inter-segment revenue.


Total consolidated operating earnings for the fiscal year ended June 30, 2012 were $1,792 million, which included total segment profit of $1,890 million and Corporate costs of $(98) million. Total consolidated operating earnings for the fiscal year ended June 30, 2011 were $1,514 million, which included total segment profit of $1,702 million and Corporate costs of $(188) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs (including amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration obligations), impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments.

 









Schedule 8










Cardinal Health, Inc. and Subsidiaries

Schedule of Notable Items












Fourth Quarter


Fiscal Year


(in millions, except per Common Share amounts)

2012


2011


2012


2011


Restructuring and employee severance









Restructuring and employee severance

$                (9)


$                (5)


$              (21)


$              (15)


Tax benefit

3


2


8


5


Restructuring and employee severance, net of tax

$                (6)


$                (3)


$              (13)


$              (10)











Decrease to diluted EPS from continuing operations

$           (0.02)


$           (0.01)


$           (0.04)


$           (0.03)











Acquisition-related costs









Amortization of acquisition-related intangible assets

$              (20)


$              (14)


$              (78)


$              (67)


Tax benefit

8


8


29


21


Amortization of acquisition-related intangible assets, net of tax

$              (12)


$                (6)


$              (49)


$              (46)











Decrease to diluted EPS from continuing operations

$           (0.03)


$           (0.02)


$           (0.14)


$           (0.13)











Other acquisition-related costs 1

$                  9


$                (1)


$                45


$              (23)


Tax benefit/(expense) 1

(10)


(2)


(20)


1


Other acquisition-related costs, net of tax

$                (1)


$                (3)


$                25


$              (22)











Increase/(decrease) to diluted EPS from continuing operations 1

$                  -


$           (0.01)


$             0.07


$           (0.06)











Total acquisition-related costs

$              (11)


$              (15)


$              (33)


$              (90)


Tax benefit/(expense)

(2)


6


9


22


Total acquisition-related costs, net of tax

$              (13)


$                (9)


$              (24)


$              (68)











Decrease to diluted EPS from continuing operations 2

$           (0.04)


$           (0.03)


$           (0.07)


$           (0.19)











Impairments and loss on disposal of assets









Impairments and loss on disposal of assets

$                (1)


$                  -


$              (21)


$                (9)


Tax benefit

1


-


8


3


Impairments and loss on disposal of assets, net of tax

$                  -


$                  -


$              (13)


$                (6)











Decrease to diluted EPS from continuing operations

$                  -


$                  -


$           (0.04)


$           (0.02)











Litigation recoveries/(charges), net









Litigation recoveries/(charges), net

$                  -


$                  6


$                  3


$                (6)


Tax expense

-


(3)


(1)


(1)


Litigation recoveries/(charges), net, net of tax

$                  -


$                  3


$                  2


$                (7)











Increase/(decrease) to diluted EPS from continuing operations

$                  -


$             0.01


$             0.01


$           (0.02)











Other Spin-Off costs









Other spin-off costs

$                  -


$                (3)


$                (2)


$              (10)


Tax benefit

-


1


1


4


Other spin-off costs, net of tax

$                  -


$                (2)


$                (1)


$                (6)











Decrease to diluted EPS from continuing operations

$                  -


$                  -


$                  -


$           (0.02)











Gain on sale of CareFusion stock









Gain on sale of CareFusion stock

$                  -


$                  4


$                  -


$                75


Tax benefit

-


-


-


-


Gain on sale of CareFusion stock, net of tax

$                  -


$                  4


$                  -


$                75











Increase to diluted EPS from continuing operations

$                  -


$             0.01


$                  -


$             0.21











Weighted average number of diluted shares outstanding

349


355


349


353











We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.










1

Includes a $71 million decrease in the fair value of the total contingent consideration obligation related to
the P4 Healthcare acquisition for the fiscal year. The related tax expense was $29 million and diluted EPS from continuing operations increased $0.13.










2

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










 









Schedule 9










Cardinal Health, Inc. and Subsidiaries

Asset Management Analysis












Fourth Quarter


Fiscal Year



2012


2011


2012


2011


Days sales outstanding

22.3


20.3






Days inventory on hand

23.9


22.5






Days payable outstanding

35.6


34.8






Net working capital days1

10.5


8.0















Debt to total capital

32 %


30 %






Net debt to capital

9 %


9 %















Return on equity

15.1 %


14.1 %


17.8 %


17.5 %


Non-GAAP return on equity

16.3 %


14.9 %


18.6 %


18.0 %











Effective tax rate from continuing operations

37.4 %


39.3 %


37.0 %


36.4 %


Non-GAAP effective tax rate from continuing operations

36.0 %


39.6 %


36.8 %


37.2 %










1

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











Refer to the GAAP/Non-GAAP reconciliation for Non-GAAP calculations. Refer to DSO, DIOH and DPO for definitions and calculations.

 









Schedule 10










Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation











Fourth Quarter 2012










(in millions, except per Common Share amounts)

Operating
Earnings

 

Operating
Earnings
Growth
Rate

Earnings
Before
Income
Taxes and
Discontinued
Operations

Provision
for
Income
Taxes

Earnings
from
Continuing
Operations

Earnings
from
Continuing Operations Growth
Rate

Diluted
EPS from
Continuing
Operations

Diluted

EPS from

Continuing

Operations

Growth Rate

GAAP

$              403

12 %

$              377

$              141

$              236

14 %

$             0.68

17 %

Restructuring and employee severance

9


9

3

6


0.02


Acquisition-related costs

11


11

(2)

13


0.04


Impairments and loss on disposal of assets

1


1

1

-


-


Litigation (recoveries)/charges, net

-


-

-

-


-


Other Spin-Off costs

-


-

-

-


-


Gain on sale of CareFusion stock

-


-

-

-


-


Non-GAAP

$              425

13 %

$              398

$              143

$              255

19 %

$             0.73

22 %











Fourth Quarter 2011

GAAP

$              359

7 %

$              341

$              134

$              207

7 %

$             0.58

7 %

Restructuring and employee severance

5


5

2

3


0.01


Acquisition-related costs

15


15

6

9


0.03


Impairments and loss on disposal of assets

-


-

-

-


-


Litigation (recoveries)/charges, net

(6)


(6)

(3)

(3)


(0.01)


Other Spin-Off costs

3


3

1

2


-


Gain on sale of CareFusion stock

-


(4)

-

(4)


(0.01)


Non-GAAP

$              375

17 %

$              354

$              140

$              214

17 %

$             0.60

20 %











Fiscal Year 2012

(in millions, except per Common Share amounts)

Operating

Earnings

Operating

Earnings

Growth Rate

Earnings

Before

Income

Taxes and

Discontinued

Operations

Provision

for

Income

Taxes

Earnings

from

Continuing

Operations

Earnings

from

Continuing

Operations

Growth Rate

Diluted

EPS from

Continuing

Operations

Diluted

EPS from

Continuing

Operations

Growth Rate

GAAP

$           1,792

18 %

$           1,698

$              628

$           1,070

11 %

$             3.06

12 %

Restructuring and employee severance

21


21

8

13


0.04


Acquisition-related costs

33


33

9

24


0.07


Impairments and loss on disposal of assets

21


21

8

13


0.04


Litigation (recoveries)/charges, net

(3)


(3)

(1)

(2)


(0.01)


Other Spin-Off costs

2


2

1

1


-


Gain on sale of CareFusion stock

-


-

-

-


-


Non-GAAP

$           1,866

13 %

$           1,772

$              653

$           1,119

13 %

$             3.21

15 %











Fiscal Year 2011

GAAP

$           1,514

16 %

$           1,518

$              552

$              966

65 %

$             2.74

69 %

Restructuring and employee severance

15


15

5

10


0.03


Acquisition-related costs

90


90

22

68


0.19


Impairments and loss on disposal of assets

9


9

3

6


0.02


Litigation (recoveries)/charges, net

6


6

(1)

7


0.02


Other Spin-Off costs

10


10

4

6


0.02


Gain on sale of CareFusion stock

-


(75)

-

(75)


(0.21)


Non-GAAP

$           1,644

18 %

$           1,573

$              585

$              988

22 %

$             2.80

25 %










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










We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.

 















Schedule 11
















Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation
























Fourth Quarter




(in millions)

2012




2011




GAAP return on equity

15.1 %




14.1 %













Non-GAAP return on equity









Net earnings

$              236




$              203




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

6




3




Acquisition-related costs, net of tax, in continuing operations

13




9




Impairments and loss on disposal of assets, net of tax, in continuing operations

-




-




Litigation (recoveries)/charges, net, net of tax, in continuing operations

-




(3)




Other spin-off costs, net of tax, in continuing operations

-




2




Gain on sale of CareFusion stock, net of tax

-




(4)




CareFusion net loss in discontinued operations 1

-




4




Adjusted net earnings

$              255




$              214




Annualized

$           1,020




$              856














Fourth


Third


Fourth


Third



Quarter


Quarter


Quarter


Quarter



2012


2012


2011


2011


Total shareholders' equity

$           6,244


$           6,240


$           5,849


$           5,657


Divided by average shareholders' equity

$           6,242




$           5,753




Non-GAAP return on equity

16.3 %




14.9 %



















We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
















1

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.  

 





















Schedule 12






















Cardinal Health, Inc. and Subsidiaries



GAAP / Non-GAAP Reconciliation


























Fiscal Year










Fiscal Year










(in millions)

2012










2011










GAAP return on equity

17.8 %










17.5 %































Non-GAAP return on equity





















Net earnings

$           1,069










$              959










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

13










10










Acquisition-related costs, net of tax, in continuing operations

24










68










Impairments and loss on disposal of assets, net of tax, in continuing operations

13










6










Litigation (recoveries)/charges, net, net of tax, in continuing operations

(2)










7










Other spin-off costs, net of tax, in continuing operations

1










6










Gain on sale of CareFusion stock, net of tax

-










(75)










CareFusion net loss in discontinued operations 1

-










7










Adjusted net earnings

$           1,118










$              988





















































Fourth


Third


Second


First


Fourth


Fourth


Third


Second


First


Fourth



Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter


Quarter



2012


2012


2012


2012


2011


2011


2011


2011


2011


2010


Total shareholders' equity

$           6,244


$       6,240


$       5,928


$       5,714


$       5,849


$           5,849


$       5,657


$       5,421


$       5,239


$       5,276


Divided by average shareholders' equity

$           5,995










$           5,488










Non-GAAP return on equity

18.6 %










18.0 %































We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.






















1

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.  

 








Schedule 13









Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation










Fourth Quarter


Fiscal Year

(in millions)

2012


2011


2012


2011

GAAP effective tax rate from continuing operations

37.4 %


39.3 %


37.0 %


36.4 %









Non-GAAP effective tax rate from continuing operations








Earnings before income taxes and discontinued operations

$              377


$              341


$           1,698


$           1,518

Restructuring and employee severance

9


5


21


15

Acquisition-related costs

11


15


33


90

Impairments and loss on disposal of assets

1


-


21


9

Litigation (recoveries)/charges, net

-


(6)


(3)


6

Other Spin-Off costs

-


3


2


10

Gain on sale of CareFusion stock

-


(4)


-


(75)

Adjusted earnings before income taxes and discontinued operations

$              398


$              354


$           1,772


$           1,573









Provision for income taxes

$              141


$              134


$              628


$              552

Restructuring and employee severance tax benefit

3


2


8


5

Acquisition-related costs tax benefit/(expense)

(2)


6


9


22

Impairments and loss on disposal of assets tax benefit

1


-


8


3

Litigation (recoveries)/charges, net tax expense

-


(3)


(1)


(1)

Other spin-off costs tax benefit

-


1


1


4

Gain on sale of CareFusion stock tax benefit

-


-


-


-

Adjusted provision for income taxes

$              143


$              140


$              653


$              585









Non-GAAP effective tax rate from continuing operations

36.0 %


39.6 %


36.8 %


37.2 %










Fourth Quarter






2012


2011





Debt to total capital

32 %


30 %













Net debt to capital








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

$              476


$              327





Long-term obligations, less current portion

2,418


2,175





Debt

$           2,894


$           2,502





Cash and equivalents

(2,274)


(1,929)





Net Debt

$              620


$              573





Total shareholders' equity

6,244


5,849





Capital

$           6,864


$           6,422





Net debt to capital

9 %


9 %













We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.









Forward-Looking Non-GAAP Financial Measures 

We present 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. We are unable to provide a quantitative
reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking
GAAP measures because we cannot reliably forecast restructuring and employee severance, acquisition-related
costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net, and
other spin-off costs, which are difficult to predict and estimate and are primarily dependent on future events.
Please note that the unavailable reconciling items could significantly impact our future financial results.  

 




Schedule 14






Cardinal Health, Inc. and Subsidiaries













Fourth Quarter


(in millions)

2012


2011


Days Sales Outstanding

22.3


20.3







Days Inventory on Hand





Inventories

$           7,864


$           7,334







Cost of products sold

$         25,628


$         25,720


Chargeback billings

3,984


3,556


Adjusted cost of products sold

$         29,612


$         29,276


Adjusted cost of products sold divided by 90 days

$              329


$              325


Days Inventory on Hand

23.9


22.5







Days Payable Outstanding





Accounts payable

$         11,726


$         11,332







Cost of products sold

$         25,628


$         25,720


Chargeback billings

3,984


3,556


Adjusted cost of products sold

$         29,612


$         29,276


Adjusted cost of products sold divided by 90 days

$              329


$              325


Days Payable Outstanding

35.6


34.8







Net Working Capital Days1

10.5


8.0






1

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







Days Sales Outstanding: trade receivables, net divided by (monthly revenue divided by 30 days).







Days Inventory on Hand: inventory divided by ((quarterly cost 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. 







Days Payable Outstanding: accounts payable divided by ((quarterly cost of products sold plus
chargeback billings) divided by 90 days).








Net Working Capital Days: days sales outstanding plus days inventory on hand less days payable
outstanding.

 













Cardinal Health, Inc. and Subsidiaries







Use of Non-GAAP Measures








This earnings release contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles ("GAAP").  In general, the measures exclude items and charges that (i) management does not believe reflect Cardinal Health, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends.  Management uses these non-GAAP financial measures internally to evaluate the Company's performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.








Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company's performance to that of its competitors.  However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.









The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements set forth above should be carefully evaluated.








Definitions








Debt: long-term obligations plus short-term borrowings.








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








Net Debt: a Non-GAAP measure defined as debt minus (cash and equivalents).








Net Debt to Capital: a Non-GAAP measure defined as net debt divided by (net debt plus total shareholders' equity).








Non-GAAP Diluted EPS from Continuing Operations and growth rate calculation 1: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding. 









Non-GAAP Earnings from Continuing Operations and growth rate calculation: earnings from continuing operations excluding (1) restructuring and employee severance 2, (2) acquisition-related costs 3, (3) impairments and loss on disposal of assets 4, (4) litigation (recoveries)/charges, net 5, (5) Other Spin-Off Costs and (6) gain on sale of CareFusion stock, each net of tax. 









Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) acquisition-related costs, (3) impairments and loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) Other Spin-Off Costs and (6) gain on sale of CareFusion stock) divided by (earnings before income taxes and discontinued operations adjusted for the same six items). 









Non-GAAP Operating Earnings and growth rate calculation: operating earnings excluding (1) restructuring and employee severance, (2) acquisition-related costs, (3) impairments and loss on disposal of assets, (4) litigation (recoveries)/charges, net and (5) Other Spin-Off Costs.









Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) acquisition-related costs, (3) impairments and loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) Other Spin-Off Costs, (6) gain on sale of CareFusion stock and (7) CareFusion net loss in discontinued operations, each net of tax) and divided by average shareholders' equity.









Other Spin-Off Costs: costs incurred in connection with our Spin-Off of CareFusion which are included in distribution, selling, general and administrative expenses. 








Return on Equity: annualized current period net earnings divided by average shareholders' equity. 








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








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.







1

In this earnings release growth rates are determined by dividing the difference between current period results and prior period results by prior period results.







2

Programs whereby the Company fundamentally changes its operations such as closing and consolidating certain manufacturing and distribution facilities, moving manufacturing of a product to another location, outsourcing the production of a product, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including substantial realignment of the management structure of a business unit in response to changing market conditions).








3

Costs that consist primarily of transaction costs, integration costs, changes in the fair value of contingent consideration obligations and amortization of acquisition-related intangible assets.








4

Asset impairments and losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and loss on disposal of assets within the consolidated statements of earnings.








5

Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.

SOURCE Cardinal Health