Filed by Cardinal Health, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: Syncor International Inc.
Commission File No. 000-08640
Cardinal Health Reports Record Fourth Quarter
and Fiscal Year 2002 Financial Performance
Fourth Quarter EPS Before Special Items Rises 28 Percent;
Operating Cash Flow Exceeds $1.4 Billion
DUBLIN, Ohio, Aug. 6 /PRNewswire-FirstCall/ -- Cardinal Health, Inc. (NYSE:
CAH) today reported record fourth quarter and full year financial results
reflecting exceptional profitability and productivity performance across all
four of its business segments. "Cardinal Health produced another outstanding
quarter, delivering value with a broad offering of superior products and
services to our customers," said Robert D. Walter, chairman and chief executive
officer. "As a result, the company continued its tradition of delivering
consistently strong and quality financial results for our shareholders. This
performance demonstrates the enduring strength of our business model of balanced
earnings growth accompanied by expanding returns on sales and capital and strong
cash flow in every segment. Cardinal Health's balance sheet is stronger than at
any time in our history."
For the fourth quarter, each of the company's business segments performed
well with notable performances from the pharmaceutical distribution and
automation businesses. Diluted earnings-per-share (EPS) before special items
grew 28 percent to $0.74 for the fourth quarter versus $0.58 last year. Record
revenues combined with excellent expense controls drove expansion in return on
sales and capital in every segment. In addition, the company generated record
returns on committed capital. Operating revenue grew by 15 percent to an
all-time record $11.8 billion versus prior year revenue of $10.3 billion.
Operating earnings rose 22 percent to a fourth quarter record $541 million
versus prior year earnings of $445 million. Operating cash flow was an all-time
record at $1.4 billion.
For the full fiscal year, earnings per diluted share increased 28 percent to
$2.64. Operating revenues increased 15 percent to $44.4 billion with operating
earnings gaining 22 percent to $2.0 billion and net earnings rising 29 percent
to $1.2 billion. Included in the company's operating earnings for the fiscal
year were expenses of over $95 million in investment spending in strategic
growth initiatives and research and development, a record for the company. These
full-year results are reflected before special items and the cumulative effect
of the change in accounting principle related to the business model changes at
the Automation and Information Services segment.
CONSOLIDATED FINANCIAL RESULTS
Fiscal year 2002 results reflect the adoption of Statement of Financial
Accounting Standards No. 142, which eliminated goodwill amortization beginning
July 1, 2001. To facilitate comparison with the prior year period in the
discussion below, a pro forma adjustment has been made eliminating goodwill
amortization from the fiscal year 2001 results. The following discussion also
excludes special items, which are primarily merger-related, and the cumulative
effect of the change in accounting principle related to the business model
changes at the Automation and Information Systems segment.
Fourth Quarter
Net earnings rose 24 percent to an all-time record of $341 million from $276
million a year ago. This growth was based on an operating revenue increase of 15
percent to an all-time high of $11.8 billion.
o Earnings per diluted share rose 23 percent to $0.74 versus $0.60 last year.
o Operating earnings rose 18 percent to an all-time record of $541 million from
$457 million a year ago.
o Selling, general and administrative expenses (SG&A) as a percent of sales
dropped to a record low of 4.43 percent, an improvement of 63 basis points, due
to the company's continued focus on disciplined expense control and prior
investments in operational efficiencies.
o Solid operating revenue growth along with continued expense efficiencies
drove a return on sales increase of 14 basis points to 4.60 percent.
o Current earnings funded investment spending for strategic initiatives and
research & development and totaled more than $29 million.
o Interest expense and other declined by 33 percent. The company capitalized on
lower interest rates and effective asset management to reduce its interest
expense by 5 percent. Another driver of the decline was the recognition of a
one-time gain on an equity investment, which added $0.01 to diluted earnings per
share.
o The company's tax efficiency continued to improve in the quarter, resulting in
an effective tax rate of 33.9 percent, a decline of 30 basis points versus prior
year.
o Return on committed capital increased to an all-time record of 34.9 percent
versus 32.2 percent last year, driven by the strong operating earnings growth
and focused asset management.
o Operating cash flow of $1.4 billion in the quarter was exceptional, setting an
all-time record. As a result of effective working capital management and
seasonal patterns, inventories declined by $538 million sequentially from the
third quarter and accounts receivable days outstanding declined to an all-time
low 17 days.
Fiscal Year 2002
Net earnings rose 23 percent to an all-time record of $1.2 billion from $987
million a year ago. This growth was based on an operating revenue increase of 15
percent to an all-time high of $44 billion versus prior year revenue of $39
billion.
o Earnings per diluted share rose 22 percent to $2.64 versus $2.17 last year.
o Operating earnings rose 19 percent to an all-time record of $2.0 billion from
$1.7 billion a year ago.
o Return on committed capital increased 250 basis points to an all-time record
of 32.5 percent.
o Operating cash flow of $984 million reflects the quality of the company's
earnings, representing over 87% of reported net earnings.
BUSINESS SEGMENT RESULTS
Cardinal Health concentrates on providing customers with integrated and
innovative solutions to their health care needs and continues to capitalize on
market acceptance of its broader offerings. During the fourth quarter, the
company signed 17 new corporate agreements with health care providers valued at
over $150 million in incremental revenue across the segments. For the fiscal
year, a total of 44 corporate agreements were signed with incremental revenue in
excess of $635 million, representing significant leveraging of pre-existing
customer relationships and improved service for our customers.
Pharmaceutical Distribution and Provider Services (PDPS)
PDPS posted record revenues of $9.6 billion in the quarter, an increase of
17 percent. This strong performance was driven by solid sales increases across
all customer segments, especially to retail pharmacy and grocery chains, as well
as mail order and alternate site customers. The company's business mix
consisting of faster growing customers continues to allow this segment to grow
at rates faster than the overall market.
Operating expenses declined to an all-time record low of 1.92 percent, a
decrease of 30 basis points, due to leveraging costs associated with new
volumes, further utilization of automation, new and larger facilities, and the
integration of Bindley Western Industries (BWI), an acquisition completed in
fiscal 2001. With strong revenues and superior expense control, operating
earnings were $295 million, an increase of 21 percent over prior year, driving
an improvement in return on sales of 10 basis points to 3.06 percent. Another
measure of the quality of PDPS performance, return on committed capital improved
to a record 34.0 percent, a 190 basis point increase.
o The BWI integration continues ahead of schedule and during the quarter another
two distribution centers were closed. In total, fourteen of BWI's sixteen
distribution facilities have been consolidated in the past five quarters. The
remaining two facilities will be integrated in the first half of fiscal year
2003. Facility consolidation is one of many steps taken to achieve future
expense and gross margin synergies. As a result of the successful integration of
facilities and information systems, the company is on track to deliver
annualized savings of over $100 million by fiscal year 2004.
o Gross margins in the quarter were 4.98 percent. Several factors contributed to
the gross margin performance including opportunities in a growing generic
pharmaceutical market as well as continued strong branded vendor margins.
However, gross margin in the quarter was negatively impacted by certain
non-recurring items, primarily related to the BWI integration. In the process of
closing and rationalizing facilities in the integration of BWI, the company
incurred one-time expenses related to inventory valuation issues in those
facilities in the fourth quarter. The net amount of these non-recurring items
was $28 million, which reduced earnings per diluted share by approximately $0.04
for the quarter. Without the impact of these one-time inventory adjustments,
gross margins would have increased in the quarter by 9 basis points versus the
prior year.
o During the quarter, the company announced an agreement to acquire Syncor
International, a leader in radiopharmacy services. This acquisition
significantly enhances the company's ability to provide specialty distribution
services to health care providers. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 has expired and the
transaction is expected to be completed by the end of 2002. The company expects
to issue approximately 14 million shares on a fully diluted basis in connection
with the transaction.
For the fiscal year, PDPS represented 52 percent of the company's operating
earnings, and generated record revenues of $36.4 billion, an increase of 17
percent. Operating earnings grew to $1.1 billion, a 23 percent improvement.
Gross margins were 5.12 percent, a slight decline of 8 basis points from the
prior year. This strong performance versus the industry-wide declines of the
past several years was fueled by solid selling and vendor margins. Excluding the
previously mentioned effect of the $28 million of inventory adjustments recorded
in the fourth quarter, gross margins for the fiscal year would have been flat at
5.20 percent. The strong earnings growth and expense improvement of 23 basis
points to 2.13 percent drove return on committed capital to 31.8 percent, a 270
basis point improvement from the prior year.
Moving into fiscal 2003, the company expects to see continued strong revenue
growth. Profitability should benefit from favorable vendor margins and
continuing expense synergies from the BWI acquisition. In addition, the company
should not incur any significant additional inventory adjustments related to BWI
facilities, which will also have a positive effect on the segment's gross
margins going forward.
Medical-Surgical Products and Services (MSPS)
This segment posted record revenues, operating earnings, and return on sales
in the fourth quarter. Revenues reached over $1.6 billion, an increase of 5
percent. New distribution business and higher expense productivity enabled the
segment to report an all-time high of $144 million in operating earnings, a 12
percent increase. On improving productivity, return on sales increased 50 basis
points to a fourth quarter record 8.85 percent.
Consistent with the company's business model of growing earnings with a
focus on leveraging capital investments, return on committed capital increased
to an all-time record 39.3 percent, an exceptional 600 basis point improvement
from the previous year. This segment also generated a record $291 million of
operating cash flow.
o Over $200 million of new distribution business began billing throughout the
fourth quarter. Previously announced contracts with the Mayo Clinic and other
Novation hospitals were the main components of the new volume. The momentum from
these and new contracts with alternate site customers is expected to further
positively impact the revenue growth of the segment heading into fiscal 2003.
o International sales and momentum in the company's custom kits for surgical
procedures were two important drivers of the revenue growth for the segment.
Importantly, gross margins for the custom kitting business improved in the
quarter after a long period of intense industry competition.
For the fiscal year, MSPS represented 26 percent of the company's operating
earnings and generated a record $6.3 billion in revenue, an increase of 6
percent. Strong productivity improvements in self-manufacturing and distribution
operations drove an operating earnings increase of 14 percent to $541 million,
also a record. As a result of the earnings performance and strong asset
management, return on committed capital was up to an all-time high 36.0 percent.
Pharmaceutical Technologies and Services (PTS)
PTS generated record fourth quarter revenues of $359 million, a 13 percent
increase. Revenue gains were particularly strong in sterile manufacturing,
pharmaceutical packaging and at the company's newer Puerto Rico facility.
The quarterly operating performance of the segment was strong with
improvements on return on sales and capital. Operating earnings reached $72
million, an increase of 15 percent versus prior year. Gross margin was roughly
flat for the quarter at 32.94 percent. Operating expenses declined to 13.02
percent, a strong 43 basis point reduction. Return on sales improved to 19.92
percent, a 42 basis point improvement. Return on committed capital improved to
28.1 percent, a 70 basis point improvement.
o Solid revenue growth occurred in manufactured and packaged products across
both sterile and oral technologies. Products that showed particular strength
were Abbott's Kaletra(R), an AIDS product; Lilly's Zyprexa(R) Zydis(R), an
anti-psychotic; and Pharmacia's Detrol(R)LA , an incontinence medication.
o During the quarter, PTS took additional steps to expand its capabilities as
the premier contract pharmaceutical services firm. The previously announced
acquisition of Magellan Laboratories, a leader in pharmaceutical development
services, was completed. Magellan has been combined with PTS' existing
development businesses, including a new $80 million product development facility
in Somerset, NJ which began development activities in the fourth quarter.
Clinical manufacturing activities are expected to commence by the second quarter
of 2003. The facility, built to provide a range of product development and
clinical manufacturing capability for pharmaceutical companies, is a key step in
the company's strategy to become a unique partner to pharmaceutical firms.
o PTS also announced and completed at the end of the quarter the strategic
acquisition of Boron, LePore & Associates, a leading medical education firm that
will allow PTS to reach a broader audience within pharmaceutical firms.
For the full year, PTS represented 12 percent of the company's operating
earnings. Revenue was an all-time high at $1.3 billion, an increase of 11
percent, while operating earnings grew at 15 percent to $261 million, also a
record. Gross margins improved 11 basis points to 33.38 percent while expenses
dropped a strong 55 basis points to 13.50 percent. Return on committed capital
was 26.4 percent, reflecting the impact of significant investments made during
the year.
Fiscal 2003 is expected to be a strong revenue and earnings growth year for
PTS as products currently in the pipeline come to market; including those
originally expected to launch in the second half of fiscal 2002. Products such
as generic isotretinoin, Clarinex(R) Redi-Tabs(R), and the over-the-counter
version of Claritin(R) Redi-Tabs(R), are expected to launch in the next six
months. In addition, demand for sterile technologies and analytical services
remains robust, and continued productivity gains are expected to drive margin
improvements.
Automation and Information Services (AIS)
AIS recorded exceptional performance on accelerating demand for the
company's automation solutions for health care providers. AIS generated $170
million in revenue, a 13 percent improvement and an all-time record revenue
quarter. Sales of both MEDSTATION and SUPPLYSTATION related products contributed
to the strong performance. Return on sales improved 256 basis points to a record
41.81 percent as a result of productivity improvements and disciplined expense
control.
Operating expenses decreased to a fourth quarter low of 27.8 percent, a 407
basis point improvement, based largely on the company's change to a "build to
order" business model instituted in the first quarter of fiscal 2002. As a
result, operating earnings were $71 million, a 21 percent increase and an
all-time record. The return on committed capital increased to a record 45.8
percent from 33.3 percent in prior year on the strong operating earnings growth,
working capital efficiencies achieved with the company's process improvements,
and the benefit of securitizing $150 million of leases earlier in the year.
o Pyxis signed $159 million in committed contracts in the quarter, up over 35
percent versus a year ago and a significant leading indicator of future
quarterly revenue. Committed contracts are defined as signed, non-cancelable
lease agreements for future installation of equipment. For the quarter, Pyxis
increased its backlog of committed contracts by $26 million, the largest
increase in the fiscal year; to end the year with $209 million as contracts for
future sales exceeded installations.
o Sales of supply products, led by the new SupplyStation(R) System 30, were
significant in the quarter, increasing more than 50 percent. In addition, the
company completed the first committed contracts for two new products: Pyxis
Patient Station(R), the first comprehensive bedside medical information system
designed for both clinicians and patients, and Pyxis' computerized physician
order entry software offering.
For the full year, AIS represented 10 percent of the company's operating
earnings. Revenue grew a healthy 19 percent to $560 million and operating
earnings expanded by 23 percent to $209 million. Gross margins stayed relatively
flat at 68.52 percent. Due largely to productivity improvements associated with
the business model changes made at the beginning of the year, operating expenses
declined to a record 31.17 percent, a strong 151 basis point decline. Return on
sales increased 147 basis point to a record 37.35 percent. Together the earnings
performance and working capital management drove return on committed capital to
35.7 percent up from 25.2 percent.
Special Items
In the fourth quarter, special items totaled $70 million. Of this amount,
approximately $65 million represents merger-related charges, primarily
associated with integration of Bindley Western Industries. In addition, the
Medical-Surgical Products and Services segment made important organizational
changes during the quarter. The reorganization resulted in severance and other
costs for terminated employees of approximately $14 million. These items were
partially offset by a favorable litigation settlement.
For the fiscal year, special items totaled $139 million. These charges were
largely merger related.
Fiscal 2002 Recap and Fiscal 2003 Outlook
"I am very pleased with the high quality performance of Cardinal Health this
year," Walter said. "We executed our plan and delivered to shareholders what we
said we would do. That is the long-standing tradition of Cardinal Health: we set
realistic goals and uphold the commitments to our key partners
customers, employees and shareholders."
"As we move into a new fiscal year, our strategic position has never been
stronger," Walter said. "Cardinal Health's financial plan for fiscal 2003 is
complete and our outlook for the year is for continued strong growth in each of
our businesses. We expect earnings growth consistent with our historical
performance combined with improving returns on sales and capital, combined with
accelerating cash flow. Our balance sheet is the strongest it's ever been which
will allow us to maximize growth opportunities to build on our leadership
positions. The momentum we have in each of our businesses gives us the
confidence that Cardinal Health will continue to keep its promises into fiscal
2003 and beyond."
Cardinal Health will host its semi-annual investor conference in New York on
August 15, 2002. Senior management presentations will be Webcast live from 10:00
A.M. to 12:00 P.M. and can be accessed via http://www.cardinal.com at Investor
Relations. For those without Internet access, these presentations can be
listened to by calling 706-679-0766.
Executive Certification of Results
In accordance with the SEC's June 27th certification order, Chief Executive
Officer, Robert Walter, and Chief Financial Officer, Richard Miller, will each
submit certifications as to the completeness and accuracy of the company's
applicable reports. Calendar year-end companies are to file their certifications
by August 14, 2002, in connection with the filing of their quarterly Form 10-Q
reports. Because Cardinal Health's year-end is June 30, 2002, its certifications
are required to be submitted with the company's Annual Report on Form 10-K for
fiscal 2002, which will be filed with the SEC by September 30, 2002.
Conference Call Today
Cardinal Health has scheduled a conference call for today at 11 a.m. Eastern
Daylight Time to discuss its fourth quarter and fiscal year financial
performance and outlook. To access this discussion via the internet, visit
http://www.cardinal.com and click on Investor Relations. For those without
internet access, the company has also established a telephone call-in line at
706-679-0766. A replay of the conference call will be available until August 9,
2002 on Cardinal Health's website or by dialing 706-645-9291, passcode 4347317.
About Cardinal Health
Cardinal Health, Inc. (http://www.cardinal.com) is the leading provider of
products and services supporting the health care industry. Cardinal Health
companies develop, manufacture, package and market products for patient care;
develop drug-delivery technologies; distribute pharmaceuticals, medical-surgical
and laboratory supplies; and offer consulting and other services that improve
quality and efficiency in health care. Headquartered in Dublin, Ohio, the
company employs more than 49,000 people on five continents and produces annual
revenues of more than $44 billion. Cardinal Health is ranked #23 on the current
Fortune 500 list and was named one of "The World's Best" companies by Forbes
magazine in 2002.
-------------
Except for historical information, all other information in this news
release consists of forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected, anticipated or implied. The most significant of
these uncertainties are described in Cardinal Health's Form 10-K, Form 8-K and
Form 10-Q reports and exhibits to those reports, and include (but are not
limited to) the costs, difficulties, and uncertainties related to the
integration of acquired businesses, the loss of one or more key customer or
supplier relationships, changes in the distribution outsourcing patterns for
health-care products and/or services, the costs and other effects of
governmental regulation and legal and administrative proceedings, and general
economic conditions. Cardinal undertakes no obligation to update or revise any
forward-looking statements.
Information regarding the identity of the persons who may, under SEC rules,
be deemed to be participants in the solicitation of stockholders of Syncor in
connection with the proposed merger, and their interests in the solicitation, is
set forth in a Schedule 14A filed on June 14, 2002 with the SEC. Cardinal Health
intends to file a registration statement on Form S-4 in connection with the
transaction, and Syncor has filed a preliminary proxy statement on Schedule 14A
and intends to mail a definitive proxy statement/prospectus to its stockholders
in connection with the transaction. Investors and security holders of Syncor are
urged to read the preliminary proxy statement/prospectus and the definitive
proxy statement/prospectus when it becomes available because each contain
important information about Cardinal Health, Syncor and the transaction.
Investors and security holders may obtain a free copy of the preliminary proxy
statement/prospectus at the SEC's Web site at http://www.sec.gov. When it
becomes available, a free copy of the definitive proxy statement/prospectus may
also be obtained from Cardinal Health or Syncor at the SEC's Web site at
http://www.sec.gov. Cardinal Health and Syncor and their respective executive
officers and directors may be deemed to be participants in the solicitation of
proxies from the stockholders of Syncor in favor of the transaction. Information
regarding the interests of Syncor's officers and directors in the transaction
will be included in the proxy statement/prospectus. In addition to the
registration statement on Form S-4 to be filed by Cardinal Health in connection
with the transaction, and the definitive proxy statement/prospectus to be mailed
to the stockholders of Syncor in connection with the transaction, each of
Cardinal Health and Syncor file annual, quarterly and special reports, proxy and
information statements, and other information with the SEC. Investors may read
and copy any of these reports, statements and other information at the SEC's
public reference room located at 450 5th Street, N.W., Washington, D.C., 20549.
Investors should call the SEC at 1-800/SEC-0330 for further information. The
reports, statements and other information filed by Cardinal Health and Syncor
with the SEC are also available for free at the SEC's Web site at
http://www.sec.gov. A free copy of these reports, statements and other
information may also be obtained from Cardinal Health or Syncor. Investors
should read the proxy statement/prospectus carefully when it becomes available
before making any voting or investment decision.
CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(in millions, except per share amounts)
FOURTH QUARTER
June June
2002 2001 % Change
Operating Revenue $11,765.9 $10,254.3 15 %
Operating Cost of Products Sold 10,703.4 9,279.1 15 %
Operating Gross Margin 1,062.5 975.2 9 %
Bulk Deliveries to 1,262.3 2,146.7 (41)%
Customer Warehouses
Cost of Products Sold - 1,262.3 2,146.0 (41)%
Bulk Deliveries
Bulk Gross Margin - 0.7 N.M.
S, G & A Expenses 521.4 518.8 1 %
Goodwill Amortization - 11.8 N.M.
Special Charges 70.4 18.3 N.M.
Operating Earnings 470.7 427.0 10 %
Interest Expense and Other 25.5 38.0 (33)%
Earnings Before Income Taxes 445.2 389.0 14 %
Provision for Income Taxes 148.9 135.7 10 %
Net Earnings $296.3 $253.3 17 %
Earnings Per Common Share:
Basic $0.66 $0.57 16 %
Diluted $0.64 $0.55 16 %
Weighted Average Number of Shares Outstanding:
Basic 451.2 446.7
Diluted 460.0 458.6
The following table summarizes the impact of special charges and goodwill
amortization on net earnings and diluted earnings per Common Share in the
quarters in which they were recorded:
Current Year Prior Year
Net Diluted Net Diluted
Earnings EPS Earnings EPS
Special Charges $(44.5) $(0.10) $(11.5) $(0.025)
Goodwill Amortization - - (10.8) (0.024)
Impact of Special Items
and Goodwill $(44.5) $(0.10) $(22.3) $(0.05)
CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(in millions, except per share amounts)
YEAR-TO-DATE
June June
2002 2001 % Change
Operating Revenue $44,394.3 $38,660.1 15 %
Operating Cost of Products Sold 40,348.1 35,050.2 15 %
Operating Gross Margin 4,046.2 3,609.9 12 %
Bulk Deliveries to Customer
Warehouses 6,741.4 9,287.5 (27)%
Cost of Products Sold - Bulk
Deliveries 6,741.4 9,285.8 (27)%
Bulk Gross Margin - 1.7 N.M.
S, G & A Expenses 2,073.8 1,950.7 6 %
Goodwill Amortization - 48.9 N.M.
Special Charges 138.6 124.9 N.M.
Operating Earnings 1,833.8 1,487.1 23 %
Interest Expense and Other 132.5 154.9 (14)%
Earnings Before Income Taxes 1,701.3 1,332.2 28 %
Provision for Income Taxes 575.0 474.8 21 %
Net Earnings Before Cumulative
Effect of Change in Accounting
Principle 1,126.3 857.4 31 %
Cumulative Effect on Prior
Years of Change in
Accounting Principle 70.1 - N.M.
Net Earnings $1,056.2 $857.4 N.M.
Basic Earnings Per Common
Share:
Before Cumulative Effect of
Change in Accounting Principle $2.50 $1.93 30 %
Cumulative Effect of Change
in Accounting Principle (0.16) - N.M.
Net Basic Earnings Per
Common Share $2.34 $1.93 N.M.
Diluted Earnings Per Common
Share:
Before Cumulative Effect of
Change in Accounting Principle $2.45 $1.88 30 %
Cumulative Effect of Change
in Accounting Principle (0.15) - N.M.
Net Diluted Earnings Per
Common Share $2.30 $1.88 N.M.
Weighted Average Number of
Shares Outstanding:
Basic 450.1 443.2
Diluted 459.9 455.5
The following table summarizes the impact of special charges and goodwill
amortization on net earnings and diluted earnings per Common Share in the
quarters in which they were recorded:
Current Year Prior Year
Net Diluted Net Diluted
Earnings EPS Earnings EPS
Special Charges $(87.1) $(0.19) $(85.3) $(0.187)
Goodwill Amortization - - (44.6) (0.098)
Impact of Special Items
and Goodwill $(87.1) $(0.19) $(129.9) $(0.29)
CARDINAL HEALTH, INC.
CONSOLIDATED BALANCE SHEETS
(in millions)
(unaudited)
June 30, March 31, June 30,
2002 2002 2001
ASSETS
CURRENT ASSETS
Cash and Equivalents $1,382.0 $869.2 $934.1
Trade Receivables 2,295.4 2,536.0 2,408.7
Current Portion of Investment in
Sales-Type Leases 218.3 204.6 236.3
Inventories 7,361.0 7,902.0 6,286.1
Prepaid Expenses and Other 649.9 870.8 851.1
Total Current Assets 11,906.6 12,382.6 10,716.3
Property and Equipment - Net 1,894.4 1,823.8 1,838.3
Investment in Sales-Type Leases 618.6 569.6 671.7
Other Assets 2,018.4 1,480.5 1,416.1
TOTAL ASSETS $16,438.0 $16,256.5 $14,642.4
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Banks and Current
Portion of Long-Term Obligations $18.2 $17.2 $14.2
Accounts Payable 5,504.5 5,266.9 5,319.9
Other Accrued Liabilities 1,287.7 1,486.6 1,240.7
Total Current Liabilities 6,810.4 6,770.7 6,574.8
Long-Term Obligations, Less
Current Portion 2,207.0 2,464.0 1,871.0
Deferred Taxes and Other
Liabilities 1,027.6 812.8 759.5
Total Shareholders' Equity 6,393.0 6,209.0 5,437.1
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $16,438.0 $16,256.5 $14,642.4
CARDINAL HEALTH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Three months ended For the year ended
June 30, June 30,
2002 2001 2002 2001
Cash Flows From Operating
Activities:
Net earnings before
cumulative effect of change
in accounting principle $296.3 $253.3 $1,126.3 $857.4
Adjustments to reconcile net
earnings before cumulative
effect of change in
accounting principle to
net cash from operations:
Depreciation and
amortization 62.0 71.6 243.5 280.6
Change in operating assets
and liabilities, net of
effects from acquisitions:
Increase in trade
receivables 315.5 453.8 188.0 10.0
(Increase)/decrease in
inventories 538.1 (158.2) (1,071.1) (1,517.8)
(Increase)/decrease in
net investment in
sales-type leases (62.7) (62.0) 71.2 (141.8)
Increase in accounts
payable 233.9 178.1 179.2 1,313.8
Other operating items -
net 43.6 146.8 246.8 69.5
Net cash provided by
operating activities 1,426.7 883.4 983.9 871.7
Cash Flows From Investing
Activities:
Acquisition of subsidiaries,
net of cash acquired (372.9) (41.0) (383.8) (364.3)
Proceeds from sale of
property and equipment 0.7 54.3 18.3 72.1
Additions to property and
equipment (99.3) (106.4) (285.4) (341.2)
Net cash used in investing
activities (471.5) (93.1) (650.9) (633.4)
Cash Flows From Financing
Activities:
Net change in commercial
paper and short-term debt (300.0) (288.8) (9.7) (824.9)
Net change in long-term
obligations 34.0 (19.5) 342.7 857.5
Proceeds from issuance of
Common Shares 27.8 65.2 140.0 252.1
Purchase of Treasury Stock (193.0) (0.6) (313.1) (139.4)
Other (11.2) (8.7) (45.0) (36.6)
Net cash provided by/(used
in) financing activities (442.4) (252.4) 114.9 108.7
Net Increase in Cash and
Equivalents 512.8 537.9 447.9 347.0
Change in Bindley's fiscal
year - - - 47.6
Cash and Equivalents at
Beginning of Period 869.2 396.2 934.1 539.5
Cash and Equivalents at End of
Period $1,382.0 $934.1 $1,382.0 $934.1
CARDINAL HEALTH, INC. - FOURTH QUARTER FY 2002 BUSINESS ANALYSIS
($ millions)
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
2002 2001 COMMENT
o REVENUE
- Amount $9,642 $8,257 RECORD
- Growth Rate 17% 28% 2 year CAGR 22%
- Mix 82% 80%
o OPERATING EARNINGS
- Amount* $295 $245
- Growth Rate* 21% 29%
- Mix* 51% 49%
o RATIO TO REVENUE
- Gross Margin 4.98% 5.18% Vendor margin, BDY
charge
- Expenses* 1.92% 2.22% RECORD LOW
- Operating Earnings* 3.06% 2.96% Q4 RECORD
o PRODUCTIVITY
- Margin Per Expense
Dollar* $2.60 $2.33 12% improvement
o ASSET MANAGEMENT
- Average Committed Capital $3,443 $2,976
- Return On Committed
Capital 34.0% 32.1% RECORD
- Operating Cash Flow $1,079 $679 RECORD
- Capital Expenditures
Investment $29 $27
MEDICAL-SURGICAL PRODUCTS AND SERVICES
2002 2001 COMMENT
o REVENUE
- Amount $1,631 $1,552 RECORD
- Growth Rate 5% 23%
- Mix 14% 15%
o OPERATING EARNINGS
- Amount* $144 $129 RECORD
- Growth Rate* 12% 22%
- Mix* 25% 26%
o RATIO TO REVENUE
- Gross Margin 21.69% 22.32%
- Expenses* 12.84% 13.97% RECORD LOW
- Operating Earnings* 8.85% 8.35% Q4 RECORD
o PRODUCTIVITY
- Margin Per Expense
Dollar* $1.69 $1.60 6% improvement
o ASSET MANAGEMENT
- Average Committed Capital $1,466 $1,465 Strong asset
management
- Return On Committed
Capital 39.3% 33.3% RECORD
- Operating Cash Flow $291 $134 RECORD
- Capital Expenditures
Investment $36 $41
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
2002 2001 COMMENT
o REVENUE
- Amount $359 $318 RECORD
- Growth Rate 13% 16%
- Mix 3% 3%
o OPERATING EARNINGS
- Amount* $72 $62
- Growth Rate* 15% 16%
- Mix* 12% 13%
o RATIO TO REVENUE
- Gross Margin 32.94% 32.95%
- Expenses* 13.02% 13.45% Q4 RECORD LOW
- Operating Earnings* 19.92% 19.50% Q4 RECORD
o PRODUCTIVITY
- Margin Per Expense
Dollar* $2.53 $2.45
o ASSET MANAGEMENT
- Average Committed Capital $1,022 $879 Strategic investments
- Return On Committed
Capital 28.1% 27.4%
- Operating Cash Flow $88 $31 RECORD
- Capital Expenditures
Investment $30 $36
AUTOMATION AND INFORMATION SERVICES
2002 2001 COMMENT
o REVENUE
- Amount $170 $150 RECORD
- Growth Rate 13% 19%
- Mix 1% 2%
o OPERATING EARNINGS
- Amount* $71 $59 RECORD
- Growth Rate* 21% 26%
- Mix* 12% 12%
o RATIO TO REVENUE
- Gross Margin 69.61% 71.12% Product mix
- Expenses* 27.80% 31.87% RECORD LOW
- Operating Earnings* 41.81% 39.25% RECORD
o PRODUCTIVITY
- Margin Per Expense
Dollar* $2.51 $2.23 13% improvement
o ASSET MANAGEMENT
- Average Committed Capital $620 $706 Q1 $150M
securitization
- Return On Committed
Capital 45.8% 33.3% RECORD
- Operating Cash Flow ($31) $40
- Capital Expenditures
Investment $4 $2
- Revenue and all ratios to revenue exclude bulk deliveries to customer
warehouses
- Corporate costs are fully allocated to businesses except for special
charges and eliminations
* Due to the implementation of FAS No. 142 and to arrive at relevant
comparisons, these lines are presented on a proforma basis for FY 2001 to
exclude goodwill
amortization
CARDINAL HEALTH, INC. - FOURTH QUARTER FY 2002 BUSINESS ANALYSIS
($ millions)
2002 2001
o REVENUE
- Amount $11,766 $10,254
- Growth Rate 15% 27%
Excluding
Special Charges
2002 2001
o OPERATING EARNINGS
- Amount* $471 $439 $541 $457
- Growth Rate* 7% 19% 18% 20%
o RATIO TO REVENUE
- Gross Margin 9.03% 9.52%
- Expenses* 4.43% 5.06%
- Special Charges 0.60% 0.18%
- Operating Earnings* 4.00% 4.28% 4.60% 4.46%
o NET EARNINGS
- Amount* $296 $264 $341 $276
- Growth Rate* 12% 22% 24% 23%
- Ratio to Revenue* 2.52% 2.57% 2.90% 2.69%
o PRODUCTIVITY
- Margin Per Expense Dollar* $2.04 $1.88
o ASSET MANAGEMENT
- Average Committed Capital $6,167 $5,480
- Return On Committed Capital 30.4% 30.8% 34.9% 32.2%
- Operating Cash Flow $1,427 $884
- Capital Expenditures
Investment $99 $106
- Revenue and all ratios to revenue exclude bulk deliveries to customer
warehouses
* Due to the implementation of FAS No. 142 and to arrive at relevant
comparisons, these lines are presented on a proforma basis for FY 2001 to
exclude goodwill amortization.
CARDINAL HEALTH, INC. - FISCAL YEAR 2002 BUSINESS ANALYSIS
($ millions)
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
2002 2001
o REVENUE
- Amount $36,360 $31,186
- Growth Rate 17% 31%
- Mix 82% 81%
o OPERATING EARNINGS
- Amount* $1,088 $888
- Growth Rate* 23% 31%
- Mix* 52% 50%
o RATIO TO REVENUE
- Gross Margin 5.12% 5.20%
- Expenses* 2.13% 2.36%
- Operating Earnings* 2.99% 2.84%
o PRODUCTIVITY
- Margin Per Expense Dollar* $2.40 $2.20
o ASSET MANAGEMENT
- Average Committed Capital $3,414 $3,020
- Return On Committed Capital 31.8% 29.1%
- Operating Cash Flow $76 $492
- Capital Expenditures Investment $80 $87
MEDICAL-SURGICAL PRODUCTS AND SERVICES
2002 2001
o REVENUE
- Amount $6,257 $5,903
- Growth Rate 6% 19%
- Mix 14% 15%
o OPERATING EARNINGS
- Amount* $541 $473
- Growth Rate* 14% 19%
- Mix* 26% 27%
o RATIO TO REVENUE
- Gross Margin 21.90% 22.09%
- Expenses* 13.27% 14.07%
- Operating Earnings* 8.63% 8.02%
o PRODUCTIVITY
- Margin Per Expense Dollar* $1.65 $1.57
o ASSET MANAGEMENT
- Average Committed Capital $1,501 $1,389
- Return On Committed Capital 36.0% 31.9%
- Operating Cash Flow $599 $293
- Capital Expenditures Investment $88 $90
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
2002 2001
o REVENUE
- Amount $1,306 $1,178
- Growth Rate 11% 9%
- Mix 3% 3%
o OPERATING EARNINGS
- Amount* $261 $227
- Growth Rate* 15% 10%
- Mix* 12% 13%
o RATIO TO REVENUE
- Gross Margin 33.38% 33.27%
- Expenses* 13.50% 14.05%
- Operating Earnings* 19.88% 19.22%
o PRODUCTIVITY
- Margin Per Expense Dollar* $2.47 $2.37
o ASSET MANAGEMENT
- Average Committed Capital $984 $813
- Return On Committed Capital 26.4% 27.0%
- Operating Cash Flow $191 $79
- Capital Expenditures Investment $102 $157
AUTOMATION AND INFORMATION SERVICES
2002 2001
o REVENUE
- Amount $560 $472
- Growth Rate 19% 17%
- Mix 1% 1%
o OPERATING EARNINGS
- Amount* $209 $169
- Growth Rate* 23% 22%
- Mix* 10% 10%
o RATIO TO REVENUE
- Gross Margin 68.52% 68.56%
- Expenses* 31.17% 32.68%
- Operating Earnings* 37.35% 35.88%
o PRODUCTIVITY
- Margin Per Expense Dollar* $2.20 $2.10
o ASSET MANAGEMENT
- Average Committed Capital $586 $667
- Return On Committed Capital 35.7% 25.2%
- Operating Cash Flow $118 $8
- Capital Expenditures Investment $15 $7
- Revenue and all ratios to revenue exclude bulk deliveries to customer
warehouses
- Corporate costs are fully allocated to businesses except for special
charges and eliminations
* Due to the implementation of FAS No. 142 and to arrive at relevant
comparisons, these lines are presented on a proforma basis for FY 2001 to
exclude goodwill amortization.
CARDINAL HEALTH, INC. - FISCAL YEAR 2002 BUSINESS ANALYSIS
($ millions)
TOTAL
2002 2001
o REVENUE
- Amount $44,394 $38,660 Excluding
- Growth Rate 15% 28% Special Charges
o OPERATING EARNINGS 2002 2001
- Amount* $1,834 $1,536 $1,973 $1,661
- Growth Rate* 19% 16% 19% 20%
o RATIO TO REVENUE
- Gross Margin 9.11% 9.34%
- Expenses* 4.67% 5.05%
- Special Charges 0.31% 0.32%
- Operating Earnings* 4.13% 3.97% 4.44% 4.29%
o NET EARNINGS**
- Amount* $1,126 $902 $1,213 $987
- Growth Rate* 25% 19% 23% 23%
- Ratio to Revenue* 2.54% 2.33% 2.73% 2.55%
o PRODUCTIVITY
- Margin Per Expense Dollar* $1.95 $1.85
o ASSET MANAGEMENT
- Average Committed Capital $6,054 $5,356
- Return On Committed Capital 30.3% 27.7% 32.5% 30.0%
- Operating Cash Flow $984 $872
- Capital Expenditures
Investment $285 $341
- Revenue and all ratios to revenue exclude bulk deliveries to customer
warehouses
* Due to the implementation of FAS No. 142 and to arrive at relevant
comparisons, these lines are presented on a proforma basis for FY 2001 to
exclude goodwill amortization.
** The net earnings section is presented before the cumulative effect
of change in accounting principle.
CARDINAL HEALTH, INC. - QUARTERLY FY 2002 BUSINESS ANALYSIS
($ millions)
PHARMACEUTICAL DISTRIBUTION AND PROVIDER SERVICES
Q1 Q2 Q3 Q4 TOTAL
o REVENUE
- Amount $7,961 $9,215 $9,542 $9,642 $36,360
- Growth Rate 17% 20% 13% 17% 17%
- Mix 81% 82% 83% 82% 82%
o OPERATING EARNINGS
- Amount $222 $256 $315 $295 $1,088
- Growth Rate 24% 25% 22% 21% 23%
- Mix 51% 50% 56% 51% 52%
o RATIO TO REVENUE
- Gross Margin 5.21% 4.87% 5.45% 4.98% 5.12%
- Expenses 2.42% 2.09% 2.15% 1.92% 2.13%
- Operating Earnings 2.79% 2.78% 3.30% 3.06% 2.99%
o PRODUCTIVITY
- Margin Per Expense
Dollar* $2.15 $2.33 $2.54 $2.60 $2.40
o ASSET MANAGEMENT
- Average Committed
Capital $3,047 $3,733 $4,008 $3,443 $3,414
- Return On Committed
Capital 29.1% 27.5% 31.4% 34.0% 31.8%
- Operating Cash Flow ($703) ($615) $315 $1,079 $76
- Capital Expenditures
Investment $14 $16 $21 $29 $80
MEDICAL-SURGICAL PRODUCTS AND SERVICES
Q1 Q2 Q3 Q4 TOTAL
o REVENUE
- Amount $1,510 $1,555 $1,561 $1,631 $6,257
- Growth Rate 10% 5% 4% 5% 6%
- Mix 15% 14% 13% 14% 14%
o OPERATING EARNINGS
- Amount $127 $131 $139 $144 $541
- Growth Rate 15% 15% 15% 12% 14%
- Mix 29% 25% 24% 25% 26%
o RATIO TO REVENUE
- Gross Margin 21.42% 22.11% 22.39% 21.69% 21.90%
- Expenses 13.03% 13.72% 13.51% 12.84% 13.27%
- Operating Earnings 8.39% 8.39% 8.88% 8.85% 8.63%
o PRODUCTIVITY
- Margin Per Expense
Dollar* $1.64 $1.61 $1.66 $1.69 $1.65
o ASSET MANAGEMENT
- Average Committed
Capital $1,502 $1,556 $1,546 $1,466 $1,501
- Return On Committed
Capital 33.7% 33.6% 35.8% 39.3% 36.0%
- Operating Cash Flow $30 $94 $184 $291 $599
- Capital Expenditures
Investment $12 $22 $18 $36 $88
PHARMACEUTICAL TECHNOLOGIES AND SERVICES
Q1 Q2 Q3 Q4 TOTAL
o REVENUE
- Amount $301 $330 $316 $359 $1,306
- Growth Rate 11% 15% 5% 13% 11%
- Mix 3% 3% 3% 3% 3%
o OPERATING EARNINGS
- Amount $58 $70 $61 $72 $261
- Growth Rate 12% 15% 17% 15% 15%
- Mix 13% 14% 11% 12% 12%
o RATIO TO REVENUE
- Gross Margin 33.82% 33.97% 32.83% 32.94% 33.38%
- Expenses 14.62% 12.92% 13.57% 13.02% 13.50%
- Operating Earnings 19.20% 21.05% 19.26% 19.92% 19.88%
o PRODUCTIVITY
- Margin Per Expense
Dollar* $2.31 $2.63 $2.42 $2.53 $2.47
o ASSET MANAGEMENT
- Average Committed
Capital $941 $996 $997 $1,022 $984
- Return On Committed
Capital 24.5% 27.9% 24.4% 28.1% 26.4%
- Operating Cash Flow $10 $59 $34 $88 $191
- Capital Expenditures
Investment $27 $22 $23 $30 $102
AUTOMATION AND INFORMATION SERVICES
Q1 Q2 Q3 Q4 TOTAL
o REVENUE
- Amount $108 $140 $142 $170 $560
- Growth Rate 20% 17% 27% 13% 19%
- Mix 1% 1% 1% 1% 1%
o OPERATING EARNINGS
- Amount $30 $55 $53 $71 $209
- Growth Rate 27% 21% 29% 21% 23%
- Mix 7% 11% 9% 12% 10%
o RATIO TO REVENUE
- Gross Margin 66.92% 67.93% 69.06% 69.61% 68.52%
- Expenses 39.43% 28.50% 31.57% 27.80% 31.17%
- Operating Earnings 27.49% 39.43% 37.49% 41.81% 37.35%
o PRODUCTIVITY
- Margin Per
Expense Dollar* $1.70 $2.38 $2.19 $2.51 $2.20
o ASSET MANAGEMENT
- Average Committed
Capital $588 $491 $544 $620 $586
- Return On Committed
Capital 20.3% 44.9% 39.2% 45.8% 35.7%
- Operating Cash
Flow $182 ($4) ($29) ($31) $118
- Capital Expenditures
Investment $5 $3 $3 $4 $15
- Revenue and all ratios to revenue exclude bulk deliveries to
customer warehouses
- Corporate costs are fully allocated to businesses except for special
charges and eliminations
* Margin Per Expense Dollar = Ratio of gross margin to expenses
CARDINAL HEALTH, INC. - QUARTERLY FY 2002 BUSINESS ANALYSIS
($ millions)
TOTAL (EXCLUDING SPECIAL CHARGES)
Q1 Q2 Q3 Q4 TOTAL
o REVENUE
- Amount $9,865 $11,222 $11,541 $11,766 $44,394
- Growth Rate 16% 17% 12% 15% 15%
o OPERATING EARNINGS
- Amount $412 $487 $533 $541 $1,973
- Growth Rate 18% 20% 19% 18% 19%
o RATIO TO REVENUE
- Gross Margin 9.27% 8.92% 9.26% 9.03% 9.11%
- Expenses 5.09% 4.58% 4.64% 4.43% 4.67%
- Operating Earnings 4.18% 4.34% 4.62% 4.60% 4.44%
o NET EARNINGS**
- Amount $254 $294 $325 $341 $1,213
- Growth Rate 23% 23% 22% 24% 23%
- Ratio to Revenue 2.58% 2.62% 2.81% 2.90% 2.73%
o PRODUCTIVITY
- Margin Per Expense
Dollar * $1.82 $1.95 $1.99 $2.04 $1.95
o ASSET MANAGEMENT
- Average Committed
Capital $5,579 $6,362 $6,710 $6,167 $6,054
- Return On Committed
Capital 29.6% 30.6% 31.7% 34.9% 32.5%
- Operating Cash Flow ($481) ($466) $504 $1,427 $984
- Capital Expenditures
Investment $58 $63 $65 $99 $285
-Revenue and all ratios to revenue exclude bulk deliveries to customer
warehouses
* Margin Per Expense Dollar = Ratio of gross margin to expenses
** The net earnings section is presented before the cumulative effect of
change in accounting principle.
CARDINAL HEALTH, INC. - FISCAL 2002 AND 2001 ASSET MANAGEMENT ANALYSIS
($ millions)
2002
Q1 Q2 Q3 Q4 YTD COMMENT
o RECEIVABLE DAYS 20 19 18 17 RECORD LOW
o INVENTORY TURNS 6.0 5.6 5.5 6.7 Seasonal
o CASH $872 $399 $869 $1,382 liquidation
o DEBT $2,315 $2,480 $2,481 $2,225
o EQUITY $5,670 $5,863 $6,209 $6,393
o NET DEBT/TOTAL
CAPITAL 20% 26% 21% 12% RECORD LOW
o TANGIBLE NET
WORTH $4,503 $4,697 $5,031 $4,849
o RETURN ON EQUITY 17.8% 19.7% 19.9% 18.8% 19.0%
EXCLUDING SPECIAL
ITEMS 18.3% 20.3% 21.5% 21.5% 20.5% RECORD
o TAX RATE 33.7% 34.3% 33.8% 33.4% 33.8%
EXCLUDING SPECIAL
ITEMS 33.8% 34.4% 34.1% 33.9% 34.1% Business mix
2001
Q1 Q2 Q3 Q4 YTD
o RECEIVABLE DAYS 22 22 21 18
o INVENTORY TURNS 6.1 6.3 6.6 6.3
o CASH $573 $541 $396 $934
o DEBT $2,433 $2,502 $2,193 $1,885
o EQUITY $4,668 $4,798 $5,092 $5,437
o NET DEBT/TOTAL
CAPITAL 28% 29% 26% 15%
o TANGIBLE NET
WORTH $3,540 $3,694 $3,950 $4,262
o RETURN ON
EQUITY 16.8% 18.7% 15.6% 19.2% 17.6%
EXCLUDING SPECIAL
ITEMS 17.3% 19.2% 20.5% 20.0% 19.3%
o TAX RATE 33.6% 35.2% 35.9% 34.1% 34.7%
EXCLUDING SPECIAL
ITEMS 34.3% 34.9% 34.3% 34.2% 34.4%
http://tbutton.prnewswire.com/prn/11690X74674451
SOURCE Cardinal Health, Inc.
CONTACT: Media: David Verbraska, +1-614-757-3690; or Investor Relations:
Stephen Fischbach, +1-614-757-7067, both of Cardinal Health