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Press release from PR Newswire

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

Thursday, August 02, 2012

Cardinal Health Reports Strong Q4 And Fiscal Year 2012; Provides Fiscal 2013 Outlook07:00 EDT Thursday, August 02, 2012- 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) - Fiscal 2012 diluted earnings per share from continuing operations increase by 12 percent to $3.06, or 15 percent to $3.21 on a non-GAAP basis - Fiscal 2013 outlook for non-GAAP diluted earnings per share of $3.35 to $3.50DUBLIN, 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 SummaryQ4 FY12Q4 FY11Y/YFY12FY11Y/YRevenue$26.8 billion$26.8 billion0%$107.6 billion$102.6 billion5% 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 RESULTSPharmaceutical SegmentFourth-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 FY12Q4 FY11Y/YFY12FY11Y/YRevenue$24.3 billion$24.5 billion(1%)$97.9 billion$93.7 billion4%Segment Profit$354 million$308 million15%$1.6 billion$1.3 billion17%Medical SegmentFourth-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 FY12Q4 FY11Y/YFY12FY11Y/YRevenue$2.4 billion$2.3 billion5%$9.6 billion$8.9 billion8%Segment Profit$79 million$78 million2%$332 million$373 million(11%)ADDITIONAL YEAR-END AND RECENT HIGHLIGHTSIncreased 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 CALLCardinal 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 StatementsThis 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 1Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Statements of Earnings (Unaudited)Fourth Quarter(in millions, except per Common Share amounts)20122011% ChangeRevenue$         26,764$         26,7640 %Cost of products sold25,62825,720(0)%Gross margin1,1361,0449 %Operating expenses:Distribution, selling, general and administrative expenses7126716 %Restructuring and employee severance95N.M.Acquisition-related costs1115N.M.Impairments and loss on disposal of assets1-N.M.Litigation (recoveries)/charges, net-(6)N.M.Operating earnings40335912 %Other (income)/expenses, net1(2)N.M.Interest expense, net25244 %Gain on sale of investment in CareFusion-(4)N.M.Earnings before income taxes and discontinued operations37734111 %Provision for income taxes1411345 %Earnings from continuing operations23620714 %Loss from discontinued operations, net of tax-(4)N.M.Net earnings$              236$              20317 %Basic earnings/(loss) per Common Share:Continuing operations$             0.68$             0.5915 %Discontinued operations-(0.01)N.M.Net basic earnings per Common Share$             0.68$             0.5817 %Diluted earnings/(loss) per Common Share:Continuing operations$             0.68$             0.5817 %Discontinued operations-(0.01)N.M.Net diluted earnings per Common Share$             0.68$             0.5719 %Weighted average number of Common Shares outstanding:Basic345349Diluted349355 Schedule 2Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Statements of EarningsFiscal Year(in millions, except per Common Share amounts)20122011% Change(Unaudited)Revenue$       107,552$       102,6445 %Cost of products sold103,01198,4825 %Gross margin4,5414,1629 %Operating expenses:Distribution, selling, general and administrative expenses2,6772,5286 %Restructuring and employee severance2115N.M.Acquisition-related costs3390N.M.Impairments and loss on disposal of assets219N.M.Litigation (recoveries)/charges, net(3)6N.M.Operating earnings1,7921,51418 %Other income, net(1)(22)N.M.Interest expense, net95932 %Gain on sale of investment in CareFusion-(75)N.M.Earnings before income taxes and discontinued operations1,6981,51812 %Provision for income taxes62855214 %Earnings from continuing operations1,07096611 %Loss from discontinued operations, net of tax(1)(7)N.M.Net earnings$           1,069$              95911 %Basic earnings/(loss) per Common Share:Continuing operations$             3.10$             2.7712 %Discontinued operations-(0.02)N.M.Net basic earnings per Common Share$             3.10$             2.7513 %Diluted earnings/(loss) per Common Share:Continuing operations$             3.06$             2.7412 %Discontinued operations-(0.02)N.M.Net diluted earnings per Common Share$             3.06$             2.7213 %Weighted average number of Common Shares outstanding:Basic345349Diluted349353 Schedule 3Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Balance SheetsJune 30,June 30,(in millions)20122011(Unaudited)AssetsCash and equivalents$           2,274$           1,929Trade receivables, net6,3556,156Inventories7,8647,334Prepaid expenses and other1,017897Total current assets17,51016,316Property and equipment, net1,5511,512Goodwill and other intangibles, net4,3924,259Other assets807759Total assets$         24,260$         22,846Liabilities and Shareholders' EquityAccounts payable$         11,726$         11,332Current portion of long-term obligations and other short-term borrowings476327Other accrued liabilities1,9721,711Total current liabilities14,17413,370Long-term obligations, less current portion2,4182,175Deferred income taxes and other liabilities1,4241,452Total shareholders' equity6,2445,849Total liabilities and shareholders' equity$         24,260$         22,846 Schedule 4Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Statements of Cash FlowsFourth QuarterFiscal Year(in millions)2012201120122011(Unaudited)(Unaudited)(Unaudited)Cash Flows from Operating Activities:Net earnings$              236$              203$           1,069$              959Loss from discontinued operations-417Earnings from continuing operations2362071,070966Adjustments to reconcile earnings from continuing operations to net cash from operations:Depreciation and amortization8674325313Gain on sale of investment in CareFusion-(4)-(75)Impairments and loss on disposal of assets1-219Share-based compensation22198580Provision for deferred income taxes158128158128Provision for bad debts752227Change 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 receivables190122(129)(457)Decrease/(increase) in inventories375384(495)(665)Increase/(decrease) in accounts payable(893)(630)3191,356Other accrued liabilities and operating items, net(271)(179)(129)(280)Net cash provided by/(used in) operating activities(107)1201,1761,395Cash 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)-33Proceeds from sale of CareFusion---706Proceeds from maturities of held-to-maturity securities46109210Net 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 borrowings551346Reduction of long-term obligations(206)(1)(251)(229)Proceeds from long-term obligations, net of issuance costs496-496495Proceeds from issuance of Common Shares19274263Tax 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 activities82(52)(454)(193)Net increase/(decrease) in cash and equivalents(136)(32)345(826)Cash and equivalents at beginning of period2,4101,9611,9292,755Cash and equivalents at end of period$           2,274$           1,929$           2,274$           1,929 Schedule 5Cardinal Health, Inc. and SubsidiariesTotal Company Business AnalysisNon-GAAPFourth QuarterFourth Quarter(in millions)2012201120122011RevenueAmount$         26,764$         26,764Growth rate0 %9 %Operating earningsAmount$              403$              359$              425$              375Growth rate12 %7 %13 %17 %Earnings from continuing operationsAmount$              236$              207$              255$              214Growth rate14 %7 %19 %17 %Non-GAAPFiscal YearFiscal Year(in millions)2012201120122011RevenueAmount$       107,552$       102,644Growth rate5 %4 %Operating earningsAmount$           1,792$           1,514$           1,866$           1,644Growth rate18 %16 %13 %18 %Earnings from continuing operationsAmount$           1,070$              966$           1,119$              988Growth rate11 %65 %13 %22 %Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances. Schedule 6Cardinal Health, Inc. and SubsidiariesSegment Business AnalysisFourth QuarterFourth Quarter(in millions)20122011(in millions)20122011PharmaceuticalMedicalRevenueRevenueAmount$         24,335$         24,458Amount$           2,432$           2,312Growth rate(1)%10 %Growth rate5 %7 %Mix91 %91 %Mix9 %9 %Segment profitSegment profitAmount$              354$              308Amount$                79$                78Growth rate15 %34 %Growth rate2 %(24)%Mix82 %80 %Mix18 %20 %Segment profit margin1.46 %1.26 %Segment profit margin3.27 %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 $(27) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs (including amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration obligations), impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Schedule 7Cardinal Health, Inc. and SubsidiariesSegment Business AnalysisFiscal YearFiscal Year(in millions)20122011(in millions)20122011PharmaceuticalMedicalRevenueRevenueAmount$         97,925$         93,744Amount$           9,642$           8,922Growth rate4 %4 %Growth rate8 %2 %Mix91 %91 %Mix9 %9 %Segment profitSegment profitAmount$           1,558$           1,329Amount$              332$              373Growth rate17 %31 %Growth rate(11)%(13)%Mix82 %78 %Mix18 %22 %Segment profit margin1.59 %1.42 %Segment profit margin3.45 %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 $(188) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs (including amortization of acquisition-related intangible assets and changes in the fair value of contingent consideration obligations), impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Schedule 8Cardinal Health, Inc. and SubsidiariesSchedule of Notable ItemsFourth QuarterFiscal Year(in millions, except per Common Share amounts)2012201120122011Restructuring and employee severanceRestructuring and employee severance$                (9)$                (5)$              (21)$              (15)Tax benefit3285Restructuring 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 costsAmortization of acquisition-related intangible assets$              (20)$              (14)$              (78)$              (67)Tax benefit882921Amortization 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)1Other 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)6922Total 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 assetsImpairments and loss on disposal of assets$                (1)$                  -$              (21)$                (9)Tax benefit1-83Impairments 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), netLitigation 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 costsOther spin-off costs$                  -$                (3)$                (2)$              (10)Tax benefit-114Other spin-off costs, net of tax$                  -$                (2)$                (1)$                (6)Decrease to diluted EPS from continuing operations$                  -$                  -$                  -$           (0.02)Gain on sale of CareFusion stockGain on sale of CareFusion stock$                  -$                  4$                  -$                75Tax benefit----Gain on sale of CareFusion stock, net of tax$                  -$                  4$                  -$                75Increase to diluted EPS from continuing operations$                  -$             0.01$                  -$             0.21Weighted average number of diluted shares outstanding349355349353We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.1Includes 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 $0.13.2The sum of the components may not equal the total due to rounding. Schedule 9Cardinal Health, Inc. and SubsidiariesAsset Management AnalysisFourth QuarterFiscal Year2012201120122011Days sales outstanding22.320.3Days inventory on hand23.922.5Days payable outstanding35.634.8Net working capital days110.58.0Debt to total capital32 %30 %Net debt to capital9 %9 %Return on equity15.1 %14.1 %17.8 %17.5 %Non-GAAP return on equity16.3 %14.9 %18.6 %18.0 %Effective tax rate from continuing operations37.4 %39.3 %37.0 %36.4 %Non-GAAP effective tax rate from continuing operations36.0 %39.6 %36.8 %37.2 %1The sum of the components may not equal the total due to rounding.Refer to the GAAP/Non-GAAP reconciliation for Non-GAAP calculations. Refer to DSO, DIOH and DPO for definitions and calculations. Schedule 10Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationFourth Quarter 2012(in millions, except per Common Share amounts)Operating Earnings OperatingEarningsGrowth RateEarningsBefore Income Taxes and Discontinued OperationsProvision for Income TaxesEarnings from Continuing OperationsEarnings from Continuing Operations Growth RateDiluted EPS from Continuing OperationsDilutedEPS fromContinuingOperationsGrowth RateGAAP$              40312 %$              377$              141$              23614 %$             0.6817 %Restructuring and employee severance99360.02Acquisition-related costs1111(2)130.04Impairments and loss on disposal of assets111--Litigation (recoveries)/charges, net-----Other Spin-Off costs-----Gain on sale of CareFusion stock-----Non-GAAP$              42513 %$              398$              143$              25519 %$             0.7322 %Fourth Quarter 2011GAAP$              3597 %$              341$              134$              2077 %$             0.587 %Restructuring and employee severance55230.01Acquisition-related costs1515690.03Impairments and loss on disposal of assets-----Litigation (recoveries)/charges, net(6)(6)(3)(3)(0.01)Other Spin-Off costs3312-Gain on sale of CareFusion stock-(4)-(4)(0.01)Non-GAAP$              37517 %$              354$              140$              21417 %$             0.6020 %Fiscal Year 2012(in millions, except per Common Share amounts)OperatingEarningsOperatingEarningsGrowth RateEarningsBeforeIncomeTaxes andDiscontinuedOperationsProvisionforIncomeTaxesEarningsfromContinuingOperationsEarningsfromContinuingOperationsGrowth RateDilutedEPS fromContinuingOperationsDilutedEPS fromContinuingOperationsGrowth RateGAAP$           1,79218 %$           1,698$              628$           1,07011 %$             3.0612 %Restructuring and employee severance21218130.04Acquisition-related costs33339240.07Impairments and loss on disposal of assets21218130.04Litigation (recoveries)/charges, net(3)(3)(1)(2)(0.01)Other Spin-Off costs2211-Gain on sale of CareFusion stock-----Non-GAAP$           1,86613 %$           1,772$              653$           1,11913 %$             3.2115 %Fiscal Year 2011GAAP$           1,51416 %$           1,518$              552$              96665 %$             2.7469 %Restructuring and employee severance15155100.03Acquisition-related costs909022680.19Impairments and loss on disposal of assets99360.02Litigation (recoveries)/charges, net66(1)70.02Other Spin-Off costs1010460.02Gain on sale of CareFusion stock-(75)-(75)(0.21)Non-GAAP$           1,64418 %$           1,573$              585$              98822 %$             2.8025 %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 11Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationFourth Quarter(in millions)20122011GAAP return on equity15.1 %14.1 %Non-GAAP return on equityNet earnings$              236$              203Restructuring and employee severance, net of tax, in continuing operations63Acquisition-related costs, net of tax, in continuing operations139Impairments 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-2Gain on sale of CareFusion stock, net of tax-(4)CareFusion net loss in discontinued operations 1-4Adjusted net earnings$              255$              214Annualized$           1,020$              856FourthThirdFourthThirdQuarterQuarterQuarterQuarter2012201220112011Total shareholders' equity$           6,244$           6,240$           5,849$           5,657Divided by average shareholders' equity$           6,242$           5,753Non-GAAP return on equity16.3 %14.9 %We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.1To 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 12Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationFiscal YearFiscal Year(in millions)20122011GAAP return on equity17.8 %17.5 %Non-GAAP return on equityNet earnings$           1,069$              959Restructuring and employee severance, net of tax, in continuing operations1310Acquisition-related costs, net of tax, in continuing operations2468Impairments and loss on disposal of assets, net of tax, in continuing operations136Litigation (recoveries)/charges, net, net of tax, in continuing operations(2)7Other spin-off costs, net of tax, in continuing operations16Gain on sale of CareFusion stock, net of tax-(75)CareFusion net loss in discontinued operations 1-7Adjusted net earnings$           1,118$              988FourthThirdSecondFirstFourthFourthThirdSecondFirstFourthQuarterQuarterQuarterQuarterQuarterQuarterQuarterQuarterQuarterQuarter2012201220122012201120112011201120112010Total shareholders' equity$           6,244$       6,240$       5,928$       5,714$       5,849$           5,849$       5,657$       5,421$       5,239$       5,276Divided by average shareholders' equity$           5,995$           5,488Non-GAAP return on equity18.6 %18.0 %We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.1To 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 13Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationFourth QuarterFiscal Year(in millions)2012201120122011GAAP effective tax rate from continuing operations37.4 %39.3 %37.0 %36.4 %Non-GAAP effective tax rate from continuing operationsEarnings before income taxes and discontinued operations$              377$              341$           1,698$           1,518Restructuring and employee severance952115Acquisition-related costs11153390Impairments and loss on disposal of assets1-219Litigation (recoveries)/charges, net-(6)(3)6Other Spin-Off costs-3210Gain on sale of CareFusion stock-(4)-(75)Adjusted earnings before income taxes and discontinued operations$              398$              354$           1,772$           1,573Provision for income taxes$              141$              134$              628$              552Restructuring and employee severance tax benefit3285Acquisition-related costs tax benefit/(expense)(2)6922Impairments and loss on disposal of assets tax benefit1-83Litigation (recoveries)/charges, net tax expense-(3)(1)(1)Other spin-off costs tax benefit-114Gain on sale of CareFusion stock tax benefit----Adjusted provision for income taxes$              143$              140$              653$              585Non-GAAP effective tax rate from continuing operations36.0 %39.6 %36.8 %37.2 %Fourth Quarter20122011Debt to total capital32 %30 %Net debt to capitalCurrent portion of long-term obligations and other short-term borrowings$              476$              327Long-term obligations, less current portion2,4182,175Debt$           2,894$           2,502Cash and equivalents(2,274)(1,929)Net Debt$              620$              573Total shareholders' equity6,2445,849Capital$           6,864$           6,422Net debt to capital9 %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 continuingoperations (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 14Cardinal Health, Inc. and SubsidiariesFourth Quarter(in millions)20122011Days Sales Outstanding22.320.3Days Inventory on HandInventories$           7,864$           7,334Cost of products sold$         25,628$         25,720Chargeback billings3,9843,556Adjusted cost of products sold$         29,612$         29,276Adjusted cost of products sold divided by 90 days$              329$              325Days Inventory on Hand23.922.5Days Payable OutstandingAccounts payable$         11,726$         11,332Cost of products sold$         25,628$         25,720Chargeback billings3,9843,556Adjusted cost of products sold$         29,612$         29,276Adjusted cost of products sold divided by 90 days$              329$              325Days Payable Outstanding35.634.8Net Working Capital Days110.58.01The 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 SubsidiariesUse of Non-GAAP MeasuresThis 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.DefinitionsDebt: 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.1In this earnings release growth rates are determined by dividing the difference between current period results and prior period results by prior period results.2Programs 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).3Costs that consist primarily of transaction costs, integration costs, changes in the fair value of contingent consideration obligations and amortization of acquisition-related intangible assets.4Asset 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.5Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.SOURCE Cardinal HealthFor further information: Media: Debbie Mitchell, +1-614-757-6225, debbie.mitchell@cardinalhealth.com; Investors: Sally Curley, +1-614-757-7115, sally.curley@cardinalhealth.com