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Press release from PR Newswire

Cardinal Health Reports Fiscal 2013 Second-Quarter Results

Tuesday, February 05, 2013

Cardinal Health Reports Fiscal 2013 Second-Quarter Results07:00 EST Tuesday, February 05, 2013- Operating earnings increase 13 percent to $506 million, or 11 percent to $525 million on a non-GAAP basis(1) - Diluted earnings per share from continuing operations increase 16 percent to $0.88, or 15 percent to $0.93 on a non-GAAP basis - Fiscal 2013 non-GAAP earnings per share guidance tightened to $3.42 to $3.50, representing top half of prior rangeDUBLIN, Ohio, Feb. 5, 2013 /PRNewswire/ -- Cardinal Health today reported fiscal year 2013 second-quarter revenue of $25.2 billion and a 15 percent increase in non-GAAP diluted earnings per share (EPS) from continuing operations to $0.93.In addition, the company tightened its fiscal 2013 outlook for non-GAAP diluted EPS from continuing operations to $3.42 to $3.50, which represents the top half of the prior guidance range. "We've now completed a strong first half to our fiscal 2013 with a good second-quarter performance. While continued brand-to-generic conversions and the previously announced movement of the Express Scripts contract drove a revenue decline in the Pharmaceutical segment, excellent performance from our generic programs and new customer wins fueled profit gains," said George Barrett, chairman and chief executive officer of Cardinal Health. "And, despite continued procedural softness in the industry, our Medical segment reported double-digit growth this quarter. With our performance in the first six months of fiscal 2013, we are now guiding to the top half of our prior non-GAAP EPS range." Q2 FY13 SUMMARYQ2 FY13Q2 FY12Y/YRevenue$25.2 billion$27.1 billion(7%) Operating Earnings $506 million $449 million 13%Non-GAAP Operating Earnings $525 million $475 million 11%Earnings from Continuing Operations $303 million $264 million 15%Non-GAAP Earnings from Continuing Operations $317 million $281 million 13%Diluted EPS from Continuing Operations $0.88 $0.76 16%Non-GAAP Diluted EPS from Continuing Operations $0.93 $0.81 15%SEGMENT RESULTSPharmaceutical segmentRevenue for the Pharmaceutical segment decreased 8 percent to $22.7 billion due to the previously announced non-renewal of the Express Scripts contract as well as expected conversions from branded pharmaceuticals to lower-priced generics. The decline was partially offset by revenues from new pharmaceutical distribution customers. Segment profit increased 12 percent to $441 million, largely from overall strong performance from generics programs and benefits of customer and product mix within pharmaceutical distribution, partially offset by the impact of continued market softness in our nuclear business.Q2 FY13Q2 FY12Y/YRevenue$22.7 billion$24.7 billion(8%)Segment Profit$441 million$394 million12%Medical segmentRevenue for the Medical segment increased 3 percent to $2.5 billion, reflecting the benefits of last year's acquisition of FutureMed and one additional sales day year-on-year. Excluding these drivers, year-on-year revenue growth was flat, reflecting continued softness in key U.S. markets, particularly as it relates to procedural volume. Segment profit increased 11 percent to $94 million driven by the favorable impact of commodities, acquisitions and preferred product mix. The increase was partially offset by customer mix and continued volume softness.The overall profit impact of our Medical Business Transformation for the quarter was slightly negative, including year-over-year incremental depreciation and program expenses, realized benefits, and a $5 million favorable out-of-period adjustment as part of continued cleanup from the conversion to the new platform.Q2 FY13Q2 FY12Y/YRevenue$2.5 billion$2.4 billion3%Segment Profit$94 million$85 million11%ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTSRetained the No. 1 slot in the Gartner Fourth Annual Healthcare Supply Chain Top 25 ranking Established Cardinal Health Specialty Solutions pathways program with Blue Cross Blue Shield of Louisiana and expanded Cardinal Health Specialty Solutions pathways program with Aetna to include oncologists in Michigan Launched Cardinal Health Specialty Solutions VitalPath? Integrated Dispensing Solution, VitalSource? GPO Regimen Analyzer, and PathWare? Decision Transaction Solutions to help improve physician practice efficiencies Named one of 40 of the 2013 Best Companies for Leaders by Chief Executive magazine Named one of the 2012 Working Mother 100 Best Companies by Working Mother magazine CONFERENCE CALLCardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss second-quarter results. 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, using conference ID 81032416. There is no pre-registration for the call; however, participants are advised to dial into the call at least 10 minutes prior to the start time. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will be available until March 5 by dialing 855.859.2056 or 404.537.3406, using conference ID 81032416.UPCOMING EVENTSLeerink Swann Global Healthcare Conference on Feb. 13 at 10:30 a.m. Eastern in New York Cowen and Co. 33rd Annual Health Care Conference on March 5 at 8:40 a.m. Eastern in Boston Barclays Global Healthcare Conference on March 13 at 9:30 a.m. Eastern in MiamiAt these events, Cardinal Health will discuss the company's diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, go to the Investors page at cardinalhealth.com.  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, including our relationships with CVS Caremark Corporation and Walgreen Co.; 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 Feb. 5, 2013. 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 Subsidiaries Condensed Consolidated Statements of Earnings (Unaudited)Second Quarter(in millions, except per Common Share amounts)20132012% ChangeRevenue$25,232$27,078(7)%Cost of products sold24,00825,964(8)%Gross margin1,2241,11410%Operating expenses:Distribution, selling, general and administrative expenses6996409%Restructuring and employee severance12N.M.Acquisition-related costs2522N.M.Impairments and loss on disposal of assets51N.M.Litigation (recoveries)/charges, net(12)?N.M.Operating earnings50644913%Other income, net(4)?N.M.Interest expense, net272318%Earnings before income taxes and discontinued operations48342614%Provision for income taxes18016211%Earnings from continuing operations30326415%Loss from discontinued operations, net of tax?(2)N.M.Net earnings$303$26216%Basic earnings/(loss) per Common Share:Continuing operations$0.89$0.7716%Discontinued operations?(0.01)N.M.Net basic earnings per Common Share$0.89$0.7617%Diluted earnings/(loss) per Common Share:Continuing operations$0.88$0.7616%Discontinued operations?(0.01)N.M.Net diluted earnings per Common Share$0.88$0.7517%Weighted-average number of Common Shares outstanding:Basic340345Diluted343349 Schedule 2Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Statements of Earnings (Unaudited)Year-to-Date(in millions, except per Common Share amounts)20132012% ChangeRevenue$51,121$53,870(5)%Cost of products sold48,73951,672(6)%Gross margin2,3822,1988%Operating expenses:Distribution, selling, general and administrative expenses1,3881,2838%Restructuring and employee severance65N.M.Acquisition-related costs5349N.M.Impairments and loss on disposal of assets62N.M.Litigation (recoveries)/charges, net(34)(3)N.M.Operating earnings96386212%Other (income)/expense, net(12)5N.M.Interest expense, net534614%Earnings before income taxes and discontinued operations92281114%Provision for income taxes34731012%Earnings from continuing operations57550115%Loss from discontinued operations, net of tax?(2)N.M.Net earnings$575$49915%Basic earnings/(loss) per Common Share:Continuing operations$1.69$1.4517%Discontinued operations?(0.01)N.M.Net basic earnings per Common Share$1.69$1.4417%Diluted earnings/(loss) per Common Share:Continuing operations$1.67$1.4416%Discontinued operations?(0.01)N.M.Net diluted earnings per Common Share$1.67$1.4317%Weighted-average number of Common Shares outstanding:Basic340345Diluted344349 Schedule 3Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Balance Sheets(in millions)December 31, 2012June 30, 2012(Unaudited)AssetsCurrent assets:Cash and equivalents$2,255$2,274Trade receivables, net6,1586,355Inventories8,4527,864Prepaid expenses and other9961,017Total current assets17,86117,510Property and equipment, net1,4751,551Goodwill and other intangibles, net4,4284,392Other assets878807Total assets$24,642$24,260Liabilities and Shareholders' EquityCurrent liabilities:Accounts payable$11,796$11,726Current portion of long-term obligations and other short-term borrowings474476Other accrued liabilities1,9321,972Total current liabilities14,20214,174Long-term obligations, less current portion2,4232,418Deferred income taxes and other liabilities1,4751,424Total shareholders' equity6,5426,244Total liabilities and shareholders' equity$24,642$24,260 Schedule 4Cardinal Health, Inc. and SubsidiariesCondensed Consolidated Statements of Cash Flows (Unaudited)Second QuarterYear-to-Date(in millions)2013201220132012Cash flows from operating activities:Net earnings$303$262$575$499Loss from discontinued operations, net of tax?2?2Earnings from continuing operations303264575501Adjustments to reconcile earnings from continuing operations to net cash provided by/(used in) operating activities:Depreciation and amortization8878176156Impairments and loss on disposal of assets5162Share-based compensation22224642Provision for bad debts8192Change in operating assets and liabilities, net of effects from acquisitions:Decrease in trade receivables299236228167Increase in inventories(329)(1,392)(536)(1,553)Increase/(decrease) in accounts payable(433)708311,118Other accrued liabilities and operating items, net(93)(32)(97)(45)Net cash provided by/(used in) operating activities(130)(114)438390Cash flows from investing activities:Acquisition of subsidiaries, net of cash acquired(26)?(126)(7)Additions to property and equipment(36)(57)(62)(101)Proceeds from maturities of held-to-maturity securities48257135Purchase of held-to-maturity securities and other investments?(11)?(11)Net cash used in investing activities(14)(43)(117)(84)Cash flows from financing activities:Net change in short-term borrowings279174Reduction of long-term obligations(2)(1)(6)(1)Proceeds from issuance of Common Shares25142611Tax disbursements from share-based compensation(10)(4)(12)?Dividends on Common Shares(81)(74)(165)(152)Purchase of treasury shares??(200)(300)Net cash used in financing activities(41)(56)(340)(438)Net decrease in cash and equivalents(185)(213)(19)(132)Cash and equivalents at beginning of period2,4402,0112,2741,930Cash and equivalents at end of period$2,255$1,798$2,255$1,798 Schedule 5Cardinal Health, Inc. and SubsidiariesTotal Company Business AnalysisNon-GAAPSecond QuarterSecond Quarter(in millions)2013201220132012RevenueAmount$25,232$27,078Growth rate(7)%7%Operating earningsAmount$506$449$525$475Growth rate13%31%11%21%Earnings from continuing operationsAmount$303$264$317$281Growth rate15%23%13%10%Non-GAAPYear-to-DateYear-to-Date(in millions)2013201220132012RevenueAmount$51,121$53,870Growth rate(5)%8%Operating earningsAmount$963$862$995$917Growth rate12%22%8%18%Earnings from continuing operationsAmount$575$501$598$537Growth rate15%(2)%11%10%Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances. Schedule 6Cardinal Health, Inc. and SubsidiariesSegment Business AnalysisSecond QuarterSecond Quarter(in millions)20132012(in millions)20132012PharmaceuticalMedicalRevenueRevenueAmount$22,747$24,665Amount$2,487$2,416Growth rate(8)%6%Growth rate3%9%Mix90%91%Mix10%9%Segment profitSegment profitAmount$441$394Amount$94$85Growth rate12%30%Growth rate11%(18)%Mix83%82%Mix17%18%Segment profit margin1.94%1.60%Segment profit margin3.76%3.50%Refer to definitions for an explanation of calculations.Total consolidated revenue for the three months ended December 31, 2012 was $25,232 million, which included total segment revenue of $25,234 million and Corporate revenue of $(2) million. Total consolidated revenue for the three months ended December 31, 2011 was $27,078 million, which included total segment revenue of $27,081 million and Corporate revenue of $(3) million.  Corporate revenue consists primarily of elimination of inter-segment revenue. Total consolidated operating earnings for the three months ended December 31, 2012 were $506 million, which included total segment profit of $535 million and Corporate costs of $(29) million. Total consolidated operating earnings for the three months ended December 31, 2011 were $449 million, which included total segment profit of $479 million and Corporate costs of $(30) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Medical segment profit includes a $5 million favorable out-of-period adjustment to reflect certain vendor chargeback billings that were delayed when we implemented our medical business transformation. Schedule 7Cardinal Health, Inc. and SubsidiariesSegment Business AnalysisYear-to-DateYear-to-Date(in millions)20132012(in millions)20132012PharmaceuticalMedicalRevenueRevenueAmount$46,244$49,083Amount$4,879$4,796Growth rate(6)%8%Growth rate2%10%Mix90%91%Mix10%9%Segment profitSegment profitAmount$841$757Amount$168$164Growth rate11%24%Growth rate3%(12)%Mix83%82%Mix17%18%Segment profit margin1.82%1.54%Segment profit margin3.44%3.41%Refer to definitions for an explanation of calculations.Total consolidated revenue for the six months ended December 31, 2012 was $51,121 million, which included total segment revenue of $51,123 million and Corporate revenue of $(2) million. Total consolidated revenue for the six months ended December 31, 2011 was $53,870 million, which included total segment revenue of $53,879 million and Corporate revenue of $(9) million.  Corporate revenue consists primarily of elimination of inter-segment revenue. Total consolidated operating earnings for the six months ended December 31, 2012 were $963 million, which included total segment profit of $1,009 million and Corporate costs of $(46) million. Total consolidated operating earnings for the six months ended December 31, 2011 were $862 million, which included total segment profit of $921 million and Corporate costs of $(59) million. Corporate includes, among other things, restructuring and employee severance, acquisition-related costs, impairments and loss on disposal of assets, litigation (recoveries)/charges, net and certain investment spending that are not allocated to the segments. Medical segment profit includes an $8 million favorable out-of-period adjustment to reflect certain vendor chargeback billings that were delayed when we implemented our medical business transformation. The $5 million out-of-period adjustment recorded during the three months ended December 31, 2012 included $2 million related to the three months ended September 30, 2012. Schedule 8Cardinal Health, Inc. and SubsidiariesSchedule of Notable ItemsSecond QuarterYear-to-Date(in millions, except per Common Share amounts)2013201220132012Restructuring and employee severance$(1)$(2)$(6)$(5)Tax benefit1122Restructuring and employee severance, net of tax$?$(1)$(4)$(3)Decrease to diluted EPS from continuing operations$?$?$(0.01)$(0.01)Acquisition-Related CostsAmortization of acquisition-related intangible assets$(22)$(19)$(43)$(38)Tax benefit871514Amortization of acquisition-related intangible assets, net of tax$(14)$(12)$(28)$(24)Decrease to diluted EPS from continuing operations$(0.04)$(0.03)$(0.08)$(0.07)Other acquisition-related costs$(4)$(3)$(10)$(12)Tax benefit1134Other acquisition-related costs, net of tax$(3)$(2)$(7)$(8)Decrease to diluted EPS from continuing operations$(0.01)$(0.01)$(0.02)$(0.02)Total acquisition-related costs1$(25)$(22)$(53)$(49)Tax benefit1981917Total acquisition-related costs, net of tax1$(16)$(14)$(34)$(32)Decrease to diluted EPS from continuing operations1$(0.05)$(0.04)$(0.10)$(0.09)Impairments and loss on disposal of assets$(5)$(1)$(6)$(2)Tax benefit??11Impairments and loss on disposal of assets, net of tax$(5)$(1)$(5)$(1)Decrease to diluted EPS from continuing operations$(0.01)$?$(0.01)$?Litigation recoveries/(charges), net$12$?$34$3Tax expense(5)?(14)(1)Litigation recoveries/(charges), net, net of tax$7$?$20$2Increase to diluted EPS from continuing operations$0.02$?$0.06$0.01Other Spin-Off Costs$?$(1)$?$(2)Tax benefit????Other Spin-Off Costs, net of tax$?$(1)$?$(2)Decrease to diluted EPS from continuing operations$?$?$?$?Weighted-average number of diluted shares outstanding3433493443491           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 9Cardinal Health, Inc. and SubsidiariesAsset Management AnalysisSecond QuarterYear-to-Date2013201220132012Days sales outstanding122.019.9Days inventory on hand27.027.0Days payable outstanding37.837.9Net working capital days211.39.1Debt to total capital31%30%Net debt to capital9%11%Return on equity18.9%18.0%18.1%17.1%Non-GAAP return on equity19.8%19.1%18.8%18.3%Effective tax rate from continuing operations37.2%37.9%37.6%38.1%Non-GAAP effective tax rate from continuing operations36.8%37.8%37.3%37.9%1           We changed our method of calculating days sales outstanding and have revised prior-year information to conform, refer to Schedule 14.2       The sum of the components may not equal the total due to rounding.Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances. Refer to DSO, DIOH and DPO for definitions and calculations. Schedule 10Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationSecond Quarter 2013OperatingEarnings BeforeProvisionEarningsEarnings fromDiluted EPSDiluted EPSEarningsIncome TaxesforfromContinuingfromfrom ContinuingOperatingGrowthand DiscontinuedIncomeContinuingOperationsContinuingOperations(in millions, except per Common Share amounts)EarningsRateOperationsTaxesOperationsGrowth RateOperationsGrowth RateGAAP$50613%$483$180$30315%$0.8816%Restructuring and employee severance111??Acquisition-related costs25259160.05Impairments and loss on disposal of assets55?50.01Litigation (recoveries)/charges, net(12)(12)(5)(7)(0.02)Other Spin-Off Costs?????Non-GAAP$52511%$502$185$31713%$0.9315%Second Quarter 2012GAAP$44931%$426$162$26423%$0.7625%Restructuring and employee severance2211?Acquisition-related costs22228140.04Impairments and loss on disposal of assets11?1?Litigation (recoveries)/charges, net?????Other Spin-Off Costs11?1?Non-GAAP$47521%$452$171$28110%$0.8111%Year-to-Date 2013OperatingEarnings BeforeProvisionEarningsEarnings fromDiluted EPSDiluted EPSEarningsIncome TaxesforfromContinuingfromfrom ContinuingOperatingGrowthand DiscontinuedIncomeContinuingOperationsContinuingOperations(in millions, except per Common Share amounts)EarningsRateOperationsTaxesOperationsGrowth RateOperationsGrowth RateGAAP$96312%$922$347$57515%$1.6716%Restructuring and employee severance66240.01Acquisition-related costs535319340.10Impairments and loss on disposal of assets66150.01Litigation (recoveries)/charges, net(34)(34)(14)(20)(0.06)Other Spin-Off Costs?????Non-GAAP$9958%$953$355$59811%$1.7413%Year-to-Date 2012GAAP$86222%$811$310$501(2)%$1.44(1)%Restructuring and employee severance55230.01Acquisition-related costs494917320.09Impairments and loss on disposal of assets2211?Litigation (recoveries)/charges, net(3)(3)(1)(2)(0.01)Other Spin-Off Costs22?2?Non-GAAP$91718%$866$329$53710%$1.5411%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 ReconciliationSecond Quarter(in millions)20132012GAAP return on equity18.9%18.0%Non-GAAP return on equityNet earnings$303$262Restructuring and employee severance, net of tax, in continuing operations?1Acquisition-related costs, net of tax, in continuing operations1614Impairments and loss on disposal of assets, net of tax, in continuing operations51Litigation (recoveries)/charges, net, net of tax, in continuing operations(7)?Other Spin-Off Costs, net of tax, in continuing operations?1Adjusted net earnings$317$279Annualized$1,268$1,116SecondFirstSecondFirstQuarterQuarterQuarterQuarter2013201320122012Total shareholders' equity$6,542$6,281$5,928$5,714Divided by average shareholders' equity$6,411$5,821Non-GAAP return on equity19.8%19.1%We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. Schedule 12Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationYear-to-Date(in millions)20132012GAAP return on equity18.1%17.1%Non-GAAP return on equityNet earnings$575$499Restructuring and employee severance, net of tax, in continuing operations43Acquisition-related costs, net of tax, in continuing operations3432Impairments and loss on disposal of assets, net of tax, in continuing operations51Litigation (recoveries)/charges, net, net of tax, in continuing operations(20)(2)Other Spin-Off Costs, net of tax, in continuing operations?2Adjusted net earnings$598$535Annualized$1,196$1,070SecondFirstFourthSecondFirstFourthQuarterQuarterQuarterQuarterQuarterQuarter201320132012201220122011Total shareholders' equity$6,542$6,281$6,244$5,928$5,714$5,849Divided by average shareholders' equity$6,355$5,830Non-GAAP return on equity18.8%18.3%We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred. Schedule 13Cardinal Health, Inc. and SubsidiariesGAAP / Non-GAAP ReconciliationSecond QuarterYear-to-Date(in millions)2013201220132012GAAP effective tax rate from continuing operations37.2%37.9%37.6%38.1%Non-GAAP effective tax rate from continuing operationsEarnings before income taxes and discontinued operations$483$426$922$811Restructuring and employee severance1265Acquisition-related costs25225349Impairments and loss on disposal of assets5162Litigation (recoveries)/charges, net(12)?(34)(3)Other Spin-Off Costs?1?2Adjusted earnings before income taxes and discontinued operations$502$452$953$866Provision for income taxes$180$162$347$310Restructuring and employee severance tax benefit1122Acquisition-related costs tax benefit981917Impairments and loss on disposal of assets tax benefit??11Litigation (recoveries)/charges, net tax expense(5)?(14)(1)Other Spin-Off Costs tax benefit????Adjusted provision for income taxes$185$171$355$329Non-GAAP effective tax rate from continuing operations36.8%37.8%37.3%37.9%Second Quarter20132012Debt to total capital31%30%Net debt to capitalCurrent portion of long-term obligations and other short-term borrowings$474$342Long-term obligations, less current portion2,4232,211Debt$2,897$2,553Cash and equivalents(2,255)(1,798)Net debt$642$755Total shareholders' equity6,5425,928Capital$7,184$6,683Net debt to capital9%11%We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.Forward-Looking Non-GAAP Financial MeasuresWe 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 and litigation (recoveries)/charges, net, 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 SubsidiariesSecond Quarter(in millions)20132012Days sales outstanding22.019.9Days inventory on handInventories$8,452$8,889Cost of products sold$24,008$25,964Chargeback billings4,1133,627Adjusted cost of products sold$28,121$29,591Adjusted cost of products sold divided by 90 days$312$329Days inventory on hand27.027.0Days payable outstandingAccounts payable$11,796$12,457Cost of products sold$24,008$25,964Chargeback billings4,1133,627Adjusted cost of products sold$28,121$29,591Adjusted cost of products sold divided by 90 days$312$329Days payable outstanding37.837.9Net working capital days111.39.11           The sum of the components may not equal the total due to rounding.Days Sales Outstanding (DSO): trade receivables, net divided by (quarterly revenue divided by 90 days). Beginning in the first quarter of fiscal 2013, we changed our method of calculating DSO in order to align it with the 90-day convention that we use in the calculation of Days Inventory on Hand and Days Payable Outstanding. Prior to this change we calculated DSO by dividing trade receivable, net by (monthly revenue divided by 30 days). In connection with this change, we have revised prior year information to conform to the new method of calculating DSO.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 the vendors 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. To conform to the new method of calculating DSO, we have revised prior year information.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: non-GAAP earnings from continuing operations divided by diluted weighted-average shares outstanding.Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) acquisition-related costs2, (3) impairments and loss on disposal of assets3, (4) litigation (recoveries)/charges, net4 and (5) Other Spin-Off Costs, 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 and (5) Other Spin-Off Costs) divided by (earnings before income taxes and discontinued operations adjusted for the same five items). Non-GAAP Operating Earnings: 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 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 and (5) Other Spin-Off Costs, 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 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           Programs whereby the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, 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).2           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.3           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 condensed consolidated statements of earnings.4           Loss 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