CARDINAL HEALTH, INC. DUBLIN, Ohio, Oct. 30, 2014 /PRNewswire/ -- Cardinal Health today reported fiscal year 2015 first-quarter revenue of $24.1 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $1.00. Non-GAAP operating earnings increased 6 percent to $566 million. On a GAAP basis, operating earnings decreased 1 percent to $466 million, and diluted EPS from continuing operations decreased 21 percent to $0.78. Prior year first quarter GAAP and non-GAAP EPS included an $0.18 benefit related to tax settlements. Excluding the impact of these tax settlements, non-GAAP diluted EPS for the fiscal year 2015 first quarter increased 9 percent.
"Fiscal year 2015 is off to a good start. Our organization has committed itself to anticipating and acting on the evolving needs of a fast-changing market," said George Barrett, chairman and chief executive officer of Cardinal Health. "Both segments reported solid earnings growth and progress on all strategic fronts. Our Pharmaceutical segment continued its momentum, and we are excited about the potential from Red Oak Sourcing, our generic sourcing joint venture with CVS Health. The Medical segment continued its growth with strategic accounts and our direct-to-customer platforms, now rebranded as Cardinal Health at Home. Our physician preference item program addresses significant health system pain points and now spans orthopedics, interventional cardiology and wound management."
The company reaffirmed its fiscal year 2015 outlook for non-GAAP diluted earnings per share from continuing operations of $4.10 to $4.30.
Q1 FY15 SUMMARY
Q1 FY15 Q1 FY14 Y/Y
------- ------- ---
Revenue $24.1 billion $24.5 billion (2)%
------- ------------- ------------- ---
Operating Earnings $466 million $471 million (1)%
------------------ ------------ ------------ ---
Non-GAAP Operating $566 million $532 million 6%
Earnings
-------- ---
Earnings from Continuing $266 million $340 million (22)%
Operations
---------- ---
Non-GAAP Earnings from $340 million $378 million (10)%
Continuing Operations
--------------------- ---
Diluted EPS from Continuing $0.78 $0.99 (21)%
Operations
----------
Non-GAAP Diluted EPS from $1.00 $1.10 (9)%
Continuing Operations
---------------------
SEGMENT RESULTS
Pharmaceutical segment
Revenue for the Pharmaceutical segment declined 3 percent to $21.2 billion due to the expiration of the Walgreens contract in the prior year first quarter. The decline was partially offset by growth from new and existing customers as well as continued strong growth in China. Segment profit increased 4 percent to $451 million, driven by growth from new and existing customers as well as strong performance from generic programs.
Q1 FY15 Q1 FY14 Y/Y
------- ------- ---
Revenue $21.2 billion $21.8 billion (3)%
------- ------------- ------------- ---
Segment Profit $451 million $433 million 4%
-------------- ------------ ------------ ---
Medical segment
Revenue for the Medical segment was up 5 percent to $2.9 billion, driven by strong performance from acquisitions and the positive net impact of customer volume. Segment profit increased 6 percent to $113 million due to growth in Cardinal Health-branded products as well as select service offerings, partially offset by a reduction in contribution from national brand products.
Q1 FY15 Q1 FY14 Y/Y
------- ------- ---
Revenue $2.9 billion $2.7 billion 5%
------- ------------ ------------ ---
Segment Profit $113 million $106 million 6%
-------------- ------------ ------------ ---
ADDITIONAL FIRST-QUARTER AND RECENT HIGHLIGHTS
-- Completed $360 million of share repurchases in the first quarter under
the expanded repurchase authorization approved by the board of directors
in August 2014
-- Named Michael C. Kaufmann as chief financial officer and Jon Giacomin to
the role of chief executive officer of the Pharmaceutical segment,
currently held by Mike Kaufmann, with both positions to be effective on
Nov. 11, 2014
-- Acquired Emerge Medical, an orthopedic trauma manufacturer, and
Innovative Therapies, a negative pressure wound therapy company
-- Donated more than 1 million products to emergency response efforts to
help contain the Ebola outbreak in West Africa
-- Donated more than $4 million to more than 20 universities through the
company's nationwide pharmacy scholarship program, now in its fourth
year
CONFERENCE CALL
Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss first-quarter results. To access the call and corresponding slide presentation, visit ir.cardinalhealth.com, or dial 816.581.1703, using conference ID# 1088767. There is no access code required for the call.
There is no pre-registration for the call. 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 Cardinal Health website after the conclusion of the conference call. The audio replay will also be available for seven days by dialing 719.457.0820, passcode 1088767.
UPCOMING WEBCASTED INVESTOR EVENTS
-- Annual Meeting of Shareholders at 8 a.m. local time on Nov. 5 at the
company headquarters in Dublin, Ohio
-- Credit Suisse Healthcare Conference at 8 a.m. local time on Nov. 11 in
Phoenix
At these events, Cardinal Health executives 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 ir.cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $91 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, clinical laboratories 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 and services to more than 100,000 locations each day and is also the industry-leading direct-to-home medical supplies distributor. The company is a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company operates the nation's largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Ranked #22 on the Fortune 500, Cardinal Health employs 34,000 people worldwide. More information about the company may be found at www.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, financial information, earnings and analyst presentations, and information about upcoming presentations and events is routinely posted and accessible on the Investors page at ir.cardinalhealth.com. In addition, our website allows investors and other interested persons to sign up automatically to receive e-mail alerts when we post news releases, SEC filings and certain other information on our website.
Cautions Concerning Forward-Looking Statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue," "likely," and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive pressures in Cardinal Health's various lines of business; the ability to achieve the expected benefits from the generic sourcing joint venture with CVS Health; the frequency or rate of pharmaceutical price appreciation or deflation and the timing of generic and branded pharmaceutical introductions; the non-renewal or a default under one or more key customer or supplier arrangements or changes to the terms of or level of purchases under those arrangements; the ability to achieve anticipated results from the AccessClosure and Sonexus Health acquisitions; 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; and changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel. 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 Oct. 30, 2014. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Schedule 1
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
First Quarter
-------------
(in millions, except per common
share amounts) 2015 2014 % Change
------------------------------- ---- ---- --------
Revenue $24,070 $24,523 (2)
%
Cost of products sold 22,729 23,259 (2)%
--------------------- ------ ------ ---
Gross margin 1,341 1,264 6%
Operating expenses:
Distribution, selling, general and
administrative expenses 775 732 6%
Restructuring and employee
severance 19 11 N.M.
Amortization and other acquisition-
related costs 53 49 N.M.
Impairments and loss on disposal of
assets - - N.M.
Litigation (recoveries)/charges,
net 28 1 N.M.
-------------------------------- --- --- ----
Operating earnings 466 471 (1)%
Other income, net (3) (4) N.M.
Interest expense, net 34 33 1%
--------------------- --- --- ---
Earnings before income taxes and
discontinued operations 435 442 (2)%
Provision for income taxes 169 102 65%
Earnings from continuing operations 266 340 (22)%
Loss from discontinued operations,
net of tax - (1) N.M.
---------------------------------- --- --- ----
Net earnings $266 $339 (22)%
------------ ---- ---- ----
Basic earnings per common share:
Continuing operations $0.79 $1.00 (21)%
Discontinued operations - - N.M.
--- --- ----
Net basic earnings per common share $0.79 $1.00 (21)%
----------------------------------- ----- ----- ----
Diluted earnings per common share:
Continuing operations $0.78 $0.99 (21)%
Discontinued operations - - N.M.
--- --- ----
Net diluted earnings per common
share $0.78 $0.99 (21)%
------------------------------- ----- ----- ----
Weighted-average number of common shares
outstanding:
Basic 336 340
Diluted 340 344
------- --- ---
Schedule 2
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in
millions) September 30, June 30,
2014 2014
--- ---- ----
(Unaudited)
Assets
Current assets:
Cash and
equivalents $2,469 $2,865
Trade
receivables,
net 5,662 5,380
Inventories,
net 8,069 8,266
Prepaid
expenses
and other 1,338 1,428
---------- ----- -----
Total
current
assets 17,538 17,939
Property
and
equipment,
net 1,434 1,459
Goodwill
and other
intangibles,
net 5,923 5,870
Other
assets 816 765
Total
assets $25,711 $26,033
------- ------- -------
Liabilities and
Shareholders' Equity
Current liabilities:
Accounts
payable $11,995 $12,149
Current
portion of
long-term
obligations
and other
short-
term
borrowings 843 801
Other
accrued
liabilities 2,058 2,165
------------ ----- -----
Total
current
liabilities 14,896 15,115
Long-term
obligations,
less
current
portion 3,164 3,171
Deferred
income
taxes and
other
liabilities 1,395 1,346
Total
shareholders'
equity 6,256 6,401
Total
liabilities
and
shareholders'
equity $25,711 $26,033
-------------- ------- -------
Schedule 3
----------
Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
First Quarter
-------------
(in millions) 2015 2014
------------
Cash flows from operating
activities:
339
Net earnings $266 $
Loss from
discontinued
operations, net of
tax - 1
Earnings from
continuing
operations 266 340
Adjustments to reconcile earnings
from continuing operations to
net cash provided by operating
activities:
Depreciation and
amortization 108 117
Gain on sale of
other investments (5) -
Share-based
compensation 25 24
Provision for bad
debts 12 12
Change in operating assets and
liabilities, net of effects from
acquisitions:
Decrease/(increase)
in trade
receivables (291) 1,395
Decrease in
inventories 199 1,098
Decrease in accounts
payable (157) (1,852)
Other accrued
liabilities and
operating items,
net (96) (183)
Net cash provided by
operating
activities 61 951
Cash flows from investing
activities:
Acquisition of
subsidiaries, net
of cash acquired (61) (25)
Additions to
property and
equipment (36) (26)
Purchase of
available-for-
sale securities and
other investments (75) -
Proceeds from sale
of available-for-
sale securities and
other investments 91 -
Net cash used in
investing
activities (81) (51)
Cash flows from financing
activities:
Net change in short-
term borrowings 40 20
Net proceeds from
issuance of common
shares 25 75
Tax proceeds from
share-based
compensation 38 12
Dividends on common
shares (119) (105)
Purchase of treasury
shares (360) (50)
Net cash used in
financing
activities (376) (48)
Net increase/
(decrease) in cash
and equivalents (396) 852
Cash and equivalents
at beginning of
period 2,865 1,901
2,753
Cash and equivalents
at end of period $2,469 $
-------------------- ------ ---
Schedule 4
----------
Cardinal Health, Inc. and Subsidiaries
Total Company Business Analysis
Non-GAAP
First Quarter First Quarter
------------- -------------
(in millions) 2015 2014 2015 2014
------------ ---- ---- ---- ----
Revenue
Amount $24,070 $24,523
Growth rate(1) (2)% (5)%
Operating earnings
Amount $466 $471 $566 $532
Growth rate (1)% 3% 6% 13%
Earnings from continuing
operations
Amount $266 $340 $340 $378
Growth rate (22)% 25% (10)% 35%
Return on equity 16.8% 22.1% 21.5% 24.7%
Effective tax
rate from
continuing
operations(2) 38.9% 23.2% 36.5% 24.7%
Debt to total
capital 39% 38%
Net debt to total capital 20% 15%
------------------------- --- ---
(1) Revenue from Walgreens was $3.3
billion for the three months
ended September 30, 2013.
Excluding the impact of the
Walgreens contract expiration,
the fiscal 2015 first quarter
revenue growth rate would have
been 13 percent.
(2) The settlements of federal and
state tax controversies favorably
impacted, for fiscal 2014 first
quarter, both the effective tax
rate from continuing operations
and non-GAAP effective tax rate
from continuing operations by
14.3 and 12.6 percentage points,
respectively. The fiscal 2014
first quarter non-GAAP effective
tax rate from continuing
operations, excluding the impact
of the tax settlements, would
have been 37.3 percent.
Refer to the GAAP/Non-GAAP reconciliation
for definitions and calculations
supporting the Non-GAAP balances.
Schedule 5
----------
Cardinal Health, Inc. and Subsidiaries
Segment Business Analysis
First Quarter First Quarter
------------- -------------
(in millions) 2015 2014 (in millions) 2015 2014
------------ ---- ---- ------------ ---- ----
Pharmaceutical Medical
Revenue
Revenue
Amount $21,209 $21,813 Amount $2,852 $2,711
Growth rate(1) (3)% (7)% Growth rate 5% 13%
Segment profit Segment profit
Amount $451 $433 Amount $113 $106
Growth rate 4% 8% Growth rate 6% 43%
Segment profit margin 2.13% 1.99% Segment profit margin 3.97% 3.92%
--------------------- ---- ---- --------------------- ---- ----
(1) Revenue from Walgreens was $3.3 billion
for the three months ended September 30,
2013. Excluding the impact of the
Walgreens contract expiration, the fiscal
2015 first quarter Pharmaceutical segment
revenue growth rate would have been 15
percent.
Refer to definitions for an explanation of
calculations.
Total consolidated revenue for the three months
ended September 30, 2014 was $24,070 million,
which included total segment revenue of $24,061
million and Corporate revenue of $9 million.
Total consolidated revenue for the three months
ended September 30, 2013 was $24,523 million,
which included total segment revenue of $24,524
million and Corporate revenue of $(1) million.
Corporate revenue consists primarily of
elimination of inter-segment revenue and other
revenue not allocated to the segments.
Total consolidated operating earnings for the
three months ended September 30, 2014 were $466
million, which included total segment profit of
$564 million and Corporate costs of $(98)
million. Total consolidated operating earnings
for the three months ended September 30, 2013
were $471 million, which included total segment
profit of $539 million and Corporate costs of
$(68) million. Corporate includes, among other
things, restructuring and employee severance,
amortization and other acquisition-related
Schedule 6
----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
First Quarter 2015
------------------
Operating Earnings Before Provision Earnings Earnings from Diluted EPS Diluted EPS
Earnings Income Taxes for from Continuing from from Continuing
(in millions, except per common share amounts) Operating Growth and Discontinued Income Continuing Operations Continuing Operations
---------------------------------------------
Earnings Rate Operations Taxes Operations Growth Rate Operations Growth Rate(1)
-------- ---- ---------- ----- ---------- ----------- ---------- -------------
GAAP $466 (1)% $435 $169 $266 (22)% $0.78 (21)%
---- ---- --- ---- ---- ---- ---- ----- ----
Restructuring and employee severance 19 19 7 12 0.04
Amortization and other acquisition-related costs 53 53 19 34 0.10
Impairments and loss on disposal of assets - - - - -
Litigation (recoveries)/charges, net 28 28 - 28 0.08
Non-GAAP $566 6% $535 $195 $340 (10)% $1.00 (9)%
-------- ---- --- ---- ---- ---- ---- ----- ---
First Quarter 2014
GAAP $471 3% $442 $102 $340 25% $0.99 25%
---- ---- --- ---- ---- ---- --- ----- ---
Restructuring and employee severance 11 11 4 7 0.02
Amortization and other acquisition-related costs 49 49 18 31 0.09
Impairments and loss on disposal of assets - - - - -
Litigation (recoveries)/charges, net 1 1 - 1 -
Non-GAAP $532 13% $503 $124 $378 35% $1.10 36%
-------- ---- --- ---- ---- ---- --- ----- ---
(1) The $63 million settlements of
federal and state tax
controversies favorably impacted,
for fiscal 2014 first quarter,
both diluted EPS from continuing
operations and non-GAAP diluted
EPS from continuing operations by
$0.18. The fiscal 2015 first
quarter growth rates for diluted
EPS from continuing operations
and non-GAAP diluted EPS from
continuing operations, excluding
the impact of the tax
settlements, would have been (4)
percent and 9 percent,
respectively.
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 7
----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
First Quarter
-------------
(in millions) 2015 2014
------------
GAAP return on equity 16.8% 22.1%
--------------------- ---- ----
Non-GAAP return on equity
Net earnings $266 $339
Restructuring and employee
severance, net of tax, in
continuing operations 12 7
Amortization and other acquisition-
related costs, net of tax, in
continuing operations 34 31
Impairments and loss on disposal of
assets, net of tax, in continuing
operations - -
Litigation (recoveries)/charges,
net, net of tax, in continuing
operations 28 1
Adjusted net earnings $340 $378
Annualized $1,360 $1,512
---------- ------ ------
First Fourth First Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
2015 2014 2014 2013
---- ---- ---- ----
Total shareholders' equity $6,256 $6,401 $6,297 $5,975
Divided by average shareholders'
equity $6,328 $6,136
-------------------------------- ------ ------
Non-GAAP return on equity 21.5% 24.7%
------------------------- ---- ----
We apply varying tax rates depending on the item's nature and tax jurisdiction where it is incurred.
Schedule 8
----------
Cardinal Health, Inc. and Subsidiaries
GAAP / Non-GAAP Reconciliation
First Quarter
-------------
(in millions) 2015 2014
------------
GAAP effective tax rate from
continuing operations(1) 38.9% 23.2%
---------------------------- ---- ----
Non-GAAP effective tax rate from continuing
operations
Earnings before income taxes and
discontinued operations $435 $442
Restructuring and employee
severance 19 11
Amortization and other acquisition-
related costs 53 49
Impairments and loss on disposal of
assets - -
Litigation (recoveries)/charges,
net 28 1
Adjusted earnings before income
taxes and discontinued operations $535 $503
Provision for income taxes $169 $102
Restructuring and employee
severance tax benefit 7 4
Amortization and other acquisition-
related costs tax benefit 19 18
Impairments and loss on disposal of
assets tax benefit - -
Litigation (recoveries)/charges,
net tax benefit - -
--- ---
Adjusted provision for income taxes $195 $124
Non-GAAP effective tax rate from
continuing operations(1) 36.5% 24.7%
-------------------------------- ---- ----
First Quarter
-------------
2015 2014
Debt to total capital 39% 38%
--------------------- --- ---
Net debt to capital
Current portion of long-term
obligations and other short-term
borrowings $843 $190
Long-term obligations, less
current portion 3,164 3,693
Debt $4,007 $3,883
Cash and equivalents (2,469) (2,753)
Net debt $1,538 $1,130
Total shareholders' equity 6,256 6,297
Capital $7,794 $7,427
Net debt to capital 20% 15%
------------------- --- ---
(1) The settlements of federal and
state tax controversies favorably
impacted, for fiscal 2014 first
quarter, both the effective tax
rate from continuing operations
and non-GAAP effective tax rate
from continuing operations by
14.3 and 12.6 percentage points,
respectively. The fiscal 2014
first quarter non-GAAP effective
tax rate from continuing
operations, excluding the impact
of the tax settlements, would
have been 37.3 percent.
We apply varying tax rates depending on the
item's nature and tax jurisdiction where it
is incurred.
Forward-Looking Non-GAAP Financial Measures
-------------------------------------------
We present non-GAAP earnings from continuing
operations and non-GAAP effective tax rate from
continuing operations (and presentations derived
from these financial measures, including per
share calculations) on a forward-looking basis.
The most directly comparable forward-looking
GAAP measures are earnings from continuing
operations and effective tax rate from continuing
operations. We are unable to provide a
quantitative reconciliation of these forward-
looking non-GAAP measures to the most directly
comparable forward-looking GAAP measures because
we cannot reliably forecast restructuring and
employee severance, amortization and other
acquisition-related costs, impairments and loss
on disposal of assets, litigation (recoveries)/
charges, net and LIFO charges/(credits), 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.
Cardinal Health, Inc. and Subsidiaries
Use of Non-GAAP Measures
------------------------
This earnings release contains financial measures
that are not calculated in accordance with U.S.
generally accepted accounting principles
("GAAP"). In general, the measures exclude items
and charges that (i) management does not believe
reflect Cardinal Health, Inc.'s (the "Company")
core business and relate more to strategic,
multi-year corporate activities; or (ii) relate
to activities or actions that may have occurred
over multiple or in prior periods without
predictable trends. Management uses these non-
GAAP financial measures internally to evaluate
the Company's performance, evaluate the balance
sheet, engage in financial and operational
planning and determine incentive compensation.
Beginning in fiscal 2015, the Company will exclude
last-in, first-out ("LIFO") inventory charges/
(credits)5 from its non-GAAP earnings, for
consistency with the presentation by some of its
peers. The Company did not record any LIFO
charges or credits in the first quarter of fiscal
2015 or 2014, respectively.
Management provides these non-GAAP financial
measures to investors as supplemental metrics to
assist readers in assessing the effects of items
and events on its financial and operating results
and in comparing the Company's performance to
that of its competitors. However, the non-GAAP
financial measures used by the Company may be
calculated differently from, and therefore may
not be comparable to, similarly titled measures
used by other companies.
The non-GAAP financial measures disclosed by the
Company should not be considered a substitute
for, or superior to, financial measures
calculated in accordance with GAAP, and the
financial results calculated in accordance with
GAAP and reconciliations to those financial
statements set forth above should be carefully
evaluated.
Definitions
-----------
Debt: long-term obligations plus short-term
borrowings.
Debt to Total Capital: debt divided by (debt plus
total shareholders' equity).
Net Debt: a Non-GAAP measure defined as debt
minus (cash and equivalents).
Net Debt to Capital: a Non-GAAP measure defined
as net debt divided by (net debt plus total
shareholders' equity).
Non-GAAP Diluted EPS from Continuing Operations:
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 severance(1), (2)
amortization and other acquisition-related
costs(2), (3) impairments and loss on disposal of
assets(3), (4) litigation (recoveries)/charges,
net4 and (5) LIFO charges/(credits), each net of
tax.
Non-GAAP Effective Tax Rate from Continuing
Operations: (provision for income taxes adjusted
for (1) restructuring and employee severance, (2)
amortization and other acquisition-related
costs, (3) impairments and loss on disposal of
assets, (4) litigation (recoveries)/charges, net
and (5) LIFO charges/(credits)) 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) amortization and other
acquisition-related costs, (3) impairments and
loss on disposal of assets, (4) litigation
(recoveries)/charges, net and (5) LIFO charges/
(credits).
Non-GAAP Return on Equity: (annualized current
period net earnings excluding (1) restructuring
and employee severance, (2) amortization and
other acquisition-related costs, (3) impairments
and loss on disposal of assets, (4) litigation
(recoveries)/charges, net and (5) LIFO charges/
(credits), each net of tax) divided by average
shareholders' equity.
Return on Equity: annualized current period net
earnings divided by average shareholders' equity.
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.
(1) Programs by which 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 realignment of the
management structure of a business
unit in response to changing market
conditions).
(2) Costs that consist primarily of
amortization of acquisition-related
intangible assets, transaction
costs, integration costs and changes
in the fair value of contingent
consideration obligations.
(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.
5 The inventories of the Company's core
pharmaceutical distribution
facilities in the Pharmaceutical
segment are valued at the lower of
cost, using the LIFO method, or
market. These charges or credits
are included in cost of products
sold, and represent changes in the
Company's LIFO inventory reserve.
SOURCE Cardinal Health
