Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Investor Day (September 2006)
26 slides from Cardinal Health's investor day presentation, Sep 20, 2006
Slide 1: Forward-looking and adjusted information
September 20 Investor Conference Forward-looking and adjusted information Exhibit 99.01 Except for historical information, all other information in the following presentations consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These for
Slide 2: Financial Overview
Jeff Henderson Chief Financial Officer September 20, 2006 Financial Overview
Slide 3: Agenda
Agenda Fiscal 2006 Highlights Fiscal 2007 Performance Drivers – Organic operating growth – Balance sheet management – Capital deployment Financial Targets and Goals
Slide 4: FY 2006 Highlights
FY 2006 Highlights A year of transition…
Slide 5: FY 2006 Highlights
FY 2006 Highlights • Re-established growth momentum • Completed pharma distribution model transition • Continued journey to One Cardinal Health • Established improved controls • Strong balance sheet management and capital deployment discipline • Delivered 12% shareholder returns
Slide 6: FY 2006 Consolidated results
FY 2006 Consolidated results Revenue Operating earnings Earnings from continuing operations Diluted EPS FY 2005 FY 2006 % Change $74,272 $81,364 10% $ 1,824 $ 1,967 8% $ 1,108 $ 1,245 12% $ 2.54 $ 2.90 14% GAAP Basis
Slide 7: FY 2006 Capital deployment
FY 2006 Capital deployment Total capital deployed = $2.4 Billion 16% - Acquisitions 64% - Returned to shareholders 20% - Capital investments
Slide 8: Portfolio optimization
Portfolio optimization Acquisitions • Source Medical Corporation • ParMed Pharmaceutical, Inc. • Denver Biomedical, Inc. • F. Dohmen Co. • MedMined, Inc. Divestitures • Healthcare marketing services • UK–based Intercare pharmaceutical distribution business • Majority of specialty distribution busine
Slide 9: FY 2007 – Value drivers
FY 2007 – Value drivers CAH Value Operating growth Balance sheet management Disciplined capital deployment
Slide 10: Operating growth
Operating growth Scale Capital Efficiency Operational Excellence International Innovation Healthcare Supply Chain Services Pharmaceutical and Medical Products
Slide 11: Operating growth: Healthcare Supply Chain Services
Operating growth Operational Excellence Healthcare Supply Chain Services Pharmaceutical and Medical Products Scale Capital Efficiency International Innovation
Slide 12: Operating growth: Pharmaceutical and Medical Products
Operating growth Operational Excellence Healthcare Supply Chain Services Pharmaceutical and Medical Products Scale Capital Efficiency International Innovation Revenue growth EP Margin Expansion Revenue growth Op. Margin Expansion EP Growth
Slide 13: Economic Profit Margin
Economic Profit Margin • Definition: – Economic Profit divided by Revenue – EP: after tax operating profit less tangible capital cost • Why we measure: – Creates disciplined focus on both operating margins and capital management Healthcare Supply Chain Services EP Margin Trend FY 05 FY 06 FY 07 FY 0
Slide 14: FY 2007 Financial targets and goals
FY 2007 Financial targets and goals Operating Earnings Growth Healthcare Supply Chain Services Revenue Growth Pharma + 7 - 10% + 7 - 10% Medical + 4 - 7% + 6 - 9% In range In range Long-term Themes • EP margins stable to expanding; EP growth • Intense cost focus • Capital management, cash flow gener
Slide 15: FY 2007 Financial targets and goals
FY 2007 Financial targets and goals Operating Earnings Growth Pharma and Medical Products Revenue Growth MPM + 6 - 8% + 10 - 12% PTS + 6 - 9% + 8 - 15% CTS + 10 - 15% + 15 - 20% Operating Earnings Growth Above range Low end of range In range Themes • Margin expansion • Investment for innovation • In
Slide 16: FY 2007 – Other EPS drivers
FY 2007 – Other EPS drivers • SG&A moderation – Back office consolidations – Facility restructuring • Equity expense – 20% decline year-over-year • Capital deployment – Share count reduction • Tax rate
Slide 17: Balance sheet management
Balance sheet management • Focus on return on capital, economic profit margin and economic profit • Portfolio optimization • Opportunistic financing
Slide 18: Operating Cash Flow Trends
Operating Cash Flow Trends 0.0 0.5 1.0 1.5 2.0 2.5 3.0 $ BB Net earning and non-cash items Changes in operating assets and liabilities Operating cash flow * Excludes the $550 million net impact of A/R securitization * *
Slide 19: Working capital trend
Working capital trend Although pharma business model transition is complete, focus on Operational Excellence continues to improve the supply chain Inventory Days Net Days March ‘03 Dec ‘04 June ‘06
Slide 20: Capital deployment
Capital deployment • Capital expenditures - ~ 25% of operating cash flow • Tuck-in acquisitions - ~ 20% of operating cash flow • Cash returned to shareholders - ~ 50% of OCF • Maintain flexibility for opportunistic acquisition opportunities
Slide 21: Increasing returns
Increasing returns Return On Equity Return On Invested Capital Note: Excluding special items and equity compensation 14.0% 15.0% 16.0% 17.0% FY 05 FY 06 5.5% 6.5% 7.5% FY 05 FY 06
Slide 22: Financial targets and goals
Financial targets and goals Long-term financial goals defined over FY '07 - FY '09 3-year period * Excludes special items and impairment charges and other ** Excludes special items Consolidated results Long- term FY 2007 target target Revenue + 8 – 10% At or above high end Diluted EPS* + 12 – 15% $3
Slide 23: 2007 Financial targets and goals
2007 Financial targets and goals Over FY'07 - FY'09 3 Year Period: Fiscal Year 2007 Revenue: + 8 - 10% At or above the high end of long-term goal EPS ¹ : + 12 - 15% $3.50 - $3.70 per share (includes equity compensation expense) Operating FY07 OE ² growth Segment Revenue Earnings vs. long-term target
Slide 24: Our future
Our future FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 Operating growth Balance sheet management Disciplined capital deployment Revenue EPS ROE
Slide 25: Financial information and non-GAAP reconciliation
CARDINAL HEALTH, INC. AND SUBSIDIARIES, FINANCIAL INFORMATION {The folloning tabla provides Covishn Financia mitlos and reconciles all now-GAAP mossuras i thaly GAAP ospuivalent (im mutans, except por Common Share amounts) Return on equity Return on equity. excleding spacial lame and equity compensa
Slide 26: Cardinal Health
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