Cardinal Health, Inc. · NYSE:CAH
Cardinal Health — Q2 FY2010 Earnings Presentation
31 slides from Cardinal Health's earnings presentation, Jan 28, 2010
Slide 1: Q2 FY2010 Investor/Analyst Call
Exhibit 99.3 Q2 FY2010 Investor/Analyst Call Essential to care January 28, 2010
Slide 2: Forward-looking statements and GAAP reconciliation
Forward-looking statements and GAAP reconciliation This presentation contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual
Slide 3: Q2 FY2010 Results
Q2 FY2010 Results “ee atteath Essential to care™
Slide 4: Q2 FY2010 Business Analysis
Q2 FY2010 Business Analysis GAAP Basis ($M) Non-GAAP Basis ($M) 1 1 Q2 FY10 Q2 FY09 Q2 FY10 Q2 FY09 Revenue $24,920 $24,118 % change 3% 8% Operating earnings $367 $313 $358 $337 % change 17% (8)% 6% - Ratio to revenue 1.47% 1.30% 1.44% 1.40% Earnings from continuing ops $230 $169 $207 $183 % change
Slide 5: Pharmaceutical Segment Business Analysis
Pharmaceutical Segment Business Analysis Q2 FY10 Q2 FY09 ($M) ($M) % Change Revenue $22,695 $22,079 3% Segment Profit $260 $263 (1%) Segment Profit Margin 1.14% 1.19% Highlights: • Revenue performance was driven by increased sales to existing pharmaceutical distribution customers – Revenue for bulk
Slide 6: Medical Segment Business Analysis
Medical Segment Business Analysis Q2 FY10 Q2 FY09 ($M) ($M) % Change Revenue $2,232 $2,057 9% Segment Profit $103 $75 38% Segment Profit Margin 4.59% 3.62% Highlights: • Revenue increase was driven by organic growth, flu-related sales and foreign exchange – Double-digit growth in Canada, lab and amb
Slide 7: Q2 GAAP to Non-GAAP Reconciliation
Q2 GAAP to Non-GAAP Reconciliation Q2 FY 2010 Q2 FY 2009 Earnings from Diluted EPS from Earnings from Diluted EPS from Operating Continuing Continuing Operating Continuing Continuing Earnings ($M) Operations ($M) Operations Earnings ($M) Operations ($M) Operations GAAP $367 $230 $0.64 $313 $169 $0.4
Slide 8: Significant Q2 FY10 Items
Significant Q2 FY10 Items • CareFusion Investment – Sold 5.5 million shares for total proceeds of $135.0 million and pre-tax realized gain of $20 million – No income tax impact – Realized gain included in “Other Income” but excluded from non-GAAP earnings – Remaining 35.9 million shares at 12/31/09
Slide 9: FY 2010 outlook
FY 2010 outlook OK nalteat Essential to care™
Slide 10: Pharmaceutical Segment FY10 Business Trends and Expectations
Pharmaceutical Segment FY10 Business Trends and Expectations January 28, 2010 • Market factors: – Modest segment revenue growth – YoY decline in generic launches (although less significant than expected in H1) – Customer contract repricings – Earlier impact of compensation under branded manufacturer
Slide 11: Medical Segment FY10 Business Trends and Expectations
Medical Segment FY10 Business Trends and Expectations January 28, 2010 • Market factors: – Solid segment revenue growth – Positive impact from decreases in raw materials/COGS; impact greater in H1 • Transformational investments: – Medical Transformation progressing – in design moving to build stage
Slide 12: CAH FY10 Overall Expectations
CAH FY10 Overall Expectations January 28, 2010 FY10 outlook FY09 Non-GAAP effective tax 37%+ 1 37% rate Diluted weighted average ~361M 361.5M shares outstanding Interest and other, net ~$110M $128M Capital expenditures $200M - $250M $421M 2 1May change due to unique items affecting quarters 2Include
Slide 13: CAH FY10 Financial Expectations
CAH FY10 Financial Expectations January 28, 2010 FY10 outlook FY09 Revenue: Low single digit $96B growth Non-GAAP EPS1: $2.08 - $2.18 $2.26 1 Non-GAAP diluted earnings per share from continuing operations 13
Slide 14: Cardinal Health
— CardinalHealth Essential to care™
Slide 15: Cardinal Health
_— CardinalHealth Essential to care”
Slide 16: Q2 FY10 Trailing Five Quarters
Q2 FY10 Trailing Five Quarters 16
Slide 17: Segment Analysis: Q2 FY10
Segment Analysis: Q2 FY10 Pharmaceutical Segment Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Revenue 22,079 22,118 22,263 22,562 22,695 ($M) Segment 263 286 273 208 260 Profit ($M) Medical Segment Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Revenue 2,057 1,976 2,090 2,237 2,232 ($M) Segment 75 129 83 115 103 Profit (
Slide 18: GAAP to Non-GAAP Reconciliation Statements
GAAP to Non-GAAP Reconciliation Statements 18
Slide 19: GAAP / Non-GAAP Reconciliation
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter 2010 Year-To-Date 2010 Restructuring Impairments Litigation Other Gain on Restructuring Impairments Litigation Other Gain on (in millions, except per and and Loss on (Credits)/ Spin- Sale of and and Loss on (Credits
Slide 20: GAAP / Non-GAAP Reconciliation: Return on Invested Capital
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter Second Quarter (in millions) 2010 2009 GAAP Return on Invested Capital 7.72% 7.09% Adjusted Net Earnings Net earnings $ 234.5 $ 316.5 Restructuring and employee severance, net of tax, in continuing operations1 8.1 1
Slide 21: GAAP / Non-GAAP Reconciliation: Return on Invested Capital (YTD)
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Year-To-Date Year-To-Date (in millions) 2010 2009 GAAP Return on Invested Capital 2.96% 6.35% Adjusted Net Earnings Net earnings $ 196.3 $ 565.6 Restructuring and employee severance, net of tax, in continuing operations1 50.4 23.7
Slide 22: Reconciliation footnotes
1 The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred. 2 To 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 present
Slide 23: GAAP / Non-GAAP Reconciliation: Return on Equity
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter Second Quarter (in millions) 2010 2009 GAAP Return on Equity 18.5% 15.8% Non-GAAP Return on Equity Net earnings $ 234.5 $ 316.5 Restructuring and employee severance, net of tax, in continuing operations1 8.1 10.4 Im
Slide 24: GAAP / Non-GAAP Reconciliation: Return on Equity (YTD)
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Year-To-Date Year-To-Date (in millions) 2010 2009 GAAP Return on Equity 6.2% 14.3% Non-GAAP Return on Equity Net earnings $ 196.3 $ 565.6 Restructuring and employee severance, net of tax, in continuing operations1 50.4 23.7 Impair
Slide 25: GAAP / Non-GAAP Reconciliation: Effective Tax Rate
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter Year-to-Date (in millions) 2010 2009 2010 2009 GAAP Effective Tax Rate from Continuing Operations 36.9% 37.7% 68.8% 35.1% Non-GAAP Effective Tax Rate from Continuing Operations Earnings before income taxes and disco
Slide 26: GAAP / Non-GAAP Reconciliation: Operating Expenses
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter (in millions) 2010 2009 Non-GAAP Operating Expenses Distribution, selling, general and administrative expenses $605.2 $578.5 Restructuring and employee severance 10.7 16.9 Impairments and loss on sale of assets 0.4
Slide 27: GAAP / Non-GAAP Reconciliation: Other (Income)/Expense, Net
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Second Quarter Year-to-Date (in millions) 2010 2009 2010 2009 Non-GAAP Other (Income)/Expense, Net Total GAAP other (income)/expense, net $(25.6) $19.7 $(34.5) $22.2 Gain on sale of CareFusion stock 20.0 — 20.0 — Other spin-off co
Slide 28: GAAP / Non-GAAP Reconciliation: Effective Tax Rate FY2009
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Fiscal (in millions) 2009 GAAP Effective Tax Rate from Continuing Operations 34.6% Non-GAAP Effective Tax Rate from Continuing Operations Earnings before income taxes and discontinued operations $1,159.8 Restructuring and employee
Slide 29: GAAP / Non-GAAP Reconciliation: Diluted EPS from Continuing Operations
CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION Fiscal 2009 Restructuring Impairments Litigation and Employee and Loss on (Credits)/ Other Spin-Off GAAP Severance Sale of Assets Charges, Net Costs Non-GAAP Diluted EPS from Continuing Operations Amount $2.10 $ 0.21 $ (0.07) $ 0.
Slide 30: Days Inventory on Hand
CARDINAL HEALTH, INC. AND SUBSIDIARIES Second Quarter (in millions) 2010 2009 Days Inventory on Hand Inventories $ 7,961.0 $ 8,224.5 Cost of products sold $23,962.0 $23,202.7 Chargeback billings 2,790.8 2,972.4 Adjusted cost of products sold $26,752.8 $26,175.1 Adjusted cost of products sold divided
Slide 31: Definitions
CARDINAL HEALTH, INC. AND SUBSIDIARIES DEFINITIONS GAAP Debt: long-term obligations plus short-term borrowings Debt to Total Capital: debt divided by (debt plus total shareholders’ equity) Diluted EPS from Continuing Operations: earnings from continuing operations divided by diluted weighted average