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8-K - CURRENT REPORT - CARDINAL HEALTH INCd8k.htm
EX-99.2 - INFORMATION DISCLOSED BY CARDINAL HEALTH - CARDINAL HEALTH INCdex992.htm
EX-99.1 - NEWS RELEASE ISSUED BY CARDINAL HEALTH - CARDINAL HEALTH INCdex991.htm
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Q3 FY2010 
Investor/Analyst Call
April 29, 2010
Exhibit 99.3


2
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 results to differ materially from those projected, anticipated or
implied. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding the
effect of the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds
realized from future sales of CareFusion stock; uncertainties due to government health care reform including
the recently enacted federal healthcare reform legislation; 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; disruptions in the supply of medical isotopes for the nuclear pharmacy business; the
timing of generic and branded pharmaceutical introductions and the frequency or rate of branded
pharmaceutical price appreciation or generic pharmaceutical price deflation; changes in the distribution
patterns or reimbursement rates for health care products and/or services; the results, consequences, effects
or timing of any inquiry or investigation by any regulatory authority or any legal or administrative
proceedings; the effects of disruptions in the financial markets, including uncertainties related to the
availability and/or cost of credit on Cardinal Health’s customers and vendors; and conditions in the
pharmaceutical market and general economic and market conditions. In addition, 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
(including
all
amendments
to
those
reports)
and
exhibits
to
those
reports.
This
presentation
reflects
management’s views as of April 29, 2010. Except to the extent required by applicable law, Cardinal Health
undertakes no obligation to update or revise any forward-looking statement. In addition, this presentation
includes non-GAAP financial measures. Cardinal Health provides definitions and reconciling information at
the
end
of
this
presentation
and
on
its
investor
relations
page
at
www.cardinalhealth.com.
An
audio
replay
of
the
conference
call
will
be
available
on
the
investor
relations
page
at
www.cardinalhealth.com.


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
Q3 FY2010 Results
3


4
Q3 FY2010 Business Analysis
Q3 FY10
Q3 FY09
1
Q3 FY10
Q3 FY09
1
Revenue
$24,343
$24,089
% change
1%
10%
Operating earnings
$366
$381
$385
$415
% change
(4)%
-
(7)%
2%
Ratio to revenue
1.50%
1.58%
1.58%
1.72%
Earnings from continuing ops
$225
$215
$222
$237
% change
5%
(9)%
(6)%
(7)%
Ratio to revenue
0.92%
0.89%
0.91%
0.98%
Diluted EPS from continuing ops
$0.62
$0.60
$0.61
$0.66
% change
3%
(9)%
(8)%
(7)%
Asset Management
Q3 FY10
Q3 FY09
1
Operating Cash Flow
$879
$617
Days Receivable
18.9
19.5
Days Inventory on Hand
25
27
Non-GAAP Basis
($M)
GAAP Basis ($M)
     1  
All FY09 financial information reflects the reclassification of CareFusion
to discontinued operations and change in reportable segments.  See the
Company’s Form 8-K filed on November 16, 2009.


5
Q3FY10 Pharmaceutical Segment
Business Analysis
Highlights:
Revenue performance was driven by increased sales to existing pharmaceutical distribution
customers and solid growth in generics
Revenue from non-bulk customers increased 0.5% to $11.3 billion driven by growth in
retail chain, hospital and retail independents
Revenue from bulk customers increased 0.5% to $10.9 billion
Segment profit increased 7% to $307 million primarily from continued strong performance under
branded manufacturer agreements, positive margin contribution from the company’s generic
programs and disciplined expense management
Continued progress made in sourcing, contract compliance and customer-facing IT initiatives
Excellent execution in nuclear pharmacy services
Continued solid working capital management
Revenue
Segment Profit
Segment Profit Margin
$22,226
$307
1.38%
Q3 FY10
($M)
$22,118
$286
1.29%
Q3 FY09
($M)
0.5%
7%
% Change


6
Q3FY10 Medical Segment
Business Analysis
Revenue
Segment Profit
Segment Profit Margin
$2,123
$108
5.08%
Q3 FY10
($M)
$1,976
$128
6.49%
Q3 FY09
($M)
7%
(16)%
% Change
Highlights:
Revenue increase was driven by growth in existing domestic customer base, and strong growth
in Canada
Segment profit decline was due to an unusual year-over-year comparison in cost of goods sold,
the impact of performance-based employee compensation and increased Medical Business
Transformation investment spend
Decline was partially offset from the positive profit impact of revenue growth within the lab
and ambulatory businesses as well as preferred products
Segment profit increased sequentially from Q2 by more than $5M
Continued momentum in Medical Transformation and customer-facing IT initiatives


7
Q3FY10 GAAP to Non-GAAP Reconciliation
Note:
Costs
associated
with
the
CareFusion
spinoff
are
as
follows:
Operating      
Earnings ($M)
Earnings from
Continuing
Operations ($M)
Diluted EPS from
Continuing
Operations
Operating       
Earnings ($M)
Earnings from
Continuing
Operations ($M)
Diluted EPS from
Continuing
Operations
GAAP
$366
$225
$0.62
$381
$215
$0.60
Restructuring and Employee
Severance (Note)
$14
$4
$0.01
$32
$27
$0.08
Impairments and Loss on Sale of
Assets
$4
$16
$0.04
$1
($6)
($0.02)
Litigation (Credits)/Charges, Net
($3)
($2)
($0.01)
$1
-
-
Other Spinoff Costs (Note)
$4
$3
$0.01
$1
-
-
Gain on Sale of CareFusion
Stock
-
($23)
($0.06)
-
-
-
Non-GAAP
$385
$222
$0.61
$415
$237
$0.66
Spinoff Costs Included in
Restructuring and Employee
Severance 
$3
($3)
Other Spinoff Costs
$4
$3
Total Spinoff Costs
$7
$0
Q3 FY 2009
Q3 FY 2010


8
Significant Q3 FY10 Items
CareFusion Investment
Sold 5.4 million shares for total proceeds of $136 million and realized gain of
$23 million
No income tax impact
Realized gain excluded from non-GAAP earnings
Remaining 30.5 million shares at 3/31/10 have market value of $805.2 million
Pre-tax
unrealized
gain
of
$43.3
million
recognized
in
equity
in
Q3;
no
earnings impact until shares are sold
Other Items
Completed
sale
of
Specialty
Scripts;
signed
definitive
agreement
to
sell
Martindale with close anticipated by end of June


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
FY2010 Outlook
9


10
FY10 outlook
FY09
Non-GAAP effective tax
rate
37%+
37%
Diluted weighted average
shares outstanding
~361M
361.5M
Interest and other, net
~$110M
$128M
Capital expenditures
$200M -
$250M
$421M
1
May change due to unique items affecting quarters
2
Includes $150M repurchase of assets under synthetic lease
CAH FY10 Overall Expectations
April 29, 2010
1
2


11
FY10 outlook
FY09
Revenue:
Low single digit
growth
$96B
Non-GAAP EPS
1
:
$2.15 -
$2.20
$2.26
1
Non-GAAP diluted earnings per share from continuing operations
CAH FY10 Financial Expectations
April 29, 2010


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
12
FY2011 Preliminary Outlook
1
Non-GAAP diluted earnings per share from continuing operations
Non-GAAP EPS
:  $2.35 -
$2.45
1


13
Pharmaceutical Segment
FY11 Preliminary Assumptions
April 29, 2010
Renewal of major contracts
Brand inflation comparable to FY10
Generic launches and deflation comparable to FY10
Continued improvement in generic programs
Nuclear pharmacy assumes raw material from Canadian reactor to be at
more normal levels in Q2 FY11
Continued significant investment in IT systems for longer-term benefits
Continued working capital improvement
Assumes no LIFO impact


14
Medical Segment
FY11 Preliminary Assumptions
April 29, 2010
Benefit from investments in Ambulatory Care
Growth in higher margin preferred products category
Improvement in performance from kitting business, following a year of
stabilization and investment
Medical Transformation investment expense comparable to FY10
Raw materials costs/COGS increasing driven by oil and latex price
movements
Lean/operational excellence initiatives improving working capital


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
15
Q & A


16


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
17
Q3 FY10 Trailing Five Quarters


18
Q3 FY10 Segment Analysis
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Revenue ($M)
22,118
22,263
22,562
22,695
22,226
Segment
Profit ($M)
286
273
208
260
307
Q3FY09
Q4FY09
Q1FY10
Q2FY10
Q3FY10
Revenue
($M)
1,976
2,090
2,237
2,232
2,123
Segment
Profit ($M)
128
83
115
103
108
Pharmaceutical Segment
Medical Segment


©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
©
Copyright 2010, Cardinal Health, Inc. or one of its subsidiaries. All rights reserved.
19
GAAP to Non-GAAP
Reconciliation Statements


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

    Third Quarter 2010     Year-To-Date 2010  

(in millions,
except per
Common Share
amounts)

  GAAP     Restructuring
and
Employee
Severance
  Impairments
and Loss on
Sale of
Assets
    Litigation
(Credits)/
Charges,
Net
    Other
Spin-Off
Costs
  Gain on
Sale of
CareFusion
Stock
    Non-GAAP     GAAP     Restructuring
and
Employee
Severance
  Impairments
and Loss on
Sale of
Assets
    Litigation
(Credits)/
Charges,
Net
    Other
Spin-Off
Costs
    Gain on
Sale of
CareFusion
Stock
    Non-GAAP  

Operating Earnings

                           

Amount

  $ 366      $ 14   $ 4        ($3   $ 4   —        $ 385      $ 973      $ 84   $ 28      ($29   $ 9      —        $ 1,066   

Growth Rate

    (4 )%                (7 )%      (1 )%                —     

Earnings Before Income Taxes and Discontinued Operations

  $ 363      $ 14   $ 4        ($3   $ 4   ($23   $ 359      $ 903      $ 84   $ 28      ($29   $ 52      ($43   $ 995   

Provision for Income Taxes1

  $ 138      $ 10     ($12     ($1   $ 1   —        $ 137      $ 510      $ 30     ($3   ($11     ($153   —        $ 373   

Earnings from Continuing Operations

                           

Amount

  $ 225      $ 4   $ 16        ($2   $ 3   ($23   $ 222      $ 393      $ 54   $ 32      ($18   $ 205      ($43   $ 622   

Growth Rate

    5               (6 )%      (29 )%                6

Diluted EPS from Continuing Operations

                           

Amount

  $ 0.62      $ 0.01   $ 0.04        ($0.01   $ 0.01   ($0.06   $ 0.61      $ 1.09      $ 0.15   $ 0.09      ($0.05   $ 0.56      ($0.12   $ 1.72   

Growth Rate

    3               (8 )%      (29 )%                6
    Third Quarter 2009     Year-To-Date 2009  
    GAAP     Restructuring
and
Employee
Severance
  Impairments
and Loss on
Sale of
Assets
    Litigation
(Credits)/
Charges,
Net
    Other
Spin-Off
Costs
  Gain on
Sale of
CareFusion
Stock
    Non-GAAP     GAAP     Restructuring
and
Employee
Severance
  Impairments
and Loss on
Sale of
Assets
    Litigation
(Credits)/
Charges,
Net
    Other
Spin-Off
Costs
    Gain on
Sale of
CareFusion
Stock
    Non-GAAP  

Operating Earnings

                           

Amount

  $ 381      $ 32   $ 1      $ 1      $ 1   —        $ 415      $ 981      $ 69   $ 11      —        $ 1      —        $ 1,062   

Growth Rate

    —                    2     (7 )%                (3 )% 

Earnings Before Income Taxes and Discontinued Operations

  $ 344      $ 32   $ 1      $ 1      $ 1   —        $ 378      $ 870      $ 69   $ 11      —        $ 1      —        $ 951   

Provision for Income Taxes 1

  $ 129      $ 5   $ 7        —          —     —        $ 141      $ 314      $ 19   $ 31      —          —        —        $ 364   

Earnings from Continuing Operations

                           

Amount

  $ 215      $ 27     ($6     —          —     —        $ 237      $ 556      $ 50     ($20   —        $ 1      —        $ 587   

Growth Rate

    (9 )%                (7 )%      (16 )%                (15 )% 

Diluted EPS from Continuing Operations

                           

Amount

  $ 0.60      $ 0.08     ($0.02     —          —     —        $ 0.66      $ 1.54      $ 0.14     ($0.05   —          —        —        $ 1.63   

Growth Rate

    (9 )%                (7 )%      (15 )%                (14 )% 

 

The sum of the components may not equal the total due to rounding.

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Third Quarter          Third Quarter        

(in millions)

   2010          2009        

GAAP Return on Equity

     16.8        15.1  

Non-GAAP Return on Equity

         

Net earnings

   $ 222.4         $ 312.9     

Restructuring and employee severance, net of tax, in continuing operations1

     3.9           26.8     

Impairments and loss on sale of assets, net of tax, in continuing operations1

     15.7           (6.0  

Litigation (credits)/charges, net, net of tax, in continuing operations1

     (1.8        0.4     

Other spin-off costs, net of tax1

     2.5           0.4     

Gain on sale of CareFusion stock, net of tax1

     (23.2        —       

CareFusion net earnings in discontinued operations, net of tax1, 2

     4.7           (98.0  
                     

Adjusted net earnings

   $ 224.2         $ 236.5     

Annualized

   $ 896.8         $ 946.0     
     Third Quarter     Second Quarter    Third Quarter     Second Quarter  
     2010     2010    2009     2009  

Non-GAAP Shareholders’ Equity

         

Total shareholders’ equity

   $ 5,360.9      $ 5,226.1    $ 8,434.5      $ 8,127.9   

Non-cash dividend related to CareFusion spin-off

     —          —        (3,758.0     (3,758.0
                               

Non-GAAP shareholders’ equity

   $ 5,360.9      $ 5,226.1    $ 4,676.5      $ 4,369.9   
                               

Divided by average shareholders’ equity

     5,293.5           4,523.2     

Non-GAAP return on equity

     16.9        20.9  

 

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 presented.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

    Year-To-Date                   Year-To-Date                    

(in millions)

  2010                   2009                    

GAAP Return on Equity

    9.2           14.5      

Non-GAAP Return on Equity

               

Net earnings

  $ 418.7            $ 878.4         

Restructuring and employee severance, net of tax, in continuing operations1

    54.3              50.3         

Impairments and loss on sale of assets, net of tax, in continuing operations1

    31.5              (19.7      

Litigation (credits)/charges, net, net of tax, in continuing operations1

    (17.9           0.2         

Other spin-off costs, net of tax1

    204.7              0.4         

Gain on sale of CareFusion stock, net of tax1

    (43.3           —           

CareFusion net earnings in discontinued operations, net of tax1, 2

    (15.4           (319.1      
                           

Adjusted net earnings

  $ 632.6            $ 590.5         

Annualized

  $ 843.5            $ 787.3         
    Third Quarter     Second Quarter   First Quarter   Fourth Quarter     Third Quarter     Second Quarter     First Quarter     Fourth Quarter  
    2010     2010   2010   2009     2009     2009     2009     2008  

Non-GAAP Shareholders’ Equity

               

Total shareholders’ equity

  $ 5,360.9      $ 5,226.1   $ 4,941.2   $ 8,724.7      $ 8,434.5      $ 8,127.9      $ 7,918.1      $ 7,747.5   

Non-cash dividend related to CareFusion spin-off

    —          —       —       (3,758.0     (3,758.0     (3,758.0     (3,758.0     (3,758.0
                                                           

Non-GAAP shareholders’ equity

  $ 5,360.9      $ 5,226.1   $ 4,941.2   $ 4,966.7      $ 4,676.5      $ 4,369.9      $ 4,160.1      $ 3,989.5   
                                                           

Divided by average shareholders’ equity

    5,123.7              4,299.0         

Non-GAAP return on equity

    16.5           18.3      

 

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 presented.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Third Quarter     Year-to-Date  

(in millions)

   2010     2009     2010     2009  

GAAP Effective Tax Rate from Continuing Operations

     38.1     37.5     56.5     36.1

Non-GAAP Effective Tax Rate from Continuing Operations

        

Earnings before income taxes and discontinued operations

   $ 363.2      $ 344.1      $ 903.2      $ 870.1   

Restructuring and employee severance

     13.9        31.7        84.4        69.3   

Impairments and loss on sale of assets

     4.2        0.7        28.2        11.2   

Litigation (credits)/charges, net

     (2.9     0.6        (28.8     0.3   

Other spin-off costs

     3.7        0.7        51.5        0.7   

Gain on sale of CareFusion stock

     (23.2     —          (43.3     —     
                                

Adjusted earnings before income taxes and discontinued operations

   $ 358.9      $ 377.8      $ 995.2      $ 951.6   

Provision for income taxes1

   $ 138.4      $ 129.0      $ 510.0      $ 313.9   

Restructuring and employee severance tax benefit1

     10.0        4.9        30.1        19.0   

Impairments and loss on sale of assets, tax benefit/(expense)1

     (11.5     6.7        (3.3     30.9   

Litigation (credits)/charges, net tax benefit/(expense)1

     (1.1     0.2        (10.9     0.1   

Other spin-off costs tax benefit/(expense)1

     1.2        0.3        (153.2     0.3   

Gain on sale of CareFusion stock tax expense1

     —          —          —          —     
                                

Adjusted provision for income taxes

   $ 137.0      $ 141.1      $ 372.7      $ 364.2   

Non-GAAP effective tax rate from continuing operations

     38.2     37.3     37.5     38.3
     Third Quarter        
     2010     2009              

Debt to Total Capital

     28     30    

Net Debt to Capital

        

Current portion of long-term obligations and other short-term borrowings

   $ 232.6      $ 359.8       

Long-term obligations, less current portion and other short-term borrowings

     1,875.6        3,300.6       
                    

Debt

   $ 2,108.2      $ 3,660.4       

Cash and equivalents

     (2,638.8     (971.8    
                    

Net debt

   $ (530.6   $ 2,688.6       

Total shareholders’ equity

   $ 5,360.9      $ 8,434.5       

Capital

   $ 4,830.3      $ 11,123.1       

Net Debt to Capital

     (11 )%      24    

 

1

The Company applies varying tax rates depending upon the tax jurisdiction where the items are incurred.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Third Quarter  

(in millions)

   2010     2009  

Distribution, selling, general and administrative expenses

   $ 628.6      $ 573.0   

Restructuring and employee severance

     13.9        31.7   

Impairments and loss on sale of assets

     4.2        0.7   

Litigation (credits)/charges, net

     (2.9     0.6   
                

Total GAAP operating expenses

   $ 643.8      $ 606.0   

Restructuring and employee severance

     (13.9     (31.7

Impairments and loss on sale of assets

     (4.2     (0.7

Litigation credits/(charges), net

     2.9        (0.6

Other spin-off costs

     (3.7     (0.7
                

Total non-GAAP operating expenses

   $ 624.9      $ 572.3   

Growth Rate

     9.2  


CARDINAL HEALTH, INC. AND SUBSIDIARIES

GAAP / NON-GAAP RECONCILIATION

 

     Fiscal 2009
     GAAP    Restructuring
and Employee
Severance
   Impairments
and Loss on
Sale of Assets
    Litigation
(Credits)/
Charges, Net
   Other Spin-Off
Costs
   Gain on Sale
of CareFusion
Stock
   Non-GAAP

Diluted EPS from Continuing Operations

                   

Amount

   $ 2.10    $ 0.21    $ (0.07   $ 0.01    $ 0.01    —      $ 2.26

Forward-Looking Non-GAAP Financial Measures

The Company presents 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. The Company is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because the Company cannot reliably forecast restructuring and employee severance, impairments and loss on sale of assets, litigation (credits)/charges, net, other spin-off costs and gains or losses on sale of CareFusion stock, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact the Company’s future financial results.


CARDINAL HEALTH, INC. AND SUBSIDIARIES

 

     Third Quarter

(in millions)

   2010    2009

Days Inventory on Hand

     

Inventories

   $ 7,214.9    $ 7,748.0

Cost of products sold

   $ 23,332.7    $ 23,102.4

Chargeback billings

     3,053.2      2,981.5
             

Adjusted cost of products sold

   $ 26,385.9    $ 26,083.9

Adjusted cost of products sold divided by 90 days

   $ 293.2    $ 289.8

Days inventory on hand

     25      27

Days Inventory on Hand: inventory divided by ((quarterly costs 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.


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 shares outstanding

Effective Tax Rate from Continuing Operations: provision for income taxes divided by earnings before income taxes and discontinued operations

Gain on Sale of CareFusion Stock: realized gains and losses from the sale of the Company’s ownership of CareFusion common stock retained in connection with the spin-off

Operating Expenses: distribution, selling, general and administrative expenses, restructuring and employee severance, impairments and loss on sale of assets, and litigation (credits)/charges, net

Other Spin-Off Costs: costs and tax charges incurred in connection with the Company’s spin-off of CareFusion that are not included in restructuring and employee severance, impairments and loss on sale of assets and litigation (credits)/charges, net. Other spin-off costs include, among other things, the loss on extinguishment of debt and the income tax charge related to the anticipated repatriation of a portion of cash loaned to the Company’s entities within the United States

Receivable Days: trade receivables, net divided by (monthly revenue divided by 30 days)

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

Return on Equity: annualized net earnings divided by average shareholders’ equity

Revenue Mix: segment revenue divided by total segment revenue for all segments

NON-GAAP

Net Debt to Capital: net debt divided by (net debt plus total shareholders’ equity)

Net Debt: debt minus (cash and equivalents)

Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding

Non-GAAP Diluted EPS from Continuing Operations Growth Rate: (current period non-GAAP diluted EPS from continuing operations minus prior period non-GAAP diluted EPS from continuing operations) divided by prior period non-GAAP diluted EPS from continuing operations

Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock, each net of tax

Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period non-GAAP earnings from continuing operations

Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock) divided by (earnings before income taxes and discontinued operations adjusted for (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs and (5) gain on sale of CareFusion stock)

Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation credits/(charges), net and (4) Other Spin-Off Costs included within distribution, selling, general and administrative expenses

Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP operating earnings minus prior period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings

Non-GAAP Operating Expenses: operating expenses excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) Other Spin-Off Costs

Non-GAAP Operating Expenses Growth Rate: (current period non-GAAP operating expenses minus prior period non-GAAP operating expenses) divided by prior period non-GAAP operating expenses

Non-GAAP Return on Equity: (annualized current period net earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net, (4) Other Spin-Off Costs, (5) CareFusion net earnings in discontinued operations and (6) gain on sale of CareFusion stock, each net of tax) divided by average shareholders’ equity adjusted for the $3.8 billion non-cash dividend issued in connection with the spin-off