Cardinal Health Reports Second-Quarter Results

Revenue increases 3 percent to $24.9 billion

Earnings from continuing operations increase 36 percent to $230 million, or $0.64 per share

Non-GAAP diluted earnings per share from continuing operations increase 12 percent to $0.57

Company increases outlook for fiscal 2010 non-GAAP EPS to $2.08 to $2.18 from previous range of $1.90 to $2.00

Jan 28, 2010, 07:00 ET from Cardinal Health, Inc.

DUBLIN, Ohio, Jan. 28 /PRNewswire-FirstCall/ --Cardinal Health today reported fiscal second-quarter results, with revenue increasing 3 percent to $24.9 billion and non-GAAP diluted earnings per share from continuing operations(1) increasing 12 percent to $0.57.  

Highlights from the quarter include a 38 percent increase in profit from the Medical segment and continued improvement within the Pharmaceutical segment, with a decline in segment profit of 1 percent. The company also reported strong operating cash flow of $524 million and improvements in working capital for the quarter.

GAAP earnings from continuing operations were $230 million for the quarter, or $0.64 per share. GAAP results include a positive $0.07 per share net after-tax contribution, primarily from a previously disclosed insurance recovery and the gain on the sale of CareFusion stock, partially offset by restructuring expenses and other costs associated with the spinoff of CareFusion Corp.

"We are encouraged by our performance in the second quarter and in the first half of our fiscal year," said George Barrett, chairman and CEO of Cardinal Health. "These results reflect excellent progress on our key initiatives and customer focus across our businesses, as well as the benefit from external factors that were more pronounced than we had anticipated. Our medical segment has had particularly strong year-over-year growth, and our pharmaceutical segment continued its momentum, performing considerably better than we expected in the second quarter."

    
    
    Q2 FY10 SUMMARY
    
                                    Q2 FY10         Q2 FY09          Y/Y
                                    -------         -------          ---
    Revenue                      $24.9 billion    $24.1 billion        3%
    -------                      -------------    -------------      ---
    
    
    Operating Earnings            $367 million     $313 million       17%
    ------------------            ------------     ------------      ---
    Non-GAAP Operating 
     Earnings(2)                  $358 million     $337 million        6%
    ----------------------        ------------     ------------      ---
    
    
    Earnings from Continuing
     Operations                   $230 million     $169 million       36%
    ------------------------      ------------     ------------      ---
    Non-GAAP Earnings from
     Continuing Operations(3)     $207 million     $183 million       13%
    --------------------------    ------------     ------------      ---
    
    
    Diluted EPS from
     Continuing Operations               $0.64            $0.47       36%
    ----------------------               -----            -----      ---
    Non-GAAP Diluted EPS
     from Continuing Operations          $0.57            $0.51       12%
    --------------------                 -----            -----      ---

SECOND-QUARTER SEGMENT RESULTS

Pharmaceutical Segment

The Pharmaceutical segment increased revenue by 3 percent to $22.7 billion, primarily driven by increased sales to existing pharmaceutical distribution customers. Sales to non-bulk customers increased 7 percent to $11.7 billion and sales to bulk customers declined 1 percent to $11 billion. Segment profit declined 1 percent to $260 million as a result of fewer significant generic product launches versus the prior year period, the effect of customer contract repricings within the pharmaceutical distribution business and the expected impact from the Medicine Shoppe International franchisee contract transition. The decline in segment profit was partially offset by the positive margin impact from key initiatives including changes to the company's sourcing model, solid performance under its branded manufacturer agreements and disciplined cost controls.

    
    
                                        Q2 FY10         Q2 FY09        Y/Y
                                        -------         -------        ---
    Revenue                          $22.7 billion   $22.1 billion       3%
    -------                          -------------   -------------     ---
    Segment Profit                    $260 million    $263 million     (1)%
    --------------                    ------------    ------------     ---

Medical Segment

Revenue for the Medical segment increased 9 percent to $2.2 billion, primarily from sales growth with existing customers. Segment profit grew 38 percent to $103 million, primarily driven by the sales growth and decreased cost of raw materials associated with commodity price movements. Segment profit was partially dampened from investments associated with the Medical Transformation project.

    
    
                                       Q2 FY10        Q2 FY09       Y/Y
                                       -------        -------       ---
    Revenue                          $2.2 billion  $2.1 billion       9%
    -------                          ------------  ------------     ---
    Segment Profit                   $103 million   $75 million      38%
    --------------                   ------------   -----------     ---

OUTLOOK

The company also raised its EPS outlook for the year and now expects full-year fiscal 2010 non-GAAP diluted earnings per share from continuing operations to be in the range of $2.08 to $2.18, up from the company's previous guidance range of $1.90 to $2.00.

"Based on our year-to-date performance and our best assessment of our current environment, our outlook for the full year has improved considerably since we last reported," Barrett said. "Although our journey is in its early stages, we are pleased with our rate of progress."

ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS:

  • Renewed multi-billion-dollar pharmaceutical supply chain contracts with Express Scripts and American Associated Pharmacies, the parent company of Associated Pharmacies, Inc. (API) and United Drugs and largest cooperative of independent pharmacy owners.
  • Entered into exclusive distribution agreement for SurgiCount™ Surgical Safety products.
  • Dr. James J. Mongan and Carrie S. Cox appointed to the company's board of directors.

CONFERENCE CALL

Cardinal Health will host a conference call and webcast today at 8:30 a.m. EST to discuss second-quarter results. To access the call and corresponding slide presentation, go to the Investor page at cardinalhealth.com/investors or dial 617.213.4856, passcode 28763800. Presentation slides, an audio replay and transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. EST on Feb. 4 by dialing 617.801.6888, passcode 90738815.

UPCOMING EVENTS

Cardinal Health will be participating in the following health care investor conferences:

  • UBS Global Healthcare Services Conference in New York on Monday, Feb. 8 at 11 a.m. EST
  • Raymond James Annual Institutional Investors Conference in Orlando, Fla. on Tuesday, March 9 at 11 a.m. EST
  • Barclays Capital Global Healthcare Conference in Miami on Tuesday, March 23 at 8:30 a.m. EST

At these events, company executives will discuss Cardinal Health's diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks or a transcript, go to the Investors page at cardinalhealth.com.

About Cardinal Health

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a Fortune 18 health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. As one of the largest health care companies in the world, Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 40,000 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. Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com.

1 -- Non-GAAP diluted EPS from continuing operations:  Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.

2 -- 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 Spinoff Costs (as defined at the end of the attached tables) included within distribution, selling, general and administrative expenses.

3 -- 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 Spinoff Costs, and (5) gain on sale of CareFusion stock, each net of tax.

A reconciliation of the differences between these non-GAAP financial measures and their most directly comparable GAAP financial measures is provided in the attached tables and at cardinalhealth.com.

Cardinal Health uses its Web site 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 investor page at cardinalhealth.com.

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 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; 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; 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; the ultimate features of government health care reform initiatives and their enactment and implementation; 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 news release reflects management's views as of Jan. 28, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.

    
    
    
          CARDINAL HEALTH, INC. AND SUBSIDIARIES      
       CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS  
                        (UNAUDITED)                   
                                                      
                                                      
                                              
                                             
    (in millions,                                     
     except per                Second Quarter                       
     Common Share              --------------                        
     amounts)                  2010       2009  % Change  
                               ----       ----            
                                                       
    Revenue               $24,919.7  $24,117.8         3% 
    Cost of products                                  
     sold                  23,962.0   23,202.7         3% 
                           --------   --------            
    Gross margin              957.7      915.1         5% 
    Operating expenses                                
      Distribution,                                   
       selling,                                       
       general and                                    
       administrative                                 
        expenses              605.2      578.5         5% 
      Restructuring                                   
       and employee                                    
       severance               10.7       16.9       N.M.  
      Impairments                                     
       and loss on                                    
       sale of assets           0.4        6.9       N.M.  
      Litigation                                      
       (credits)/                                      
       charges, net           (25.4)      (0.3)      N.M.  
                              -----       ----            
    Operating                                         
     earnings                 366.8      313.1        17% 
                                                      
    Other (income)/                                   
     expense, net             (25.6)      19.7       N.M.  
    Interest                                          
     expense, net              27.4       22.2        24% 
                               ----       ----            
    Earnings before                                   
     income taxes and                                 
     discontinued                                     
     operations               365.0      271.2        35% 
                                                      
    Provision for                                     
     income taxes             134.8      102.2        32% 
                              -----      -----            
    Earnings from                                     
     continuing                                       
     operations               230.2      169.0        36% 
                                                      
    Earnings from discontinued
     operations (net of tax
     expense of $2.4 million
     and $56.7 million for the
     second quarter of fiscal
     2010 and 2009, 
     respectively)              4.3      147.5       N.M.  
                                ---      -----            
                                                      
    Net earnings             $234.5     $316.5       (26)%
                             ------     ------            
                                                      
    Basic earnings per Common Share:                  
    
    Continuing operations    $0.64      $0.48         33% 
    Discontinued operations   0.01       0.41       N.M.  
                              ----       ----            
      Net basic earnings per                                   
       Common Share          $0.65      $0.89        (27)%
                             =====      =====            
                                                      
    Diluted earnings per Common Share:                
    
    Continuing operations    $0.64      $0.47        36% 
    Discontinued operations   0.01       0.41       N.M.  
                              ----       ----            
      Net diluted earnings per                                   
       Common Share          $0.65      $0.88       (26)%
                              =====      =====            
                                                      
    Weighted average number of Common Shares          
     outstanding:                                     
    
    Basic                    359.0      357.3            
    Diluted                  361.0      360.3            
    
    
    
           CARDINAL HEALTH, INC. AND SUBSIDIARIES       
        CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS   
                         (UNAUDITED)                    
                                                        
                                                        
                                Year-to-Date                
                               ------------                
    (in millions,                                       
     except per Common                                  
     Share amounts)              2010       2009  % Change  
                                 ----       ----            
                                                        
    Revenue                $49,700.4  $47,554.9         5% 
    Cost of products                                    
     sold                    47,833.9   45,738.6        5% 
                             --------   --------           
    Gross margin              1,866.5    1,816.3        3% 
    Operating expenses                                  
      Distribution,                                     
       selling, general                                 
       and administrative                                   
       expenses               1,191.3    1,168.8        2% 
      Restructuring and employee                                
       severance                 70.4       37.6      N.M.  
      Impairments and loss on
      sale of assets             24.0       10.5      N.M.  
      Litigation (credits)/                                       
       charges, net             (25.9)      (0.3)     N.M.  
                               -----       ----            
    Operating earnings          606.7      599.7         1% 
                                                        
    Other (income)/                                     
     expense, net               (34.5)      22.2       N.M.  
    Interest expense, net        61.3       51.4       19% 
    Loss on extinguishment
     of debt                     39.9          -      N.M.  
                                 ----          -            
    Earnings before                                     
     income taxes and                                   
     discontinued operations    540.0      526.1        3% 
                                                        
    Provision for income taxes  371.6      184.9      N.M.  
                                -----      -----            
    Earnings from                                       
     continuing operations      168.4      341.2      (51)%
                                                        
    Earnings from discontinued 
      operations (net of tax   
      expense of $28.4 million                                  
      and $88.7 million for                                      
      fiscal 2010 and 2009
      year-to-date,                                            
      respectively)              27.9      224.4      N.M.  
                                 ----      -----            
                                                        
    Net earnings               $196.3     $565.6       (65)%
                               ------     ------            
                                                        
    Basic earnings per Common Share:                    
    
    Continuing operations       $0.47      $0.96       (51)%
    Discontinued operations      0.08       0.62       N.M.  
                                 ----       ----            
      Net basic earnings per                                     
       Common Share             $0.55      $1.58       (65)%
                                =====      =====            
                                                        
    Diluted earnings per Common Share:                  
    
    Continuing operations       $0.47      $0.95       (51)%
    Discontinued operations      0.07       0.62       N.M.  
                                 ----       ----            
      Net diluted Earnings
       per Common Share         $0.54      $1.57       (66)%
                                =====      =====            
                                                        
    Weighted average number of Common Shares            
     outstanding:                                       
    
    Basic                       359.1      357.0            
    Diluted                     361.1      361.2            
    
    
    
                   CARDINAL HEALTH, INC. AND SUBSIDIARIES               
                         CONSOLIDATED BALANCE SHEETS                    
                                                                       
                                                     (UNAUDITED)          
                                                     December 31,     June 30,
    (in millions)                                       2009            2009
                                                        ----            ----
                                                                        
    Assets                                                              
    Cash and equivalents                              $1,746.8      $1,221.6
    Trade receivables, net                             4,927.5       5,214.9
    Inventories                                        7,961.0       6,832.8
    Prepaid expenses and other                           674.1         523.0
    Assets from businesses held for sale and                            
     discontinued operations                             148.9       7,189.4
                                                         -----       -------
      Total current assets                            15,458.3      20,981.7
                                                      --------     --------
                                                                        
    Property and equipment, net                        1,423.2       1,464.5
    Investment in CareFusion                             897.4             -
    Goodwill and other intangibles, net                2,294.7       2,266.9
    Other assets                                         747.9         405.7
                                                         -----         -----
      Total assets                                   $20,821.5     $25,118.8
                                                     =========     =========
                                                                        
    Liabilities and Shareholders' Equity                                
    Current portion of long-term obligations and                        
     other short-term borrowings                         $12.7        $366.2
    Accounts payable                                  10,543.1       9,041.9
    Other accrued liabilities                          1,609.9       1,496.2
    Liabilities from businesses held for sale                           
     and discontinued operations                          37.3       1,370.9
                                                          ----       -------
      Total current liabilities                       12,203.0      12,275.2
                                                      --------      --------
                                                                        
    Long-term obligations, less current portion                         
     and other short-term borrowings                   2,099.2       3,271.6
    Deferred income taxes and other liabilities        1,293.2         847.3
      Total shareholders' equity                       5,226.1       8,724.7
                                                       -------       -------
      Total liabilities and shareholders' equity     $20,821.5     $25,118.8
                                                     =========     =========
    
    
    
                CARDINAL HEALTH, INC. AND SUBSIDIARIES          
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
                              (UNAUDITED)                       
                                                                
                                                                
                                          Second Quarter      Year-to-Date    
                                         --------------      ------------    
      (in millions)                        2010    2009      2010      2009
                                           ----    ----      ----      ----
                                                                
      Cash Flows From Operating Activities:                     
      Net earnings                       $234.5  $316.5    $196.3    $565.6
    
      Earnings from discontinued                                            
       operations                          (4.3) (147.5)    (27.9)   (224.4)
                                           ----  ------     -----    ------ 
        Earnings from continuing                                             
         operations                      230.2   169.0     168.4     341.2 
    
    Adjustments to reconcile earnings from continuing operations          
     to net cash provided by operating activities:           
    
        Depreciation and amortization     59.5    68.7     125.8     116.1
        Loss on debt extinguishment          -       -      39.9         - 
        Gain on sale of investment       (20.0)      -     (20.0)        - 
        Impairments and loss on sale of                                   
         assets                            0.4     6.9      24.0      10.5 
        Equity compensation               20.1    29.2      42.1      50.2 
        Provision for bad debts            9.1     9.4      21.4      21.8 
      
     Change in operating assets and liabilities, net of 
      effects from acquisitions:                              
        Decrease/(Increase) in                                          
         trade receivables                985.3   619.6     269.2    (238.6)
        Increase in inventories        (1,099.2) (956.1) (1,127.2) (1,820.3)
        Increase in                                             
         accounts payable                 496.1   321.0   1,499.2   1,299.1 
        Other accrued                                           
         liabilities and                                        
         operating items,                                       
         net                             (159.7) (282.1)   (259.0)   (286.4)
                                         ------  ------    ------    ------ 
          Net cash provided by/                                         
           (used in) operating                                            
           activities -continuing                                           
           operations                     521.8   (14.4)    783.8    (506.4)
          Net cash provided by                                          
           operating activities -                                         
           discontinued operations          2.3   380.7     146.8     717.6 
                                            ---   -----     -----     ----- 
      Net cash provided by operating                                     
       activities                         524.1   366.3     930.6     211.2 
                                          -----   -----     -----     ----- 
                                                                
      Cash Flows From Investing Activities:                     
      Acquisition of subsidiaries, net                                        
       of divestitures and cash acquired      -       -     (32.0)     (6.2)
      Proceeds from sale of property and                                  
       equipment                              -    11.6       4.3      12.3 
      Additions to property and                                             
       equipment                         (42.9)  (73.0)    (79.9)    (130.5)
      Proceeds from sale                                        
       of CareFusion common stock         135.0       -     135.0         - 
                                         -----   ------     -----     ----- 
          Net cash provided by/                                         
           (used in) investing                                            
           activities - continuing                                           
           operations                      92.1   (61.4)     27.4    (124.4)
          Net cash used in investing                                         
           activities - discontinued                                         
           operations                         -   (19.9)     (9.9)    (51.7)
                                         ------   -----      ----     ----- 
      Net cash provided by/(used in)                            
       investing activities                92.1   (81.3)     17.5    (176.1)
                                           ----   -----      ----    ------ 
                                                                
      Cash Flows From Financing Activities:                     
      Net change in  commercial paper                                         
       and short-term borrowings              -   100.0         -     101.1 
      Reduction of long-                                        
       term obligations                  (350.4) (153.8) (1,484.9)   (304.5)
      Proceeds from long-                                       
       term obligations,                                        
       net of issuance costs                  -    13.2         -      21.4 
      Proceeds from issuance of Common                                       
       Shares                               9.2     2.8      27.9      20.7 
      Tax (expense)/ benefit from stock                    
       options                                -    (1.1)     (6.1)      2.3 
      Payment of premiums for debt                                       
       extinguishment                         -       -     (66.4)        - 
      Dividends on Common Shares          (63.0)  (50.2)   (127.2)   (100.0)
      Purchase of                                               
       treasury shares                    (50.0)      -     (50.0)        - 
                                          -----       -     -----         - 
          Net cash used in financing                                         
           activities - continuing                                           
           operations                   (454.2)  (89.1) (1,706.7)   (259.0)
          Net cash provided by/(used in)                                            
           financing activities -                                         
           discontinued operations           -    (0.7)  1,283.8      (2.3)
                                            
      Net cash used in financing                                
       activities                       (454.2)  (89.8)   (422.9)   (261.3)
                                        ------   -----    ------    ------ 
                                                                
      Net increase/(decrease) in cash                                       
       and equivalents                    162.0   195.2     525.2    (226.2)
                                                                
      Cash and equivalents at                                           
       beginning of period             1,584.8   387.4   1,221.6     808.8 
                                       -------   -----   -------     ----- 
                                                                
      Cash and equivalents at end                                       
       of period                      $1,746.8  $582.6  $1,746.8    $582.6 
                                      ========  ======  ========    ====== 
    
    
    
                CARDINAL HEALTH, INC. AND SUBSIDIARIES            
                           BUSINESS ANALYSIS                      
                                                                  
                             TOTAL COMPANY                        
                                                                  
                                                                  
                                                     
                                                        Non-GAAP  
                                                         Second   
                                    Second Quarter       Quarter  
                                    --------------      --------  
    (in millions)                    2010      2009    2010   2009  
                                     ----      ----    ----   ----  
                                                                  
    Revenue                                                       
    Amount                        $24,920   $24,118               
    Growth Rate                         3%        8%              
                                                                  
    Operating Earnings                                            
    Amount                           $367      $313    $358   $337  
    Growth Rate                        17%       (8)%     6%     -  
                                                                  
    Earnings from Continuing Operations                           
    Amount                           $230      $169    $207   $183  
    Growth Rate                        36%      (21)%    13%   (15)%
                                                         --    ---  
                                                                  
                                                      
                                                        Non-GAAP  
                                     Year-to-Date     Year-to-Date 
                                     ------------     ------------ 
                                     2010      2009    2010   2009  
                                     ----      ----    ----   ----  
                                                                  
    Revenue                                                       
    Amount                        $49,700   $47,555               
    Growth Rate                         5%        9%              
                                                                  
    Operating Earnings                                            
    Amount                           $607      $600    $681   $648  
    Growth Rate                         1%      (11)%     5%    (6)%
                                                                  
    Earnings from Continuing Operations                           
    Amount                           $168      $341    $401   $351  
    Growth Rate                       (51)%     (20)%    14%   (20)%
                                                         --    ---  
                                                                  
                                                                  
                                                                  
                                                                  
    -----------------------------                                 
    Refer to the GAAP / Non-GAAP Reconciliation for definitions and
     calculations supporting the non-GAAP balances. 
    
    
                       CARDINAL HEALTH, INC. AND SUBSIDIARIES            
                             SEGMENT BUSINESS ANALYSIS                      
                                                                              
                       Second Quarter                           Second Quarter
                       --------------                           --------------
    (in millions)        2010     2009   (in millions)           2010    2009 
                         ----     ----                           ----    ---- 
                                                                              
    PHARMACEUTICAL                        MEDICAL                             
                                                                              
    Revenue                               Revenue                             
    Amount            $22,695  $22,079   Amount                $2,232  $2,057 
    Growth Rate             3%       8%  Growth Rate                9%      4%
    Mix                    91%      91%  Mix                        9%      9%
                                                                              
    Segment Profit                        Segment Profit                      
    Amount               $260     $263   Amount                  $103     $75
    Growth Rate            (1)%     12%  Growth Rate               38%   (24)%
    Mix                    72%      78%  Mix                       28%     22%
    Segment Profit                                                            
     Margin              1.14%    1.19%  Segment Profit Margin   4.59%   3.62%
    --------------       ----      ----  ---------------------   ----    ----
                                                                               
                                                                               
    Refer to definitions for an explanation of calculations. 
    
    Total consolidated revenue for the three months ended December 31, 2009
    was $24,920 million, which included total segment revenue of $24,927 
    million and Corporate revenue of $(7) million.  Total consolidated revenue
    for the three months ended December 31, 2008 was $24,118 million, which 
    included total segment revenue of $24,136 million and Corporate revenue of
    $(18) million.  Corporate revenue consists primarily of elimination of 
    inter-segment revenue.  
    
    Total consolidated operating earnings for the three months ended December 
    31, 2009 were $367 million, which included total segment profit of $363 
    million and Corporate profit of $4 million.  Total consolidated operating 
    earnings for the three months ended December 31, 2008 were $313 million, 
    which included total segment profit of $338 million and Corporate loss of 
    $25 million.  Corporate includes, among other things, restructuring and 
    employee severance, impairments and loss on sale of assets and litigation 
    (credits)/charges, net. 
    
    
    
                       CARDINAL HEALTH, INC. AND SUBSIDIARIES                 
                             SEGMENT BUSINESS ANALYSIS                        
                                                                              
                        Year-to-Date                             Year-to-Date 
                        ------------                             ------------ 
    (in millions)       2010      2009   (in millions)           2010    2009 
                        ----      ----                           ----    ---- 
                                                                              
    PHARMACEUTICAL                       MEDICAL                              
                                                                              
    Revenue                              Revenue                              
    Amount           $45,257   $43,483   Amount                $4,469  $4,094 
    Growth Rate            4%       10%  Growth Rate                9%      6%
    Mix                   91%       91%  Mix                        9%      9%
                                                                              
    Segment Profit                       Segment Profit                       
    Amount              $468      $476   Amount                  $217    $172
    Growth Rate           (2)%      (8)% Growth Rate               26%    (1)%
    Mix                   68%       73%  Mix                       32%     27%
    Segment Profit                                                            
     Margin             1.03%     1.09%  Segment Profit Margin   4.86%   4.21%
    --------------      ----      ----   ---------------------   ----    ---- 
                                                                              
    
    Refer to definitions for an explanation of calculations. 
    
    Total consolidated revenue for the six months ended December 31, 2009 was 
    $49,700 million, which included total segment revenue of $49,726 million 
    and Corporate revenue of $(26) million.  Total consolidated revenue for 
    the six months ended December 31, 2008 was $47,555 million, which included
    total segment revenue of $47,577 million and Corporate revenue of $(22) 
    million.  Corporate revenue consists primarily of elimination of inter-
    segment revenue.  
    
    Total consolidated operating earnings for the six months ended December 
    31, 2009 were $607 million, which included total segment profit of $685 
    million and Corporate loss of $78 million.  Total consolidated operating 
    earnings for the six months ended December 31, 2008 were $600 million, 
    which included total segment profit of $648 million and Corporate loss of 
    $48 million.  Corporate includes, among other things, restructuring and 
    employee severance, impairments and loss on sale of assets and litigation 
    (credits)/charges, net. 
    
    
                    CARDINAL HEALTH, INC. AND SUBSIDIARIES
                         SCHEDULE OF NOTABLE ITEMS
    
                                              Second Quarter    Year-to-Date  
                                              --------------    ------------  
    (in millions, except per Common Share                                     
     amounts)                                   2010    2009     2010    2009 
                                                ----    ----     ----    ---- 
                                                                              
    Restructuring and Employee Severance                                      
    Restructuring and employee severance      $(10.7) $(16.9)  $(70.4) $(37.6)
      Tax benefit                                2.6     6.5     20.0    13.9 
                                                 ---     ---     ----    ---- 
      Restructuring and employee severance,                                   
       net of tax                              $(8.1) $(10.4)  $(50.4) $(23.7)
                                               =====  ======   ======  ====== 
                                                                              
      Decrease to diluted EPS from                                            
       continuing operations                  $(0.02) $(0.03)  $(0.14) $(0.06)
                                              ======  ======   ======  ====== 
                                                                              
    Impairments and Loss on Sale of Assets                                    
    Impairments and loss on sale of assets     $(0.4)  $(6.9)  $(24.0) $(10.5)
      Tax benefit                                0.2     3.4      8.3    24.3 
                                                 ---     ---      ---    ---- 
      Impairments and loss on sale of asset,                                  
       net of tax                              $(0.2)  $(3.5)  $(15.7)  $13.8 
                                               =====   =====   ======   ===== 
                                                                              
      (Decrease)/increase to diluted EPS                                      
       from continuing operations                 $-  $(0.01)  $(0.04)  $0.04 
                                                  ==  ======   ======   ===== 
                                                                              
    Litigation Credits/(Charges), Net                                         
    Litigation credits/(charges), net          $25.4    $0.3    $25.9    $0.3 
      Tax expense                               (9.6)   (0.1)    (9.8)   (0.1)
                                                ----    ----     ----    ---- 
      Litigation credits/(charges), net, net                                  
       of tax                                  $15.8    $0.2    $16.1    $0.2 
                                               =====    ====    =====    ==== 
                                                                              
      Increase to diluted EPS from                                            
       continuing operations                   $0.04      $-    $0.04      $- 
                                               =====      ==    =====      == 
                                                                              
    Other Spin-Off Costs                                                      
    Other spin-off costs 1                     $(5.3)     $-   $(47.6)     $- 
      Tax benefit/(expense) 2                    1.4       -   (154.5)      - 
                                                 ---      --   ------      -- 
      Other spin-off costs, net of tax         $(3.9)     $-  $(202.1)     $- 
                                               =====      ==  =======      == 
                                                                              
      Decrease to diluted EPS from                                            
       continuing operations                  $(0.01)     $-   $(0.56)     $- 
                                              ======      ==   ======      == 
                                                                              
    Gain on Sale of CareFusion stock                                          
    Gain on sale of CareFusion stock 3         $20.0      $-    $20.0      $- 
      Tax expense                                  -       -        -       - 
                                                  --      --       --      -- 
      Gain on sale of CareFusion stock, net                                   
       of tax                                  $20.0      $-    $20.0      $- 
                                               =====      ==    =====      == 
                                                                              
      Increase to diluted EPS from                                            
       continuing operations                   $0.06      $-    $0.06      $- 
                                               =====      ==    =====      == 
                                                                              
    Weighted Average Number of Diluted                                        
     Shares Outstanding                        361.0   360.3    361.1   361.2 
                                                                              
    (1)  Other spin-off costs included in other (income)/expense, net for the 
    six months ended December 31, 2009 were $2.4 million. Other spin-off costs
    also include the $39.9 million loss on extinguishment of debt for the six 
    months ended December 31, 2009. 
    
    (2)  The fiscal 2010 year-to-date tax expense associated with the other 
    spin-off costs includes $171.9 million related to the anticipated 
    repatriation of a portion of cash loaned to the Company's entities within 
    the United States. 
    
    (3)  Included within other (income)/expense, net on the unaudited condensed consolidated statements of earnings.
    
    
    
                      CARDINAL HEALTH, INC. AND SUBSIDIARIES                 
                            ASSET MANAGEMENT ANALYSIS                        
                                                                             
                                                                             
                                                        Second      Year-To-  
                                                        Quarter        Date   
                                                       --------     --------  
                                                      2010  2009   2010  2009 
                                                      ----  ----   ----  ---- 
                                                                             
                                                                             
    Receivable Days                                   17.5  17.7             
                                                                             
    Days Inventory on Hand                              27    28             
                                                                             
    Debt to Total Capital                               29%   32%            
    Net Debt to Capital                                  7%   29%            
                                                                             
                                                                             
    Return on Equity                                  18.5% 15.8%   6.2% 14.3%
    Non-GAAP Return on Equity                         16.6% 17.2%  16.2% 17.0%
                                                                             
                                                                             
    Return on Invested Capital                        7.72% 7.09%  2.96% 6.35%
    Non-GAAP Return on Invested Capital               6.98% 6.19%  6.57% 5.95%
                                                                             
                                                                             
    Effective Tax Rate from Continuing Operations     36.9% 37.7%  68.8% 35.1%
    Non-GAAP Effective Tax Rate from Continuing                              
     Operations                                       38.5% 38.0%  37.0% 38.9%
                                                                             
                                                                             
                                                                             
    -------------------------------------------------                        
    Refer to the GAAP / Non-GAAP Reconciliation for non-GAAP calculations. 
    
    
    
    
    
    
    
    
    
    
                           CARDINAL HEALTH, INC. AND SUBSIDIARIES
                               GAAP / NON-GAAP RECONCILIATION
    
    
    
    
    
                                   Second Quarter 2010
                                  ---------------------
                         Restruc-                        
                          turing  Impairments                    Gain on      
                           and        and     Litigation  Other  Sale of    
                         Employee   Loss on   (Credits)/  Spin-   Care-
                         Sever-     Sale of    Charges,    Off    Fusion  Non-
                   GAAP   ance      Assets       Net     Costs    Stock   GAAP
     
    
    (in millions, 
     except per Common
      Share amounts) 
     
    Operating 
     Earnings
    
    Amount        $367    $11        -       ($25)       $5        -     $358
    Growth Rate     17 %                                                    6%
    Earnings Before
     Income Taxes 
     and 
     Discontinued
     Operations   $365    $11         -      ($25)       $5     ($20)    $336
    
    Provision for
     Income 
     Taxes (1)    $135     $3         -      ($10)       $1        -     $129
    
    Earnings from
     Continuing
     Operations
    Amount        $230     $8         -      ($16)       $4     ($20)    $207
    Growth Rate     36%                                                    13%
    
    Diluted EPS from
     Continuing
     Operations
    Amount       $0.64  $0.02         -    ($0.04)     $0.01  ($0.06)   $0.57
    Growth Rate     36%                                                    12%
    
    
    
    
    
    
                                     Year-To-Date 2010
                                     -----------------
                         Restruc-                        
                          turing  Impairments                    Gain on      
                           and        and     Litigation  Other  Sale of    
                         Employee   Loss on   (Credits)/  Spin-   Care-
                         Sever-     Sale of    Charges,    Off    Fusion  Non-
                   GAAP   ance      Assets       Net     Costs    Stock   GAAP
    
    
    Operating 
     Earnings
    
    Amount       $607     $70     $24         ($26)      $5        -     $681
    Growth Rate     1 %                                                     5%
    
    Earnings
     Before Income
     Taxes and
     Discontinued
     Operations   $540     $70     $24         ($26)    $48      ($20)   $636
    
    Provision for
     Income Taxes
     (1)          $372     $20      $8        ($10)   ($155)        -    $236
    
    Earnings from
     Continuing
     Operations
    Amount        $168     $50     $16        ($16)    $202      ($20)   $401
    Growth Rate    (51)%                                                   14%
    
    Diluted EPS
     from
     Continuing
     Operations
    Amount       $0.47  $0.14    $0.04      ($0.04)   $0.56   ($0.06)   $1.11
    Growth Rate    (51)%                                                   14%
    
    
    
    
    
                                          Second Quarter 2009
                                          -------------------
                         Restruc-                        
                          turing  Impairments                    Gain on      
                           and        and     Litigation  Other  Sale of    
                         Employee   Loss on   (Credits)/  Spin-   Care-
                         Sever-     Sale of    Charges,    Off    Fusion  Non-
                   GAAP   ance      Assets       Net     Costs    Stock   GAAP
    
    
    Operating 
     Earnings
    
    Amount          $313     $17      $7            -      -       -    $337
    Growth Rate       (8)%                                                 -
    
    Earnings Before 
     Income Taxes 
     and
     Discontinued
     Operations     $271     $17      $7            -     -       -     $295
      
    Provision for 
     Income
     Taxes (1)      $102      $7      $3            -     -       -     $112
    
    Earnings from
     Continuing 
     Operations
    Amount          $169     $10      $4            -     -       -     $183
    Growth Rate      (21)%                                               (15)%
    
    Diluted EPS 
     from Continuing 
     Operations
    Amount         $0.47   $0.03   $0.01            -     -       -    $0.51
    Growth Rate      (20)%                                               (14)%
    
    
    
    
    
                                             Year-To-Date 2009
                                             -----------------
                         Restruc-                        
                          turing  Impairments                    Gain on      
                           and        and     Litigation  Other  Sale of    
                         Employee   Loss on   (Credits)/  Spin-   Care-
                         Sever-     Sale of    Charges,    Off    Fusion  Non-
                   GAAP   ance      Assets       Net     Costs    Stock   GAAP
    
    
    
    Operating 
     Earnings
    
    Amount       $600     $38       $11           -       -       -     $648
    Growth Rate   (11)%                                                   (6)%
    
    Earnings Before 
     Income Taxes 
     and 
     Discontinued
     Operations  $526     $38       $11           -       -       -     $574
    
    Provision for 
     Income
     Taxes (1)   $185     $14       $24           -       -       -     $223
    
    Earnings from 
     Continuing
     Operations
    Amount       $341     $24      ($14)          -       -       -     $351
    Growth Rate   (20)%                                                  (20)%
    
    Diluted EPS 
     from Continuing 
     Operations
    Amount      $0.95   $0.06    ($0.04)          -       -       -    $0.97
    Growth Rate   (18)%                                                  (18)%
    
    
    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
    
    
                                                     Second        Second
                                                    Quarter       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 operations(1)               8.1          10.4
    Impairments and loss on sale of assets,
     net of tax, in continuing operations(1)           0.2           3.5
    Litigation (credits)/charges, net, net of
     tax, in continuing operations(1)                (15.8)         (0.2)
    Other spin-off costs, net of tax(1)                3.9             -
    Gain on sale of CareFusion stock, net of
     tax(1)                                          (20.0)            -
    Other (income)/expense, net, net of
     tax(1)                                           (3.5)         12.6
    Interest expense, net, net of tax(1)              17.1          14.2
    CareFusion net earnings in discontinued
     operations(2)                                    (0.3)       (147.0)
                                                      ----        ------
      Adjusted net earnings                         $224.2        $210.0
    
      Annualized                                    $896.8        $840.0
    
    
    
    
    
    
    
                                       Second      First    Second      First
                                      Quarter     Quarter  Quarter     Quarter
                                       2010        2010      2009       2009
    
    GAAP Total Invested Capital   $12,819.9   $12,888.9  $19,522.8  $19,220.0
    
    Non-GAAP Total Invested
     Capital
    Total shareholders' equity     $5,226.1    $4,941.2   $8,127.9   $7,918.1
    Current portion of long-
     term obligations and other
     short-term borrowings             12.7       362.3      459.0      158.0
    Long-term obligations, less
     current portion and other
     short-term borrowings          2,099.2     2,103.5    3,385.8    3,593.3
    Non-cash dividend related
     to CareFusion spin-off               -          -    (3,752.4)  (3,752.4)
    Current portion of long-
     term obligations and other
     short-term borrowings in
     discontinued operations              -          -         7.2        7.3
    Long-term obligations, less
     current portion and other
     short-term borrowings in
     discontinued operations             -          -          3.4        3.7
    Unrecorded goodwill(3)         5,481.9    5,481.9      5,481.9    5,481.9
                                   
      Non-GAAP total invested
       capital                   $12,819.9  $12,888.9    $13,712.8  $13,409.9
                                
    
      Average non-GAAP total
       invested capital          $12,854.4              $13,561.4
    
    Non-GAAP Return on Invested
     Capital                          6.98%                  6.19%
    
    
    
    (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.
    
    (3)  Unrecorded goodwill is $5.5 billion on a GAAP basis at December
    31, 2009 and September 30, 2009, respectively.  Unrecorded goodwill
    is $7.5 billion on a GAAP basis at December 31, 2008 and September
    30, 2008, respectively, of which $2.0 billion relates to CareFusion.
    Accordingly, on a non-GAAP basis, unrecorded goodwill is $5.5
    billion 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 Invested Capital                   2.96%          6.35%
    
    Adjusted Net Earnings
    Net earnings                                    $196.3         $565.6
    Restructuring and employee severance,
     net of tax, in continuing operations(1)          50.4           23.7
    Impairments and loss on sale of assets,
     net of tax, in continuing operations(1)          15.7          (13.8)
    Litigation (credits)/charges, net, net
     of tax, in continuing operations(1)             (16.1)          (0.2)
    Other spin-off costs, net of tax(1)              202.1              -
    Gain on sale of CareFusion stock, net of
     tax(1)                                          (20.0)             -
    Other (income)/expense, net, net of
     tax(1)                                          (10.6)          14.2
    Interest expense, net, net of tax(1)              38.2           32.8
    CareFusion net earnings in discontinued
     operations(2)                                   (20.4)        (221.0)
                                                     -----         ------
      Adjusted net earnings                         $435.6         $401.3
    
      Annualized                                    $871.2         $802.6
    
    
    
                  Second     First    Fourth      Second     First     Fourth
                  Quarter   Quarter   Quarter     Quarter   Quarter    Quarter
                   2010      2010       2009       2009       2009       2008
                   ----      ----       ----       ----      ----       ----
    
    
    GAAP Total
     Invested
     Capital  $12,819.9  $12,888.9  $19,911.5  $19,522.8  $19,220.0  $19,133.4
    
    Non-GAAP Total 
     Invested 
     Capital
    Total
     shareholders'
     equity    $5,226.1   $4,941.2   $8,724.7   $8,127.9   $7,918.1   $7,747.5
    
    Current portion 
     of long-term
     obligations and
     other short-
     term
     borrowings    12.7      362.3      366.2      459.0      158.0      151.6
    
    Long-term  
     obligations,
     less current 
     portion and 
     other short-
     term
     borrowings  2,099.2   2,103.5    3,271.6     3,385.8   3,593.3   3,681.7
    
    Non-cash 
     dividend
     related to 
     CareFusion
     spin- off         -         -   (3,752.4)   (3,752.4) (3,752.4) (3,752.4)
    
    Current portion 
     of long-term
     obligations and
     other short-term
     borrowings in
     discontinued
     operations        -          -        1.1         7.2       7.3       7.4
    
    Long-term
     obligations, less
     current portion
     and other short-
     term borrowings
     in discontinued
     operations        -          -        8.4         3.4       3.7       5.7
    
    Unrecorded
     good-
     will(3)     5,481.9    5,481.9    5,481.9     5,481.9   5,481.9   5,481.9
    
     Non-GAAP 
      total
      invested
      capital  $12,819.9  $12,888.9  $14,101.5   $13,712.8 $13,409.9 $13,323.4
    
     Average non-
      GAAP Total
      invested
      capital  $13,270.1                         $13,482.0
    
    Non-GAAP 
     Return
     on Invested
     Capital        6.57%                            5.95%
    
    
    
    (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.
    
    (3)  Unrecorded goodwill is $5.5 billion on a GAAP basis at December
    31, 2009 and September 30, 2009, respectively.  Unrecorded goodwill
    is $7.5 billion on a GAAP basis at June 30, 2009, December 31, 2008,
    September 30, 2008 and June 30, 2008, respectively, of which $2.0
    billion relates to CareFusion. Accordingly, on a non-GAAP basis,
    unrecorded goodwill is $5.5 billion for all periods presented.
    
    
    
    
    
    
                CARDINAL HEALTH, INC. AND SUBSIDIARIES
                   GAAP / NON-GAAP RECONCILIATION
    
    
                                                   Second      Second
                                                   Quarter     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 operations(1)          8.1        10.4
    Impairments and loss on sale of assets,
     net of tax, in continuing operations(1)          0.2         3.5
    Litigation (credits)/charges, net, net
     of tax, in continuing operations(1)            (15.8)       (0.2)
    Other spin-off costs, net of tax(1)               3.9           -
    Gain on sale of CareFusion stock, net of
     tax(1)                                         (20.0)          -
    CareFusion net earnings in discontinued
     operations(1, 2)                                (0.3)     (147.0)
                                                     ----      ------
      Adjusted net earnings                        $210.6      $183.2
    
      Annualized                                   $842.4      $732.8
      
    
    
    
                         Second          First          Second          First
                         Quarter        Quarter         Quarter        Quarter
                          2010           2010            2009            2009
    
    Non-GAAP 
     Shareholders' Equity
    
    Total shareholders'
     equity            $5,226.1         $4,941.2        $8,127.9      $7,918.1
    Non-cash dividend
     related to
     CareFusion
     spin-off                -                -       (3,752.4)      (3,752.4)
    Non-GAAP 
     shareholders'
     equity           $5,226.1         $4,941.2       $4,375.5       $4,165.7
    
     Average non-
      GAAP 
      shareholders'
      equity          5,083.7                         4,270.6
    
    Non-GAAP return
     on equity          16.6%                           17.2%
    
    
    (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-    Year-To-
                                                Date        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 operations(1)  50.4         23.7  
    Impairments and loss on sale of assets,
     net of tax, in continuing operations(1)  15.7        (13.8)
    Litigation (credits)/charges, net, net 
     of tax, in continuing operations(1)     (16.1)        (0.2)
    Other spin-off costs, net of tax(1)      202.1            -
    Gain on sale of CareFusion stock,
     net of tax(1)                           (20.0)           -
    CareFusion net earnings in Discontinued
     operations(1, 2)                        (20.4)      (221.0)
                                             -----       ------
      Adjusted net earnings                 $408.0       $354.3  
    
      Annualized                            $816.0       $708.6  
    
    
    
                     Second     First    Fourth    Second   First    Fourth
                     Quarter   Quarter   Quarter   Quarter Quarter  Quarter
                      2010      2010      2009     2009     2009      2008
    Non-GAAP 
     Shareholders'
     Equity
    Total 
     shareholders'
     equity         $5,226.1  $4,941.2  $8,724.7 $8,127.9  $7,918.1  $7,747.5
    Non-cash 
     dividend
     related to
     CareFusion
     spin-off             -         -  (3,752.4) (3,752.4) (3,752.4) (3,752.4)
    
    Non-GAAP 
     shareholders'
     equity       $5,226.1   $4,941.2  $4,972.3  $4,375.5  $4,165.7   $3,995.1
    
    
      Average non-
       GAAP
       shareholders'
       equity      5,046.5                        4,178.8
    
    Non-GAAP return 
     on equity        16.2%                          17.0%
    
    
    (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
    
    
                                   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 discontinued
      operations                $365.0       $271.2     $540.0       $526.1
     Restructuring and
      employee severance          10.7         16.9       70.4         37.6
     Impairments and loss on
      sale of assets               0.4          6.9       24.0         10.5
     Litigation
      (credits)/charges, net     (25.4)        (0.3)     (25.9)        (0.3)
     Other spin-off costs          5.3            -       47.6            -
     Gain on sale of
      CareFusion stock           (20.0)           -      (20.0)           -
                                 -----          ---      -----          ---
       Adjusted earnings before
        income taxes and
        discontinued operations $336.0      $294.7      $636.1       $573.9
    
     Provision for income
      taxes(1)                  $134.8      $102.2      $371.6       $184.9
     Restructuring and
      employee severance tax
      benefit(1)                   2.6         6.5        20.0         13.9
     Impairments and loss on
      sale of assets, tax
      benefit(1)                   0.2         3.4         8.3         24.3
     Litigation
      (credits)/charges, net
      tax expense(1)              (9.6)       (0.1)       (9.8)        (0.1)
     Other spin-off costs tax
      expense(1)                   1.4           -      (154.5)           -
     Gain on sale of
      CareFusion stock tax
      expense(1)                     -           -           -            -
                                   ---         ---         ---          ---
       Adjusted provision for
        income taxes            $129.4      $112.0      $235.6       $223.0
    
     Non-GAAP effective tax
      rate from continuing
      operations                  38.5%       38.0%       37.0%        38.9%
    
    
    
    
                                                       Second Quarter
                                                       --------------
                                                  2010                2009
                                                  ----                ----
    
    
     Debt to Total Capital                          29%                 32%
    
    
     Net Debt to Capital
     Current portion of long-term obligations
      and other short-term borrowings            $12.7              $459.0
     Long-term obligations, less current
      portion and other short-term borrowings  2,099.2             3,385.8
                                               -------             -------
       Debt                                   $2,111.9            $3,844.8
     Cash and equivalents                     (1,746.8)             (582.6)
                                              --------              ------
       Net debt                                 $365.1            $3,262.2
     Total shareholders' equity               $5,226.1            $8,127.9
     Capital                                  $5,591.2           $11,390.1
       Net Debt to Capital                           7%                 29%
    
    
    (1) The Company applies varying tax rates depending upon the tax
        jurisdiction where the items are incurred. 
    
    
    
    
                           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 by 90
      days                                           $297.3            $290.8
    
    Days inventory on hand                               27                28
    
    
      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 pharmaceutical 
      manufacturers and the end customers.
    
      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
                                        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
    
    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
    
    Return on Invested Capital:  annualized net earnings plus other 
     (income)/expense, net plus interest expense, net divided by (average
     total shareholders’ equity plus debt plus unrecorded goodwill)
    
    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 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 $3.7 billion non-cash
     dividend issued in connection with the spin-off
    
    Non-GAAP Return on Invested Capital:  (annualized 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) gain on sale of CareFusion stock, (6) other (income)/expense,
     net, (7) interest expense, net and (8) CareFusion net earnings in
     discontinued operations, each net of tax) divided by (average total
     shareholders’ equity adjusted for the $3.7 billion non-cash dividend
     issued in connection with the spin-off plus debt plus unrecorded goodwill
     excluding unrecorded goodwill attributed to CareFusion) 

SOURCE Cardinal Health, Inc.



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http://www.cardinalhealth.com