Credit Suisse Healthcare Conference Presentation

© Copyright 2014, Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and

ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health.

Cardinal Health: Well-balanced. Well-prepared. Well-focused.

George Barrett

Chairman and Chief Executive Officer

Credit Suisse 2014 Healthcare Conference, November 11, 2014


ESSENTIAL TO CARE are trademarks or registered trademarks of Cardinal Health. 2

Cautions concerning forward-looking statements

This presentation contains forward-looking statements addressing expectations, prospects, estimates and other

matters that are dependent upon future events or developments. These statements may be identified by words

such as "expect," "anticipate," "intend," "plan," "believe," "will," "should," "could," "would," "project," "continue,"

"likely," and similar expressions, and include statements reflecting future results or guidance, statements of

outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results

to differ materially from those projected, anticipated or implied. These risks and uncertainties include competitive

pressures in Cardinal Health's various lines of business; the ability to achieve the expected benefits from the

generic sourcing joint venture with CVS Health; the frequency or rate of pharmaceutical price appreciation or

deflation and the timing of generic and branded pharmaceutical introductions; the non-renewal or a default under

one or more key customer or supplier arrangements or changes to the terms of or level of purchases under those

arrangements; the ability to achieve the expected benefits from the AccessClosure and Sonexus Health

acquisitions; uncertainties due to government health care reform including federal health care reform legislation;

changes in the distribution patterns or reimbursement rates for health care products and services; the effects of

any investigation or action by any regulatory authority; and changes in the cost of commodities such as oil-based

resins, cotton, latex and diesel fuel. Cardinal Health is subject to additional risks and uncertainties described in

Cardinal Health's Form 10-K, Form 10-Q and Form 8-K reports and exhibits to those reports. This presentation

reflects management's views as of November 11, 2014. Except to the extent required by applicable law, Cardinal

Health undertakes no obligation to update or revise any forward-looking statement. In addition, these

presentations contain Non-GAAP financial measures. Cardinal Health provides GAAP numbers, definitions and

reconciling information in the Financial Appendix at the end of these presentations and on its Investors page at

ir.cardinalhealth.com. An audio replay of the conference call will be available on the Investors page at

ir.cardinalhealth.com.



Our profile

Outstanding record of financial growth based

on strong execution and focus on the right

strategic priorities

Thoughtful deployment of capital and

substantial returns for shareholders

Positioned for future growth in an evolving

healthcare landscape



$1,394

$1,644

$1,866

$2,046 $2,133

FY10 FY11 FY12 FY13 FY14

4

Non-GAAP operating earnings:

Historical trend

(In millions)



1.4%

1.6%

1.8%

2.0%

2.2%

2.4%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2011 2012 2013 2014 2015

Please see appendix for GAAP/non-GAAP definitions and reconciling information.

Driving consistent operating

margin expansion

5

Non-GAAP operating earnings as a

percent of revenue (TTM)



Thoughtful capital deployment approach

1 Capital deployment from Q2 FY10 to Q1 FY15.

Capital deployment post CareFusion spin1

6

Dividends

Capital expenditures

Share repurchases

Acquisitions, net ofdivestitures



$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

FY10 FY11 FY12 FY13 FY14

Dividends Paid Share Repurchases

7

Returning cash to shareholders through dividends and share repurchases

$ M

illio

ns

+125% or

cumulatively

$3.7B



8

Biology

advances and

big data

Increased

consumerism

in healthcare

Need to deliver

care more cost-

effectively: new

settings, less

waste, more

coordination

Transition from

fee-for-service

to payment for

outcomes

Continued innovation in healthcare

Increased

participation of

government,

both as payor

and regulator

Demographics and public health issues driving demand

Our priorities are driven by key trends in healthcare



FY15 Strategic priorities

Specialty and biopharma

Generics

International

Health system

and hospital solutions • Continue to build scale and capabilities to

deliver value in generics

• Tailored programs to a segmented

customer base

Provide health systems with scaled

solutions including:

–Physician preference products

–Medical consumables

–Performance management tools and

services • Develop new models to address changing

market needs

• Enhance and build programs to create

value for providers and biopharma

manufacturers

• Expand Chinese footprint

• Reposition Canada for growth

• Grow medical product scale through

international markets

• Continue to evaluate new markets

9

Alternate sites of care • Accelerate growth in home

• Grow post-acute and ambulatory settings,

leveraging IDN experience and scale

• Expand product lines, services,

capabilities and touch points



• Largest generics sourcing entity (50/50 JV) in U.S., which is

largest generic market in world

• Single point of negotiation

• Simple, straightforward model

• Outstanding progress to date



Payers

- Integrating clinical

pathways with Specialty

Pharmacy

- Improving patient care

while reducing the cost

of care

We add value in Specialty by connecting

stakeholders to better serve patients

Providers

- Proven track record

- Strong reputation

- Increasing scale and

broad reach

Biopharma

- Best in class

commercialization

capabilities

- Insights essential to

success Patient

11



Increasing the breadth of our consumable

product portfolio; 500+ launches in FY14

Launching solutions focused on reducing the

cost of physician preference items

Expanding our service offerings through new

launches and acquisitions

Providing a new platform for serving patients in

the home

1

2

3

4

Fracture fixation

Health systems and hospital solutions

Aligning in support of customer needs



Home

healthcare

agency

Hospitals Hospital

systems Physician

offices

Surgery

centers Payors DME Pharmacies

Edgepark® referral sources

Cardinal Health

Cardinal Health supports care At Home; Opportunities extend across care continuum



International: China, growing into the future

Broaden geographic reach

– Expand from 10 to ~25 local wholesaling companies through

tuck-in acquisitions

– Expand from ~30 to over 50 DTP specialty pharmacies

Expand direct-to-patient for chronic care

– Focus on disease-centric, patient support model

Invest in innovative healthcare solutions

– Hospital and retail pharmacy focused

Accelerate brand recognition



Generics excellence

Customer mix shift

Targeted international

Specialty

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Preferred products: medical consumables

Preferred products: physician preference

Health system services

Alternate sites of care

Strong portfolio driving growth and positioning for the future

15

© Copyright 2014 Cardinal Health. All rights reserved. CARDINAL HEALTH, the Cardinal Health LOGO and


Financial appendix

Operating Earnings Before Provision Earnings Earnings from Diluted EPS Diluted EPS

Earnings Income Taxes for from Continuing from from Continuing

Operating Growth and Discontinued Income Continuing Operations Continuing Operations

(in millions, except per common share amounts) Earnings Rate Operations Taxes Operations Growth Rate Operations Growth Rate1

GAAP 466$ (1)% 435$ 169$ 266$ (22)% 0.78$ (21)%

Restructuring and employee severance 19 19 7 12 0.04

Amortization and other acquisition-related costs 53 53 19 34 0.10

Impairments and loss on disposal of assets - - - - -

Litigation (recoveries)/charges, net 28 28 - 28 0.08

Non-GAAP 566$ 6 % 535$ 195$ 340$ (10)% 1.00$ (9)%

GAAP 471$ 3 % 442$ 102$ 340$ 25 % 0.99$ 25 %



Impairments and loss on disposal of assets - - - - -

Litigation (recoveries)/charges, net 1 1 - 1 -

Non-GAAP 532$ 13 % 503$ 124$ 378$ 35 % 1.10$ 36 %

1 The $63 million settlements of federal and state tax controversies favorably impacted, for f iscal 2014 first quarter, both diluted EPS from continuing operations and non-GAAP diluted EPS from

continuing operations by $0.18. The fiscal 2015 first quarter grow th rates for diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations, excluding the impact of

the tax settlements, w ould have been (4) percent and 9 percent, respectively.

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

We apply varying tax rates depending on the item’s nature and tax jurisdiction w here it is incurred.

Cardinal Health, Inc. and Subsidiaries

GAAP / Non-GAAP Reconciliation

First Quarter 2015

First Quarter 2014




(in millions, except per common share amounts) Earnings Rate Operations Taxes Operations Growth Rate1 Operations Growth Rate1,2

GAAP 1,885$ 89 % 1,798$ 635$ 1,163$ 247 % 3.37$ 247 %



Impairments and loss on disposal of assets 15 15 5 10 0.03

Litigation (recoveries)/charges, net (21) (21) (8) (13) (0.04)

Non-GAAP 2,133$ 4 % 2,047$ 722$ 1,324$ 3 % 3.84$ 3 %

GAAP 996$ (44)% 888$ 553$ 335$ (69)% 0.97$ (68)%





Other Spin-Off costs - - - - -

Gain on sale of CareFusion stock - - - - -

Non-GAAP 2,046$ 10 % 1,938$ 654$ 1,284$ 15 % 3.73$ 16 %

1

2

Fiscal Year 2013

The 4-year compound annual grow th rate for GAAP and non-GAAP earnings from continuing operations w as 10 percent and 11 percent, respectively. The 4-year compound annual grow th rate for GAAP and

non-GAAP diluted EPS from continuing operations w as 20 percent and 14 percent, respectively.


We apply varying tax rates depending on the item’s nature and tax jurisdiction w here it is incurred.



Fiscal Year 2014

Fiscal 2014 earnings from continuing operations includes a $63 million benefit related to the settlements of federal and state tax controversies, partially offset by a $56 million charge related to the remeasurement

of unrecognized tax benefits, each of w hich contributed $0.18 and ($0.16), or $0.02 net, to both diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations, respectively. Fiscal

2013 earnings from continuing operations includes a $64 million benefit related to the revaluation of the deferred tax liability and related interest on unrepatriated foreign earnings as a result of an agreement w ith

tax authorities, w hich contributed $0.18 to both diluted EPS from continuing operations and non-GAAP diluted EPS from continuing operations. The fiscal 2014 grow th rates for diluted EPS from continuing

operations and non-GAAP diluted EPS from continuing operations, excluding the impact of the tax items in each fiscal year, w ould have been 324 percent and 8 percent, respectively.




Earnings Rate Operations Taxes Operations Growth Rate Operations Growth Rate

GAAP 1,792$ 18 % 1,698$ 628$ 1,070$ 11 % 3.06$ 12 %





Other Spin-Off costs 2 2 1 1 -

Gain on sale of CareFusion stock - - - - -

Non-GAAP 1,866$ 13 % 1,772$ 653$ 1,119$ 13 % 3.21$ 15 %

GAAP 1,514$ 16 % 1,518$ 552$ 966$ 65 % 2.74$ 69 %




Litigation (recoveries)/charges, net 6 6 (1) 7 0.02

Other Spin-Off costs 10 10 4 6 0.02

Gain on sale of CareFusion stock - (75) - (75) (0.21)

Non-GAAP 1,644$ 18 % 1,573$ 585$ 988$ 22 % 2.80$ 25 %

GAAP 1,307$ 1 % 1,212$ 625$ 587$ (23)% 1.62$ (23)%



Impairments and loss on disposal of assets 29 29 (5) 34 0.09


Other Spin-Off Costs 11 53 (149) 202 0.56

Gain on sale of CareFusion stock - (45) - (45) (0.12)

Non-GAAP 1,394$ (3)% 1,296$ 486$ 810$ (2)% 2.24$ (2)%

We apply varying tax rates depending on the item’s nature and tax jurisdiction where it is incurred.



Fiscal Year 2012

Fiscal Year 2011

Fiscal Year 2010


(in millions) 2015 2014 2015 2014

Revenue

Amount 24,070$ 24,523$

Grow th rate1 (2)% (5)%

Operating earnings

Amount 466$ 471$ 566$ 532$

Grow th rate (1)% 3 % 6 % 13 %

Earnings from continuing operations

Amount 266$ 340$ 340$ 378$

Grow th rate (22)% 25 % (10)% 35 %

1

Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.


Total Company Business Analysis

Non-GAAP

First Quarter First Quarter

Revenue from Walgreens w as $3.3 billion for the three months ended September 30, 2013. Excluding the impact of the Walgreens contract expiration, the f iscal

2015 first quarter revenue grow th rate w ould have been 13 percent.

(in millions) 2014 2013 2014 2013

Revenue

Amount 91,084$ 101,093$

Grow th rate1 (10)% (6)%

Operating earnings

Amount 1,885$ 996$ 2,133$ 2,046$

Grow th rate 89 % (44)% 4 % 10 %

Earnings from continuing operations

Amount 1,163$ 335$ 1,324$ 1,284$

Grow th rate 247 % (69)% 3 % 15 %

1

Non-GAAP


Total Company Business Analysis


Refer to the GAAP/Non-GAAP reconciliation for definitions and calculations supporting the Non-GAAP balances.

Revenue from Walgreens w as $3.3 billion and $20.2 billion for the f iscal year ended June 30, 2014 and 2013, respectively. Excluding the impact of the Walgreens

contract expiration, the f iscal 2014 fiscal year revenue grow th rate w ould have been 8 percent.

Fiscal Year Fiscal Year

2015

(in millions) Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1

Revenue 90,631$ 91,084$ 93,610$ 96,735$ 99,727$ 101,093$ 102,437$ 104,803$ 106,648$ 107,552$ 107,551$ 106,705$ 104,999$ 102,644$ 100,340$ 98,612$ 98,160$

GAAP operating earnings 1,880$ 1,885$ 1,056$ 1,023$ 1,011$ 996$ 1,842$ 1,893$ 1,836$ 1,792$ 1,747$ 1,668$ 1,562$ 1,514$ 1,489$ 1,408$ 1,431$

Restructuring and employee severance 39 31 57 85 76 71 48 22 23 21 17 16 17 15 17 25 33

Amortization and other acquisition-related costs 228 223 212 209 179 158 117 37 34 33 37 94 106 90 86 58 28

Impairments and loss on disposal of assets 15 15 843 863 859 859 29 25 21 21 20 7 8 9 9 9 7

Litigation (recoveries)/charges, net 6 (21) (24) (18) (15) (38) (37) (34) (22) (3) (9) (4) 2 6 (22) (29) (60)

Other Spin-Off Costs - - - - - - - 1 1 2 4 4 8 10 9 12 12

Non-GAAP operating earnings 2,167$ 2,133$ 2,144$ 2,163$ 2,109$ 2,046$ 1,999$ 1,943$ 1,893$ 1,866$ 1,816$ 1,786$ 1,703$ 1,644$ 1,588$ 1,483$ 1,451$

GAAP operating earnings margin rate 2.07 % 2.07 % 1.13 % 1.06 % 1.01 % 0.99 % 1.80 % 1.81 % 1.72 % 1.67 % 1.62 % 1.56 % 1.49 % 1.48 % 1.48 % 1.43 % 1.46 %

Non-GAAP operating earnings margin rate 2.39 % 2.34 % 2.29 % 2.24 % 2.11 % 2.02 % 1.95 % 1.85 % 1.77 % 1.73 % 1.69 % 1.67 % 1.62 % 1.60 % 1.58 % 1.50 % 1.48 %

4-year margin expansion 91bp

Forward-Looking Non-GAAP Financial Measures

We present non-GAAP earnings 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. We are

unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures because we cannot reliably forecast restructuring and employee severance, amortization and other acquisition-related costs, impairments

and loss on disposal of assets, litigation (recoveries)/charges, net and LIFO charges/(credits), which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact our future financial results.


2014



2013 2012 2011

Rolling Quarter

1

2

3

4

5

6

7

Loss contingencies related to litigation and regulatory matters and income from favorable resolution of legal matters.

The inventories of the Company's core pharmaceutical distribution facilities in the Pharmaceutical segment are valued at the lower of cost, using the LIFO method, or market. These charges or credits are included in cost of products sold, and represent

changes in the Company's LIFO inventory reserve.

Except for compound annual growth rates (CAGR), growth rates in this presentation are determined by dividing the difference between current period results and prior period results by prior period results. CAGR is determined by subtracting one from ((the

ending value divided by the beginning value) raised to the power of (one divided by the number of years)).

Costs incurred in connection with our Spin-Off of CareFusion which are included in distribution, selling, general and administrative expenses.

Programs by which the Company fundamentally changes its operations such as closing and consolidating facilities, moving manufacturing of a product to another location, production or business process sourcing, employee severance (including rationalizing

headcount or other significant changes in personnel) and realigning operations (including realignment of the management structure of a business unit in response to changing market conditions).

Costs that consist primarily of amortization of acquisition-related intangible assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations.

Asset impairments and losses from the disposal of assets not eligible to be classified as discontinued operations are classified within impairments and loss on disposal of assets within the consolidated statements of earnings.

Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding (1) restructuring and employee severance1, (2) amortization and other acquisition-related costs

2, (3) impairments and loss on disposal of assets

3, (4) litigation

(recoveries)/charges, net4, (5) LIFO charges/(credits), (6) Other Spin-Off costs

6 and (7) Gain on sale of CareFusion stock, each net of tax.

Non-GAAP Operating Earnings Margin Rate and growth rate calculation7: current period non-GAAP operating earnings divided by revenue.

Non-GAAP Operating Earnings: operating earnings excluding (1) restructuring and employee severance, (2) amortization and other acquisition-related costs, (3) impairments and loss on disposal of assets, (4) litigation (recoveries)/charges, net, (5) LIFO

charges/(credits), (6) Other Spin-Off costs and (7) Gain on sale of CareFusion stock.

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


Use of Non-GAAP MeasuresThis presentation contains financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). In general, the measures exclude items and charges that (i) management does not believe reflect Cardinal

Health, Inc.'s (the "Company") core business and relate more to strategic, multi-year corporate activities; or (ii) relate to activities or actions that may have occurred over multiple or in prior periods without predictable trends. Management uses these non-GAAP

financial measures internally to evaluate the Company’s performance, evaluate the balance sheet, engage in financial and operational planning and determine incentive compensation.

Beginning in fiscal 2015, the Company will exclude last-in, first-out ("LIFO") inventory charges/(credits)5 from its non-GAAP earnings, for consistency with the presentation by some of its peers. The Company did not record any LIFO charges or credits in the

periods presented.

Management provides these non-GAAP financial measures to investors as supplemental metrics to assist readers in assessing the effects of items and events on its financial and operating results and in comparing the Company’s performance to that of its

competitors. However, the non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies.

The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to

those financial statements set forth above should be carefully evaluated.

Definitions

Date post:	25-Jun-2015
Category:	Business
Upload:	cardinalhealth
View:	1,521 times
Download:	1 times