<PAGE> 1
PROSPECTUS
7,000,000 SHARES
[LOGO]
COMMON SHARES
------------------
Of the 7,000,000 Common Shares offered hereby, 1,600,000 are being sold by
Cardinal Health, Inc. ("Cardinal" or the "Company") and 5,400,000 are being sold
by certain shareholders of the Company (the "Selling Shareholders"). See
"Selling Shareholders." The Company will not receive any of the proceeds from
the sale of Common Shares by the Selling Shareholders. Of the 7,000,000 Common
Shares offered hereby, 5,600,000 are being offered hereby in the United States
and Canada (the "U.S. Offering") by the U.S. Underwriters (as defined herein)
and 1,400,000 are being offered in a concurrent international offering (the
"International Offering" and, together with the U.S. Offering, the "Combined
Offering") outside of the United States and Canada by the Managers (as defined
herein). See "Underwriting."
The Common Shares are listed on the New York Stock Exchange under the
symbol "CAH." On September 19, 1994, the last reported sale price for the
Company's Common Shares on the New York Stock Exchange was $39.00 per share.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------
Per Share $39.00 $1.25 $37.75 $37.75
- ---------------------------------------------------------------------------------------------------------
Total(3) $273,000,000 $8,750,000 $60,400,000 $203,850,000
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the U.S.
Underwriters against certain liabilities, including certain liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Combined Offering payable by the Company,
estimated at $400,000.
(3) The Company and certain of the Selling Shareholders have granted the U.S.
Underwriters an option, exercisable within 30 days after the date hereof, to
purchase up to 1,050,000 additional Common Shares on the same terms per
share solely for the purpose of covering overallotments, if any. If the U.S.
Underwriters exercise such option in full, the Price to Public, Underwriting
Discounts and Commissions, Proceeds to Company and Proceeds to Selling
Shareholders will be $313,950,000, $10,062,500, $70,477,325, and
$233,410,175, respectively. See "Underwriting."
------------------
The Common Shares are offered by the several U.S. Underwriters when, as and
if delivered to and accepted by them and subject to their right to reject orders
in whole or in part. It is expected that the Common Shares will be available for
delivery at the offices of Smith Barney Inc., 388 Greenwich Street, New York,
New York 10013 or through the facilities of The Depository Trust Company, on or
about September 26, 1994.
------------------
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
WILLIAM BLAIR & COMPANY
September 19, 1994
<PAGE> 2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). These reports and other information (including
proxy and information statements) filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at its
principal office at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10007 and Chicago
Regional Office, 500 West Madison, 14th Floor, Chicago, Illinois 60661-2511.
Copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. This Prospectus constitutes part of a Registration Statement on Form S-3
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Company and the Common Shares offered
hereby. Statements contained herein concerning the provisions of any document
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus: (1)
Annual Report on Form 10-K for the fiscal year ended June 30, 1994, and (2)
Current Report on Form 8-K dated September 12, 1994. All reports and other
documents filed with the Commission pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Combined Offering shall be deemed to be incorporated by
reference herein and to be a part hereof from the respective dates of filing of
said reports and other documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. The Company hereby undertakes to provide without charge to each
person to whom this Prospectus has been delivered, upon the written or oral
request of such person, a copy of any and all documents incorporated herein by
reference (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be submitted in writing to Cardinal Health, Inc., 655 Metro Place
South, Suite 925, Dublin, Ohio 43017, Attn: David Bearman, Executive Vice
President and Chief Financial Officer, (614) 761-8700.
------------------------
IN CONNECTION WITH THE COMBINED OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
SHARES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE> 3
THE COMPANY
Cardinal is one of the nation's largest wholesale distributors of
pharmaceutical and related health care products. The Company's customer base
includes hospitals and managed care facilities (50%), independent retail drug
stores (21%), chain drug stores and the pharmacy departments of supermarkets and
mass merchandisers (23%), as well as customers for specialty products, including
physicians and clinics (6%). Cardinal operates approximately 40 distribution
facilities nationwide.
Wholesale Drug Industry
The wholesale drug industry in the United States has experienced rapid
growth. As reported by the National Wholesale Druggists' Association (the
"NWDA"), industry sales grew from $11.9 billion in 1983 to $47.5 billion in
1993. An aging population, new product introductions, and a higher concentration
of distribution through wholesalers are all factors which have contributed to
this growth. Drug wholesaling is also a competitive industry, undergoing
significant change and consolidation. Reflecting this consolidation, the number
of NWDA wholesalers has declined from 139 in 1980 to fewer than 70 in 1993.
In response to cost containment pressure from private and governmental
payors and the current focus on health care reform in the United States,
customers are consolidating into super-regional and national affiliations while
manufacturers are under increased pressure to slow the rate of drug price
inflation and to seek more cost-effective methods of marketing and distributing
their products. In this regard, drug wholesalers will be challenged to service
customers over a wider geographic base, offer manufacturers innovative marketing
and distribution services, and provide both manufacturers and customers with
standardized distribution and information systems and reporting links necessary
to streamline the efficient flow of product and information among distribution
partners.
Cardinal's Strategy
Cardinal's strategy is to grow by expanding its existing wholesale and
specialty distribution businesses and to make selective complementary
acquisitions. Cardinal's internal sales growth has occurred primarily as a
result of market share gains, geographic expansion, an increased reliance on
drug wholesaling by both customers and pharmaceutical manufacturers, and new
pharmaceutical products and price increases. Complementing this internal growth,
Cardinal has acquired or merged with ten drug distribution companies and a
specialty distributor of oncology products over the past ten years. As a result
of its strategy, Cardinal's net sales have increased from $2.1 billion in fiscal
1990 to $5.8 billion in fiscal 1994, a compound annual growth rate of 28%.
Cardinal believes it is well-positioned to continue its growth and maintain
operating margins by: (a) providing superior distribution services to its
customers, including inventory management systems and logistical support
functions; (b) developing advanced information systems that improve internal and
customer operations; (c) providing merchandising and marketing programs for
manufacturers and customers; (d) further expanding its specialty wholesaling
businesses and leveraging these activities over larger volume; and (e)
supplementing the above strategies through selective acquisitions.
Cardinal has achieved earnings growth due in part to its successful
management of the Company's changing business equation. This equation has
changed over the last several years due to: (a) a greater mix of higher volume
customers, where the lower cost of distribution and better asset management and
cash flow enable Cardinal to offer lower pricing to the customer; (b) reduced
inventory gains associated with lower drug price inflation, which are partially
offset by corresponding decreases in last-in, first-out (LIFO) earnings charges
and inventory carrying costs; (c) increased merchandising funding from
manufacturers, particularly related to the growth in generic pharmaceuticals;
(d) improved selling, general and administrative cost absorption due to
significant productivity investments and the operating leverage associated with
sales growth and acquisitions; and (e) increased sales and earnings from
specialty distribution services.
3
<PAGE> 4
Cardinal's Business
As a full-service wholesale distributor, Cardinal complements its
distribution activities by offering a broad range of value-added support
services to assist customers and suppliers in maintaining and improving their
market positions and to strengthen Cardinal's role in the channel of
distribution. These support services include computerized order entry and order
confirmation systems, customized invoicing, generic sourcing programs, product
movement and management reports, consultation on store operation and
merchandising, and customer training.
Most customers transmit merchandise orders directly to Cardinal's data
processing system through computerized order entry devices. Cardinal's
proprietary software systems feature customized databases specially designed to
help its customers order more efficiently, contain costs and monitor their
purchases which are covered by group contract purchasing arrangements. Upon
receipt of the customer's order at a distribution center, Cardinal's warehouse
management system processes the order and provides customized price information
to facilitate the customer's pricing of items. Customer orders are routinely
processed for next-day delivery, enabling the Company's customers to minimize
the size and carrying cost of their own inventories. In addition, Cardinal's
AccuNet,(R) Otis(R) and Network(TM) proprietary software systems facilitate
primary supply relationships between Cardinal and its customers and enable
Cardinal's customers to reduce their costs. These systems provide a variety of
information which assist the customer to identify the best price available under
group purchasing contracts with pharmaceutical manufacturers, maintain formulary
compliance, and better manage their own inventories. Over 2,800 of these systems
have been placed with hospital, managed care, and chain drug customers located
throughout the United States.
In addition to its core drug wholesaling activities, Cardinal operates
several specialty health care businesses which offer value-added services to its
customers and suppliers while providing Cardinal with opportunities for growth
and profitability. For example, Cardinal's National PharmPak subsidiary operates
a pharmaceutical repackaging program for both independent and chain customers.
In January 1992, Cardinal formed National Specialty Services, Inc., which
distributes therapeutic plasma products and other specialty pharmaceuticals to
hospitals, clinics, and other managed care facilities on a nationwide basis
through the utilization of telemarketing and direct mail programs. Cardinal
recently expanded its specialty wholesaling business through a merger with PRN
Services, Inc., a distributor of oncology and other specialty products to
clinics and physician groups across the United States. These specialty
distribution activities are part of Cardinal's overall strategy of developing
diversified products and services to enhance the profitability of its business
and the businesses of its customers and suppliers.
Whitmire Merger
In February 1994, Cardinal completed its largest transaction when it merged
with Whitmire Distribution Corporation ("Whitmire"), a Folsom, California based
drug wholesaler with sales of approximately $2.9 billion for calendar 1993 (the
"Whitmire Merger"). The majority of Whitmire's sales were concentrated in the
western and central United States, complementing Cardinal's former concentration
of sales in the eastern United States and positioning the combined company to
service both customers and manufacturers on a national basis.
As a result of the Whitmire Merger, Cardinal now maintains a network of
approximately 40 distribution centers enabling it to routinely serve the entire
population of the continental United States on a next-day basis. In addition, a
majority of Whitmire's business was with hospital, managed care and large retail
chain customers, complementing Cardinal's rapidly expanding presence in these
customer categories and Cardinal's well-developed programs and services for
independent retail pharmacies.
4
<PAGE> 5
Recent Transactions
On July 1, 1994, Cardinal acquired Humiston-Keeling, Inc., a Calumet City,
Illinois based drug wholesaler, with annualized sales of approximately $330
million, serving customers located primarily in the upper midwest region of the
United States. On July 18, 1994, Cardinal completed a merger with Behrens Inc.,
a Waco, Texas based drug wholesaler, with annualized sales of approximately $185
million, serving customers located primarily in Texas and adjoining states.
Summary
While the wholesale drug industry continues to undergo rapid change and
consolidation, Cardinal believes that the trend in health care distribution is
toward selection by both customers and manufacturers of fewer, more efficient
wholesalers that can cover a broader geographic territory or customer group. In
this regard, Cardinal believes that, due to its internal growth and recent
mergers and acquisitions, it provides capabilities increasingly valued in the
marketplace, including: (a) single-supplier distribution capability for
customers who are themselves becoming more national or super-regional in scope;
(b) innovative marketing and merchandising support for manufacturers and
customers; (c) advanced information systems support for both customers and
manufacturers on a consistent basis; and (d) benefits of scale and leverage with
respect to investments in new technology, systems and services.
Cardinal's principal executive offices are located at 655 Metro Place
South, Suite 925, Dublin, Ohio 43017, and its telephone number is (614)
761-8700.
5
<PAGE> 6
USE OF PROCEEDS
The net proceeds to the Company from its sale of 1,600,000 Common Shares
offered hereby are estimated to be approximately $60,000,000 (assuming no
exercise of the U.S. Underwriters' overallotment option). The net proceeds will
be used to finance working capital growth and for other general corporate
purposes, including, to the extent required, acquisitions. Although the Company
continually evaluates possible candidates for acquisition and intends to
continue to seek opportunities to expand its health care distribution
operations, no acquisition has been agreed upon or become the subject of a
letter of intent or agreement in principle. Pending application of the net
proceeds as described above, the proceeds will be used to reduce short-term
notes payable-banks, if any, and to invest in short-term, interest bearing
securities.
The Company will not receive any of the proceeds from the sale of Common
Shares by the Selling Shareholders and, if any, proceeds from the U.S.
Underwriters' exercise of the portion of the overallotment option allocated to
certain Selling Shareholders.
MARKET PRICE AND DIVIDEND DATA
Since September 7, 1994, the Common Shares have been listed on the New York
Stock Exchange under the symbol "CAH." Prior to that date, the Common Shares
were quoted on the Nasdaq National Market under the symbol "CDIC." The following
table reflects, for the periods indicated, the range of the reported high and
low last sale prices of Common Shares as reported on the Nasdaq National Market
through September 6, 1994 and on the New York Stock Exchange since September 7,
1994, and the per share dividends declared thereon. The information in the table
has been adjusted to reflect retroactively all stock splits and stock dividends
and also to reflect the Company's decision, as of March 1, 1994, to change its
fiscal year end from March 31 to June 30.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
FISCAL 1993
Quarter Ended
June 30, 1992................................................. $24.00 $19.80 $.016
September 30, 1992............................................ 25.80 21.60 .016
December 31, 1992............................................. 24.20 20.20 .020
March 31, 1993................................................ 23.80 19.60 .020
Three Months Ended June 30, 1993................................ 23.70 20.60 .020
FISCAL 1994
Quarter Ended
September 30, 1993............................................ 30.00 21.80 .020
December 31, 1993............................................. 38.40 28.80 .024
March 31, 1994................................................ 40.60 33.30 .024
June 30, 1994................................................. 40.80 34.40 .030
FISCAL 1995
Through September 19, 1994.................................... 41.25 36.625 .030
</TABLE>
On August 8, 1994, there were approximately 1,150 holders of record of the
Common Shares. The last reported sales price of the Common Shares on the New
York Stock Exchange on September 19, 1994 was $39.00.
The Company anticipates that it will continue to pay quarterly cash
dividends in the future. The timing and amount of any future dividends, however,
remain within the discretion of the Company's board of directors and will depend
upon the Company's future earnings, financial condition, capital requirements
and other factors.
6
<PAGE> 7
CAPITALIZATION
The following table sets forth the short-term obligations and total
capitalization of the Company at June 30, 1994, and as adjusted to reflect the
issuance and sale by the Company of 1,600,000 Common Shares offered hereby and
the application of the net proceeds therefrom (assuming no exercise of the U.S.
Underwriters' overallotment option, see "Underwriting") to in part reduce notes
payable-banks. See "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1994
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term obligations:
Notes payable-banks................................................. $ 25,000 $ 0
Current portion of long-term obligations............................ 2,929 2,929
-------- -----------
Total short-term obligations................................ $ 27,929 $ 2,929
======== =========
Long-term obligations:
Other long-term obligations including capital leases................ $ 10,086 $ 10,086
8% Notes due 1997................................................... 100,000 100,000
6 1/2% Notes due 2004............................................... 100,000 100,000
-------- -----------
Total long-term obligations................................. 210,086 210,086
-------- -----------
Shareholders' equity:
Common Shares, without par value, authorized 60,000,000 shares;
issued 35,042,713 shares; as adjusted 39,027,713 shares; Class B
Common Shares, without par value, authorized 5,000,000 shares;
issued 2,971,375 shares; as adjusted 586,375 shares(1)........... $255,458 $ 315,458
Retained earnings................................................... 120,399 120,399
Common Shares in treasury, at cost 179,878 shares................... (3,390) (3,390)
Unamortized restricted stock awards................................. (3,973) (3,973)
-------- -----------
Total shareholders' equity.................................. 368,494 428,494
-------- -----------
Total capitalization.................................................. $578,580 $ 638,580
======== =========
</TABLE>
- ---------------
(1) The number of outstanding Common Shares and Class B Common Shares has been
adjusted to reflect the conversion of Class B Common Shares into Common
Shares for sale in this Combined Offering by Chemical Equity Associates, the
only holder of Class B Common Shares. Under the Company's Amended and
Restated Articles of Incorporation, as amended, holders of Class B Common
Shares have the right to convert such shares into Common Shares, subject to
certain conditions, if (i) such holder reasonably believes that the
converted shares will be transferred within fifteen (15) days pursuant to
certain Conversion Events (which term is defined in the Company's Amended
and Restated Articles of Incorporation, as amended, and includes any public
offering or sale of the Company's securities); (ii) such holder has agreed
not to vote any such Common Shares prior to a Conversion Event; and (iii)
such holder undertakes to promptly convert such shares back into Class B
Common Shares if such shares are not transferred pursuant to a Conversion
Event. See "Description of Capital Stock." Chemical Equity Associates has
informed the Company that, immediately prior to the consummation of the
Combined Offering, it intends to convert 2,385,000 Class B Common Shares
into Common Shares to be sold in the Combined Offering, assuming no exercise
by the U.S. Underwriters of the overallotment option.
7
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial data concerning Cardinal has
been prepared giving retroactive effect to the business combination of Cardinal
and Whitmire on February 7, 1994, which has been accounted for as a
pooling-of-interests transaction. On March 1, 1994, the Company made the
decision to change its fiscal year end from March 31 to June 30. As such, for
the fiscal year ended March 31, 1993 and prior years, the information presented
is derived from consolidated financial statements which combine data from
Cardinal for the fiscal years ended March 31, 1990, March 31, 1991, March 31,
1992, and March 31, 1993, with data from Whitmire for the fiscal years ended
June 30, 1990, June 29, 1991, June 27, 1992 and July 3, 1993, respectively. For
the twelve months ended June 30, 1993 and the fiscal year ended June 30, 1994,
the information presented is derived from consolidated financial statements
which combine data from Cardinal for the twelve months ended June 30, 1993 and
the fiscal year ended June 30, 1994 with data from Whitmire for the fiscal years
ended July 3, 1993 and June 30, 1994. Due to the different fiscal year ends of
the merged companies, Whitmire's results of operations for the three months
ended July 3, 1993 have been included in both the fiscal year ended March 31,
1993 and the twelve months ended June 30, 1993. The selected consolidated
financial data below should be read in conjunction with the consolidated
financial statements and related notes incorporated herein by reference. See
"Incorporation of Certain Documents by Reference." All share and per share data
have been adjusted to give retroactive effect to stock splits and stock
dividends.
<TABLE>
<CAPTION>
|| TWELVE FISCAL
|| MONTHS YEAR
FISCAL YEAR ENDED || ENDED ENDED
------------------------------------------------- || ---------- ----------
MARCH 31, MARCH 31, MARCH 31, MARCH 31, || JUNE 30, JUNE 30,
1990 1991 1992 1993 || 1993 1994
---------- ---------- ---------- ---------- || ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) ||
<S> <C> <C> <C> <C> || <C> <C>
EARNINGS STATEMENT DATA(1)(2): ||
Net sales...................................... $2,137,896 $2,803,111 $3,680,678 $4,633,375 || $4,709,085 $5,790,411
Gross margin................................... 170,529 206,197 256,833 297,293 || 300,245 355,172
Selling, general and administrative expenses... (128,864) (152,769) (184,523) (203,740) || (205,161) (233,305)
Unusual items ||
Merger costs................................. -- -- -- -- || -- (35,880)
Termination fee.............................. -- -- -- 13,466 || 13,466 --
Nonrecurring charges......................... -- -- (1,973) (18,904) || (18,904) --
---------- ---------- ---------- ---------- || ---------- ----------
Operating earnings............................. 41,665 53,428 70,337 88,115 || 89,646 85,987
Interest expense and other, net................ (20,579) (22,616) (22,684) (21,858) || (21,127) (15,227)
---------- ---------- ---------- ---------- || ---------- ----------
Earnings before income taxes and cumulative ||
effect of change in accounting principle..... 21,086 30,812 47,653 66,257 || 68,519 70,760
Income taxes................................... (8,176) (11,123) (19,291) (25,710) || (26,345) (35,624)
---------- ---------- ---------- ---------- || ---------- ----------
Earnings before cumulative effect of change in ||
accounting principle......................... 12,910 19,689 28,362 40,547 || 42,174 35,136
Preferred dividends declared/accretion......... (2,840) (2,840) (2,840) (2,876) || (2,876) (1,205)
---------- ---------- ---------- ---------- || ---------- ----------
Earnings available for Common Shares before ||
cumulative effect of change in accounting ||
principle.................................... 10,070 16,849 25,522 37,671 || 39,298 33,931
Cumulative effect of change in accounting ||
principle.................................... -- -- -- (10,000) || -- --
---------- ---------- ---------- ---------- || ---------- ----------
Net earnings available for Common Shares....... $ 10,070 $ 16,849 $ 25,522 $ 27,671 || $ 39,298 $ 33,931
========== ========== ========== ========== || ========== ==========
Earnings per Common Share: ||
Primary: ||
Earnings before cumulative effect of change ||
in accounting principle.................. $ 0.34 $ 0.53 $ 0.74 $ 1.10 || $ 1.14 $ 0.86
Cumulative effect of change in accounting ||
principle................................ -- -- -- (0.29) || -- --
---------- ---------- ---------- ---------- || ---------- ----------
Net earnings............................... $ 0.34 $ 0.53 $ 0.74 $ 0.81 || $ 1.14 $ 0.86
========== ========== ========== ========== || ========== ==========
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
| | TWELVE FISCAL
| | MONTHS YEAR
FISCAL YEAR ENDED | | ENDED ENDED
------------------------------------------------- | | ---------- ----------
MARCH 31, MARCH 31, MARCH 31, MARCH 31, | | JUNE 30, JUNE 30,
1990 1991 1992 1993 | | 1993 1994
---------- ---------- ---------- ---------- | | ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA) | |
<S> <C> <C> <C> <C> | | <C> <C>
Fully diluted: | |
Earnings before cumulative effect of change | |
in accounting principle.................. $ 0.34 $ 0.53 $ 0.74 $ 1.06 | | $ 1.10 $ 0.86
Cumulative effect of change in accounting | |
principle................................ -- -- -- (0.26)| | -- --
---------- ---------- ---------- ---------- | | ---------- ----------
Net earnings............................... $ 0.34 $ 0.53 $ 0.74 $ 0.80 | | $ 1.10 $ 0.86
========= ========= ========= ========= | | ========= =========
Cash dividends declared per Common Share....... $ 0.04 $ 0.05 $ 0.06 $ 0.07 | | $ 0.08 $ 0.10
========= ========= ========= ========= | | ========= =========
Weighted average number of shares outstanding: | |
Primary...................................... 29,904 31,581 34,291 34,311 | | 34,349 39,392
Fully diluted................................ 31,213 34,691 38,571 38,616 | | 38,653 39,477
| |
| |
| |
| |
MARCH 31, MARCH 31, MARCH 31, MARCH 31, | | JUNE 30, JUNE 30,
1990 1991 1992 1993 | | 1993 1994
--------- --------- --------- ---------- | | ---------- ----------
(IN THOUSANDS) | |
<S> <C> <C> <C> <C> | | <C> <C>
BALANCE SHEET DATA(1)(2): | |
Current assets................................... $454,482 $711,825 $845,877 $ 995,832 | | $1,032,902 $1,287,124
Property and equipment-net....................... 29,188 48,572 57,548 59,313 | | 61,595 60,029
Other assets..................................... 29,772 39,816 43,656 44,705 | | 55,926 48,449
--------- --------- --------- ----------- | | ---------- ----------
Total assets............................. $513,442 $800,213 $947,081 $1,099,850 | | $1,150,423 $1,395,602
========= ========= ========= ========== | | ========= =========
Current liabilities.............................. $265,302 $381,087 $408,874 $ 555,094 | | $ 594,188 $ 816,042
Long-term obligations............................ 111,721 213,986 304,943 275,789 | | 274,908 210,086
Other liabilities................................ 816 822 1,266 705 | | 3,010 980
Redeemable preferred stock....................... 17,480 18,320 19,560 20,400 | | 20,400 --
Shareholders' equity............................. 118,123 185,998 212,438 247,862 | | 257,917 368,494
--------- --------- --------- ----------- | | ---------- ----------
Total liabilities and shareholders' | |
equity................................. $513,442 $800,213 $947,081 $1,099,850 | | $1,150,423 $1,395,602
========= ========= ========= ========== | | ========== ==========
<FN>
- ---------------
(1) Amounts reflect business combinations in fiscal 1991, 1992, the twelve
months ended June 30, 1993, and fiscal 1994.
(2) The consolidated financial information includes the impact of the following
unusual items: (a) an equity transaction expense of approximately $2.0
million recorded by Whitmire in fiscal 1992, (b) a termination fee of
approximately $13.5 million received by Cardinal in fiscal 1993, resulting
from the termination by Durr-Fillauer Medical, Inc. of its agreement to
merge with Cardinal, (c) certain nonrecurring charges of approximately $9.9
million and $3.8 million recorded by Cardinal and Whitmire, respectively in
fiscal 1993, (d) a stock option compensation charge of approximately $5.2
million recorded by Whitmire in fiscal 1993, and (e) a nonrecurring charge
to reflect the estimated Whitmire Merger costs of approximately $35.9
million ($28.2 million net of tax) recorded by Cardinal in fiscal 1994.
</TABLE>
<TABLE>
The following supplemental information summarizes the results of operations
of the Company, adjusted on a pro forma basis to reflect: (a) the
elimination of the effect of the unusual items discussed above; and (b) the
redemption of Whitmire's preferred stock pursuant to the terms of the
Agreement and Plan of Reorganization between Cardinal and Whitmire. Solely
for purposes of the summary presented below, such redemption is assumed to
have been funded from the liquidation of investments in tax-exempt
marketable securities.
<CAPTION>
TWELVE
FISCAL YEAR ENDED MONTHS FISCAL YEAR
-------------------- ENDED ENDED
MARCH 31, MARCH 31, JUNE 30, JUNE 30,
1992 1993 1993 1994
--------- --------- ----------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Operating earnings.............................................. $72,310 $93,553 $ 95,084 $ 121,867
Earnings before cumulative effect of change in accounting
principle..................................................... $29,252 $42,865 $ 44,510 $ 63,044
Earnings per common share before cumulative effect of change in
accounting principle:
Primary....................................................... $0.85 $1.25 $1.30 $1.60
Fully diluted................................................. 0.84 1.19 1.24 1.60
</TABLE>
9
<PAGE> 10
SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of each of the Selling Shareholders of the Company's Common
Shares as of August 8, 1994, and as adjusted to reflect the sale of the shares
offered hereby. The following table assumes the conversion of all 2,971,375
outstanding Class B Common Shares into Common Shares both prior to and after the
Combined Offering.
<TABLE>
<CAPTION>
COMMON COMMON
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
COMBINED OFFERING COMMON COMBINED OFFERING
NAME OF --------------------- SHARES ------------------------
SELLING SHAREHOLDER(1) NUMBER PERCENT BEING NUMBER PERCENT(2)
- ---------------------------------- --------- ------- OFFERED(2) --------- ----------
---------
<S> <C> <C> <C> <C> <C>
Apollo Investment Fund,
L.P.(3)(4)...................... 3,333,921 8.50% 2,385,000 948,921 2.32%
Chemical Equity Associates(3)..... 3,261,803(5) 8.32 2,385,000 876,803(5) 2.15
Melburn G. Whitmire(3)(6)......... 1,205,134 3.03 375,000 830,134 2.01
Gary E. Close(6).................. 271,985 * 100,000 171,985 *
James E. Clare(6)................. 114,812 * 45,000 69,812 *
Philip Solomons, Sr.(7)........... 145,637 * 5,000 140,637 *
Philip Solomons, Jr.(7)........... 633,293 1.61 4,000 629,293 1.54
Ralph S. Solomons(7).............. 81,540 * 500 81,040 *
Richard M. Solomons(7)............ 78,009 * 500 77,509 *
William L. Clifton, Jr.(8)........ 306,934 * 25,685 281,249 *
James R. Clifton(8)............... 304,939 * 23,690 281,249 *
The Mary Lacy Clifton Separate
Property Trust(8)............... 331,874 * 50,625 281,249 *
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise noted below, the persons named above have sole voting
and investment power with respect to all shares shown as being beneficially
owned by them.
(2) Excludes any Common Shares issuable upon exercise by the U.S. Underwriters
of the overallotment option granted by certain of the Selling Shareholders
to purchase Common Shares. See "Underwriting" for the allocation of the
overallotment option among the Company and certain of the Selling
Shareholders. To the extent that the overallotment option is exercised, the
Common Shares beneficially owned after the Combined Offering would be
reduced accordingly.
(3) Cardinal has entered into a Registration Rights Agreement, dated as of
October 11, 1993, as amended, with Apollo Investment Fund, L.P., Chemical
Equity Associates and Mr. Whitmire whereby each such shareholder has certain
rights to require the Company to register under the Securities Act Common
Shares owned by them through the period ending April 25, 1999, subject to
extensions under certain circumstances. See "Selling Shareholders --
Whitmire Registration Rights."
(4) As a result of the Company's merger with Whitmire on February 7, 1994 (the
"Whitmire Merger"), Apollo Investment Fund, L.P. has the right to designate
two nominees for election as directors of the Company for so long as (A)
Apollo Investment Fund, L.P., including any of its affiliates and any of its
accounts under common management and control (the "Apollo Group"), and (B)
any former shareholder of Whitmire (exclusive of Apollo Advisors, L.P. and
any such shareholders who were current or former employees of Whitmire as of
October 11, 1993 or any family members of such employees or trusts for their
benefit ("Management Shareholders")) each continue to have a pecuniary
interest in 1,250,000 or more Common Shares and Class B Common Shares issued
to such person in the Whitmire Merger (the "Threshold Amount"). Further,
Apollo Advisors, L.P. has the right to designate one individual for so long
as only one of the Apollo Group or any former shareholder of Whitmire
(exclusive of Apollo Advisors, L.P. or Management Shareholders) shall
continue to have a pecuniary interest in the Common Shares and Class B
Common Shares which equal or exceed the Threshold Amount. In connection with
the Whitmire Merger, Apollo Investment Fund, L.P. has designated as
directors of Cardinal Michael S. Gross, Vice President of Apollo Capital
Management, Inc., and Mitchell J. Blutt, M.D., Executive Partner of Chemical
Venture Partners. Upon completion of the Combined Offering, neither the
Apollo Group nor any other former shareholder of Whitmire will have a
pecuniary interest in the Common Shares or the Class B Common Shares which
equals or exceeds the Threshold Amount.
In addition, until the Apollo Group no longer has a pecuniary interest in
the Common Shares equal to or exceeding the Threshold Amount, Cardinal must
include as a member of the audit committee of its board of directors one
individual on the board of directors of Cardinal designated by the Apollo
Group and, if Mr. Whitmire ceases to be a
10
<PAGE> 11
member of the executive committee of the board of directors of Cardinal,
Cardinal is required to include as a member of the executive committee of
the board of directors one individual on the board of directors of Cardinal
designated by the Apollo Group.
(5) Chemical Equity Associates owns all of the 2,971,375 outstanding Class B
Common Shares. The share ownership amounts are calculated assuming the
conversion of all such outstanding Class B Common Shares into Common Shares
immediately prior to this Combined Offering. See "Description of Capital
Stock." Prior to the conversion of such Class B Common Shares, Chemical
Equity Associates owns of record 290,428 Common Shares and 2,971,375 Class B
Common Shares. Chemical Equity Associates has informed the Company that,
immediately prior to the consummation of the Combined Offering, it intends
to convert 2,385,000 Class B Common Shares into Common Shares to be sold in
the Combined Offering assuming no exercise by the U.S. Underwriters of the
overallotment option.
(6) In connection with the Whitmire Merger in February 1994, Mr. Whitmire
entered into a three-year employment agreement with the Company and serves
as a director and Vice Chairman of the Company. Gary E. Close and James E.
Clare also entered into three-year employment agreements with the Company
and serve as its Executive Vice President -- Western Region and Executive
Vice President -- Southern Region, respectively. The shares shown above as
being beneficially owned by Mr. Whitmire include 532,333 Common Shares which
he has the right to acquire pursuant to options currently exercisable and
4,801 Common Shares which he holds as custodian for a minor child. The
shares shown above as being beneficially owned by Mr. Close include 146,125
Common Shares which he has the right to acquire pursuant to options which
are currently exercisable. The shares shown as being beneficially owned by
Mr. Clare include 52,187 Common Shares which he has the right to acquire
pursuant to options which are currently exercisable.
(7) In connection with the merger of Solomons Company, a Savannah, Georgia based
drug wholesaler, with Cardinal on May 4, 1993 (the "Solomons Merger"),
Philip Solomons, Sr. entered into a seven-year consulting agreement with and
serves as the Senior Chairman of Solomons Company, a wholly-owned subsidiary
of the Company. Philip Solomons, Jr., Ralph Solomons and Richard Solomons
(sons of Philip Solomons, Sr.) each entered into five-year employment
agreements with Solomons Company in connection with the Solomons Merger.
Philip Solomons, Jr. serves as the President of Solomons Company. The shares
shown above as being beneficially owned by Philip Solomons, Sr. include
51,441 Common Shares owned by Mr. Solomons' wife. The shares shown above as
being beneficially owned by Philip Solomons, Jr. include 17,948 Common
Shares held in his individual retirement account, 250,756 Common Shares held
in a trust established by Philip Solomons, Sr., as to which Philip Solomons,
Jr. acts as sole trustee and 264,793 Common Shares held in a trust
established by Shirley Solomons (the wife of Philip Solomons, Sr.), as to
which Philip Solomons, Jr. acts as sole trustee. The shares shown above as
being beneficially owned by Ralph Solomons include 6,290 Common Shares held
in his individual retirement account. The shares shown above as being
beneficially owned by Richard Solomons include 3,911 Common Shares held in
his individual retirement account.
(8) In connection with the merger of Behrens Inc., a Waco, Texas based drug
wholesaler, with Cardinal on July 18, 1994 (the "Behrens Merger"), William
L. Clifton, Jr. and James R. Clifton each entered into two-year employment
agreements with Behrens Inc., a wholly-owned subsidiary of the Company.
William L. Clifton, Jr. serves as the President of Behrens Inc., and James
R. Clifton serves as the Vice President -- Operations of Behrens Inc. The
shares shown above as being beneficially owned by James R. Clifton, include
74,974 held by James R. Clifton and his wife, Barbara Clifton, as community
property, and all of the shares being sold in the Combined Offering are held
as community property. The shares shown above as being beneficially owned by
William L. Clifton, Jr. do not include 331,874 Common Shares held by The
Mary Lacy Clifton Separate Property Trust, of which Mr. Clifton is the Co-
Trustee.
WHITMIRE REGISTRATION RIGHTS
In connection with the Whitmire Merger, Cardinal granted to Apollo
Investment Fund, L.P., Chemical Equity Associates ("CEA") and Mr. Whitmire
(collectively, the "Whitmire Stockholders") certain rights to require Cardinal
to register under the Securities Act Common Shares held by them (including
Common Shares issuable to CEA upon conversion of Class B Common Shares). These
rights include "demand" and "piggyback" registration rights and are contained in
the Registration Rights Agreement dated as of October 11, 1993 (the
"Registration Rights Agreement"), as amended, among Cardinal, the Whitmire
Stockholders and Robert D. Walter, Chairman of Cardinal. Under the Registration
Rights Agreement, the Whitmire Stockholders are entitled to require Cardinal to
file a registration statement under the Securities Act
11
<PAGE> 12
with the Commission covering the sale of their shares (a "Required
Registration") up to seven times in the five-year period ending April 25, 1999,
unless earlier terminated or extended as provided below. The Whitmire
Stockholders may only request up to four Required Registrations during the
three-year period ending April 25, 1997. Cardinal will pay all expenses incurred
in connection with up to four Required Registrations, exclusive of the fees and
expenses of counsel for selling stockholders. In addition, the selling Whitmire
Stockholders will be responsible for any underwriters' discounts and commissions
attributable to the sale of their shares.
Cardinal is not required to effect the first Required Registration under
the Registration Rights Agreement unless Whitmire Stockholders (together with
certain permitted transferees) making the request hold at least 1,250,000 Common
Shares and Class B Common Shares, and Cardinal is not required to effect
subsequent Required Registrations unless such persons hold (i) at least 937,500
Common Shares and Class B Common Shares acquired in the Whitmire Merger, or (ii)
Common Shares and Class B Common Shares acquired in the Whitmire Merger with a
fair market value of at least $25 million. The Whitmire Stockholders may not
make a request for a Required Registration until 180 days have elapsed since the
completion of a prior Required Registration. In addition, Cardinal has the right
to delay for up to 90 days the filing of a registration statement with respect
to a Required Registration if Cardinal's Board of Directors determines such
action is in the best interests of Cardinal's shareholders, but Cardinal may not
invoke a delay if at least 12 months have not elapsed from the end of any
previous delay period. These delays and certain other events will extend on a
day-for-day basis the five- and three-year periods referred to in the preceding
and following paragraphs.
The Registration Rights Agreement also provides that the Whitmire
Stockholders have the right to include their Common Shares in registration
statements filed by Cardinal in connection with primary or secondary offerings
for cash (with certain exceptions). These "piggyback" registration rights also
terminate on April 25, 1999 unless earlier terminated or extended.
The demand and piggyback registration rights granted to (i) CEA, its
affiliates and successors (the "Chemical Holders"), and (ii) Apollo Investment
Fund, L.P., its affiliates and successors (the "Apollo Holders"), terminate
prior to April 25, 1999, if the Chemical Holders or the Apollo Holders, as the
case may be, either (i) shall beneficially own fewer than 312,500 Common Shares
and Class B Common Shares or (ii) shall acquire more than an additional 625,000
Common Shares and Class B Common Shares without the Company's consent. The
Registration Rights Agreement also limits the grant by Cardinal of additional
registration rights.
SOLOMONS REGISTRATION RIGHTS
Cardinal has granted to the former shareholders of Solomons Company
("Solomons Stockholders") the right until May 4, 1995 (exercisable by holders
representing a majority of all Common Shares issued to Solomons Stockholders in
the Solomons Merger) to include Common Shares received in the Solomons Merger in
registration statements filed by Cardinal in connection with offerings of Common
Shares. This participation by Solomons Stockholders is limited to 10% of the
number of Common Shares offered in such registration statement.
BEHRENS REGISTRATION RIGHTS
Cardinal has granted to the former shareholders of Behrens Inc. ("Behrens
Stockholders") the right until July 18, 1996 (exercisable by holders
representing a majority of all Common Shares issued to Behrens Stockholders in
the Behrens Merger) to include up to an aggregate of 187,500 Common Shares
received in the Behrens Merger in registration statements filed by Cardinal in
connection with offerings of Common Shares. The Common Shares to be included in
a registration statement at the request of Behrens Stockholders, when combined
with Common Shares included in such a registration statement at the request of
Solomons Stockholders, shall not exceed 10% of the number of Common Shares
offered in such a registration statement. Upon completion of the Combined
Offering and assuming no exercise by the U.S. Underwriters of the overallotment
option, 87,500 Common Shares will remain subject to the registration rights of
Behrens Stockholders.
12
<PAGE> 13
SHARES ELIGIBLE FOR FUTURE SALE
Pursuant to the Registration Rights Agreement described above, Cardinal has
granted to certain of the Whitmire Stockholders the right, exercisable during
the five-year period ending April 25, 1999, to register 7,800,858 Common Shares
(which number reflects all stock splits and stock dividends and assumes
conversion of all 2,971,375 Class B Common Shares and the exercise of options to
purchase all 532,333 Common Shares held by Mr. Whitmire) issued or issuable to
the Whitmire Stockholders as a result of the Whitmire Merger. Assuming the sale
of 5,145,000 Common Shares hereunder and no exercise by the U.S. Underwriters of
the overallotment option, the Whitmire Stockholders will continue to have
2,655,858 Common Shares available for future sale.
In connection with the Solomons Merger, Solomons Stockholders received, in
a private placement, 1,062,000 Common Shares (which number reflects all stock
splits and stock dividends). Assuming the sale of 10,000 Common Shares
hereunder, Solomons Stockholders will continue to have 1,052,000 Common Shares
available for future sale, which shares are restricted under the Securities Act.
Solomons Stockholders will be able to sell such Common Shares under Rule 144 of
the Securities Act beginning May 4, 1995, and they have certain registration
rights described above until such date.
In connection with the Behrens Merger, Behrens Stockholders received, in a
private placement, 943,747 Common Shares (which number reflects all stock splits
and stock dividends). Assuming the sale of 100,000 Common Shares hereunder, and
no exercise by the U.S. Underwriters of the overallotment option, Behrens
Stockholders will continue to have 843,747 Common Shares available for future
sale, which shares are restricted under the Securities Act. The Behrens
Stockholders will be able to sell such Common Shares under Rule 144 of the
Securities Act beginning July 18, 1996, and they have certain registration
rights described above until such date.
The Company and the Selling Shareholders (who will beneficially own after
the Combined Offering 4,669,881 Common Shares, assuming no exercise by the U. S.
Underwriters of the overallotment option, and the conversion of all Class B
Common Shares into Common Shares) have agreed that, for a period of 90 days from
the date of this Prospectus, they will not, without the prior written consent of
Smith Barney Inc., sell, contract to sell, or otherwise dispose of, any Common
Shares, or any securities convertible into, or exercisable or exchangeable for,
Common Shares, except under certain circumstances set forth in the U.S.
Underwriting Agreement and the International Underwriting Agreement.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital shares consist of: (a) 60,000,000 Common
Shares, without par value, of which at August 8, 1994, 36,247,148 were
outstanding, 3,930,000 were reserved for issuance under stock incentive plans
(including approximately 1,020,000 Common Shares reserved for issuance under
stock option agreements entered into between the Company and former holders of
options to purchase shares of common stock of Whitmire), and 2,971,375 were
reserved for issuance upon conversion of the Company's outstanding Class B
Common Shares (as defined below); (b) 5,000,000 Class B common shares, without
par value (the "Class B Common Shares"), of which, at August 8, 1994, 2,971,375
were outstanding; and (c) 500,000 non-voting preferred shares, without par value
(the "Preferred Shares"), none of which has been issued. The Class B Common
Shares were authorized in February 1994 in connection with the Whitmire Merger
because Chemical Equity Associates ("CEA"), one of the former Whitmire
Stockholders, is regulated under the Bank Holding Company Act and is thus
prohibited from holding voting stock of Cardinal in excess of certain
limitations. All of the outstanding Class B Common Shares are held by CEA.
All of the outstanding Common Shares and Class B Common Shares are fully
paid and nonassessable. Holders of the Common Shares and Class B Common Shares
do not have preemptive rights. All holders of the Common Shares and the Class B
Common Shares share equally in dividends, when and as declared by the Board of
Directors. Generally, holders of Common Shares have no rights to convert their
shares into any other security; except, however, any Regulated Shareholder (a
defined term in the Company's Amended and Restated Articles of Incorporation, as
amended (the "Articles")), is entitled to convert at any time any or all
13
<PAGE> 14
of its Common Shares into the same number of Class B Common Shares. Holders of
Class B Common Shares may convert such shares into Common Shares only if the
holder reasonably believes that the converted shares will be transferred within
15 days pursuant to a Conversion Event (a defined term in the Articles which
generally involves a disposition of the Class B Common Shares), such holder
agrees not to vote any such Common Shares prior to such Conversion Event and
such holder undertakes to promptly convert such shares into Class B Common
Shares if the Common Shares are not transferred pursuant to that Conversion
Event. In the event of liquidation of the Company, holders of the Common Shares
and the Class B Common Shares are entitled to share ratably in any assets
remaining after payment of all liabilities, subject to prior distribution rights
of any Preferred Shares then outstanding. Holders of the Common Shares are
entitled to one vote per share for the election of directors and upon all
matters on which shareholders are entitled to vote. Holders of Class B Common
Shares are entitled to one-fifth of one vote per share in the election of
directors and upon all matters on which shareholders are entitled to vote.
Holders of Common Shares and Class B Common Shares are entitled to vote their
shares cumulatively for the election of directors subject to compliance with
provisions of applicable law.
Pursuant to the Company's Restated Code of Regulations (the "Regulations"),
the Company's board of directors consists of fourteen members, divided into two
classes of five members each and a third class of four members. The Regulations
provide that the number of directors may be increased or decreased by action of
the board of directors upon the majority vote of the board, but in no case shall
the number of directors be fewer than nine or more than fourteen without an
amendment approved by the affirmative vote of the holders of not less than 75%
of the shares having voting power with respect to that proposed amendment. The
Regulations require that any proposal to either remove a director during his
term of office or to further amend the Regulations relating to the
classification or removal of directors be approved by the affirmative vote of
the holders of not less than 75% of the shares having voting power with respect
to such proposal. The board of directors may fill any vacancy with a person who
shall serve until the shareholders hold an election to fill the vacancy. The
purpose of these provisions is to prevent directors from being removed from
office prior to the expiration of their respective terms, thus protecting the
safeguards inherent in the classified board structure unless dissatisfaction
with the performance of one or more directors is widely shared by the Company's
shareholders. These provisions could also have the effect of increasing from one
year to two or three years (depending upon the number of Common Shares and Class
B Common Shares held) the amount of time required for an acquiror to obtain
control of the Company by electing a majority of the board of directors and may
also make the removal of incumbent management more difficult and discourage or
render more difficult certain mergers, tender offers, proxy contests, or other
potential takeover proposals.
The foregoing descriptions of the Common Shares, Class B Common Shares and
Preferred Shares and the provisions relating to the Articles and Regulations are
not complete and are qualified in their entirety by reference to the Articles
and the Regulations, which are incorporated by reference into the Registration
Statement of which this Prospectus is a part. See "Available Information."
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Common Shares is Bank
One, Indianapolis, NA, Indianapolis, Indiana.
14
<PAGE> 15
UNDERWRITING
Upon the terms and subject to the conditions contained in the U.S.
Underwriting Agreement dated the date hereof, each of the underwriters of the
United States and Canadian offering of Common Shares named below (the "U.S.
Underwriters"), for whom Smith Barney Inc., Goldman, Sachs & Co., Bear, Stearns
& Co. Inc., and William Blair & Company are acting as Representatives (the
"Representatives"), has severally agreed to purchase, and the Company has agreed
to sell to each U.S. Underwriter, the number of Common Shares set forth opposite
the name of such U.S. Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER COMMON SHARES
------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITER COMMON SHARES
------------------------------------------------
<S> <C>
Smith Barney Inc.................. 940,000
Goldman, Sachs & Co............... 940,000
Bear, Stearns & Co. Inc........... 940,000
William Blair & Company........... 940,000
Alex. Brown & Sons Incorporated... 100,000
Dain Bosworth Incorporated........ 70,000
Dean Witter Reynolds Inc. ........ 100,000
Dillon, Read & Co. Inc. .......... 100,000
Donaldson, Lufkin & Jenrette
Securities Corporation.......... 100,000
A. G. Edwards & Sons, Inc. ....... 100,000
Kemper Securities, Inc. .......... 70,000
McDonald & Company Securities,
Inc. ........................... 70,000
Merrill Lynch, Pierce, Fenner &
Smith Incorporated.............. 100,000
Montgomery Securities............. 100,000
Morgan Stanley & Co.
Incorporated.................... 100,000
The Ohio Company.................. 70,000
PaineWebber Incorporated.......... 100,000
Piper Jaffray Inc. ............... 70,000
Principal Financial Securities,
Inc. ........................... 70,000
Raymond James & Associates,
Inc. ........................... 70,000
The Robinson-Humphrey Company,
Inc. ........................... 70,000
Roney & Co. ...................... 70,000
SBCI Swiss Bank Corporation
Investment banking Inc. ........ 100,000
Scott & Stringfellow, Inc. ....... 70,000
Wedbush Morgan Securities......... 70,000
Wheat, First Securities, Inc. .... 70,000
--------------
Total..................... 5,600,000
===============
</TABLE>
Under the terms and subject to the conditions contained in the International
Underwriting Agreement dated the date hereof, each of the managers of the
concurrent international offering of Common Shares named below (the "Managers"),
for whom Smith Barney Inc., Goldman Sachs International, Bear, Stearns
International Limited, and William Blair & Company are acting as lead managers
(the "Lead Managers"), has severally agreed to purchase, and the Company has
agreed to sell to each Manager, the number of Common Shares set forth opposite
the name of such Manager.
<TABLE>
<CAPTION>
NUMBER OF
MANAGER COMMON SHARES
------------------------------------------------
<S> <C>
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
MANAGER COMMON SHARES
------------------------------------------------
<S> <C>
Smith Barney Inc.................. 350,000
Goldman Sachs International....... 350,000
Bear, Stearns International
Limited......................... 350,000
William Blair & Company........... 350,000
--------------
Total..................... 1,400,000
===============
</TABLE>
15
<PAGE> 16
The obligations of the several U.S. Underwriters and Managers to pay for
and accept delivery of the Common Shares are subject to approval of certain
legal matters by counsel and to certain other conditions. The U.S. Underwriters
and Managers are obligated to take and pay for all Common Shares offered hereby
(other than those covered by the overallotment option described below) if any
such Common Shares are taken.
The Representatives and Lead Managers have advised the Company that the
U.S. Underwriters and Managers propose to offer part of the Common Shares
directly to the public at the public offering price set forth in the cover page
of this Prospectus and part of the Common Shares to certain dealers at a price
which represents a concession not in excess of $.75 per Common Share under the
public offering price. Any U.S. Underwriter or Manager may allow, and such
dealers may reallow, a concession not in excess of $.25 per Common Share to any
other U.S. Underwriter or Manager, respectively, or to certain other dealers.
The Company and certain of the Selling Shareholders have granted to the
U.S. Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to 1,050,000 additional Common Shares at the price to
the public set forth on the cover page of this Prospectus minus the underwriting
discounts and commissions. The overallotment option will be allocated among the
Company and the following Selling Shareholders in the amount set forth opposite
their names: Cardinal -- 266,949 Common Shares; Apollo Investment Fund, L.P. --
383,184 Common Shares; Chemical Equity Associates -- 383,184 Common Shares;
William L. Clifton, Jr. -- 4,285 Common Shares; James R. Clifton -- 3,952 Common
Shares; and The Mary Lacy Clifton Separate Property Trust -- 8,446 Common
Shares. To the extent that the overallotment option is exercised for less than
1,050,000 Common Shares, the option will be exercised pro rata among the Company
and the foregoing Selling Shareholders. The U.S. Underwriters may exercise such
option solely for the purpose of covering overallotments, if any, made in
connection with the sales of the Common Shares offered hereby. To the extent
such option is exercised, each U.S. Underwriter will be obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional Common Shares as the number of Common Shares set forth opposite each
U.S. Underwriter's name in the preceding table bears to the total number of
Common Shares listed in such table.
Any offer of Common Shares in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the relevant province of
Canada in which such offer is made.
Each Manager has represented and agreed that (i) it has not offered or sold
and will not offer or sell in the United Kingdom, by means of any document, any
Common Shares other than to persons whose ordinary business is to buy or sell
shares or debentures, whether as principal or agent (except under circumstances
that do not constitute an offer to the public within the meaning of the
Companies Act 1985), (ii) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Common Shares in, from, or otherwise involving, the United
Kingdom, and (iii) it has only issued or passed on or will only issue or pass on
to any person in the United Kingdom any investment document (within the meaning
of the Financial Services Act 1986) relating to the Common Shares if that person
is of the kind described in Article 9(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1988.
No action has been or will be taken in any jurisdiction by the Company, any
Selling Shareholder, or the Managers that would permit an offering to the
general public of the Common Shares offered hereby in any jurisdiction other
than the United States.
Purchasers of the Common Shares offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the country
of the purchase in addition to the offering price set forth on the cover page of
this Prospectus.
The Company and the Selling Shareholders (who will beneficially own after
the Combined Offering 4,669,881 Common Shares, assuming no exercise by the U. S.
Underwriters of the overallotment option and the conversion of all Class B
Common Shares to Common Shares) have agreed that, for a period of 90 days from
the date of this Prospectus, they will not, without the prior written consent of
Smith Barney Inc., sell, contract to sell, or otherwise dispose of, any Common
Shares, or any securities convertible into, or exercisable or exchangeable for,
Common Shares, except Common Shares issued (i) pursuant to outstanding options
and
16
<PAGE> 17
employee benefit plans, (ii) in any acquisitions or (iii) upon conversion of
Class B Common Shares of the Company.
The Company, the U.S. Underwriters and the Managers have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.
The U.S. Underwriters and the Managers have entered into an Agreement
between U.S. Underwriters and Managers pursuant to which each U.S. Underwriter
has agreed that, as part of the distribution of 5,600,000 Common Shares offered
in the U.S. Offering (i) it is not purchasing any such Common Shares for the
account of anyone other than a U.S. or Canadian Person and (ii) it has not
offered or sold, and will not offer, sell, resell or deliver, directly or
indirectly, any of such Common Shares or distribute any prospectus relating to
the U.S. Offering outside the United States or Canada or to anyone other than a
U.S. or Canadian Person. In addition, each Manager has agreed that as part of
the distribution of the 1,400,000 Common Shares offered in the International
Offering (i) it is not purchasing any such Common Shares for the account of any
U.S. or Canadian Person and (ii) it has not offered or sold, and will not offer,
sell, resell or deliver, directly or indirectly, any of such Common Shares or
distribute any prospectus relating to the International Offering in the United
States or Canada or to any U.S. or Canadian Person. Each U.S. Underwriter and
Manager has also agreed that it will offer to sell Common Shares only in
compliance with all relevant requirements of any applicable laws.
The foregoing limitations do not apply to stabilization transactions or to
certain other transactions specified in the U.S. Underwriting Agreement, the
International Underwriting Agreement and the Agreement between U.S. Underwriters
and Managers including, (i) certain purchases and sales between the U.S.
Underwriters and the Managers, (ii) certain offers, sales, resales, deliveries
or distributions to or through investment advisors or other persons exercising
investment discretion, (iii) purchases, offers or sales by a U.S. Underwriter
who is also acting as a U.S. Underwriter, and (iv) other transactions
specifically approved by the Representatives and the Lead Managers. As used
herein, "U.S. or Canadian Person" means any resident or national of the United
States or Canada, any corporation, partnership or other entity created or
organized in or under the laws of the United States or Canada or any estate or
trust the income of which is subject to United States or Canadian income
taxation regardless of the source of its income (other than the foreign branch
of any U.S. or Canadian Person), and includes any United States or Canadian
branch of a person other than a U.S. or Canadian Person.
LEGAL MATTERS
Certain legal matters in connection with the offering of the Common Shares
will be passed upon for the Company by Baker & Hostetler, Columbus, Ohio.
Michael E. Moritz, a director of the Company, is a partner of Baker & Hostetler
and is the beneficial owner of 551,233 Common Shares. Certain legal matters in
connection with the Common Shares offered hereby will be passed upon for the
Underwriters by Davis Polk & Wardwell. Certain legal matters in connection with
the Common Shares offered hereby will be passed upon for certain of the Selling
Shareholders by Wachtell, Lipton, Rosen & Katz.
17
<PAGE> 18
EXPERTS
The consolidated financial statements of the Company and its consolidated
subsidiaries as of June 30, 1994 and for the year then ended and the
consolidated financial statements of the Company and its consolidated
subsidiaries, except Whitmire Distribution Corporation, as of March 31, 1993 and
1992 and for the years then ended, incorporated in this Prospectus by reference
from the Company's Annual Report on Form 10-K for the year ended June 30, 1994
have been audited by Deloitte & Touche LLP as stated in their report which is
incorporated herein by reference (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to the change in the method of
accounting for income taxes). The financial statements of Whitmire Distribution
Corporation (consolidated with those of the Company in the consolidated
financial statements for the years ended March 31, 1993 and 1992) have been
audited by Arthur Andersen LLP, as stated in its report which is incorporated
herein by reference from the Company's Annual Report on Form 10-K for the year
ended June 30, 1994. Such consolidated financial statements of the Company and
its consolidated subsidiaries are incorporated by reference herein in reliance
upon the respective reports of such firms given upon their authority as experts
in accounting and auditing. Both of the foregoing firms are independent
auditors.
18
<PAGE> 19
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Company.......................... 3
Use of Proceeds...................... 6
Market Price and Dividend Data....... 6
Capitalization....................... 7
Selected Consolidated Financial
Information........................ 8
Selling Shareholders................. 10
Description of Capital Stock......... 13
Underwriting......................... 15
Legal Matters........................ 17
Experts.............................. 18
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
7,000,000 SHARES
[Logo]
COMMON SHARES
----------------------------------
PROSPECTUS
SEPTEMBER 19, 1994
----------------------------------
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
WILLIAM BLAIR & COMPANY
- ------------------------------------------------------
- ------------------------------------------------------
