<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1997 Commission File Number 0-12591
CARDINAL HEALTH, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-0958666
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5555 GLENDON COURT, DUBLIN, OHIO 43016
(Address of principal executive offices and zip code)
(614) 717-5000
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
The number of Registrant's Common Shares outstanding at the close of
business on April 30, 1997 was as follows:
Common Shares, without par value: 108,532,925
<PAGE> 2
CARDINAL HEALTH, INC. AND SUBSIDIARIES
Index *
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
Part I. Financial Information:
----------------------
Item 1. Financial Statements:
Consolidated Statements of Earnings for the Fiscal Quarter and Nine
Months Ended March 31, 1997 and 1996............................................... 3
Consolidated Balance Sheets at March 31, 1997 and June 30, 1996.................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 1997 and 1996............................................................ 5
Notes to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................................ 9
Part II. Other Information:
------------------
Item 1. Legal Proceedings.................................................................. 11
Item 5. Other Information.................................................................. 11
Item 6. Exhibits and Reports on Form 8-K................................................... 12
</TABLE>
* Items omitted are inapplicable.
Page 2
<PAGE> 3
PART I. FINANCIAL INFORMATION
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Quarter Ended Nine Months Ended
------------------------------- -------------------------------
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues $ 2,825,500 $ 2,352,254 $ 8,177,382 $ 6,824,765
Cost of products sold 2,581,842 2,148,667 7,513,038 6,255,285
-------------- -------------- -------------- --------------
Gross margin 243,658 203,587 664,344 569,480
Selling, general and administrative expenses 129,702 122,382 381,171 356,604
Unusual items, merger costs (39,604) -- (56,963) (17,552)
-------------- -------------- -------------- --------------
Operating earnings 74,352 81,205 226,210 195,324
Other income (expense):
Interest expense (8,414) (8,664) (22,388) (19,838)
Other, net-- primarily interest income 787 2,836 5,308 8,630
-------------- -------------- -------------- --------------
Earnings before income taxes 66,725 75,377 209,130 184,116
Provision for income taxes 30,497 30,686 89,901 77,496
-------------- -------------- -------------- --------------
Net earnings $ 36,228 $ 44,691 $ 119,229 $ 106,620
============== ============== ============== ==============
Net earnings per Common Share:
Primary $ 0.33 $ 0.43 $ 1.10 $ 1.05
Fully diluted $ 0.33 $ 0.43 $ 1.10 $ 1.04
Weighted average number of Common
Shares outstanding:
Primary 110,246 102,788 108,711 101,763
Fully diluted 110,247 103,852 108,809 102,902
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, June 30,
1997 1996
-------------- ---------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 12,521 $ 304,281
Marketable securities available-for-sale -- 54,335
Trade receivables 759,206 612,277
Current portion of net investment in sales-type leases 47,608 37,953
Merchandise inventories 1,570,482 1,272,616
Prepaid expenses and other 76,605 62,826
-------------- ---------------
Total current assets 2,466,422 2,344,288
-------------- ---------------
Property and equipment, at cost 467,041 300,328
Accumulated depreciation and amortization (200,815) (133,472)
-------------- ---------------
Property and equipment, net 266,226 166,856
Other assets:
Net investment in sales-type leases, less current portion 104,527 111,604
Goodwill and other intangibles 128,497 114,901
Other 85,994 87,526
-------------- ---------------
Total $ 3,051,666 $ 2,825,175
============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 146,496 $ --
Current portion of long-term obligations 6,890 106,008
Accounts payable 1,034,415 1,138,368
Other accrued liabilities 233,825 175,498
-------------- ---------------
Total current liabilities 1,421,626 1,419,874
-------------- ---------------
Long-term obligations, less current portion 279,539 265,146
Deferred income taxes and other liabilities 91,713 104,317
Shareholders' equity:
Common Shares, without par value 629,879 558,598
Retained earnings 640,157 492,762
Common Shares in treasury, at cost (5,867) (11,522)
Other (5,381) (4,000)
-------------- ---------------
Total shareholders' equity 1,258,788 1,035,838
-------------- ---------------
Total $ 3,051,666 $ 2,825,175
============== ===============
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
CARDINAL HEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
March 31, March 31,
1997 1996
-------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 119,229 $ 106,620
Adjustments to reconcile net earnings to net cash from operations:
Depreciation and amortization 38,945 28,594
Provision for bad debts 5,923 7,129
Change in operating assets and liabilities, net of effects from acquisitions:
Increase in trade receivables (133,469) (60,377)
Increase in merchandise inventories (283,324) (171,104)
Increase in net investment in sales-type leases (2,578) (23,731)
Increase (decrease) in accounts payable (114,543) 48,231
Other operating items, net 37,540 32,660
-------------- ---------------
Net cash used in operating activities (332,277) (31,978)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of subsidiary, net of cash acquired -- (36,244)
Proceeds from sale of property and equipment 2,148 717
Additions to property and equipment (52,002) (63,048)
Purchase of marketable securities available-for-sale (3,400) (88,034)
Proceeds from sale of marketable securities available-for-sale 57,735 121,565
-------------- ---------------
Net cash provided by (used in) investing activities 4,481 (65,044)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity 127,684 (3,000)
Reduction of long-term obligations (129,501) (23,252)
Proceeds from long-term obligations 604 148,960
Proceeds from issuance of Common Shares 34,516 57,895
Tax benefit of stock options 10,500 7,455
Dividends paid on Common Shares and cash paid in lieu
of fractional shares (6,388) (6,163)
Purchase of treasury shares (1,379) (1,304)
-------------- ---------------
Net cash provided by financing activities 36,036 180,591
-------------- ---------------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS (291,760) 83,569
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 304,281 70,660
-------------- ---------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 12,521 $ 154,229
============== ===============
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. The consolidated financial statements of the Company include the
accounts of all majority-owned subsidiaries and all significant
intercompany amounts have been eliminated. The consolidated financial
statements contained herein have been restated to give retroactive
effect to the mergers with Medicine Shoppe International, Inc.
("Medicine Shoppe") on November 13, 1995, Pyxis Corporation ("Pyxis")
on May 7, 1996 and Owen Healthcare, Inc. ("Owen") on March 18, 1997,
including adjustments to conform certain accounting practices of Owen
to those followed by the Company. Such business combinations were
accounted for under the pooling-of-interests method (see Note 3).
These consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and include all of the
information and disclosures required by generally accepted accounting
principles for interim reporting. In the opinion of management, all
adjustments necessary for a fair presentation have been included. All
such adjustments are of a normal and recurring nature.
The consolidated financial statements included herein should be read in
conjunction with the audited consolidated financial statements and
related notes contained in the Company's annual report on Form 10-K for
the fiscal year ended June 30, 1996.
Note 2. Net earnings per Common Share are based on the weighted average number
of Common Shares outstanding during each period and the dilutive effect
of stock options from the date of grant, computed using the treasury
stock method. For the three and nine months ended March 31, 1996, fully
diluted net earnings per Common Share include the effect of convertible
subordinated notes.
Note 3. On March 18, 1997, the Company completed a merger with Owen (the "Owen
Merger"). The Owen Merger was accounted for as a pooling-of-interests.
The Company issued approximately 7.7 million Common Shares to Owen
shareholders and Owen's outstanding stock options were converted into
options to purchase approximately 0.7 million Common Shares. The term
"Cardinal" as used herein refers to Cardinal Health, Inc. and
subsidiaries prior to the Owen Merger.
Cardinal's fiscal year end is June 30 and Owen's fiscal year end was
November 30. The consolidated financial statements for the quarter
ended March 31, 1997 combine Cardinal and Owen for the same period of
time. For the nine months ended March 31, 1997, the consolidated
financial statements combine Cardinal's nine months ended March 31,
1997 with Owen's financial results for the period of June 1, 1996 to
March 31, 1997 (excluding Owen's financial results for December 1996 in
order to change Owen's fiscal year end to June 30). For the quarter and
nine months ended March 31, 1996, the consolidated financial statements
combine Cardinal's March 31, 1996 period end results with Owen's
financial results for the quarter and nine months ended August 31,
1995. Due to the change in Owen's fiscal year from November 30 to
conform with Cardinal's June 30 fiscal year end, Owen's results of
operations for the periods from December 1, 1995 through May 31, 1996
and the month of December 1996 will not be included in the combined
results of operations but will be reflected as an adjustment to
combined retained earnings. Owen's net revenues and net earnings for
these periods were $260.1 million and $5.7 million, respectively.
Owen's cash flows from operating and financing activities for these
periods were $0.9 million and $0.7 million, respectively, while cash
flows used in investing activities were $5.6 million. Cardinal's net
revenues and net earnings for the six months ended December 31, 1996
were $5,117 million and $78.2 million, respectively.
On October 11, 1996, the Company completed a merger with PCI Services,
Inc. ("PCI"). The merger was accounted for as a pooling-of-interests.
The Company issued approximately 3.1 million Common Shares to PCI
shareholders and PCI's outstanding stock options were converted into
options to purchase approximately 0.2 million Common Shares. The
historical cost of PCI assets combined was approximately $148.4 million
and the total liabilities assumed (including total debt of
approximately
Page 6
<PAGE> 7
$62.0 million) were approximately $87.8 million. The impact of the PCI
merger, on a historical basis, is not significant. Accordingly, prior
period financial statements have not been restated for the PCI merger.
During the three month period ended March 31, 1997, the Company
recorded non-recurring costs totaling approximately $39.6 million
($27.5 million, net of tax) primarily related to the Owen Merger. These
costs included approximately $12.5 million for transaction fees and
employee costs associated with the merger; $10.1 million related to
certain asset impairments and exit costs; and $4.9 million for other
integration and restructuring costs associated with the merger. Certain
of these amounts are based upon estimates, and actual amounts paid may
ultimately differ from these estimates. If additional costs are
incurred, such items will be expensed in subsequent periods.
During the three month period ended December 31, 1996, the Company
recorded non-recurring costs totaling approximately $17.4 million
($12.7 million, net of tax) related to the PCI merger. As a result of
the mergers with Medicine Shoppe and Pyxis in fiscal 1996, the Company
recorded non-recurring costs totaling approximately $67.3 million
($47.8 million, net of tax).
During the nine months ended March 31, 1997, the Company utilized
approximately $28 million related to the costs recorded at the time of
the various mergers. The Company's current estimates of the merger
costs ultimately to be incurred are not materially different from the
amounts originally recorded.
The following supplemental information, which is presented for purposes
of facilitating meaningful comparisons to ongoing operations and to
other companies, summarizes the results of operations of the Company,
adjusted on a pro forma basis to reflect the elimination of the effect
of the non-recurring merger costs discussed above.
<TABLE>
<CAPTION>
Fiscal Quarter Ended
------------------------------------------------------------------
March 31, Percentage March 31, Percentage
1997 of Net Sales 1996 of Net Sales
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating earnings $113,956 4.03% $81,205 3.45%
Net earnings $ 63,750 2.26% $44,691 1.90%
Net earnings per Common Share:
Primary $ 0.58 $ 0.43
Fully diluted $ 0.58 $ 0.43
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------------------------------------------
March 31, Percentage March 31, Percentage
1997 of Net Sales 1996 of Net Sales
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Operating earnings $283,173 3.46% $212,876 3.12%
Net earnings $159,406 1.95% $119,115 1.75%
Net earnings per Common Share:
Primary $ 1.47 $ 1.17
Fully diluted $ 1.47 $ 1.16
</TABLE>
The differences between the above results and those reported in the
Consolidated Statements of Earnings are due solely to the assumed
elimination of the above mentioned non-recurring expenses primarily
associated with the Owen and PCI mergers during the three and nine
months ended March 31, 1997, and the elimination of approximately $17.6
million ($12.5 million, net of tax) incurred primarily in connection
with the merger with Medicine Shoppe during the nine months ended March
31, 1996.
Page 7
<PAGE> 8
Note 4. On October 29, 1996, the Board of Directors of the Company declared a
three-for-two stock split which was effected as a stock dividend and
distributed on December 16, 1996 to shareholders of record on December
2, 1996. All share and per share information have been retroactively
restated for the stock split.
Note 5. The Company filed a shelf debt registration statement on Form S-3 with
the Securities and Exchange Commission, which was declared effective on
April 21, 1997. The registration increases the Company's shelf debt
capacity by $350 million to a total of $400 million. No securities have
been sold under this registration statement.
Note 6. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share," which will require retroactive adoption in the
Company's fiscal quarter ending December 31, 1997. The new standard
simplifies the computation of earnings per share and requires the
presentation of basic and diluted earnings per share. The Company
believes that in light of its present capital structure, the impact of
adopting SFAS 128 will not be significant.
Page 8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management's discussion and analysis presented below has been prepared to
give retroactive effect to the pooling-of-interests business combinations with
Medicine Shoppe on November 13, 1995, Pyxis on May 7, 1996 and Owen on March
18, 1997 (see Notes 1 and 3 of "Notes to Consolidated Financial Statements").
On October 11, 1996, the Company completed a merger with PCI, which was also
accounted for as a pooling-of-interests. The impact of the PCI merger, on a
historical basis, is not significant. Accordingly, prior period financial
statements have not been restated for the PCI merger (see Note 3 of "Notes to
Consolidated Financial Statements"). This discussion and analysis is concerned
with material changes in financial condition and results of operations for the
Company's consolidated balance sheets as of March 31, 1997 and June 30, 1996,
and for the consolidated statements of earnings for the three and nine month
periods ended March 31, 1997 and 1996.
Portions of management's discussion and analysis presented below include
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks, uncertainties and other factors which could cause actual results to
materially differ from those projected or implied. The most significant of such
risks, uncertainties and other factors are described in Exhibit 99.01 to this
Form 10-Q, which is incorporated herein by reference.
RESULTS OF OPERATIONS
Net Revenues. Net revenues increased 20% for the three and nine month
periods ended March 31, 1997, as compared to the prior year. The growth in
Company's pharmaceutical distribution and pharmacy management service
businesses were the largest factors contributing to the increases. The
increases primarily resulted from internal growth fueled by the addition of new
customers, increased volume from existing customers and price increases.
Incremental revenues were also provided by the addition of PCI operations
following the merger in October 1996. Expansion of the Company's relationship
with Kmart Corporation ("Kmart") and opportunities created by the deterioration
of the financial condition of a major pharmaceutical distribution competitor
also contributed to the increases during the third quarter and nine months
ended March 31, 1997.
Gross Margin. As a percentage of net revenues, gross margin for the third
quarter was 8.62% compared to 8.65% in the prior year. For the nine months
ended March 31, 1997 and 1996, gross margin was 8.12% and 8.34%, respectively.
The change in gross margin in the nine month period is primarily due to the
shift in net revenue mix caused by significant increases in the relatively
lower margin pharmaceutical distribution activities (see "Net Revenues" above).
The impact of this shift was partially offset by increased merchandising and
marketing programs with customers and suppliers, and the additional gross
margin contributed by the PCI operations. The Company's gross margin continues
to be affected by the combination of a highly competitive environment and a
greater mix of high volume customers, where a lower cost of service and better
asset management enable the Company to offer lower selling margins and still
achieve higher operating margins.
Selling, General and Administration Expenses. Selling, general and
administrative expenses as a percentage of net revenues improved to 4.59% in
the third quarter of fiscal 1997 compared to 5.20% in the prior year, and 4.66%
for the nine month period ended March 31, 1997 compared to 5.23% in the prior
year. The improvements in the third quarter and the nine month period reflect
the economies associated with the Company's revenue growth, as well as
significant productivity gains resulting from continued cost control efforts,
and the consolidation and selective automation of operating facilities.
Unusual Items, Merger Costs. The Company recorded certain non-recurring
charges to primarily reflect the estimated PCI and Owen merger costs during the
nine months ended March 31, 1997 and charges to reflect the estimated Medicine
Shoppe merger costs during the nine months ended March 31, 1996. See further
discussion in Note 3 of "Notes to Consolidated Financial Statements."
Interest Expense. The increase in interest expense for the nine month
period ended March 31, 1997, as compared to the prior year is primarily due to
the Company's issuance of $150 million, 6% Notes due 2006, in a public offering
in January 1996, which has been used for working capital purposes (see
"Liquidity and Capital Resources"). Partially offsetting this increase is the
impact of the extinguishment of the Company's $100 million 8% Notes on March 1,
1997.
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<PAGE> 10
Provision for Income Taxes. The Company's effective income tax rate
increased during the three and nine months ended March 31, 1997 compared to the
prior year primarily due to nondeductible items associated with the current
year's business combinations (see Note 3 of "Notes to Consolidated Financial
Statements").
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $1,044.8 million at March 31, 1997 from
$924.4 million at June 30, 1996. This increase included additional investments
in merchandise inventories and trade receivables of $297.9 million and $146.9
million, respectively, and a decrease in accounts payable of $104.0 million.
Offsetting the increases in working capital were decreases in cash and
equivalents, and marketable securities available-for-sale of $291.8 million and
$54.3 million, respectively. Increases in merchandise inventories reflect the
seasonal increase of inventories and higher level of business volume in
pharmaceutical distribution activities, including higher inventories required
by the new pharmaceutical services agreement with Kmart. The increase in trade
receivables is consistent with the Company's revenue growth (see "Net Revenues"
above). The change in cash and equivalents, marketable securities
available-for-sale and accounts payable is due to the timing of inventory
purchases and related payments.
The Company currently has the capacity to issue $400 million of additional
long-term debt pursuant to a shelf debt registration statement filed with the
Securities Exchange Commission (see Note 5 of "Notes to Consolidated Financial
Statements"). The Company does not currently have any specific plans to issue
additional debt under this facility.
Property and equipment, at cost, increased by $166.7 million from June 30,
1996. Of this amount, $111.5 million was attributable to the merger with PCI.
The additional increase in property and equipment included increased
investments in management information systems and customer support systems, as
well as upgrades to distribution facilities.
Shareholders' equity increased to $1,258.8 million at March 31, 1997 from
$1,035.8 million at June 30, 1996, primarily due to net earnings of $119.2
million, equity of PCI on the merger date of $60.6 million and issuances of
Common Shares resulting from stock option exercises and related tax benefits in
the amount of $44.9 million.
Page 10
<PAGE> 11
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
In November 1993, the Company and Whitmire Distribution Corporation
("Whitmire"), as well as other pharmaceutical wholesalers, were named as
defendants in a series of purported class action antitrust lawsuits which were
later consolidated and transferred by the Judicial Panel for Multi-District
Litigation to the United States District Court for the Northern District of
Illinois (the "Brand Name Prescription Drug Litigation"). Subsequent to the
consolidation, a new consolidated complaint was filed which included
allegations that the wholesaler defendants, including the Company and Whitmire,
conspired with manufacturers to inflate prices by using a chargeback pricing
system. In addition to the Federal court cases described above, the Company and
Whitmire have also been named as defendants in a series of state court cases
alleging similar claims under various state laws regarding the sale of brand
name prescription drugs. These lawsuits are described in "Item 1 - Legal
Proceedings" of Part II of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, which is incorporated herein by reference. On
November 9, 1995, the Company, along with the other wholesaler defendants,
filed a motion for summary judgment in the Brand Name Prescription Drug
Litigation. On April 4, 1996, summary judgment was granted in favor of the
Company and the other wholesaler defendants. The plaintiffs have appealed this
decision. The Company believes that the allegations against the Company and
Whitmire in such litigation are without merit, and it intends to contest such
allegations vigorously. The Company also becomes involved from time to time in
litigation incidental to its business. Although the ultimate resolution of the
litigation referenced herein cannot be forecast with certainty, the Company
does not believe that the outcome of these lawsuits will have a material
adverse effect on the Company's financial condition or results of operations.
Item 5: Other Information
Set forth below are certain unaudited financial results reflecting the combined
operating results of the Company and Owen for the thirty days ended April 17,
1997. These financial results are presented to satisfy the requirements for
publication of combined results of operations with respect to affiliate trading
restrictions as specified in pooling-of-interest accounting treatment. This
information is presented only to satisfy such requirements and is not
necessarily indicative of future operating results or financial condition.
CARDINAL HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data) Thirty Days
Ended
April 17, 1997
--------------
<S> <C>
Net sales $941,200
Net earnings $ 20,900
Net earnings per Common Share:
Primary $ 0.19
Fully Diluted $ 0.19
Weighted average number of Common Shares outstanding
Primary 110,300
Fully Diluted 110,300
</TABLE>
Page 11
<PAGE> 12
Item 6: Exhibits and Reports on Form 8-K:
(a) Listing of Exhibits:
Exhibit 4.01 Indenture dated as of April 18, 1997, between the
Company and Bank One, Columbus, NA, Trustee. (1)
Exhibit 10.01 Form of Nonqualified Stock Option Agreement.*
Exhibit 10.02 Form of Restricted Shares Agreement.*
Exhibit 10.03 PCI Services, Inc. Stock Option Plan, as amended. (2)*
Exhibit 10.04 Performance-Based Incentive Compensation Plan of the
Registrant.*
Exhibit 11.01 Computation of Per Share Earnings.
Exhibit 27.01 Financial Data Schedule.
Exhibit 99.01 Statement Regarding Forward-Looking Information. (3)
--------------------
(1) Filed as Exhibit 1 to the Current Report on Form 8-K of the
Company dated April 21, 1997, and incorporated herein by reference.
(2) Filed as Exhibit 99 to the Registrant's post-effective Amendment
No. 1 on Form S-8 to Form S-4 Registration Statement (No.
333-11803-01), and incorporated herein by reference.
(3) Filed as Exhibit 99.01 to the Quarterly Report on Form 10-Q of the
Registrant for the quarter ended September 30, 1996, and incorporated
herein by reference.
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K:
On April 21, 1997, the Company filed a Current Report on Form 8-K
under Item 7 which filed as an exhibit an Indenture dated as of April
18, 1997, between the Company and Bank One, Columbus, NA, Trustee.
On March 19, 1997, the Company filed a Current Report on Form 8-K
under Item 5 which reported that it had completed its merger of a
wholly-owned subsidiary with and into Owen Healthcare, Inc. on March
18, 1997.
On March 4, 1997, the Company filed a Current Report on Form 8-K under
Item 5 which reported the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
applicable to the then-pending merger between the Company and Owen
Healthcare, Inc.
Page 12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CARDINAL HEALTH, INC.
Date: May 9, 1997 By: /s/ Robert D. Walter
-----------------------------------
Robert D. Walter
Chairman and Chief Executive Officer
By: /s/ David Bearman
-----------------------------------
David Bearman
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Page 13
<PAGE> 1
EXHIBIT 10.01
NONQUALIFIED STOCK OPTION AGREEMENT
Cardinal Health, Inc., an Ohio corporation (the "Company"), has
granted to ________________("Grantee"), an option (the "Option") to purchase
_________ shares (the "Shares") of common stock in the Company for a total
purchase price (the "Option Price") of $____________ (i.e., the equivalent of
$____________ for each full Share). The Option has been granted pursuant to the
Cardinal Health, Inc. Equity Incentive Plan (the "Plan") and shall include and
be subject to all provisions of the Plan, which are hereby incorporated herein
by reference, and shall be subject to the provisions of this agreement.
Capitalized terms used herein which are not specifically defined herein shall
have the meanings ascribed to such terms in the Plan.
1. Term. The Option shall be exercisable at any time on or after
__________ and prior to __________.
2. Method of Exercise. At any time when the Option is exercisable
under the Plan and this agreement, the Option shall be exercisable from time to
time by written notice to the Company which shall:
(a) state that the Option is thereby being exercised, the number of
Shares with respect to which the Option is being exercised, each
person in whose name any certificates for the Shares should be
registered and his address and social security number;
(b) be signed by the person or persons entitled to exercise the Option
and, if the Option is being exercised by anyone other than the
Grantee, be accompanied by proof satisfactory to counsel for the
Company of the right of such person or persons to exercise the Option
under the Plan and all applicable laws and regulations; and
(c) contain such representations and agreements with respect to the
investment intent of such person or persons in form and substance
satisfactory to counsel for the Company.
3. Payment of Price. The full exercise price for the Option shall be
paid to the Company in cash; however, in the discretion of the Committee, the
exercise price may be paid to the Company: (a) by delivery of Shares with a
fair market value equal to the total exercise price at the time of exercise,
(b) by delivery of cash on the extension of credit by a broker-dealer to whom
the Grantee (or other person authorized to exercise the Option) has submitted a
notice of exercise or an irrevocable election to effect such extension of
credit, or (c) by any combination of the preceding methods.
4. Transferability. The Option shall be transferable (I) at the
Grantee's death, by the Grantee by will or pursuant to the laws of descent and
distribution, and (II) by the Grantee during the Grantee's lifetime, to (a) the
spouse, parents, parents-in-law, siblings, children, grandchildren, nieces, or
nephews of the grantee ("Immediate Family Members"), (b) a trust or trusts for
the primary benefit of the Grantee or such Immediate Family Members, or (c) a
partnership in which the Grantee or such Immediate Family Members are the
majority or controlling partners, provided that subsequent transfers of the
transferred Option shall be prohibited except (X) if the transferee is an
individual, at the transferee's death by the transferee by will or pursuant to
the laws of descent and distribution and (Y) to the individuals or entities
listed in subitems II(a), (b), or (c), above, with respect to the original
Grantee. The Committee may, in its discretion, permit transfers to other
persons and entities as permitted by the Plan. Within ten days of any transfer,
the Grantee shall notify the Stock Option Administrator of the Company in
writing of the transfer. Following transfer, the Option shall continue to be
subject to the same terms and conditions as
<PAGE> 2
were applicable immediately prior to transfer and, except as otherwise provided
in the Plan or this agreement, references to the original Grantee shall be
deemed to refer to the transferee. The events of termination of employment of
the Grantee provided in item 5 hereof shall continue to be applied with respect
to the original Grantee, following which the Option shall be exercisable by the
transferee only to the extent, and for the periods, specified in item 5. The
Company shall have no obligation to notify any transferee of the Grantee's
termination of employment with the Company for any reason. The conduct
prohibited of Grantee in item 7 hereof shall continue to be prohibited of
Grantee following transfer to the same extent as immediately prior to transfer
and the Option (or its economic value, as applicable) shall be subject to
forfeiture by the transferee and recoupment from the Grantee to the same extent
as would have been the case of the Grantee had the Option not been transferred.
The Grantee shall remain subject to the recoupment provisions of item 7 of this
agreement and tax withholding provisions of Section 13(d) of the Plan following
transfer of the Option.
5. Termination of Relationship.
(a) Termination by Death. If the Grantee's employment by the Company
and its subsidiaries (collectively, the "Cardinal Group") terminates
by reason of death, then, unless otherwise determined by the Committee
within five days of such death, any unexercised portion of the Option
shall thereafter be exercisable in full and any unvested portion
thereof shall immediately vest. The Option may thereafter be exercised
by any transferee of the Option, if applicable, or by the legal
representative of the estate or by the legatee of the Grantee under
the will of the Grantee for a period of one year (or such other period
as the Committee may specify at or after grant or death) from the date
of death or until the expiration of the stated term of the Option,
whichever period is shorter.
(b) Termination by Reason of Retirement. If the Grantee's employment
by the Cardinal Group terminates by reason of retirement (as defined
in the Plan), then, unless otherwise determined by the Committee
within sixty days of such retirement, any unexercised portion of the
Option will vest in accordance with item 1 of this agreement and may
thereafter be exercised by the Grantee (or any transferee, if
applicable) until the expiration of the stated term of the Option;
provided, however, if the Grantee dies after retirement but before the
expiration of the stated term of the Option, unless otherwise
determined by the Committee within 5 days of such death, any
unexercised portion of the Option shall thereafter be exercisable in
full and any unvested portion thereof shall immediately vest and the
Option may thereafter be exercised by any transferee of the Option, if
applicable, or by the legal representative of the estate or by the
legatee of the Grantee under the will of the Grantee for a period of
one year (or such other period as the Committee may specify at or
after grant or death) from the date of death or until the expiration
of the stated term of the Option, whichever period is shorter.
(c) Other Termination of Employment. If the Grantee's employment by
the Cardinal Group terminates for any reason other than death or
retirement (subject to Section 10 of the Plan regarding acceleration
of the vesting of the Option upon a Change of Control), any
unexercised portion of the Option which has not vested on such date of
termination will automatically terminate on the date of such
termination. Unless otherwise determined by the Committee at or after
grant or termination, the Grantee (or any transferee, if applicable)
will have ninety days (or such other period as the Committee may
specify at or after grant or termination) from the date of termination
or until the expiration of the stated term of the Option, whichever
period is shorter, to exercise any portion of the Option that is then
exercisable on the date of termination; provided, however,
<PAGE> 3
that if the termination was for Cause, the Option may be immediately
canceled by the Committee (whether then held by Grantee or any
transferee).
6. Restrictions on Exercise. The Option is subject to all restrictions
in this agreement or in the Plan. As a condition of any exercise of the Option,
the Company may require the Grantee or his transferee or successor to make any
representation and warranty to comply with any applicable law or regulation or
to confirm any factual matters (including Grantee's compliance with the terms
of item 7 of this agreement or any employment or severance agreement between
any member of the Cardinal Group and the Grantee) reasonably requested by the
Company.
7. Special Forfeiture/Repayment Rules. If Grantee engages in certain
"Triggering Conduct" (defined below), then: (a) the Option (or any part thereof
that has not been exercised) shall immediately terminate, be forfeited, and
shall cease to be exercisable; and (b) the Grantee shall, within 30 days
following written notice from the Company, pay to the Company an amount equal
to the gross option gain realized or obtained by the Grantee or any transferee
resulting from the exercise of such Option, measured at the date of exercise
(i.e., the difference between the market value of the Option Shares on the
exercise date and the exercise price paid for such Option Shares), with respect
to any portion of the Option that has already been exercised at any time within
three years prior to the Triggering Conduct (the "Look-Back Period"). If the
only Triggering Conduct is Competitor Triggering Conduct (as defined below),
then the Look-Back Period shall be shortened to exclude any period more than
one year prior to Grantee's termination of employment with the Cardinal Group.
As used herein, "Triggering Conduct" shall include activity in
competition with or inimical, contrary, or harmful to the interests of the
Company, including, but not limited to the following: disclosing or misusing
any confidential information or material concerning the Company; violation of
Company policies, including conduct which would constitute a breach of the
then-most recent version of the Certificate of Compliance with Company Policies
signed by the Grantee; accepting employment with or serving as a consultant,
advisor, or any other capacity to an entity that is in competition with the
business conducted by any member of the Cardinal Group (a "Competitor") either
during or within one year following Grantee's termination of employment with
the Cardinal Group ("Competitor Triggering Conduct"); directly or indirectly
employing, contacting concerning employment, or participating in any way in the
recruitment for employment (whether as an employee, officer, director, agent,
consultant or independent contractor) any person who was or is at any time
during the previous twelve months an employee, representative, officer, or
director of the Cardinal Group; and breaching any provision of any employment
or severance agreement with a member of the Cardinal Group. The Committee shall
resolve in good faith any disputes concerning whether particular conduct
constitutes Triggering Conduct, and any such determination by the Committee
shall be conclusive and binding on all interested persons. The Grantee may be
released from Grantee's obligations under this item 7 only if the Committee (or
its duly appointed agent) determines, in its sole discretion, that such action
is in the best interests of the Company.
Nothing in this item 7 constitutes a so-called "noncompete" covenant.
However, this item 7 does prohibit certain conduct while Grantee is associated
with the Cardinal Group and thereafter and does provide for the forfeiture or
repayment of the benefits granted by this agreement under certain
circumstances, including but not limited to the Grantee's acceptance of
employment with a Competitor. Grantee agrees to provide the Company with at
least ten days written notice prior to directly or indirectly accepting
employment with or serving as a consultant, advisor, or any other capacity to a
Competitor, and further agrees to inform any such new employer, before
accepting employment, of the terms of this item 7 and of the Grantee's
continuing obligations contained herein.
No provision of this agreement shall diminish, negate, or otherwise
impact any separate noncompete agreement to which Grantee may be a party.
Grantee acknowledges and agrees that the provisions contained in this item 7
are being made for the benefit of the Company in consideration of Grantee's
receipt of the Option, the adequacy of which consideration is hereby expressly
confirmed. Grantee further acknowledges that the receipt of the Option and
execution of this agreement are voluntary
<PAGE> 4
actions on the part of Grantee, and that the Company is unwilling to provide
the Option to Grantee without including this item 7.
8. Right of Set-Off. By accepting this Option, the Grantee consents to
a deduction from and set-off against any amounts owed to the Grantee by any
member of the Cardinal Group from time to time (including but not limited to
amounts owed to the Grantee as wages, severance payments, or other fringe
benefits) to the extent of the amounts owed to the Cardinal Group by the
Grantee under this agreement.
9. Governing Law/Venue. This agreement shall be governed by the laws
of the State of Ohio, without regard to principles of conflicts of law, except
to the extent superseded by the laws of the United States of America. In
addition, all legal actions or proceedings relating to this agreement shall be
brought in state or federal courts located in Franklin County, Ohio, and the
parties executing this agreement hereby consent to the personal jurisdiction of
such courts. Any provision of this agreement which is determined by a court of
competent jurisdiction to be invalid or unenforceable should be construed or
limited in a manner that is valid and enforceable and that comes closest to the
business objectives intended by such provision, without invalidating or
rendering unenforceable the remaining provisions of this agreement.
10. Prompt Acceptance of Agreement. The Option grant evidenced by this
agreement shall, at the discretion of the Committee, be forfeited if this
agreement is not executed by the Grantee and returned to the Company within
forty-five days of the Grant Date set forth below.
CARDINAL HEALTH, INC.
DATE OF GRANT: By:
----------------- -------------------------------
George H. Bennett, Jr.
Executive Vice President
ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges receiving a copy of the
Plan, which has either been previously delivered or is attached to this
agreement, and represents that he is familiar with all provisions of the Plan;
and (b) accepts this agreement and the Option granted to him under this
agreement subject to all provisions of the Plan and this agreement. The Grantee
further acknowledges receiving a copy of the Company's most recent Annual
Report and other communications routinely distributed to the Company's
shareholders and a copy of the Plan Description dated February 12, 1997,
pertaining to the Plan.
-------------------------------------
Name
-------------------------------------
Grantee's Social Security Number
--------------------------------------
Date
<PAGE> 1
EXHIBIT 10.02
RESTRICTED SHARES AGREEMENT
Cardinal Health, Inc., an Ohio corporation (the "Company"), has
granted to _________________ (the "Grantee"), ______ Common Shares in the
Company (the "Restricted Shares"). The Restricted Shares have been granted
pursuant to the Cardinal Health, Inc. Equity Incentive Plan (the "Plan") and
shall be subject to all provisions of the Plan, which are hereby incorporated
herein by reference, and shall be subject to the provisions of this agreement.
Capitalized terms used herein which are not specifically defined herein shall
have the meanings ascribed to such terms in the Plan.
1. Vesting. The Restricted Shares shall vest in accordance with the
following schedule (which dates shall be "Vesting Date(s)"):
<TABLE>
<CAPTION>
Vesting Date % of Restricted Shares
------------ ----------------------
<S> <C>
%
%
%
Total 100%
</TABLE>
2. Purchase Price. The purchase price of the Restricted Shares shall
be $-0-.
3. Transferability. Prior to the applicable Vesting Date(s), the
Grantee shall not be permitted to sell, transfer, pledge, assign or otherwise
encumber the Restricted Shares, except as otherwise provided in Section 4 of
this agreement. The Restricted Shares will be held by the Company; provided,
however, that the Company will deliver certificates representing these
Restricted Shares which have fully vested to the Grantee within a reasonable
time after being requested in writing to do so. The Grantee agrees to execute
and deliver a stock power with respect to the Restricted Shares for the purpose
of transferring back to the Company any Restricted Shares that do not become
vested.
4. Termination of Service. Unless otherwise determined by the
Committee at or after grant or termination, and except as set forth below, if
the Grantee's Continuous Service to the Company and its subsidiaries
(collectively, the "Cardinal Group") terminates during the Restriction Period,
all of the Restricted Shares that have not vested shall be forfeited by the
Grantee. If the Grantee's Continuous Service terminates prior to the vesting of
all of the Restricted Shares by reason of the Grantee's death or total or
partial disability, then the restrictions with respect to a ratable portion of
the Restricted Shares shall lapse and such shares shall not be forfeited. Such
ratable portion shall be determined with respect to each separate award of
Restricted Shares and shall be an amount equal to (i) the number of Restricted
Shares awarded to the Grantee multiplied by the portion of the Restriction
Period that has expired at the date of the Grantee's death or total or partial
disability, reduced by (ii) the number of Restricted Shares awarded with
respect to which the restrictions had lapsed as of the date of the death or
total or partial disability of the Grantee. For purposes of this agreement, the
term "Continuous Service" shall mean the absence of any interruption or
termination of service as an employee or director of any entity within the
Cardinal Group.
5. Special Forfeiture/Repayment Rules. If Grantee engages in certain
"Triggering Conduct" (defined below), then: (a) the Restricted Shares (or any
portion thereof that have not vested) shall immediately and automatically be
forfeited and shall cease to vest at any time; and (b) the Grantee shall,
within 30 days following written notice from the Company, pay to the Company an
amount equal to the gross gain realized or obtained by the Grantee resulting
from the vesting of such Restricted Shares, measured at the date of vesting
(i.e., the market value of the Restricted Shares on the vesting date), with
respect to any portion of the Restricted Shares that have already vested at any
time within three years prior
<PAGE> 2
to the Triggering Conduct (the "Look-Back Period"). If the only Triggering
Conduct is Competitor Triggering Conduct (as defined below), then the Look-Back
Period shall be shortened to exclude any period more than one year prior to
Grantee's termination of employment with the Cardinal Group.
As used herein, "Triggering Conduct" shall include activity in
competition with or inimical, contrary, or harmful to the interests of the
Company, including, but not limited to the following: disclosing or misusing
any confidential information or material concerning the Company; violation of
Company policies, including conduct which would constitute a breach of the
then-most recent version of the Certificate of Compliance with Company Policies
signed by the Grantee; accepting employment with or serving as a consultant,
advisor, or any other capacity to an entity that is in competition with the
business conducted by any member of the Cardinal Group (a "Competitor") either
during or within one year following Grantee's termination of employment with
the Cardinal Group ("Competitor Triggering Conduct"); directly or indirectly
employing, contacting concerning employment, or participating in any way in the
recruitment for employment (whether as an employee, officer, director, agent,
consultant or independent contractor) any person who was or is at any time
during the previous twelve months an employee, representative, officer, or
director of the Cardinal Group; and breaching any provision of any employment
or severance agreement with a member of the Cardinal Group. The Committee shall
resolve in good faith any disputes concerning whether particular conduct
constitutes Triggering Conduct, and any such determination by the Committee
shall be conclusive and binding on all interested persons. The Grantee may be
released from Grantee's obligations under this item 5 only if the Committee (or
its duly appointed agent) determines, in its sole discretion, that such action
is in the best interests of the Company.
Nothing in this item 5 constitutes a so-called "noncompete" covenant.
However, this item 5 does prohibit certain conduct while Grantee is associated
with the Cardinal Group and thereafter and does provide for the forfeiture or
repayment of the benefits granted by this agreement under certain
circumstances, including but not limited to the Grantee's acceptance of
employment with a Competitor. Grantee agrees to provide the Company with at
least ten days' written notice prior to directly or indirectly accepting
employment with or serving as a consultant, advisor, or any other capacity to a
Competitor, and further agrees to inform any such new employer, before
accepting employment, of the terms of this item 5 and of the Grantee's
continuing obligations contained herein.
No provision of this agreement shall diminish, negate, or otherwise
impact any separate noncompete agreement to which Grantee may be a party.
Grantee acknowledges and agrees that the provisions contained in this item 5
are being made for the benefit of the Company in consideration of Grantee's
receipt of the Restricted Shares, the adequacy of which consideration is hereby
expressly confirmed. Grantee further acknowledges that the receipt of the
Restricted Shares and execution of this agreement are voluntary actions on the
part of Grantee, and that the Company is unwilling to provide the Restricted
Shares to Grantee without including this item 5.
6. Right of Set-Off. By accepting these Restricted Shares, the Grantee
consents to a deduction from and set-off against any amounts owed to the
Grantee by any member of the Cardinal Group from time to time (including but
not limited to amounts owed to the Grantee as wages, severance payments, or
other fringe benefits) to the extent of the amounts owed to the Cardinal Group
by the Grantee under this agreement.
7. Shareholder Rights and Restrictions. Except with regard to the
disposition of Restricted Shares, the Grantee shall generally have all rights
of a shareholder with respect to the Restricted Shares from the date of grant,
including, without limitation, the right to receive dividends with respect to
such Restricted Shares and the right to vote such Restricted Shares, but
subject, however, to those restrictions in this agreement or in the Plan.
8. Withholding Tax. The Company shall have the right to require the
Grantee to pay to the Company the amount of any taxes which the Company is
required to withhold with respect to the Restricted Shares (including the
amount of any taxes which the Company is required to withhold with
<PAGE> 3
respect to dividends on the Restricted Shares) or, in lieu thereof, to retain,
or sell without notice, a sufficient number of Restricted Shares to cover the
amount required to be withheld.
9. Law/Venue. This agreement shall be governed by the laws of the
State of Ohio, without regard to principles of conflicts of law, except to the
extent superseded by the laws of the United States of America. In addition, all
legal actions or proceedings relating to this agreement shall be brought in
state or federal courts located in Franklin County, Ohio, and the parties
executing this agreement hereby consent to personal jurisdiction of such
courts. Any provision of this agreement which is determined by a court of
competent jurisdiction to be invalid or unenforceable should be construed or
limited in a manner that is valid and enforceable that comes closest to the
business objectives intended by such provision, without invalidating or
rendering unenforceable the remaining provisions of this agreement.
10. Prompt Acceptance of Agreement. The Restricted Shares grant
evidenced by this agreement shall, at the discretion of the Committee, be
forfeited if this agreement is not executed by the Grantee and returned to the
Company within forty-five days of the Grant Date set forth below.
CARDINAL HEALTH, INC.
DATE OF GRANT: By:
----------------- -------------------------------
George H. Bennett, Jr.
Executive Vice President
<PAGE> 4
ACCEPTANCE OF AGREEMENT
The Grantee hereby: (a) acknowledges that he has received a copy of
the Plan, a copy of the Company's most recent Annual Report and other
communications routinely distributed to the Company's shareholders, and a copy
of the Plan Description dated February 12, 1997, pertaining to the Plan; (b)
accepts this Agreement and the Restricted Shares granted to him under this
Agreement subject to all provisions of the Plan and this Agreement; (c)
represents and warrants to the Company that he is purchasing the Restricted
Shares for his own account, for investment, and not with a view to or any
present intention of selling or distributing the Restricted Shares either now
or at any specific or determinable future time or period or upon the occurrence
or nonoccurrence of any predetermined or reasonably foreseeable event; and (d)
agrees that no transfer of the Restricted Shares shall be made unless the
Restricted Shares have been duly registered under all applicable Federal and
state securities laws pursuant to a then-effective registration which
contemplates the proposed transfer or unless the Company has received a written
opinion of, or satisfactory to, its legal counsel that the proposed transfer is
exempt from such registration:
-------------------------------------
Grantee's Signature
-------------------------------------
Grantee's Social Security Number
--------------------------------------
Date
<PAGE> 1
EXHIBIT 10.04
CARDINAL HEALTH, INC.
PERFORMANCE-BASED INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of the Cardinal Health, Inc. Performance-Based
Incentive Compensation Plan (the "Plan") is to advance the interests of
Cardinal Health, Inc. and its shareholders by providing certain of its key
executives with incentive compensation which is tied to the achievement of
pre-established and objective performance goals. The Plan is intended to
provide participants with incentive compensation which is not subject to the
deduction limitation rules prescribed under Section 162(m) ("Section 162(m)")
of the Internal Revenue Code of 1986, as amended from time to time (the
"Code"), and should be construed to the extent possible as providing for
remuneration which is performance-based compensation within the meaning of
Section 162(m) of the Code and the regulations promulgated thereunder.
2. DEFINITIONS. Whenever used herein, the following terms shall have their
respective meanings set forth below:
a. "Award" means the amount payable to a Participant in accordance
with Section 6 of the Plan.
b. "Committee" means the Compensation and Personnel Committee (the
"Committee") of the Board of Directors of Cardinal Health, Inc. The Committee
shall be comprised of two or more "outside directors" as that term is defined
in Section 162(m) of the Code and the regulations promulgated thereunder, as
amended from time to time.
c. "Company" means Cardinal Health, Inc. and its subsidiaries.
d. "Effective Date" means the date set forth in Section 9(a) of the
Plan.
e. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
f. "Participant" means an individual eligible to participate
hereunder, as determined by the Committee, each of whom shall be an executive
officer of the Company.
g. "Performance Period" means any time period established by the
Committee for which the attainment of Performance Goal(s) relating to an Award
will be determined.
h. "Performance Goal" means any performance goal determined by the
Committee in accordance with Section 5 of the Plan.
i. "Target Award" means the amount of any Award as established by the
Committee that would be payable to a Participant for any Performance Period if
the
<PAGE> 2
Performance Goals for the Performance Period were fully (100%) achieved and no
negative discretion was exercised by the Committee in regard to that Award
pursuant to the last sentence of Section 6.
3. ADMINISTRATION. The Plan shall be administered by the Committee. Subject to
the provisions of the Plan, the Committee will have full authority to interpret
the Plan, to establish and amend rules and regulations relating to it, to
determine the terms and provisions for making Awards and to make all other
determinations necessary or advisable for the administration of the Plan. All
decisions made by the Committee pursuant to the provisions hereof shall be made
in the Committee's sole discretion and shall be final and binding on all
persons.
4. ELIGIBILITY. The Committee shall designate the Participants eligible to
receive Awards for each Performance Period and establish the Performance Goals
applicable to each Participant for each Performance Period. An individual who
becomes eligible to participate in the Plan during the Performance Period may
be approved by the Committee for a partial period of participation. In such
case, the Participant's Target Award and Award will be based upon performance
during the portion of the Performance Period during which the Participant
participates in the Plan, and the amount of the Target Award will be pro-rated
based on the percentage of time the Participant participates in the Plan during
the Performance Period.
5. ESTABLISHMENT OF TARGET AWARDS, PERFORMANCE PERIODS AND PERFORMANCE GOALS.
For each Performance Period established by the Committee, the Committee shall
establish a Target Award for each Participant. Awards shall be earned based
upon the financial performance of the Company or one or more operating groups
of the Company during a Performance Period; provided, however, the maximum
Award that may be paid to any single Participant for any Performance Period is
the product of $1 million multiplied by the number of 12-month periods
contained within the relevant Performance Period. As to each Performance
Period, within such time as established by Section 162(m) of the Code, the
Committee will establish in writing Performance Goals based on one or more of
the following performance measures of the Company (and/or one or more operating
groups of the Company, if applicable) over the Performance Period: (i) return
on equity, (ii) earnings per share, (iii) earnings from operations, and/or (iv)
any other objective business criteria approved by the shareholders of Cardinal
Health, Inc. in accordance with the requirements for "qualified
performance-based compensation" within the meaning of the regulations under
Section 162(m). Except as otherwise provided herein, the extent to which the
Performance Goals are satisfied will determine the amount of the Award, if any,
that will be earned by each Participant. The Performance Goals may vary for
different Performance Periods and need not be the same for each Participant
eligible for an Award for a Performance Period.
6. EARNING OF AWARDS. At the end of each Performance Period, the Award will be
computed for each Participant. Payment of Awards, if any, will be made in cash,
subject to applicable tax withholding. Prior to payment of any Award, the
Committee shall certify in writing the extent to which the established
Performance Goals have been achieved. If the Performance Goals are not
satisfied to the fullest extent, a recipient may earn less than the full Target
Award or no Award at all. In addition, the Committee may in its sole discretion
reduce individual Awards otherwise payable pursuant to the Performance Goals.
2
<PAGE> 3
7. TERMINATION OF EMPLOYMENT. In the event the employment of a Participant is
terminated by reason of death or disability during a Performance Period, unless
determined otherwise by the Committee, the Participant or his legal
representative, as applicable, shall receive a prorated payout with respect to
the Award relating to such Performance Period. The prorated payout shall be
based upon the length of time that the Participant was employed by the Company
during the Performance Period and the progress toward achievement of the
established Performance Goal(s) during the portion of the Performance Period
during which the Participant was employed by the Company. Payment of the Award,
if any, shall be made at the same time payments are made to Participants who
did not terminate employment during the applicable Performance Period. In the
event of a Participant's termination of employment by the Company for any other
reason prior to the end of the Performance Period with respect to an Award, the
Participant shall not be entitled to any payment with respect to such Award.
8. AMENDMENT AND TERMINATION. The Committee may amend, modify or terminate the
Plan at any time and from time to time. Shareholder approval of such actions
will be required only as required by applicable law. Notwithstanding the
foregoing, no amendment, modification or termination shall affect the payment
of an Award for a Performance Period that has already ended or increase the
amount of any Award.
9. GENERAL PROVISIONS.
a. Effective Date. The Plan shall become effective as of July 1, 1996,
subject to its approval by the shareholders of Cardinal Health, Inc.
b. Non-Transferability. Any interest of any Participant under the Plan
may not be sold, transferred, alienated, assigned or encumbered, other than by
will or pursuant to the laws of descent and distribution, and any attempt to
take any such action shall be null and void.
c. Severability. In the event any provision of the Plan is held to be
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed
and enforced as if such illegal or invalid provisions had never been contained
in the Plan.
d. Additional Arrangements. Nothing contained in this Plan shall
prevent the Company from adopting other or additional compensation arrangements
for any Participant.
e. No Right to Award or Employment; Uniformity. No person shall have
any claim or right to be granted an Award under this Plan and the grant of an
Award shall not confer upon any Participant any right to be retained as an
employee of Cardinal Health, Inc. or any of its subsidiaries, nor shall it
interfere in any way with the right of Cardinal Health, Inc. or any subsidiary
to terminate the employment of any Participant at any time or to increase or
decrease the compensation of any Participant. There is no obligation for
uniformity of treatment of Participants.
3
<PAGE> 4
f. Tax Withholding. The Company shall have the right to withhold or
require Participants to pay the Company the amount of any taxes which the
Company is required to withhold with respect to such Award.
g. Beneficiaries. The Committee may establish such procedures as it
deems appropriate for a participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid. If no
beneficiary is designated, the right of the Participant to receive any payment
under this Plan will pass to the Participant's estate.
h. Laws Governing. The Plan and all Awards made and action taken
hereunder shall be governed by and construed in accordance with the laws of the
State of Ohio, except to the extent superseded by federal law.
i. Government Regulation. Notwithstanding any provisions of the Plan
or any agreement made pursuant to the Plan, the Company's obligations under the
Plan and such agreement shall be subject to all applicable laws, rules and
regulations and to such approvals as may be required by any governmental or
regulatory agencies.
j. Unfunded Status of Plan. The Plan is intended to constitute an
unfunded plan for incentive compensation. With respect to any payments not yet
made by the Company to a Participant or beneficiary, nothing contained herein
shall give any such Participant or beneficiary any rights that are greater than
those of a general creditor of the Company.
4
<PAGE> 1
Exhibit 11.01
CARDINAL HEALTH, INC.
COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Quarter Ended Nine Months Ended
------------------------------ -------------------------------
March 31, March 31, March 31, March 31,
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
PRIMARY:
Net earnings available for Common Shares $ 36,228 $ 44,691 $ 119,229 $ 106,620
============== ============== ============== ==============
Average shares outstanding 108,194 100,871 106,646 99,869
Dilutive effect of stock options 2,052 1,917 2,065 1,894
-------------- -------------- -------------- --------------
Weighted average number of Common
Shares outstanding 110,246 102,788 108,711 101,763
============== ============== ============== ==============
Primary earnings per Common Share $ 0.33 $ 0.43 $ 1.10 $ 1.05
============== ============== ============== ==============
FULLY DILUTED:
Net earnings available for Common Shares $ 36,228 $ 44,691 $ 119,229 $ 106,620
Convertible note interest, net of tax effect -- 73 -- 270
-------------- -------------- -------------- --------------
Fully diluted net earnings available $ 36,228 $ 44,764 $ 119,229 $ 106,890
============== ============== ============== ==============
Average shares outstanding 108,194 100,871 106,646 99,869
Dilutive effect of stock options 2,053 2,256 2,163 2,077
Assumed conversion of convertible notes -- 725 -- 956
-------------- -------------- -------------- --------------
Weighted average number of Common
Shares outstanding 110,247 103,852 108,809 102,902
============== ============== ============== ==============
Fully diluted earnings per Common Share $ 0.33 $ 0.43 $ 1.10 $ 1.04
============== ============== ============== ==============
</TABLE>
Page 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 12,521
<SECURITIES> 0
<RECEIVABLES> 797,088
<ALLOWANCES> (37,882)
<INVENTORY> 1,570,482
<CURRENT-ASSETS> 2,466,422
<PP&E> 467,041
<DEPRECIATION> (200,815)
<TOTAL-ASSETS> 3,051,666
<CURRENT-LIABILITIES> 1,421,626
<BONDS> 279,539
0
0
<COMMON> 629,879
<OTHER-SE> 628,909
<TOTAL-LIABILITY-AND-EQUITY> 3,051,666
<SALES> 8,177,382
<TOTAL-REVENUES> 8,177,382
<CGS> 7,513,038
<TOTAL-COSTS> 7,513,038
<OTHER-EXPENSES> 381,171
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (22,388)
<INCOME-PRETAX> 209,130
<INCOME-TAX> 89,901
<INCOME-CONTINUING> 119,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,229
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 304,281
<SECURITIES> 54,335
<RECEIVABLES> 648,203
<ALLOWANCES> (35,926)
<INVENTORY> 1,272,616
<CURRENT-ASSETS> 2,344,288
<PP&E> 300,328
<DEPRECIATION> (133,472)
<TOTAL-ASSETS> 2,825,175
<CURRENT-LIABILITIES> 1,419,874
<BONDS> 265,146
0
0
<COMMON> 558,598
<OTHER-SE> 477,240
<TOTAL-LIABILITY-AND-EQUITY> 2,825,175
<SALES> 9,246,420
<TOTAL-REVENUES> 9,246,420
<CGS> 8,473,186
<TOTAL-COSTS> 8,473,186
<OTHER-EXPENSES> 479,440
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (26,903)
<INCOME-PRETAX> 212,063
<INCOME-TAX> 94,429
<INCOME-CONTINUING> 117,634
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,634
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 154,229
<SECURITIES> 74,729
<RECEIVABLES> 650,682
<ALLOWANCES> (35,543)
<INVENTORY> 1,286,067
<CURRENT-ASSETS> 2,222,949
<PP&E> 263,781
<DEPRECIATION> (106,394)
<TOTAL-ASSETS> 2,651,903
<CURRENT-LIABILITIES> 1,279,106
<BONDS> 267,016
0
0
<COMMON> 544,604
<OTHER-SE> 468,759
<TOTAL-LIABILITY-AND-EQUITY> 2,651,903
<SALES> 6,824,765
<TOTAL-REVENUES> 6,824,765
<CGS> 6,255,285
<TOTAL-COSTS> 6,255,285
<OTHER-EXPENSES> 356,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,838)
<INCOME-PRETAX> 184,116
<INCOME-TAX> 77,496
<INCOME-CONTINUING> 106,620
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,620
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.04
</TABLE>
