<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, 1998 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, 1998 was as follows:
Common Shares, without par value: 110,507,970
-----------
<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, 1998 and 1997............................................... 3
Consolidated Balance Sheets at March 31, 1998 and
June 30, 1997...................................................................... 4
Consolidated Statements of Cash Flows for the Nine Months Ended
March 31, 1998 and 1997............................................................ 5
Notes to Consolidated Financial Statements......................................... 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition............................................................ 8
Part II. Other Information:
------------------
Item 1. Legal Proceedings.................................................................. 12
Item 2. Changes in Securities and Use of Proceeds.......................................... 13
Item 4. Submission of Matters to a Vote of Security Holders................................ 13
Item 6. Exhibits and Reports on Form 8-K................................................... 13
</TABLE>
* Items deleted 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,
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues $ 3,381,479 $ 2,825,500 $ 9,381,955 $ 8,177,382
Cost of products sold (3,102,103) (2,578,842) (8,627,913) (7,513,038)
--------------- --------------- --------------- ---------------
Gross margin 279,376 246,658 754,042 664,344
Selling, general and administrative expenses (142,205) (131,502) (412,372) (383,071)
Special charges:
Mergers-related costs (21,157) (30,882) (26,529) (49,056)
Facilities closures and employee severance (8,634) -- (8,634) --
--------------- --------------- --------------- ---------------
Operating earnings 107,380 84,274 306,507 232,217
Other income (expense):
Interest expense (7,096) (8,414) (17,261) (22,388)
Other, net-- primarily interest income 459 787 8,520 5,308
--------------- --------------- --------------- ---------------
Earnings before income taxes 100,743 76,647 297,766 215,137
Provision for income taxes (44,431) (34,466) (121,234) (92,304)
--------------- --------------- --------------- ---------------
Net earnings $ 56,312 $ 42,181 $ 176,532 $ 122,833
=============== =============== =============== ===============
Net earnings per Common Share:
Basic $ 0.51 $ 0.39 $ 1.61 $ 1.15
Diluted $ 0.50 $ 0.38 $ 1.58 $ 1.13
Weighted average number of Common
Shares outstanding:
Basic 109,982 108,194 109,495 106,646
Diluted 111,602 110,246 111,183 108,711
Cash dividends declared per Common Share $ 0.03 $ 0.025 $ 0.08 $ 0.07
</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,
1998 1997
--------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 90,151 $ 243,061
Trade receivables, net 811,332 672,164
Current portion of net investment in sales-type leases 70,779 40,997
Merchandise inventories 2,157,814 1,436,220
Prepaid expenses and other 173,304 94,668
--------------- ----------------
Total current assets 3,303,380 2,487,110
--------------- ----------------
Property and equipment, at cost 537,672 477,420
Accumulated depreciation and amortization (222,825) (199,949)
--------------- ----------------
Property and equipment, net 314,847 277,471
Other assets:
Net investment in sales-type leases, less current portion 155,500 118,563
Goodwill and other intangibles 120,745 122,104
Other 78,557 86,502
--------------- ----------------
Total $ 3,973,029 $ 3,091,750
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, banks $ 85,941 $ 22,159
Current portion of long-term obligations 6,847 6,158
Accounts payable 1,613,095 1,135,951
Other accrued liabilities 297,192 225,165
--------------- ----------------
Total current liabilities 2,003,075 1,389,433
--------------- ----------------
Long-term obligations, less current portion 273,267 277,766
Deferred income taxes and other liabilities 149,285 89,821
Shareholders' equity:
Common Shares, without par value 700,603 645,051
Retained earnings 861,454 701,896
Common Shares in treasury, at cost (8,626) (6,373)
Other (6,029) (5,844)
--------------- ----------------
Total shareholders' equity 1,547,402 1,334,730
--------------- ----------------
Total $ 3,973,029 $ 3,091,750
=============== ================
</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,
1998 1997
--------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 176,532 $ 122,833
Adjustments to reconcile net earnings to net cash from operating activities:
Depreciation and amortization 47,538 38,945
Provision for bad debts 9,648 5,923
Change in operating assets and liabilities:
Increase in trade receivables (147,729) (133,469)
Increase in merchandise inventories (721,594) (283,324)
Increase in net investment in sales-type leases (66,719) (3,660)
Increase/(decrease) in accounts payable 476,887 (114,543)
Other operating items, net 61,922 27,880
--------------- ----------------
Net cash used in operating activities (163,515) (339,415)
--------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 1,491 2,148
Additions to property and equipment (77,698) (52,613)
Purchase of marketable securities available-for-sale -- (3,400)
Proceeds from sale of marketable securities available-for-sale -- 57,735
--------------- ----------------
Net cash (used in) provided by investing activities (76,207) 3,870
--------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net short-term borrowing activity 63,782 127,684
Reduction of long-term obligations (6,669) (129,501)
Proceeds from long-term obligations 552 604
Proceeds from issuance of Common Shares 25,661 34,516
Tax benefit of stock options 13,913 10,500
Dividends paid on Common Shares and cash paid in lieu
of fractional shares (8,193) (6,388)
Purchase of treasury shares (2,234) (1,379)
--------------- ----------------
Net cash provided by financing activities 86,812 36,036
--------------- ----------------
NET DECREASE IN CASH AND EQUIVALENTS (152,910) (299,509)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 243,061 312,030
--------------- ----------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 90,151 $ 12,521
=============== ================
</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 Cardinal Health, Inc. (the
"Company") include the accounts of all majority-owned subsidiaries and
all significant intercompany amounts have been eliminated. 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. Except as
disclosed elsewhere herein, 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, 1997, as amended by the Form 10K/A
(Amendment No.1) filed on January 7, 1998.
Note 2. The Company arranges for bulk deliveries to be made to customer
warehouses. Revenues for these deliveries are excluded from net
revenues and totaled $0.7 billion and $0.6 billion for the quarters
ending March 31, 1998 and 1997, respectively, and $2.1 billion and
$1.8 billion during the nine months ended March 31, 1998 and 1997,
respectively. The service fees related to bulk deliveries are included
in net revenues and were not significant in any of the periods
presented.
Note 3. The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings per Share," in the quarter ended December
31, 1997. In accordance with the provisions of the Standard, all prior
periods presented have been restated to comply with SFAS No. 128.
Basic earnings per Common Share ("Basic") is computed by dividing net
earnings (the numerator) by the weighted average number of Common
Shares outstanding during each period (the denominator). Diluted
earnings per Common Share is similar to the computation for Basic,
except that the denominator is increased by the dilutive effect of
stock options outstanding, computed using the treasury stock method.
Note 4. On February 18, 1998, the Company completed a merger with MediQual
Systems, Inc. ("MediQual"). The merger was accounted for as a
pooling-of-interests. In the merger, the Company issued approximately
600,000 Common Shares to MediQual shareholders and MediQual's
outstanding stock options were converted into options to purchase
approximately 20,000 Common Shares of the Company. The historical cost
of MediQual's assets combined was approximately $7.3 million and the
total liabilities assumed were approximately $1.6 million. The impact
of the MediQual merger, on a historical basis, is not significant.
Accordingly, prior period financial statements have not been restated
for the MediQual merger.
Note 5. Costs of effecting mergers and subsequently integrating the
operations of the various merged companies are recorded as merger
costs when incurred. During the three and nine months ended March 31,
1998, the Company recorded $21.2 million ($18.5 million, net of tax)
and $26.5 million ($21.8 million, net of tax), respectively, related
to various mergers. Of the amount recorded during the third quarter of
fiscal 1998, $13.3 million ($13.1 million, net of tax) related to
transaction costs incurred to date in connection with the pending
merger transaction with Bergen Brunswig Corporation ("Bergen") (see
Note 7), $2.3 million ($2.1 million, net of tax) related to
transaction costs incurred in connection with the MediQual merger (see
Note 4), with the remaining $5.6 million ($3.3 million, net of tax) in
the three-month period and $10.9 million ($6.6 million, net of tax) in
the nine-month period, related to integrating the operations of
companies that previously merged with Cardinal.
During the three and nine months ended March 31, 1997, mergers-related
costs totaling $30.9 million ($22.3 million, net of tax) and $49.1
million ($35.4 million, net of tax), respectively, were recorded. Of
the amount recorded during the third quarter of fiscal 1997,
approximately $13.1 million related to transaction and employee
related costs, and $13.2 million to asset impairments, associated with
the
Page 6
<PAGE> 7
Company's merger with Owen Healthcare, Inc. ("Owen"), which was
completed on March 18, 1997. Additionally, approximately $13.8 million
for transaction and employee related costs associated with the
Company's merger with PCI Services, Inc. ("PCI"), which was completed
on October 11, 1996, were recorded during the nine month period ended
March 31, 1997. The remaining amounts recorded in each of the
respective periods related to integrating the operations of companies
that previously merged with Cardinal.
The Company estimates that it will incur additional mergers-related
costs associated with the various mergers it has completed to date
(excluding the Bergen merger - see Note 7) of approximately $6.2
million ($3.8 million, net of tax) in future periods (primarily fiscal
1998 and 1999) in order to properly integrate operations and implement
efficiencies. Such amounts will be charged to expense when incurred.
Note 6. During the three months ended March 31, 1998, the Company recorded a
special charge of $8.6 million ($5.2 million, net of tax) related to
the rationalization of its distribution operations. Approximately $6.1
million related to asset impairments and lease exit costs resulting
primarily from the Company's decision to accelerate the consolidation
of a number of distribution facilities and the relocation to more
modern facilities for certain others. The remaining amount related to
employee severance costs for plans announced prior to March 31, 1998,
including approximately $2.0 million incurred in connection with the
final settlement of a labor dispute with former employees of the
Company's Boston distribution facility, resulting in termination of
the union relationship.
Note 7. On August 23, 1997, the Company signed a definitive merger agreement
with Bergen, a distributor of pharmaceuticals and medical-surgical
supplies, pursuant to which Bergen will become a wholly owned
subsidiary of the Company in a stock-for-stock merger expected to be
accounted for as a pooling-of-interests for financial reporting
purposes. Under the terms of the proposed merger, shareholders of
Bergen will receive .775 of a Company Common Share in exchange for
each outstanding common share of Bergen. The Company expects to issue
approximately 42 million Common Shares in the transaction and also
expects to assume approximately $603 million in long-term debt.
Shareholders of both companies approved the transaction on February
20, 1998. On March 9, 1998, the U.S. Federal Trade Commission (the
"FTC") filed a complaint in the United States District Court for the
District of Columbia seeking a preliminary injunction to halt the
merger. On March 17, 1998, the companies announced that they would
contest the FTC's attempt to challenge the transaction. A court
hearing is currently scheduled to begin on June 10, 1998. The
companies have agreed not to consummate the merger pending a decision
on the preliminary injunction, which is expected by the end of July
1998.
In connection with the pending merger transaction with Bergen, the
companies have incurred investment banking, legal, accounting, and
other related transaction costs and fees. During the three months
ended March 31, 1998, the Company expensed $13.3 million ($13.1
million, net of tax) related to transaction costs incurred to date
(see Note 5). Based on information currently available, the total
amount of merger-related charges to be recognized in connection with
the merger (including those recorded to date) is estimated to be
between $100 and $130 million, after tax. These merger-related
expenses will be charged to expense in the period when incurred. Since
the merger has not yet been consummated, the merger expenses can only
be estimated at this time, and are subject to revision as further
information becomes available.
Note 8. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," both of which will require
adoption in fiscal 1999. These new statements will not impact the
Company's financial statements, but may require additional
disclosures. The Company is presently evaluating the applicability of
SFAS No.'s 130 and 131 to its operations.
Page 7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management's discussion and analysis presented below is concerned with
material changes in financial condition and results of operations for the
Company's consolidated balance sheets as of March 31, 1998 and June 30, 1997,
and for the consolidated statements of earnings for the three and nine month
periods ended March 31, 1998 and 1997. On February 18, 1998, the Company
completed a merger with MediQual, which was accounted for as a
pooling-of-interests. The impact of the MediQual merger, on a historical basis,
is not significant. Accordingly, prior period financial statements have not been
restated for the MediQual merger (see Note 4 of "Notes to Consolidated Financial
Statements"). This discussion and analysis should be read together with
management's discussion and analysis included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1997, as amended by the Form 10K/A
(Amendment No. 1) filed on January 7, 1998.
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 the Company's Form 10-K,
Form 8-K and Form 10-Q and exhibits and amendments to those reports and are
incorporated herein by reference. The Company disclaims any obligation to update
any forward-looking statement.
RESULTS OF OPERATIONS
Net Revenues. Net revenues for the third quarter of fiscal 1998 and for the
nine-month period ended March 31, 1998 increased 20% and 15%, respectively, as
compared to the prior year. Distribution businesses (those whose primary
operations involve the wholesale distribution of pharmaceuticals, representing
91% of total revenues) grew at a rate of 22% and 15% during the three and nine
months ended March 31, 1998, respectively, while Service businesses (those that
provide services to the healthcare industry primarily through pharmacy
franchising, pharmacy automation equipment, pharmacy management, and
pharmaceutical packaging) grew at a rate of 19% and 25% during the three and
nine months ended March 31, 1998, respectively, primarily on the strength of the
Company's pharmacy automation and pharmacy management businesses. The majority
of the revenue increase (approximately 80% for the three and nine month periods
ended March 31, 1998) came from existing customers in the form of increased
volume and price increases. The remainder of the growth came from the addition
of new customers.
Gross Margin. For the three months ended March 31, 1998 and 1997, gross
margin as a percentage of net revenues was 8.26% and 8.73%, respectively. For
the nine-month periods ended March 31, 1998 and 1997, gross margin as a
percentage of revenue was 8.04% and 8.12%, respectively. The current year
decreases in the gross margin percentages are due to a greater mix of lower
margin Distribution business in the quarter ended March 31, 1998, as well as
declines in the Distribution businesses gross margin, and to a lesser extent,
declines in the Service businesses gross margin.
The Distribution businesses gross margin as a percentage of revenues
decreased for the third quarter of the current fiscal year from 6.39% a year ago
to 5.80%. During the nine month period ended March 31, 1998, the Distribution
businesses' gross margin percentage rate decreased from 5.84% a year ago to
5.59%. These decreases are primarily due to the impact of lower selling margins,
as a result of a highly competitive market and a greater mix of high volume
customers, where a lower cost of distribution and better asset management enable
the Company to offer lower selling margins to its customers. These factors were
particularly relevant in the three months ended March 31, 1998 as the
Distribution businesses achieved 22% revenue growth, primarily through the
addition or expansion of business with large, high volume customers.
The Service businesses' gross margin as a percentage of revenues for the
third quarter of fiscal 1998 and fiscal 1997 was 30.88% and 31.49%,
respectively, and 30.96% and 32.64% for the nine months ended March 31, 1998 and
1997, respectively. The slight decline in gross margin rates experienced by the
Service businesses is a function of the mix of the various businesses. Revenue
growth has been greater in the relatively lower margin pharmacy management and
pharmaceutical packaging businesses than it has been in the higher margin
pharmacy franchising business.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of net revenues improved to 4.20% in the
third quarter of fiscal 1998 compared to 4.66% in the prior year, and 4.40%
Page 8
<PAGE> 9
for the nine-month period ended March 31, 1998 compared to 4.68% in the prior
year. The improvements in the third quarter and the nine month period reflect
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. The growth in
the business, combined with a shift towards a greater mix of Service business
(Service businesses had a 16.28% and 16.52% ratio of expenses to revenues for
the three and nine month periods ending March 31, 1998, respectively, compared
to Distribution businesses with a ratio of 2.78% and 2.92%, during the same
periods) has caused the increase in expense in the current periods. The 8%
growth in selling, general and administrative expenses experienced in the third
quarter of fiscal 1998 and in the nine months ended March 31, 1998 was due
primarily to increases in personnel costs and depreciation expense.
Special Charge - Mergers-Related. Costs of effecting mergers and
subsequently integrating the operations of the various merged companies are
recorded as merger costs when incurred. During the three and nine months ended
March 31, 1998, the Company recorded $21.2 million ($18.5 million, net of tax)
and $26.5 million ($21.8 million, net of tax), respectively, related to various
mergers. Of the amount recorded during the third quarter of fiscal 1998, $13.3
million ($13.1 million, net of tax) related to transaction costs incurred to
date in connection with the pending merger transaction with Bergen Brunswig
Corporation ("Bergen") (see Note 7 of "Notes to Consolidated Financial
Statements"), $2.3 million ($2.1 million, net of tax) related to transaction
costs incurred in connection with the MediQual merger (see Note 4 of "Notes to
Consolidated Financial Statements"), with the remaining $5.6 million ($3.3
million, net of tax) in the three-month period and $10.9 million ($6.6 million,
net of tax) in the nine-month period, related to integrating the operations of
companies that previously merged with Cardinal.
During the three and nine months ended March 31, 1997, mergers-related
costs totaling $30.9 million ($22.3 million, net of tax) and $49.1 million
($35.4 million, net of tax), respectively, were recorded. Of the amount recorded
during the third quarter of fiscal 1997, approximately $13.1 million related to
transaction and employee related costs, and $13.2 million to asset impairments
associated with the Company's merger with Owen Healthcare, Inc. ("Owen"), which
was completed on March 18, 1997. Additionally, approximately $13.8 million for
transaction and employee related costs associated with the Company's merger with
PCI Services, Inc. ("PCI"), which was completed on October 11, 1996, were
recorded during the nine-month period ended March 31, 1997. The remaining
amounts recorded in each of the respective periods related to integrating the
operations of companies that previously merged with Cardinal.
The Company estimates that it will incur additional mergers-related
costs associated with the various mergers it has completed to date (excluding
the Bergen merger - see Note 7) of approximately $6.2 million ($3.8 million, net
of tax) in future periods (primarily fiscal 1998 and 1999) in order to properly
integrate operations and implement efficiencies. Such amounts will be charged to
expense when incurred.
Special Charge - Facilities Closures and Employee Severance. During the
three months ended March 31, 1998, the Company recorded approximately $8.6
million ($5.2 million, net of tax) related to the rationalization of its
distribution operations. Approximately $6.1 million related to asset impairments
and lease exit costs resulting primarily from the Company's decision to
accelerate the consolidation of a number of distribution facilities and the
relocation to more modern facilities for certain others. The remaining amount
related to employee severance costs for plans announced prior to March 31, 1998,
including approximately $2.0 million incurred in connection with the final
settlement of a labor dispute with former employees of the Company's Boston
distribution facility, which resulted in termination of the union relationship.
The effect of Special Charges, including mergers-related costs and
facilities closures and employee severance, recorded during the three months
ended March 31, 1998 and 1997 was to reduce net earnings by $23.7 million to
$56.3 million and $22.3 million to $42.2 million, respectively, and to reduce
reported diluted earnings per common share by $0.22 per share to $0.50 per share
and by $0.20 per share to $0.38 per share, respectively. The effect of Special
Charges recorded during the nine months ended March 31, 1998 and 1997 was to
reduce net earnings by $27.0 million to $176.5 million and $35.4 million to
$122.8 million, respectively, and to reduce reported diluted earnings per common
share by $0.25 per share to $1.58 per share and by $0.32 per share to $1.13 per
share, respectively.
Other Income (Expense). The decrease in interest expense of $1.3 million in
the third quarter of fiscal 1998 compared to fiscal 1997 and $5.1 million for
the nine-month period ended March 31, 1998 compared to the prior year is
primarily due to extinguishment of the Company's $100 million 8% Notes on March
1, 1997. The increase in other income for the nine-month period ended March 31,
1998, as compared to the prior year, is primarily due to higher investment
income. This is in part due to better asset management. Only $152.9 million of
cash was used
Page 9
<PAGE> 10
during the nine month period ended March 31, 1998, compared to a use of cash of
$299.5 million in the same period of the prior year.
Provision for Income Taxes. The Company's provision for income taxes
relative to pretax earnings was 44% and 45% for the third quarter of fiscal 1998
and 1997, respectively, and 41% and 43% for the nine-month periods ended March
31, 1998 and 1997, respectively. The decrease in the effective tax rate is due
to a reduction in the state effective tax rate as a result of the change in the
Company's business mix and the impact of recording certain non-deductible
mergers-related costs during various periods.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $1,300 million at March 31, 1998 from $1,098
million at June 30, 1997. This increase included additional investments in
merchandise inventories and trade receivables of $721 million and $139 million,
respectively. Offsetting the increases in working capital was a decrease in cash
and equivalents of $153 million and an increase in accounts payable of $477
million. The increase in merchandise inventories reflects normal seasonal
purchases of pharmaceutical inventories and the higher level of current and
anticipated business volume in pharmaceutical distribution activities. The
increase in trade receivables is consistent with the Company's net revenues
growth (see "Net Revenues" above). The change in cash and equivalents and
accounts payable is due primarily to the timing of inventory purchases and
related payments.
Property and equipment, at cost, increased by $60 million from June 30,
1997. The property acquired included increased investment in management
information systems and customer support systems.
Shareholders' equity increased to $1,547.4 million at March 31, 1998 from
$1,334.7 million at June 30, 1997, primarily due to net earnings of $176.5
million and the investment of $25.7 million by employees of the Company through
various stock incentive plans during the nine-month period ended March 31, 1998.
The Company believes that it has adequate capital resources at its disposal
to fund currently anticipated capital expenditures, business growth and
expansion, and current and projected debt service requirements, including those
related to pending business combinations. See "Other" below.
OTHER
On August 23, 1997, the Company signed a definitive merger agreement with
Bergen, a distributor of pharmaceuticals and medical-surgical supplies, pursuant
to which Bergen will become a wholly owned subsidiary of the Company in a
stock-for-stock merger expected to be accounted for as a pooling-of-interests
for financial reporting purposes. Under the terms of the proposed merger,
shareholders of Bergen will receive .775 of a Company Common Share in exchange
for each outstanding common share of Bergen. The Company expects to issue
approximately 42 million Common Shares in the transaction and also expects to
assume approximately $603 million in long-term debt. Shareholders of both
companies approved the transaction on February 20, 1998. On March 9, 1998, the
U.S. Federal Trade Commission (the "FTC") filed a complaint in the United States
District Court for the District of Columbia seeking a preliminary injunction to
halt the merger. On March 17, 1998, the companies announced that they would
contest the FTC's attempt to challenge the transaction. A court hearing is
currently scheduled to begin on June 10, 1998. The companies have agreed not to
consummate the merger pending a decision on the preliminary injunction, which is
expected by the end of July 1998.
In connection with the pending merger transaction with Bergen, the
companies have incurred investment banking, legal, accounting, and other related
transaction costs and fees. During the three months ended March 31, 1998, the
Company expensed $13.3 million ($13.1 million, net of tax) related to
transaction costs incurred to date (see Note 5 of "Notes to Consolidated
Financial Statements"). Based on information currently available, the total
amount of merger-related charges to be recognized in connection with the merger
(included those recorded to date) is estimated to be between $100 and $130
million, after tax. These merger-related expenses will be charged to expense in
the period when incurred. Since the merger has not yet been consummated, the
merger expenses can only be estimated at this time, and are subject to revision
as further information becomes available
The Company utilizes computer technologies throughout its business to
effectively carry out its day-to-day operations. Similar to most companies, the
Company must determine whether its systems are capable of recognizing and
processing date sensitive information properly as the year 2000 approaches. The
Company has completed a preliminary assessment of its year 2000 requirements and
is currently correcting and replacing those
Page 10
<PAGE> 11
systems which are not year 2000 compliant in order to continue to meet its
internal needs and those of its suppliers and customers. The Company currently
believes it will be able to modify or replace its affected systems in time to
avoid any detrimental impact on its operations. The Company estimates that the
costs of its year 2000 project will be approximately $20 million. A significant
portion of these costs are not likely to be incremental costs, but rather will
represent the redeployment of existing resources. The anticipated impact and
costs of the project, as well as the date on which the Company expects to
complete the project, are based on management's best estimates using information
currently available and numerous assumptions about future events. However, there
can be no guarantee that these estimates will be achieved and actual results
could differ materially from those plans. Based on its current estimates, the
Company does not anticipate that the costs associated with this project will
have a material adverse effect on the Company's consolidated financial
statements in future periods.
The Company has initiated formal communications with its significant
suppliers and customers to determine the extent to which the Company may be
vulnerable in the event that those parties fail to properly remediate their own
year 2000 issues. While the Company is not presently aware of any such
significant exposure, there can be no guarantee that the systems of third
parties on which the Company relies will be converted in a timely manner, or
that a failure to properly convert by another company would not have a material
adverse effect on the Company.
Along with other companies in its industry, the Company has been advised
that bulk deliveries to be made to its customers' warehouses should be reported
as revenues, rather than reporting as revenues only the service fees related to
such bulk deliveries. Such service fees were not significant in any of the
periods presented (see Note 2 of "Notes to Consolidated Financial Statements").
The Company is currently evaluating its options in this matter, and intends to
adopt the revised presentation beginning with its audited financial statements
for its fiscal year ending June 30, 1998.
Page 11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
In November 1993, the Company and Whitmire Distribution Corporation (which
is now a subsidiary of the Company) ("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. Most recently, the wholesaler defendants also have
been added as defendants in a series of related antitrust lawsuits brought by
certain independent pharmacies who have opted out of the class action cases and
by certain chain drug and grocery stores. 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 was filed with
the Securities and Exchange Commission and is incorporated herein by reference.
Effective October 26, 1994, the Company entered into a Judgment Sharing
Agreement in the Brand Name Prescription Drug Litigation with other wholesaler
and pharmaceutical manufacturer defendants. Under the Judgment Sharing
Agreement: (a) the manufacturer defendants agreed to reimburse the wholesaler
defendants for litigation costs incurred, up to an aggregate of $9 million; and
(b) if a judgment is entered against both manufacturers and wholesalers, the
total exposure for joint and several liability of the Company is limited to the
lesser of 1% of such judgment or one million dollars. In addition, the Company
has released any claims which it might have had against the manufacturers for
the claims presented by the plaintiffs in the Brand Name Prescription Drug
Litigation. The Judgment Sharing Agreement covers the federal court litigation
as well as the cases which have been filed in various state courts. On December
15, 1994, the plaintiffs filed a motion to declare the Judgment Sharing
Agreement unenforceable. On April 10, 1995, the court denied that motion and
ruled that the Judgment Sharing Agreement is valid and enforceable. The
plaintiffs filed a motion for reconsideration of the court's April 10, 1995
ruling, and the court denied that motion and reaffirmed its earlier decision on
April 24, 1995.
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 appealed this
decision. On August 15, 1997, the Court of Appeals for the Seventh Circuit,
along with other rulings, reversed the District Court's decision granting
summary judgment to the wholesaler defendants. On September 5, 1997, the
wholesaler defendants filed a motion for this decision to be reconsidered by the
Court of Appeals en banc. On October 8, 1997, the motion to reconsider was
denied by the Court of Appeals. The wholesaler defendants filed a petition
seeking review of the Court of Appeals decision by the United States Supreme
Court, which petition was denied. Trial has been set for the Brand Name
Prescription Drug Litigation in September 1998. The Company continues to believe
that the allegations against Cardinal and Whitmire in such litigation are
without merit, and it intends to contest such allegations vigorously.
On March 9, 1998, the U.S. Federal Trade Commission (the "FTC") filed two
complaints in the United States District Court for the District of Columbia
seeking preliminary injunctions blocking consummation of the Company's proposed
merger involving Bergen Brunswig Corporation and the proposed merger of McKesson
Corporation and AmeriSource Healthcare Corporation. The two lawsuits have been
consolidated and will be heard together. On March 17, 1998, the Company and
Bergen announced that they would contest the FTC's challenge to the proposed
merger; subsequently, McKesson and AmeriSource announced that they would also
contest the FTC's challenge to their proposed merger transaction. The District
Court has established a schedule for the consolidated action pursuant to which
expedited discovery is presently on-going and the hearing on the FTC's
preliminary injunction request is scheduled to commence on June 10, 1998. It is
anticipated that the hearing will take approximately three weeks. The parties
have agreed not to consummate their proposed mergers pending a decision on the
preliminary injunction, which is expected by the end of July 1998. The Company
believes that the FTC's suit is without merit, and intends to vigorously contest
the FTC's request for a preliminary injunction, although there can be no
assurance that the Company will succeed in its efforts, that a decision will be
rendered before the end of July 1998 or that the proposed merger transaction
with Bergen will be consummated.
Page 12
<PAGE> 13
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 statements.
ITEM 2: CHANGES IN SECURITIES AND USE OF PROCEEDS.
On February 20, 1998, the shareholders of the Company adopted an amendment to
Article FOURTH of the Company's Amended and Restated Articles of Incorporation,
as amended, which increased the number of authorized common shares, without par
value, from 150 million to 300 million.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) A Special Meeting of the Company's shareholders was held on February 20,
1998.
(b) Not applicable.
(c) Matters voted upon at the Special Meeting were as follows:
(1) Approval, authorization and adoption of Agreement and Plan of Merger (the
"Merger") by and among Registrant, Bruin Merger Corp. and Bergen Brunswig
Corporation. The results of the shareholder vote were as follows: 87,354,953 in
favor, 966,902 against, 230,694 withheld, and 12,849 broker non-votes.
(2) Amendment of Registrant's Articles of Incorporation to increase the number
of authorized common shares, without par value, from 150 million to 300 million.
The results of the shareholder vote were as follows: 87,168,667 in favor,
1,115,295 against, 273,586 withheld, and 12,850 broker non-votes.
(3) Amendment of Registrant's Articles of Incorporation to change Registrant's
name from "Cardinal Health, Inc." to "Cardinal Bergen Health, Inc." if the
proposal referenced in item (1) above is approved and the Merger is consummated.
The results of the shareholder vote were as follows: 86,996,727 in favor,
1,316,133 against, 244,689 withheld, and 12,849 broker non-votes.
(4) Adjournment of the Registrant's Special Meeting, if necessary, to permit
further solicitation of proxies in the event there were not sufficient votes at
the time of the regularly scheduled meeting to approve either of the proposals
referenced in items (1) or (2) above. The results of the shareholder vote were
as follows: 67,199,429 in favor, 20,494,431 against, 876,538 withheld, and 0
broker non-votes.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K:
(a) Listing of Exhibits:
Exhibit
Number Exhibit Description
- ------ -------------------
2.01 Agreement and Plan of Merger dated as of August 23, 1997, among the
Registrant, Bruin Merger Corp., and Bergen Brunswig Corporation (1)
2.02 First Amendment to the Agreement and Plan of Merger, dated as of
August 23, 1997, by and among Cardinal Health, Inc., Bruin Merger
Corp., and Bergen Brunswig Corporation, made as of March 16, 1998 (3)
3.01 Amended and Restated Articles of Incorporation of the Registrant, as
amended
4.01 Form of Warrant Certificate to purchase Company Common Shares (4)
10.01 Employment Agreement dated February 10, 1998, between Robert J.
Zollars and the Registrant*
Page 13
<PAGE> 14
11.01 Computation of Per Share Earnings
27.01 Financial Data Schedule
99.01 Statement Regarding Forward-Looking Information (2)
- ------------------
(1) Included as an exhibit to the Registrant's Current Report on Form
8-K/A, Amendment No. 1 (No. 0-12591) filed with the Commission on
August 27, 1997, and incorporated herein by reference.
(2) Included as an exhibit to the Registrant's Annual Report on Form
10-K for the year ended June 30, 1997 (No. 0-12591), and
incorporated herein by reference.
(3) Included as an exhibit to the Registrant's Current Report on form
8-K (No. 0-12591) filed with the Commission on March 17, 1998, and
incorporated herein by reference.
(4) Included as an exhibit to the Registrant's Amendment No. 2 to Form
S-4 Registration Statement(No. 333-30889),and incorporated herein
by reference.
* Management contract or compensation plan or arrangement.
(b) Reports on Form 8-K:
On February 18, 1998, 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 MediQual Systems, Inc. on February 18, 1998.
On March 17, 1998, the Company filed a Current Report on Form 8-K under Item 5
which reported that it had entered into a First Amendment (the "First
Amendment") to the Agreement and Plan of Merger (without amendment, the
"Original Merger Agreement") by and among the Company, Bruin Merger Corp., and
Bergen Brunswig Corporation, which First Amendment, among other things, amended
certain of the termination provisions of the Original Merger Agreement.
Page 14
<PAGE> 15
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 13, 1998 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 15
<PAGE> 1
Exhibit 3.01
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CARDINAL DISTRIBUTION, INC.
These constitute the amended and restated articles of incorporation
of Cardinal Distribution, Inc., a corporation for profit formed under
the Ohio General Corporation Law, which amended and restated articles
of incorporation supersede the previously existing articles of incorporation
of the corporation, as heretofore amended:
FIRST: The name of the corporation shall be "Cardinal Dis-
tribution, Inc."
SECOND: The place in Ohio where the principal office of the
corporation is to be located is the City of Columbus, Franklin County.
THIRD: The purpose or purposes for which the corporation
is formed are to engage in any lawful act or activity for which corpora-
tions may be formed under Sections 1701.01 to 1701.98, inclusive, of
the Ohio Revised Code and any amendments heretofore or hereafter made
thereto.
FOURTH: Section 1. AUTHORIZED SHARES. The maximum aggregate
number of shares which the corporation is authorized to have outstanding
is 10,500,000, consisting of 10,000,000 common shares without par value
and 500,000 nonvoting preferred shares without par value.
Section 2. ISSUANCE OF PREFERRED SHARES. The board of directors
is authorized at any time, and from time to time, to provide for the
issuance of nonvoting preferred shares in one or more series, and to
determine to the extent permitted by law the designations, preferences,
limitations, and relative or other rights of the nonvoting preferred
shares or any series thereof. For each series, the board of directors
shall determine, by resolution or resolutions adopted prior to
issuance of any shares thereof, the designations, preferences, limitations,
and relative or other rights thereof, including but not limited to
the following relative rights and preferences, as to which there may
be variations among different series:
(a) the division of such shares into series and the designation
and authorized number of shares of each series,
(b) the dividend rate,
-1-
<PAGE> 2
(c) the dates of payment of dividends and the dates from which
they are cumulative,
(d) liquidation price,
(e) redemption rights and price,
(f) sinking fund requirements,
(g) conversion rights, and
(h) restrictions on the issuance of such shares.
Prior to the issuance of any shares of a series, but after
adoption by the board of directors of the resolution establishing such
series, the appropriate officers of the corporation shall file such
documents with the State of Ohio as may be required by law including,
without limitation, an amendment to these Articles of Incorporation.
Section 3. COMMON SHARES. Each common share shall entitle
the holder thereof to one vote, in person or by proxy, at any and all
meetings of the shareholders of the corporation, on all propositions
before such meetings. Subject to the preferences of any outstanding
preferred shares, each common share shall be entitled to participate
equally in such dividends as may be declared by the board of directors
out of funds legally available therefor, and to participate equally
in all distributions of assets upon liquidation.
FIFTH: The amount of stated capital with which the corporation
will begin business shall be not less than five hundred dollars ($500).
SIXTH: The board of directors may fix and determine, and
vary, the amount of working capital of the corporation; determine whether
any (and, if any, what part) of the surplus, however created or arising,
shall be used or disposed of or declared in dividends or paid to share-
holders; and, without action by the shareholders, use and apply such
surplus, or any part thereof, or such part of the stated capital of
the corporation as is permitted under the laws of the State of Ohio,
at any time or from time to time, in the purchase or acquisition of
shares of any class, voting-trust certificates for shares, bonds, deben-
tures, notes, scrip, warrants, obligations, evidence of indebtedness
of the corporation, or other securities of the corporation, to such
extent or amount and in such manner and upon such terms as the board
of directors shall deem expedient and without regard to any provisions
which may hereafter be contained in the corporation's articles of incor-
poration with respect to the redemption of shares of any class at the
option of the corporation.
SEVENTH: Every statute of the State of Ohio hereafter enacted,
whereby rights or privileges of the shareholders of a corporation organ-
-2-
<PAGE> 3
ized under the Ohio General Corporation Law are increased, diminished,
or in any way affected, or whereby effect is given to any action author-
ized, ratified, or approved by less than all the shareholders of any
such corporation, shall apply to the corporation and shall bind every
shareholder to the same extent as if such statute had been in force
at the date of the filing of these articles of incorporation.
EIGHTH: A director or officer of the corporation shall not
be disqualified by his office from dealing or contracting with the
corporation as a vendor, purchaser, employee, agent, or otherwise.
No transaction or contract or act of the corporation shall be void
or voidable or in any way affected or invalidated by reason of the
fact that any director or officer, or any firm of which any director
or officer is a shareholder, director, or trustee, or any trust of
which any director or officer is a trustee or beneficiary, is in any
way interested in such transaction or contract or act. No director
or officer shall be accountable or responsible to the corporation for
or in respect to any transaction or contract or act of the corporation
or for any gains or profits directly or indirectly realized by him
by reason of the fact that he or any firm of which he is a member or
any corporation of which he is a shareholder, director, or trustee,
or any trust of which he is a trustee or beneficiary, is interested
in such transaction or contract or act; provided the fact that such
director or officer or such firm or corporation or such trust is so
interested shall have been disclosed or shall have been known to the
board of directors or such members thereof as shall be present at any
meeting of the board of directors at which action upon such contract
or transaction or act shall have been taken. Any director may be counted
in determining the existence of a quorum at any meeting of the board
of directors which shall authorize or take action in respect to any
such contract or transaction or act, and may vote thereat to authorize,
ratify, or approve any such contract or transaction or act, and any
officer of the corporation may take any action within the scope of
his authority respecting such contract or transaction or act with like
force and effect as if he or any firm of which he is a member, or any
corporation of which he is a shareholder, director, or trustee, or
any trust of which he is a trustee or beneficiary, were not interested
in such transaction or contract or act. Without limiting or qualifying
the foregoing, if in any judicial or other inquiry, suit, cause, or
proceeding, the question of whether a director or officer of the corpora-
tion has acted in good faith is material, then notwithstanding any
statute or rule of law or of equity to the contrary (if any there be),
his good faith shall be presumed, in the absence of proof to the contrary
by clear and convincing evidence.
NINTH: No holder of shares of any class of the corporation
shall be entitled as such, as a matter of right, to subscribe for or
purchase shares of any class, now or hereafter authorized, or to purchase
or to subscribe for securities convertible into or exchangeable for
shares of the corporation, or to which shall appertain or be attached
-3-
<PAGE> 4
any warrants or rights entitling the holder thereto to subscribe for
or purchase shares, except such rights of subscription or purchase,
if any, at such price or prices, and upon such terms and conditions
as the board of directors in its discretion may from time to time deter-
mine.
TENTH: Except as otherwise provided in these Articles of
Incorporation or the Code of Regulations of the corporation, notwithstand-
ing any provision of any statute of the State of Ohio, now or hereafter
in force, requiring for any purpose the vote, consent, waiver, or release
of the holders of shares entitling them to exercise two-thirds or any
other proportion of the voting power of the corporation or of any class
or classes of shares thereof, any action may be taken by the vote of
the holders of shares entitling them to exercise a majority of the
voting power of the corporation, or of such class or classes, unless
the proportion designated by such statute cannot be altered by these
articles.
-4-
<PAGE> 5
CERTIFICATE OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
CARDINAL DISTRIBUTION, INC.
Robert D. Walter and Michael E. Moritz hereby certify that they are the
duly elected and acting chairman and secretary, respectively, of Cardinal
Distribution, Inc., an Ohio corporation (the "Company"), and further certify
that the following is a true copy of a resolution amending the Company's
Amended and Restated Articles of Incorporation duly adopted by the affirmative
vote of the holders of shares of the Company entitling them to exercise a
majority of the voting power of the Company at the annual meeting of
shareholders duly held on August 30, 1989:
RESOLVED, That the Amended and Restated Articles of
Incorporation of the Company be amended by deleting ARTICLE
FOURTH thereof in its entirety and by substituting in lieu
thereof the following ARTICLE FOURTH:
FOURTH: Section 1. AUTHORIZED SHARES. The
maximum aggregate number of shares which the
corporation is authorized to have outstanding is
20,500,000, consisting of 20,000,000 common shares
without par value and 500,000 nonvoting preferred
shares without par value.
Section 2. ISSUANCE OF PREFERRED SHARES.
The board of directors is authorized at any time,
and from time to time, to provide for the issuance
of nonvoting preferred shares in one or more
series, and to determine to the extent permitted
by law the designations, preferences, limitations,
and relative or other rights of the nonvoting
preferred shares or any series thereof. For each
series, the board of directors shall determine, by
resolution or resolutions adopted prior to the
issuance of any shares thereof, the designations,
preferences, limitations, and relative or other
rights thereof, including but not limited to the
following relative rights and preferences, as to
which there may be variations among different
series:
(a) the division of such shares into series
and the designation and authorized
number of shares of each series,
(b) the dividend rate,
(c) the dates of payment of dividends and
the dates from which they are
cumulative,
(d) liquidation price,
-5-
<PAGE> 6
(e) redemption rights and price,
(f) sinking fund requirements,
(g) conversion rights, and
(h) restrictions on the issuance
of such shares.
Prior to the issuance of any shares of a series,
but after adoption by the board of directors of
the resolution establishing such series, the
appropriate officers of the corporation shall file
such documents with the State of Ohio as may be
required by law including, without limitation, an
amendment to these Articles of Incorporation.
Section 3. COMMON SHARES. Each common share
shall entitle the holder thereof to one vote, in
person or by proxy, at any and all meetings of the
shareholders of the corporation, on all
propositions before such meetings. Subject to the
preferences of any outstanding preferred shares,
each common share shall be entitled to participate
equally in such dividends as may be declared by
the board of directors out of funds legally
available therefor, and to participate equally in
all distributions of assets upon liquidation.
August 30, 1989 CARDINAL DISTRIBUTION, INC.
By /s/ ROBERT D. WALTER
------------------------------
Robert D. Walter, Chairman
By /s/ MICHAEL E. MORITZ
------------------------------
Michael E. Moritz, Secretary
-6-
<PAGE> 7
CERTIFICATE OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
CARDINAL DISTRIBUTION, INC.
Robert D. Walter and George H. Bennett, Jr. hereby certify that they
are the duly elected and acting chairman and assistant secretary,
respectively, of Cardinal Distribution, Inc., an Ohio corporation (the
"Company"), and further certify that the following is a true copy of a
resolution amending the Company's Amended and Restated Articles of
Incorporation duly adopted by the affirmative vote of the holders of shares of
the Company entitling them to exercise a majority of the voting power of the
Company at the annual meeting of shareholders duly held on August 15, 1991:
REVOLVED, that Article FOURTH of the Company's Amended and
Restated Articles of Incorporation be, and the same hereby is,
deleted in its entirety and there is substituting the following:
FOURTH: Section 1. AUTHORIZED SHARES. The
maximum aggregate number of shares which the
corporation is authorized to have outstanding
is 40,500,000 consisting of 40,000,000 common
shares without par value and 500,000 nonvoting
preferred shares without par value.
Section 2. ISSUANCE OF PREFERRED SHARES. The
board of directors is authorized at any time,
and from time to time, to provide for the
issuance of nonvoting preferred shares in one
or more series, and to determine to the extent
permitted by law the designations, preferences,
limitations, and relative or other rights of
the nonvoting preferred shares or any other
series thereof. For each series, the board of
directors shall determine, by resolution or
resolutions adopted prior to the issuance of any
shares thereof, the designations, preferences,
limitations, and relative or other rights thereof,
including but not limited to the following
relative rights and preferences, as to which
there may be variations among different series:
(a) the division of such shares into
series and the designation and
authorized number of shares of
each series,
(b) the divided rate,
(c) the dates of payment of dividends and
the dates from which they are cumulative,
-7-
<PAGE> 8
(d) liquidation price,
(e) redemption rights and price,
(f) sinking fund requirements,
(g) conversion rights, and
(h) restrictions on the issuance of such shares.
Prior to the issuance of any shares of a series, but after
adoption by the board of directors of the resolution
establishing such series, the appropriate officers of the
corporation shall file such documents with the State of Ohio
as may be required by law including, without limitation, an
amendment to these Articles of Incorporation.
Section 3. COMMON SHARES. Each common share shall
entitle the holder thereof to one vote, in person or by proxy,
at any and all meetings of the shareholders of the corporation,
on all propositions before such meetings. Subject to the
preferences of any outstanding preferred shares, each common
share shall be entitled to participate equally in such dividends
as may be declared by the board of directors out of funds
legally available therefor, and to participate equally in all
distributions of assets upon liquidation.
August 15, 1991 CARDINAL DISTRIBUTION, INC.
By /s/ ROBERT D. WALTER
---------------------------
Robert D. Walter, Chairman
By /s/ GEORGE H. BENNETT, JR.
---------------------------
George H. Bennett, Jr., Assistant
Secretary
-8-
<PAGE> 9
EXHIBIT A
TO
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED
OF
CARDINAL DISTRIBUTION, INC.
Resolved, that Article FIRST, of the Amended and Restated Articles of
Incorporation, as amended, of Cardinal Distribution, Inc. be, and the same
hereby is, deleted in its entirety and there is substituted therefor the
following:
FIRST: The name of the corporation shall be "Cardinal Health, Inc."
Resolved, that Article FOURTH of the Amended and Restated Articles of
Incorporation, as amended, of Cardinal Distribution, Inc. be, and the same
hereby is, deleted in its entirety and there is substituted therefor the
following:
FOURTH: Section 1. AUTHORIZED SHARES. The maximum aggregate
number of shares which the corporation is authorized to have
outstanding is 65,500,000, consisting of 60,000,000 common shares,
without par value ("Class A Common Shares"), 5,000,000 Class B common
shares, without par value ("Class B Common Shares") (the Class A Common
Shares and the Class B Common Shares are sometimes referred to herein
collectively as the "Common Shares"), and 500,000 nonvoting preferred
shares, without par value.
Section 2. ISSUANCE OF PREFERRED SHARES. The board of directors
is authorized at any time, and from time to time, to provide for the
issuance of nonvoting preferred shares in one or more series, and to
determine to the extent permitted by law the designations, preferences,
limitations, and relative or other rights of the nonvoting preferred
shares or any series thereof. For each series, the board of directors
shall determine, by resolution or resolutions adopted prior to the
issuance of any shares thereof, the designations, preferences,
limitations, and relative or other rights thereof, including but not
limited to the following relative rights and preferences, as to which
there may be variations among different series:
(a) the division of such shares into series and the
designation and authorized number of shares of each series,
(b) the dividend rate,
(c) the dates of payment of dividends and the dates from which
they are cumulative,
(d) liquidation price,
(e) redemption rights and price,
(f) sinking fund requirements,
(g) conversion rights, and
(h) restrictions on the issuance of such shares.
Prior to the issuance of any shares of a series, but after adoption by
the board of directors of the resolution establishing such series, the
appropriate officers of the corporation shall file such documents with
the State of Ohio as may be required by law including, without
limitation, an amendment to these Articles of Incorporation.
Section 3. COMMON SHARES.
All common shares shall be identical and will entitle the holders
thereof to the same rights and privileges, except as otherwise provided
herein.
A. VOTING RIGHTS.
1. CLASS A COMMON SHARES. Except as set forth herein or as
otherwise required by law, each outstanding Class A Common Share shall
entitle the holder thereof to one vote, in person or by
-9-
<PAGE> 10
proxy, at any and all meetings of the shareholders of the corporation,
on all propositions before such meetings.
2. CLASS B COMMON STOCK. Except as set forth herein or as
otherwise required by law, each outstanding Class B Common Share shall
entitle the holder thereof to one-fifth (1/5) of one vote, in person
or by proxy, at any and all meetings of shareholders of the corporation,
on all propositions before such meetings. Notwithstanding the
foregoing, holders of the Class B Common Shares shall be entitled to
vote as a separate class on any amendment to this paragraph 2 of this
Section A, on the issuance in the aggregate by the corporation of
additional Class B Common Shares in excess of the number of Class B
Common Shares held by Chemical Equity Associates and its Affiliates or
issuable pursuant to Section 3(c) hereof and on any amendment, repeal
or modification of any provision of these Articles that adversely
affects the powers, preferences or special rights of the holders of the
Class B Common Shares.
B. DIVIDENDS; LIQUIDATION. Subject to the preferences of any
preferred shares, each Common Share shall be entitled to participate equally in
such dividends as may be declared by its board of directors out of funds
legally available therefor or to participate equally in all distributions of
assets upon liquidation; provided, that in the case of dividends payable in
Common Shares of the Corporation, or options, warrants or rights to acquire
such Common Shares, or securities convertible into or exchangeable for such
Common Shares, the shares, options, warrants, rights or securities so payable
shall be payable in shares of, or options, warrants or rights to acquire, or
securities convertible into or exchangeable for, Common Shares of the same
class upon which the dividend or distribution is being paid.
C. CONVERSION.
1. CONVERSION OF CLASS A COMMON SHARES. Any Regulated Shareholder
(defined below) shall be entitled to convert, at any time and from time
to time, any or all of the Class A Common Shares held by such
shareholder into the same number of Class B Common Shares.
2. CONVERSION OF CLASS B COMMON SHARES. Each holder of Class B
Common Shares may convert such shares into Class A Common Shares if
such holder reasonably believes that such converted shares will be
transferred within fifteen (15) days pursuant to a Conversion Event
(defined below) and such holder agrees not to vote any such Class A
Common Shares prior to such Conversion Event and undertakes to
promptly convert such shares back into Class B Common Shares if such
shares are not transferred pursuant to a Conversion Event. Each
Regulated Shareholder may provide for further restrictions or
limitations upon the conversion of any Class B Common Shares by
providing the corporation with signed, written instructions specifying
such additional restrictions and legending such shares as to the
existence of such restrictions.
3. CONVERSION PROCEDURE. Each conversion of Common Shares of the
corporation into shares of another class of Common Shares of the
Corporation shall be effected by the surrender of the certificate or
certificates representing the shares to be converted (the "Converting
Shares") at the principal office of the corporation (or such other
office or agency of the corporation as the corporation may designate
by written notice to the holders of common shares) at any time during
its usual business hours, together with written notice by the holder
of such Converting Shares, stating that such holder desires to convert
the Converting Shares, or a stated number of the shares represented by
such certificate or certificates, into an equal number of shares of the
class into which such shares may be converted (the "Converted Shares").
Such notice shall also state the name or names (with addresses) and
denominations in which the certificate or certificates for Converted
Shares are to be issued and shall include instructions for the delivery
thereof. Promptly after such surrender and the receipt of such written
notice, the corporation will issue and deliver in accordance with the
surrendering holder's instructions the certificate or certificates
evidencing the Converted Shares issuable upon such conversion, and the
corporation will deliver to the converting holder a certificate
representing any shares which were represented by the certificate or
certificates that were delivered to the corporation with such
conversion, but which were not converted.
-10-
<PAGE> 11
Such conversion shall be deemed to have been effected as of the
close of business on the date on which such certificate or certificates
shall have been surrendered and such notice shall have been received by
the corporation, and at such time the rights of the holder of the
Converting Shares as such holder shall cease and the person or persons
in whose name or names the certificate or certificates for the
Converted Shares are to be issued upon such conversion shall be deemed
to have become the holder or holders of record of the Converted Shares.
Upon issuance of shares in accordance with this Section C, such
Converted Shares shall be deemed to be duly authorized, validly issued,
fully paid and non-assessable.
Each holder of Class B Common Shares shall be entitled to convert
Class B Common Shares in connection with any Conversion Event if such
holder reasonably believes that such Conversion Event will be
consummated, and a written request for conversion from any holder of
Class B Common Shares to the corporation stating such holder's
reasonable belief that a Conversion Event shall occur shall be
conclusive and shall obligate the corporation to effect such
conversion in a timely manner so as to enable each such holder to
participate in such Conversion Event. The corporation will not cancel
the Class B Common Shares so converted before the 15th day following
such Conversion Event and will reserve such shares until such 15th day
for reissuance in compliance with the next sentence. If any Class B
Common Shares are converted into Class A Common Shares in connection
with a Conversion Event and such Class A Common Shares are not
actually distributed, disposed of or sold pursuant to such Conversion
Event, such Class A Common Shares shall be promptly converted back
into the same number of Class B Common Shares.
4. STOCK SPLITS; ADJUSTMENTS. If the Corporation shall in any
manner subdivide (by stock split, stock dividend or otherwise) or
combine (by reverse stock split or otherwise) the outstanding Class A
Common Shares or the Class B Common Shares, then the outstanding
shares of each other class of common shares shall be subdivided or
combined, as the case may be, to the same extent, share and share
alike, and effective provision shall be made for the protection of the
conversion rights hereunder.
In the case of any reorganization, reclassification or change of
shares of the Class A Common Shares or Class B Common Shares (other
than a change in par value or from par to no par value as a result of
a subdivision or combination), or in case of any consolidation of the
corporation with one or more corporations or a merger of the
corporation with another corporation (other than a consolidation or
merger in which the corporation is the resulting or surviving
corporation and which does not result in any reclassification or
change of outstanding Class A Common Shares or Class B Common Shares),
each holder of Class A Common Shares or Class B Common Shares shall
have the right at any time thereafter, so long as the conversion right
hereunder with respect to such share would exist had such event not
occurred, to convert such share into the kind and amount of shares of
stock and other securities and properties (including cash) receivable
upon such reorganization, reclassification, change, consolidation or
merger by a holder of the number of Class A Common Shares or Class B
Common Shares into which such Class A Common Shares or Class B Common
Shares, as the case may be, might have been converted immediately
prior to such reorganization, reclassification, change, consolidation
or merger. In the event of any such reorganization, reclassification,
change, consolidation or merger which will have the effect of causing
any Regulated Shareholder's direct or indirect ownership of shares of
capital stock of the resulting or surviving corporation immediately
following such transaction to equal or exceed 5% of the voting power
thereof (calculated as if all such Regulated Shareholder's Class B
Common Shares were converted to Class A Common Shares immediately prior
to consummation of such transaction) then provision shall be made in
the certificate of incorporation of the resulting or surviving
corporation for the protection of the conversion rights of Class A
Common Shares and Class B Common Shares that shall be applicable, as
nearly as reasonably may be, to any such other shares of stock and
other securities and property deliverable upon conversion of such
Class A Common Shares or Class B Common Shares into which such Class
A Common Shares or Class B Common Shares might have been converted
prior to such event.
-11-
<PAGE> 12
5. RESERVATION OF SHARES. The Corporation shall at all times
reserve and keep available out of its authorized but unissued Class A
Common Shares and Class B Common Shares or its treasury shares, for
the purpose of issuance upon the conversion of Class A Common Shares
and Class B Common Shares, such number of shares of such class as are
then issuable upon the conversion of all outstanding shares of Class A
Common Shares and Class B Common Shares which may be converted.
6. NO CHARGE. The issuance of certificates for shares of any class
of common shares upon conversion of shares of any other class of common
shares shall be made without charge to the holders of such shares for
any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related
issuance of common shares; provided, however, that the Corporation
shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the common
shares converted.
D. As used herein, the following terms shall have the meanings shown
below:
1. "AFFILIATES" shall mean with respect to any Person, any other
person, directly or indirectly controlling, controlled by or under
common control with such Person. For the purpose of the above
definition, the term "control" (including with correlative meaning,
the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
2. "CONVERSION EVENT" shall mean (a) any public offering or public
sale of securities of the Corporation (including a public offering
registered under the Securities Act of 1933 and a public sale pursuant
to Rule 144 of the Securities and Exchange Commission or any similar
rule then in force), (b) any sale of securities of the corporation to
a person or group of persons (withing the meaning of the Securities
Exchange Act of 1934, as amended (the "1934 Act")) if, after such sale,
such person or group of persons in the aggregate would own or control
securities which possess in the aggregate the ordinary voting power to
elect a majority of the corporation's directors (provided that such
sale has been approved by the corporation's Board of Directors or a
committee thereof), (c) any sale of securities of the corporation to a
person or group of persons (within the meaning of the 1934 Act) if,
after such sale, such person or group of persons in the aggregate would
own or control securities of the corporation (excluding any Class B
Common Shares being converted and disposed of in connection with such
Conversion Event) which possess in the aggregate the ordinary voting
power to elect a majority of the corporation's directors, (d) any sale
of securities of the corporation to a person or group of persons
(within the meaning of the 1934 Act) if, after such sale, such person
or group of persons would not, in the aggregate, own, control or have
the right to acquire more than two percent (2%) of the outstanding
securities or any class of voting securities of the corporation (for
purposes of this clause, treating Class A Common Stock and Class B
Common Stock as a single class), and (e) a merger, consolidation or
similar transaction involving the corporation if, after such
transaction, a person or group of persons (within the meaning of the
1934 Act) in the aggregate would own or control securities which
possess in the aggregate the ordinary voting power to elect a majority
of the surviving corporation's directors (provided that the
transaction has been approved by the corporation's Board of Directors
or a committee thereof).
3. "PERSON" or "PERSON" shall mean an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization
or a government or any department or agency thereof.
4. "REGULATED SHAREHOLDER" shall mean Chemical Equity Associates
and its Affiliates.
-12-
<PAGE> 13
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF
CARDINAL HEALTH, INC.
Robert D. Walter, Chairman, and George H. Bennett, Jr., Secretary, of
Cardinal Health, Inc., an Ohio corporation (the "Company"), do hereby certify
that a meeting of the shareholders of the Company was duly called and held on
November 14, 1995, at which meeting a quorum of the shareholders was present in
person or by proxy, and by the affirmative vote of holders of shares entitling
them to exercise a majority of the voting power of the Company on a proposal to
amend the Company's Amended and Restated Articles of Incorporation, as amended,
the following resolution was duly adopted:
Resolved, that Section 1 of Article FOURTH of the Amended and Restated
Articles of Incorporation, as amended, of Cardinal Health, Inc. be,
and the same hereby is, deleted in its entirety and there is
substituted therefor the following:
FOURTH: Section 1. Authorized Shares. The maximum aggregate number
of shares which the corporation is authorized to have outstanding is
105,500,000, consisting of 100,000,000 common shares, without par
value ("Class A Common Shares"), 5,000,000 Class B common shares,
without par value ("Class B Common Shares") (the Class A Common Shares
and the Class B Common Shares are sometimes referred to herein
collectively as the "Common Shares"), and 500,000 nonvoting preferred
shares, without par value.
IN WITNESS WHEREOF, Robert D. Walter, Chairman, and George H. Bennett,
Jr., Secretary, of Cardinal Health, Inc., acting for and on its behalf, do
hereunto subscribe their names this 14th day of November, 1995.
/s/ ROBERT D. WALTER
------------------------------
Robert D. Walter, Chairman
/s/ GEORGE H. BENNETT, JR.
------------------------------
George H. Bennett, Jr.
-13-
<PAGE> 14
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF
CARDINAL HEALTH, INC.
Robert D. Walter, Chairman, and George H. Bennett, Jr., Secretary, of
Cardinal Health, Inc., an Ohio corporation (the "Company"), do hereby certify
that a meeting of the shareholders of the Company was duly called and held on
October 29, 1996, at which meeting a quorum of the shareholders was present in
person or by proxy, and by the affirmative vote of holders of shares entitling
them to exercise a majority of the voting power of the Company on a proposal to
amend the Company's Amended and Restated Articles of Incorporation, as
amended, the following resolution was duly adopted;
Resolved, that Section 1 of Article FOURTH of the Amended and Restated
Articles of Incorporation, as amended, of Cardinal Health, Inc. be,
and the same hereby is, deleted in its entirety and there is
substituted therefor the following:
FOURTH: Section 1. Authorized Shares. The maximum aggregate number
of shares which the corporation is authorized to have outstanding is
155,500,000, consisting of 150,000,000 common shares, without par
value ("Class A Common Shares"), 5,000,000 Class B common shares,
without par value ("Class B Common Shares") (the Class A Common Shares
and the Class B Common Shares are sometimes referred to herein
collectively as the "Common Shares"), and 500,000 nonvoting preferred
shares, without par value.
IN WITNESS WHEREOF, Robert D. Walter, Chairman, and George H. Bennett,
Jr., Secretary, of Cardinal Health, Inc., acting for and on its behalf, do
hereunto subscribe their names this 29th day of October, 1996.
/s/ ROBERT D. WALTER
-----------------------------------
Robert D. Walter, Chairman
/s/ GEORGE H. BENNETT, JR.
-------------------------------------
George H. Bennett, Jr., Secretary
-14-
<PAGE> 15
CERTIFICATE OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION, AS AMENDED,
OF
CARDINAL HEALTH, INC.
Robert D. Walter, Chairman, and George H. Bennett, Jr., Secretary, of
Cardinal Health, Inc., an Ohio corporation (the "Company"), do hereby certify
that a meeting of the shareholders of the Company was duly called and held on
February 20, 1998, at which meeting a quorum of the shareholders was present in
person or by proxy, and by the affirmative vote of holders of shares entitling
them to exercise a majority of the voting power of the Company on a proposal to
amend the Company's Amended and Restated Articles of Incorporation, as amended,
the following resolution was duly adopted:
Resolved, that Section 1 of Article FOURTH of the Amended and Restated
Articles of Incorporation, as amended, of Cardinal Health, Inc. be, and
the same hereby is, deleted in its entirety and there is substituted
therefor the following:
FOURTH: Section 1. Authorized Shares. The maximum aggregate number of
shares which the corporation is authorized to have outstanding is
305,500,000 consisting of 300,000,000 common shares, without par value
("Class A Common Shares"), 5,000,000 Class B common shares, without par
value ("Class B Common Shares") (the Class A Common Shares and the
Class B Common Shares are sometimes referred to herein collectively as
the "Common Shares"), and 500,000 nonvoting preferred shares, without
par value.
IN WITNESS WHEREOF, Robert D. Walter, Chairman, and George H. Bennett,
Jr., Secretary, of Cardinal Health, Inc., acting for and on its behalf, do
hereunto subscribe their names this 20th day of February, 1998.
/s/ ROBERT D. WALTER
------------------------------
Robert D. Walter, Chairman
/s/ GEORGE H. BENNETT, JR.
------------------------------
George H. Bennett, Jr., Secretary
<PAGE> 1
Exhibit 10.01
EMPLOYMENT AGREEMENT
This is an agreement between Cardinal Health, Inc., an Ohio corporation
(the "Company" ) and Robert J. Zollars (the "Executive"), dated as of the 10th
day of February, 1998.
1. Employment Period. The Company shall employ the Executive, and the
Executive hereby accepts such employment, on the terms and conditions set forth
in this Agreement, for the period commencing on February 10, 1998 (the
"Effective Date") and ending on the third anniversary of the Effective Date (the
"Employment Period").
2. Position and Duties. (a) During the Employment Period, the Executive
shall be employed by the Company, and shall perform such duties and
responsibilities of an executive nature as may be determined from time to time
by the Company's Board of Directors (the "Board") or its lawfully designated
representative.
(b) During the Employment Period, the Executive shall devote his full
time and attention to the business and affairs of the Company, and shall use his
best efforts to promote and establish the business of the Company and to carry
out faithfully and efficiently the responsibilities assigned to him under this
Agreement. It shall not be considered a violation of the foregoing for the
Executive to (i) serve on corporate boards with the approval of Cardinal, (ii)
serve on civic or charitable boards or committees, and (iii) manage personal
investments, so long as such activities do not interfere with the performance of
the Executive's responsibilities under this Agreement.
3. Compensation. (a) Base Salary. During the Employment Period, the
Company shall pay the Executive a base salary (the "Base Salary") at an annual
rate of $356,250, payable in accordance with the Company's payroll practices for
management personnel, as in effect from time to time (but not less frequently
than monthly). During the Employment Period, the Base Salary shall be reviewed
for possible increase annually in accordance with the Company's normal payroll
practices for management personnel. Any increase in the Base Salary shall not
limit, expand or reduce any other obligation of the Company under this
Agreement.
(b) Annual Bonus. In addition to the Base Salary, during the Employment
Period the Executive shall be eligible to receive annual bonuses (each,
regardless of whether for a 12-month period or a different period, an "Annual
Bonus") pursuant to this Section 3(b). The Annual Bonus shall be determined and
paid at the sole discretion of the Company pursuant to the terms and conditions
of the Company's standard Management Incentive Plan as in effect from time to
time, or any successor thereto (the "MIP"), with an MIP potential equal to 85
percent of the Base Salary.
(c) Other Benefits. During the Employment Period, the Executive shall
be entitled to participate in the group health, life, disability insurance,
retirement savings and other employee benefit plans (collectively, "Group
Plans") generally offered to the Company's employees in accordance with the
standard terms and conditions of such plans as in effect from time to time. In
addition, the Executive shall be eligible to participate in the Company's Equity
Incentive Plan or any successor thereto (the "Cardinal Stock Plan"), although
the actual awards and benefits, if any, to be granted to the Executive
thereunder shall be in the sole discretion of the Compensation and Personnel
Committee of the Company's Board of Directors. The Employee shall at all times
comply with the Company's policies on option exercises and the selling and
buying of Company stock.
(d) Expenses. The Company shall reimburse the Executive for all
reasonable business expenses incurred by the Executive in the performance of his
services hereunder for the Company, which expenses shall be substantiated to the
reasonable satisfaction of the Company, in a manner similar to that
<PAGE> 2
applicable to other management personnel of the Company, and the Executive shall
provide all necessary records to reflect the reasonable business expenses
incurred.
(e) Vacation. During the Employment Period, the Executive shall be
entitled to annual paid vacations as provided in the Company's vacation policy
as in effect as of the Effective Date, as it may be revised thereafter from time
to time.
4. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment Period.
"Disability" means the illness or disability of the Executive which prevents or
hampers the performance of his obligations hereunder, and which continues for a
consecutive period of one hundred and twenty (120) days or longer or an
aggregate period of one hundred and eighty (180) days or longer, in either
instance during the Employment Period. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective upon receipt of such notice by the
Executive (the "Disability Effective Date").
(b) By the Company. (iv) The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause. "Cause"
shall mean (A) fraud, misappropriation, embezzlement or material misconduct on
the part of the Executive, (B) the Executive's (x) failure to substantially
perform his duties for the Company when and to the extent requested by the Board
or its lawfully designated representative to do so and (y) failure to correct
same within five (5) business days after notice from the Board or its lawfully
designated representative requesting the Executive to do so, or (C) the
Executive's breach of any material provision of this Agreement, the Certificate
of Compliance with Company Policies then applicable to management personnel of
the Company, or other agreements between the Executive and the Company and such
breach continues for a period of five (5) business days after notice from the
Board or its lawfully designated representative of such breach.
(v) A termination of the Executive's employment by the Company without
Cause shall be effected by giving the Executive five (5) business days written
notice of the termination.
(c) Good Reason. (i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
(A) the assignment to the Executive of duties inconsistent in
any material respect with Section 2(a) of this Agreement, other than
any such action that is remedied by the Company within five (5)
business days after receipt of notice thereof from the Executive;
(B) any failure by the Company to comply with any provision of
Section 3 of this Agreement other than any such failure that is
remedied by the Company within five (5) business days after receipt of
notice thereof from the Executive; or
(C) if prior to December 1, 2000 (the "Trigger Date"), the
Executive and the Company are unable to mutually agree upon the terms
of continued employment after the Employment Period (including, without
limitation, the Executive's position and duties with the Company) and
provided the term of this Agreement has not been terminated prior to
the Trigger Date, then the Executive may terminate this Agreement for
Good Reason.
(ii) A termination of employment by the Executive for Good Reason shall
be effectuated by giving the Company written notice ("Notice of Termination for
Good Reason") of the termination, setting forth in reasonable detail the
specific conduct of the Company that constitutes Good Reason and the specific
provision(s) of this Agreement on which the Executive relies. A termination of
employment by
<PAGE> 3
the Executive for Good Reason shall be effective on the fifth business day
following the date when the Notice of Termination for Good Reason is given,
unless the notice sets forth a later date (which date shall in no event be later
than 30 days after the notice is given); provided, that such a termination of
employment shall not become effective if the Company shall have substantially
corrected the circumstance giving rise to the Notice of Termination within such
period. Notwithstanding the foregoing, a Trigger Notice shall become effective
on the last day of the Employment Period, unless agreed in writing to the
contrary by the Executive and the Company and, for all purposes hereof
(including for purposes of Section 5(b) hereof), a termination of employment
under Section 4 (c) (i) (C) shall be deemed a termination for Good Reason during
the Employment Period.
(iii) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written notice of
the termination.
(d) Date of Termination. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause or by the
Executive for Good Reason is effective, the date on which the Company gives the
Executive notice of a termination of employment without Cause, or the date on
which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.
5. Obligations of the Company upon Termination. (a) Death, Disability,
Cause; Without Good Reason. If, during the Employment Period, the Executive's
employment is terminated because of death, Disability, for Cause, or by the
Executive without Good Reason, then the Executive shall not be entitled to any
compensation provided for under this Agreement, other than Base Salary through
the Termination Date, benefits under any long-term disability insurance coverage
in the case of termination because of Disability, and (without limiting the
provisions of Section 6 hereof) vested benefits, if any, required to be paid or
provided by law.
(b) Without Cause; Good Reason. If, during the Employment Period, the
Executive's employment is terminated by the Company without Cause or by the
Executive for Good Reason (collectively, an "Eligible Termination"), the
Executive shall not be entitled to any compensation provided for under this
Agreement except as set forth in the following three sentences. If the Eligible
Termination occurs prior to the second anniversary of the Effective Date, then
the Company (i) shall continue to pay the Executive his Base Salary, at the rate
then in effect, for and with respect to the period beginning on the date of such
termination of employment and ending on the last day of the Employment Period
(hereinafter, the "Continuation Period") in the same manner as specified in
Section 3(a) hereof; (ii) shall pay the Executive, in lieu of annual bonuses
pursuant to Section 3(b), an annual amount equal to the Executive's most recent
previous annual bonus actually paid at the same time and in the same manner as
such annual bonuses would have been paid during the Continuation Period pursuant
to Section 3(b). If the Eligible Termination occurs on or after the second
anniversary of the Effective Date, then the Company (i) shall continue to pay
the Executive his Base Salary, at the rate then in effect, for and with respect
to the period beginning on the date of such termination of employment and ending
on the first anniversary of such date; and (ii) shall pay the Executive, in lieu
of an annual bonus pursuant to Section 3(b), an amount equal to the Executive's
most recent previous annual bonus actually paid at the same time and in the same
manner as such annual bonus would have been paid had the Executive continued to
be employed by the Company during such one year period. In addition, and
irrespective of whether the Eligible Termination occurred prior to, on or after
the second anniversary of the Effective Date, the Company shall, with respect to
each employee stock option and restricted share granted to the Executive on or
prior to the Effective Date that remains outstanding but has not vested as of
the date of such Eligible Termination in accordance with its terms, either (A)
cause such options and restricted shares to become fully vested as of the date
of such Eligible Termination, or (B) arrange for the Executive to enjoy a status
such that such options and restricted shares continue to vest in accordance with
their terms in the same manner as would have occurred if the Executive had
remained employed under this Agreement, as the Company shall elect.
<PAGE> 4
6. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company for which the Executive may
qualify, nor, subject to Section 10(f), shall anything in this Agreement limit
or otherwise affect such rights as the Executive may have under any agreement
with the Company. Vested benefits and other amounts that the Executive is
otherwise entitled to receive under any plan, policy, practice or program of, or
any contract or agreement with, the Company on or after the Date of Termination
shall be payable in accordance with such plan, policy, practice, program,
contract or agreement, as the case may be, except as explicitly modified by this
Agreement.
7. Confidential Information; Business Interference; Noncompetition;
Inventions. (a) Both during his association with the Company or the Affiliated
Companies (as defined below) and at all times thereafter, Executive shall not
disclose to anyone else, directly or indirectly, any confidential, proprietary
or business-sensitive information or trade secrets concerning or relating to the
business of the Company or the Affiliated Companies (collectively, "Confidential
Information") or use, or permit or assist, by acquiescence or otherwise, anyone
else to use, directly or indirectly, any such Confidential Information.
"Confidential Information" is information not generally known to the public and
which, if released to unauthorized persons, could be detrimental to the
reputation or business interests of the Company or the Affiliated Companies or
parties with which the Company or the Affiliated Companies contract, or which
could permit such unauthorized persons to benefit improperly. Examples of
Confidential Information include, but are not limited to, the following:
strategic business plans; computer materials such as software programs or
documentation; information concerning the Company's and the Affiliated
Companies' customers and potential customers, including their identities,
contact persons, requirements, preferences, pricing or contract terms; marketing
and sales information; research and development plans or data; budgets and
unpublished financial statements; pricing information and cost data; information
concerning the skills and compensation of other employees of the Company or the
Affiliated Companies; and information concerning the suppliers of the Company
and the Affiliated Companies. The foregoing restrictions shall not apply to
disclosure of information by the Executive as may be required in the proper
conduct of his duties on behalf of the Company or the Affiliated Companies or as
may be specifically authorized in writing by the Company's chief executive
officer, president, or chief financial officer. Upon termination of employment
with the Company for any reason, Executive shall promptly deliver to the Company
all property belonging to the Company and the Affiliated Companies and shall not
retain any copies or reproductions of correspondence, reports, proposals, lists,
computer programs or files, or other information relating in any way to the
affairs of the Company or the Affiliated Companies.
(b) Both during his association with the Company and at all times
thereafter, Executive shall not take any action which is intended to or would
disparage or diminish the reputation of the Company or the Affiliated Companies.
In addition, while associated with the Company and for a period of two (2) years
after expiration or termination of employment or other association with the
Company, Executive shall not directly or indirectly, employ, contact concerning
employment, or participate in any way in the recruitment for employment (whether
as an employee, officer, director, agent, consultant or independent contractor)
of any person who was or is at any time during the previous 12 months an
employee, representative, officer, or director of the Company or any of the
Affiliated Companies.
(c) During the Noncompetition Period (as defined below), the Executive
shall not, without the prior written consent of the Board, engage in or become
associated with a Competitive Activity. For purposes of this Section 7(c): (i)
the "Noncompetition Period" means (A) the period during which the Executive is
employed by the Company, plus (B) one year; (ii) a "Competitive Activity" means
any business or other endeavor, in the United States or Canada or any other
country, of a kind then being conducted by the Company or any of the Affiliated
Companies in such country; and (v) the Executive shall be considered to have
become "associated with a Competitive Activity" if he becomes directly or
indirectly involved as an owner, principal, employee, officer, director,
independent contractor, representative, stockholder, financial backer, agent,
partner, advisor, lender, or in any other individual or representative
<PAGE> 5
capacity with any individual, partnership, corporation, other organization or
entity that is engaged in a Competitive Activity. Notwithstanding the foregoing,
the Executive may make and retain investments during the Employment Period in
not more than five percent of the equity of any entity engaged in a Competitive
Activity, if such equity is listed on a national securities exchange or
regularly traded in an over-the-counter market. Should this provision be
unenforceable in any jurisdiction because it is deemed too broad, as to time,
area, subject matter, or otherwise, this provision shall be deemed modified to
the extent necessary to be enforceable in such jurisdiction.
(d) As special consideration for the Executive's agreement to be bound
by the provisions of Section 7(c), the receipt and adequacy of which is hereby
confirmed and acknowledged, he is receiving, as of the Effective Date, a special
grant of stock options and restricted shares pursuant to the Cardinal Stock
Plan.
(e) All plans, discoveries and improvements, whether patentable or
unpatentable, made or devised by the Executive, whether by himself or jointly
with others, from the date of the Executive's initial employment by the Company
and continuing until the end of the Employment Period and any subsequent period
when the Executive is employed by the Company or any of the Affiliated
Companies, relating or pertaining in any way to his employment with or the
business of the Company or any of the Affiliated Companies, shall be promptly
disclosed in writing to the Board and are hereby transferred to and shall
redound to the benefit of the Company, and shall become and remain its sole and
exclusive property. The Executive agrees to execute any assignments to the
Company or its nominee, of his entire right, title and interest in and to any
such discoveries and improvements and to execute any other instruments and
documents requisite or desirable in applying for and obtaining patents or
copyrights, at the expense of the Company, with respect thereto in the United
States and in all foreign countries. The Executive further agrees, during and
after the Employment Period, to cooperate to the extent and in the manner
required by the Company, in the prosecution or defense of any patent or
copyright claims or any litigation, or other proceeding involving any trade
secrets, processes, discoveries or improvements covered by this Agreement, but
all necessary expenses thereof shall be paid by the Company.
(f) The Executive acknowledges and agrees that the Company's remedy at
law for any breach of the Executive's obligations under this Section 7 would be
inadequate and agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding which may be brought to enforce any
provision of such Section without the necessity of proof of actual damage. With
respect to any provision of this Section 7 finally determined by a court of
competent jurisdiction to be unenforceable, the Executive and the Company hereby
agree that such court shall have jurisdiction to reform this Agreement or any
provision hereof so that it is enforceable to the maximum extent permitted by
law, and the parties agree to abide by such court's determination.
8. Successors. (g) This Agreement is personal to the Executive, and he
may not assign any interest herein in any manner whatsoever. Any purported
assignment by the Executive shall be void.
(h) In addition to assignments by operation of law, the Company shall
have the right to assign this Agreement to any person, firm or corporation,
controlling, controlled by or under common control with the Company (including
without limitation any of the Affiliated Companies), or acquiring substantially
all of its assets, but such assignment shall not release the Company from its
obligations under this Agreement.
9. Miscellaneous. (a) The provisions of Sections 5, 6, 7, 8, and 9 of
this Agreement shall survive any expiration or termination of this Agreement.
(b) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Ohio, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
<PAGE> 6
modified except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) All notices, requests, consents and other communications required
or provided under this Agreement shall be in writing and shall be deemed
sufficient if delivered by facsimile, overnight courier, or certified or
registered mail, return receipt requested, postage prepaid, and shall be
effective upon delivery as follows:
If to the Executive:
--------------------
Robert J. Zollars
5555 Glendon Court
Dublin, Ohio 43016
Facsimile: (614) 717-8676
If to the Company:
------------------
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
Attention: General Counsel
Facsimile: (614) 717-8919
Either party may change the address and/or facsimile number to which notices are
to be sent to that party by giving written notice of such change of address to
the other party in the same manner above provided for giving notice.
(d) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective, but only to the extent of such prohibition or unenforceability,
without invalidating the other provisions hereof or without affecting the
validity or enforceability of such provision in any other jurisdiction.
(e) Notwithstanding any other provision of this Agreement, the Company
may withhold from amounts payable under this Agreement all federal, state, local
and foreign taxes that are required to be withheld by applicable laws or
regulations.
(f) As of the Effective Date, this Agreement shall constitute the
entire agreement between the parties relative to the subject matter contained
herein, superseding, canceling and replacing all prior agreements. No promises,
covenants or representations of any character or nature other than those
expressly stated herein have been made to induce either party to enter into this
Agreement. This Agreement shall not be modified, waived or discharged except in
writing duly signed by each of the parties or their authorized assignees.
(g) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement except to the extent any other party
hereto is materially prejudiced by such failure.
(h) The term "Affiliated Companies" means all companies controlled by,
controlling or under common control with the Company.
<PAGE> 7
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and the Company has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
/s/ ROBERT J. ZOLLARS
------------------------------
Robert J. Zollars
CARDINAL HEALTH, INC.
By /s/ GEORGE H. BENNETT, JR.
------------------------------
Title Executive Vice President
------------------------------
<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,
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
BASIC:
Net earnings $ 56,312 $ 42,181 $ 176,532 $ 122,833
=============== =============== =============== ===============
Weighted average number of Common
Shares outstanding 109,982 108,194 109,495 106,646
=============== =============== =============== ===============
Basic earnings per Common Share $ 0.51 $ 0.39 $ 1.61 $ 1.15
=============== =============== =============== ===============
DILUTED:
Net earnings $ 56,312 $ 42,181 $ 176,532 $ 122,833
=============== =============== =============== ===============
Weighted average number of Common
Shares outstanding 109,982 108,194 109,495 106,646
Dilutive effect of stock options 1,620 2,052 1,688 2,065
--------------- --------------- --------------- ---------------
Weighted average number of
shares outstanding 111,602 110,246 111,183 108,711
=============== =============== =============== ===============
Diluted earnings per Common Share $ 0.50 $ 0.38 $ 1.58 $ 1.13
=============== =============== =============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 90,151
<SECURITIES> 0
<RECEIVABLES> 850,937
<ALLOWANCES> (39,605)
<INVENTORY> 2,157,814
<CURRENT-ASSETS> 3,303,380
<PP&E> 537,672
<DEPRECIATION> (222,825)
<TOTAL-ASSETS> 3,973,029
<CURRENT-LIABILITIES> 2,003,075
<BONDS> 273,267
0
0
<COMMON> 700,603
<OTHER-SE> 846,799
<TOTAL-LIABILITY-AND-EQUITY> 3,973,029
<SALES> 9,381,955
<TOTAL-REVENUES> 9,381,955
<CGS> 8,627,913
<TOTAL-COSTS> 8,627,913
<OTHER-EXPENSES> 412,372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (17,261)
<INCOME-PRETAX> 297,766
<INCOME-TAX> 121,234
<INCOME-CONTINUING> 176,532
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,532
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.58
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEARS ENDED JUNE
30, 1995, JUNE 30, 1996 AND JUNE 30, 1997 AND FOR THE PERIOD ENDED SEPTEMBER 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
EARNINGS PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH THE
REQUIREMENTS OF SFAS NO. 128, EARNINGS PER SHARE.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 3-MOS
<FISCAL-YEAR-END> JUN-30-1995 JUN-30-1996 JUN-30-1997 JUN-30-1997
<PERIOD-START> JUL-01-1994 JUL-01-1995 JUL-01-1996 JUL-01-1996
<PERIOD-END> JUN-30-1995 JUN-30-1996 JUN-30-1997 SEP-30-1996
<EXCHANGE-RATE> 1 1 1 1
<CASH> 74,279 312,030 243,061 125,119
<SECURITIES> 100,760 54,335 0 57,735
<RECEIVABLES> 608,141 668,669 707,116 693,771
<ALLOWANCES> (34,606) (36,803) (34,952) (37,159)
<INVENTORY> 1,112,958 1,272,112 1,436,220 1,577,493
<CURRENT-ASSETS> 1,945,734 2,374,943 2,487,110 2,513,187
<PP&E> 311,986 411,781 477,420 289,892
<DEPRECIATION> (134,942) (161,222) (199,949) (117,176)
<TOTAL-ASSETS> 2,363,752 2,959,401 3,091,750 2,979,124
<CURRENT-LIABILITIES> 1,139,535 1,432,903 1,389,433 1,494,828
<BONDS> 267,677 320,327 277,766 263,655
0 0 0 0
0 0 0 0
<COMMON> 504,943 589,476 645,051 582,840
<OTHER-SE> 361,531 505,749 689,679 518,464
<TOTAL-LIABILITY-AND-EQUITY> 2,363,752 2,959,401 3,091,750 2,979,124
<SALES> 8,472,302 9,407,591 10,968,042 2,535,476
<TOTAL-REVENUES> 8,472,302 9,407,591 10,968,042 2,535,476
<CGS> 7,779,030 8,597,878 10,068,384 2,341,648
<TOTAL-COSTS> 7,779,030 8,597,878 10,068,384 2,341,648
<OTHER-EXPENSES> 428,343 514,879 515,551 193,828
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> (23,948) (30,611) (27,974) (6,606)
<INCOME-PRETAX> 249,264 227,502 311,080 65,745
<INCOME-TAX> 102,677 100,262 126,481 26,419
<INCOME-CONTINUING> 146,587 127,240 184,599 39,326
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 146,587 127,240 184,599 39,326
<EPS-PRIMARY> 1.46 1.22 1.72 0.38
<EPS-DILUTED> 1.40 1.19 1.69 0.37
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CARDINAL
HEALTH INC.'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER
31, 1996, MARCH 31, 1997, SEPTEMBER 30, 1997 AND DECEMBER 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. EARNINGS
PER SHARE INFORMATION HAS BEEN RESTATED TO CONFORM WITH THE REQUIREMENTS OF SFAS
NO. 128, EARNINGS PER SHARE.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 9-MOS 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997 JUN-30-1998 JUN-30-1998
<PERIOD-START> JUL-01-1996 JUL-01-1996 JUL-01-1997 JUL-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997 SEP-30-1997 DEC-31-1997
<EXCHANGE-RATE> 1 1 1 1
<CASH> 87,460 12,521 180,515 111,654
<SECURITIES> 37,185 0 0 0
<RECEIVABLES> 775,122 797,088 728,409 790,748
<ALLOWANCES> (38,351) (37,882) (36,806) (38,417)
<INVENTORY> 1,725,725 1,558,882 1,614,140 1,938,526
<CURRENT-ASSETS> 2,706,346 2,455,093 2,655,030 2,954,558
<PP&E> 456,393 467,652 492,539 514,221
<DEPRECIATION> (192,213) (200,815) (206,573) (210,075)
<TOTAL-ASSETS> 3,299,147 3,039,959 3,259,489 3,602,491
<CURRENT-LIABILITIES> 1,666,946 1,407,265 1,494,534 1,769,328
<BONDS> 297,909 279,539 277,882 275,615
0 0 0 0
0 0 0 0
<COMMON> 623,580 629,879 656,596 667,858
<OTHER-SE> 585,490 631,563 740,897 803,702
<TOTAL-LIABILITY-AND-EQUITY> 3,299,147 3,039,959 3,259,489 3,602,491
<SALES> 5,351,882 8,177,382 2,869,971 6,000,476
<TOTAL-REVENUES> 5,351,882 8,177,382 2,869,971 6,000,476
<CGS> 4,934,196 7,513,038 2,644,106 5,525,713
<TOTAL-COSTS> 4,934,196 7,513,038 2,644,106 5,525,713
<OTHER-EXPENSES> 251,569 383,071 135,054 270,265
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> (13,974) (22,388) (5,005) (10,165)
<INCOME-PRETAX> 138,490 215,137 88,585 197,022
<INCOME-TAX> 57,838 92,304 34,545 76,804
<INCOME-CONTINUING> 80,652 122,833 54,040 120,218
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 80,652 122,833 54,040 120,218
<EPS-PRIMARY> 0.76 1.15 0.50 1.10
<EPS-DILUTED> 0.75 1.13 0.49 1.08
</TABLE>
