cardinal health financial analysis sample

Financial Analysis | © 2008 PRTM Proprietary | 1CONFIDENTIAL

Table of Contents I. Executive Summary

II. Financial Analysis


Table of Contents For Financial Analysis Selection of PeersCompany and Competitors’ Performance Overview Revenue AnalysisProfitability Analysis

Net Income AnalysisEBIT AnalysisEBITDA Analysis

Efficiency AnalysisReturn on Net AssetsReturn on Capital EmployedRevenue/Employee

Cost AnalysisCOGS AnalysisR&D AnalysisSG&A Analysis

Asset Quality AnalysisAsset Quality RatioAsset Refresh RatioPPE ProductivityCapex/Revenue

Cash AnalysisOperating Cash Flow AnalysisFree Cash Flow Analysis

Working Capital AnalysisDays Receivables OutstandingDays Payable OutstandingInventory Turnover


Few Pharmaceutical Companies offer Services Similar to Cardinal Health – We Selected Relevant Peers

Enterprise / Business Unit Selected Competitor PopulationCAH - Enterprise Level 1. McKesson

2. AmerisourceBergen (ABC)3. Baxter4. Becton Dickinson (BD)

• CAH Business Unit – HSCS Pharma 1. McKesson2. AmerisourceBergen (ABC)

• CAH Business Unit – HSCS Medical 1. Owens & Minor 2. PSS World Medical3. Henry Schein4. Medline (Private)

• CAH Business Unit – MPT 1. Kimberly-Clark2. Tyco3. 3M Company4. Medline

• CAH Business Unit – CTS 1. McKesson2. Omnicell3. Hospira

Enterprise Level Comparison


Cardinal Health is one of the largest firms that provides Medical and Pharmaceutical Supply Chain Services

6,360

11,263

66,074

92,977

86,852Cardinal Health

Mckesson

Amerisourcebergen

Baxter

Becton, Dickinson

Total Revenue 2007 [$MM]


Company Profile – Cardinal Health

86,852 MM USD in 2007Revenue• Revenue Growth in 2007 = 9%

• EBIT Growth in 2007 = 12%Basic Facts

Healthcare Supply Chain Services — Pharmaceutical segment encompasses the businesses previously within the former Pharmaceutical Distribution and Provider Services segment, in addition to the nuclear pharmacy, third-party logistics support and certain generic-focused businesses previously within the former Pharmaceutical Technologies and Services segment and the therapeutic plasma distribution capabilities previously within the former Medical Products and Services segment

Healthcare Supply Chain Services — Medical segment encompasses the Company’s medical products distribution business and the assembly of sterile and non-sterile procedure kits previously within the former Medical Products and Services segment

Medical Products Manufacturing - segment encompasses the medical and surgical products manufacturing businesses previously within the former Medical Products and Services segment

Major Products

Key Market Segments

Healthcare DistributorsIndustry


Company Profile – Mckesson

92,977 MM USD in 2007Revenue• Revenue Growth in 2007 = 6.9%

• EBIT Growth in 2007 = 17.4%Basic Facts

Distribution Solutions:

International Pharmaceutical Distribution - provides logistics and distribution to more than 800 manufacturers

Medical–Surgical Distribution - Medical-Surgical distribution provides medical-surgical supply distribution, equipment, logistics and other services to healthcare providers

McKesson Retail Automation - This business supplies integrated pharmacy management systems and services to retail and institutional outpatient pharmacies as well as payors

McKesson Specialty Distribution - This business’ product-specific solutions are directed towards manufacturers, payors and physicians to enable delivery and administration of high-cost, often injectable, bio-pharmaceutical drugs

Technology Solutions: Key Solution areas are Clinical management, Enterprise imaging, Financial Management, Resource Management, Automation, Physician Practice Solutions etc.

Major Products

Key Market Segments



Company Profile – Amerisourcebergen

66,0744 MM USD in 2007Revenue• Revenue Growth in 2007 = 8%


Pharmaceutical Distribution - Pharmaceutical Distribution operating revenue of $60.9 billion in fiscal 2007 increased 9% from the prior fiscal year. This increase was primarily driven by the strong, above market, 23% operating revenue growth of ABSG, principally in its distribution businesses

Long-Term Care - Long-Term Care’s operating revenue decreased 14% from the prior fiscal year due to the divestiture

PMSI - PMSI operating revenue of $461.4 million in fiscal 2007 increased 1% from the prior fiscal year. This increase was the net result of the additional revenues of $19.0 million or 4% from the acquisition of PMSI MSA Services, which was partially offset by a 3% decline in PMSI’s business due to competitive pressures. In particular, the loss of one customer in fiscal 2007 substantially contributed to the decline of PMSI’s business. PMSI’s operating revenue in fiscal 2008 is expected to be flat to down due to the loss of certain customers and will likely continue to be impacted significantly by competitive pressures.

Major Products

Key Market Segments



Company Profile – Baxter

11,263.0 MM USD in 2007Revenue• Revenue Growth in 2007 = 8.5%


BioScience business - manufactures recombinant and plasma-based proteins to treat hemophilia and other bleeding disorders; plasma-based therapies to treat immune deficiencies, alpha 1-antitrypsin deficiency, burns and shock, and other chronic and acute blood-related conditions; products for regenerative medicine, such as proteins used in hemostasis, wound-sealing and tissue regeneration; and vaccines

Medication Delivery - The Medication Delivery business manufactures products used in the delivery of fluids and drugs to patients

Renal - The Renal business provides products to treat end-stage renal disease, or irreversible kidney failure. The business manufactures peritoneal dialysis (PD) solutions and other products for PD, a home-based dialysis therapy, and also distributes products for hemodialysis (HD), which is generally conducted in a hospital or clinic

Major Products

Key Market Segments

Healthcare EquipmentIndustry


Company Profile – Becton, Dickinson & Company

6,359 MM USD in 2007Revenue• Revenue Growth in 2007 = 10.8%


BD Medical - BD Medical’s principal product lines include needles, syringes and intravenous catheters for medication delivery; prefilled IV flush syringes; and syringes and pen needles for the self-injection of insulin and other drugs used in the treatment of diabetes

BD Diagnostics - BD Diagnostics’ principal products and services include integrated systems for specimen collection; an extensive line of safety-engineered blood collection products and systems;

BD Biosciences - BD Biosciences’ principal product lines include fluorescence-activated cell sorters and analyzers; cell imaging systems, monoclonal antibodies and kits for performing cell analysis; reagent systems for life sciences research; tools to aid in drug discovery and growth of tissue and cells

Major Products

Key Market Segments

Healthcare EquipmentIndustry


Cardinal Health’s EBITDA has not kept pace with the increase in its Revenues because of the increases in COGS and SG&A

100%

110%

120%

130%

140%

150%

160%

170%

80%90%

100100100100100

2003

106101

153156

79

2007

102

148

159163

80

114115113

2004

91

110

LTM

131

117

EBITDA

2005

89

128

140143

128

2006

99

137

SG&A

RevenueCOGS

Net PPE

0%

72

Key Financial Metrics (% of 2003 Value) – Cardinal Health


Mckesson’s EBITDA has increased at a greater rate than its Revenue because of slower growth in SG&AKey Financial Metrics (% of 2003 Value) – Mckesson

2003

104103

121122

101

2004

105108

138140

104

2005

118118

152154

112

2006

137138

163164

115

2007

162158

178179

131

LTM

R&D

EBITDASG&A

Revenue

120%

140%

160%

180%

110%

200%

232240%

190%

130%

210%

230%

0%100%

190

149

122

220%

116

100

COGS

Net PPE

100100100100100

150%

170%


Amerisource’s EBITDA has declined from its value in 2003 because of the increase in COGS

95%

105%

115%

125%

80%

90%

150%

100100100100100

2003

9894

107108

132

2004

145%

91

102

137139

150

LTM

EBITDA

SG&A

RevenueCOGS

Net PPE

0%

135%

100%

110%

120%

130%

140%

125

75%

2006

91

112

133135

144

2007

73

144

110111

146

2005

84

109

123

85%

98

Key Financial Metrics (% of 2003 Value) – Amerisourcebergen

(Cont’d.)


Baxter’s COGS has increased nominally but has seen a large increase in SGA (40% from 2003 to 2007)

109107

113

118

101

LTM

R&D

EBITDASG&A

Revenue

COGS

Net PPE

0%

135%

100%

110%

120%

130%

140%

9595%

105%

115%

125%

100100100100100100

111

117

126

117

112

92

2006

126

138137

2003

116

98

2007

132

140140

129

95

126

96

107

112111113

90

2005

93

2004

Key Financial Metrics (% of 2003 Value) – Baxter

(Cont’d.)


Beckton Dickinson shows the highest increase in EBITDA because its COGS and SG&A have not increased as rapidly as its revenue

106

2005

135

141

124129

123

116

2006

161157

136

LTM

R&DEBITDA

SG&A

Revenue

COGSNet PPE

0%

115% 111110%

120%

130%

140%

150%

160%

170%

125%

135%

100%100100100100100100

2003

105

112111110

103

2004

119

145%

155%

165%

105%

135136

2007

142

168

140

151

145146

129

117120116

170Key Financial Metrics (% of 2003 Value) – Becton, Dickinson & Company

(Cont’d.)


Revenue Analysis

159

178

163

137

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

129

151142

126

Cardinal Health

Mckesson

AmerisourcebergenBaxter

Becton, Dickinson

20072006

153

LTM

133

2003 2004 2005

Revenue Index [%]


CAH Net Income [$MM, % of Rev]

Profitability: Net Income

1,885M1,931M

1,000M1,051M

1,475M1,375M

2%

2003

2%

2004

1%

2005

1%

2006

2%

2007

2%

LTM

2007 Net Income/Revenue [%]

Ø 6.6%

2.2%Cardinal Health

1.0%

14.0%Becton, Dickinson

15.2%

Mckesson

0.7%

Baxter

Amerisourcebergen


Net Income/Revenue [%]

Profitability: Net Income (Cont’d.)

22

1 11

15

-1%0%1%2%3%4%5%6%7%8%9%

10%11%12%13%14%15%16%

2003 2004 2005 2006 2007

1

15

LTM

Cardinal HealthMckessonAmerisourcebergen

BaxterBecton, Dickinson

cardinal health financial analysis sample

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