2. Forward-Looking Statements and GAAP Reconciliation
Except for historical information, all other information in this presentation consists of forward-
looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
as amended. These forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those projected, anticipated or implied. The most
significant of these uncertainties are described in Cardinal Health's Form 10-K, Form 10-Q and
Form 8-K reports (including all amendments to those reports) and exhibits to those reports, and
include (but are not limited to) the following: competitive pressures in its various lines of
businesses; the loss of one or more key customer or supplier relationships or changes to the
terms of those relationships; changes in the distribution patterns or reimbursement rates for
health-care products and/or services; the results, consequences, effects or timing of any inquiry
or investigation by or settlement discussions with any regulatory authority or any legal and
administrative proceedings, including shareholder litigation; uncertainties related to divesting the
PTS segment, including uncertainties as to the amount of proceeds and timing; the costs,
difficulties and uncertainties related the integration of acquired businesses; with respect to
future dividends, the decision by the board of directors to declare such dividends, which is
expected to consider Cardinal Health’s surplus, earnings, cash flows, financial condition and
prospects at the time any such action is considered; with respect to future share repurchases,
the approval of the board of directors, which is expected to consider Cardinal Health’s then-
current stock price, earnings, cash flows, financial condition and prospects as well as
alternatives available to Cardinal Health at the time any such action is considered; and general
economic and market conditions. Except to the extent required by applicable law, Cardinal
Health undertakes no obligation to update or revise any forward-looking statement. In addition,
this presentation includes non-GAAP financial measures. Cardinal Health provides definitions
and a reconciliation between GAAP and non-GAAP financial information at the end of this
presentation and on its investor relations page at www.cardinalhealth.com.
2
3. Today’s Agenda
Opening remarks Kerry Clark
President & Chief
Executive Officer
Financial overview Jeff Henderson
Chief Financial
Officer
Q&A
3
7. Cardinal Health Business Analysis
Healthcare Supply Chain Services - Pharmaceutical
Q2 FY ‘07 Q2 FY ‘06
$M $M % change
Revenue $ 19,238 $ 16,977 13%
Operating earnings $ 328 $ 276 19%
Non-recurring and other items $ (3)
Highlights:
• Economic profit margin1 increased 9 basis points to 0.82% vs. prior year
• Direct-store-door (DSD) pharmaceutical sales grew 14% and bulk customer sales grew 22%
• Strong growth in generics driven by recent new item launches and strategic sourcing
• Earnings growth partially offset by lower pricing in the renewal of several large customer agreements
• Integration of F. Dohmen Co. and Parmed progressing well
• Strong earnings growth from nuclear pharmacy services
• Q2’ 07 equity compensation expense of $13.7 million vs. $15.3 million in prior year
1
Note: Non-GAAP financial measure
7
8. Cardinal Health Business Analysis
Healthcare Supply Chain Services - Medical
Q2 FY ‘07 Q2 FY ‘06
$M $M % change
Revenue $ 1,872 $ 1,770 6%
Operating earnings $ 78 $ 70 12%
Highlights:
• Economic profit margin1 declined 6 basis points to 1.12% vs. prior year
• Revenue growth driven by strong sales in laboratory business, private brand product portfolio and
continued momentum with surgery center customers and within the Canadian operations
• SG&A growth moderating due to focused cost controls and One Cardinal Health benefits
• Customer service transition metrics improving; however, still negatively impacting results
• Q2 ’07 equity compensation expense of $8.1 million vs. $9.9 million in prior year
1
Note: Non-GAAP financial measure
8
9. Cardinal Health Business Analysis
Clinical Technologies and Services
Q2 FY ‘07 Q2 FY ‘06
$M $M % change
Revenue $ 662 $ 603 10%
Operating earnings $ 92 $ 79 16%
Highlights:
• New product release of upgraded Pyxis MedStation 3500
• Strong demand for both Pyxis and Alaris products as committed contracts were up significantly
over prior year and sequentially
• Good progress with integrated medication safety and management offering (Alaris, Pyxis and Care
Fusion)
• Continued investments in international markets to support future growth
• Continued investments in product quality and customer service resulting in improved customer
service ratings
• Q2 ’07 equity compensation expense of $10.7 million vs. $12.4 million in prior year
9
10. Cardinal Health Business Analysis
Medical Products Manufacturing
Q2 FY ‘07 Q2 FY ‘06
$M $M % change
Revenue $ 455 $ 397 15%
Operating earnings $ 51 $ 42 21%
Highlights:
• Solid demand across the segment contributed to revenue growth, including infection prevention
products, medical specialties and in international markets
• Raw material cost pressures offset by contract and pricing discipline
• Operating margin improvements driven by manufacturing improvements, facility restructurings and
other One Cardinal initiatives
• Product innovation – synthetic gloves, respiratory and interventional radiology
• Continued investment in international markets and R&D spending
• Q2 ’07 equity compensation expense of $7.7 million vs. $9.1 million in prior year
10
11. FY 2007 – Key Value Drivers
Operating Growth
– Strong demand for products and services drive revenue growth
– Within Healthcare Supply Chain Services, leverage of scale, capital
efficiency and operational excellence should drive economic profit
margin expansion
– Within Pharmaceutical and Medical Products, operational excellence,
product innovation and international expansion should drive operating
margin expansion
– SG&A moderation, including declining equity compensation expense
Balance sheet management
– Focus on return on capital, economic profit margin and economic profit
– Continued portfolio optimization
Disciplined capital deployment
11
12. FY 2007 Financial Targets & Goals
As of January 25, 2007
Long-Term Financial Goals One Year Targets
Over FY'07 - FY'09 3 Year Period: Fiscal Year 2007
Revenue: + 8 - 10% At or above the high end of long-term goal
EPS 1: + 12 - 15% 2 $3.25 - $3.40 per share 2 (includes equity compensation expense)
FY07 OE 3 growth
Operating
Earnings 3
Segment Revenue vs. long-term target Drivers
HSCS - Pharma + 7 - 10% + 7 - 10% In range * Strong bulk growth; generic launches; cost control; stable to increasing
EP margins driven by efficient capital usage; impact of Dohmen acquisition
* Sell margin pressure; stable to declining operating margins due to sales
mix (driven by lower-margin bulk revenue growth)
HSCS - Medical + 4 - 7% + 6 - 9% In range * Strong corporate brand sales growth; cost control; stable to increasing
operating margins; stable EP margins
* Launch of IPS and customer service consolidations
MPM + 6 - 8% + 10 - 12% Above range * New contracts; product innovation; international growth; impact of
restructuring and sourcing initiatives; impact of DBI acquisition
CTS + 10 - 15% + 15 - 20% Below range * Strong product demand for Alaris and Pyxis products; new product
launches; continued impact of operational improvements; international
expansion; impact of MedMined acquisition
* Increased investment in innovation, quality and service
* Current estimate of SE pump fix; impact of Care Fusion acquisition
Return on Equity 4: 15% - 20% In line with long-term goal
Operating Cash Flow: > 100% of net earnings In line with long-term goal
Cash Returned up to 50% of OCF, via share - Quarterly dividend increased 50% to $0.09 per share
repurchase and dividends 2
to Shareholders: - Plan to repurchase $1.5 Billion in FY'07
Credit Rating: Strong investment grade Continued progress from BBB
1
Non-GAAP diluted EPS from continuing operations.
2
Excludes the impact of proceeds from the PTS divestiture.
12
3
Segment operating earnings growth rates represent organic growth only (except as noted), and exclude the impact of equity compensation.
4
Non-GAAP return on equity.
13. Acquisition Scorecard
Acquisition Date Results
Care Fusion (CTS) October ’06 (+)
MedMined (CTS) July ’06 (+)
Dohmen (HSCS-P) June ’06 (+)
Denver Biomedical (MPM) May ’06 (+)
Parmed (HSCS-P) March ’06 (+)
Source Medical (HSCS-M) November ’05 (+)
Geodax (HSCS-P) July ’04 (+)
Alaris (CTS) June ’04 (+)
Snowden Pencer (MPM) March ’04 (–)
13
14. Other Items
Segment reporting changes
– Re-class of PTS corporate expense allocation
– Equity compensation allocation
14
16. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
(in millions)
HEALTHCARE SUPPLY CHAIN SERVICES First Quarter Fiscal 2007 Second Quarter Fiscal 2007 Fiscal 2007
Pharmaceutical July August September Total October November December Total YTD
Economic Profit Margin
$ 288.7 $ 328.0 $ 616.7
Operating earnings
36.2% 36.2% 36.2%
Effective tax rate from continuing operations
$ 184.2 $ 209.3 $ 393.5
Net operating earnings, after-tax (NOPAT)
Total assets $ 11,549.8 $ 12,206.9 $ 11,527.6 $ 11,781.8 $ 11,624.6 $ 11,663.1
Less: assets from discontinued operations 107.5 109.4 - - - -
Less: accounts payable 6,644.9 7,115.6 6,979.1 6,897.3 6,836.3 6,912.9
Less: other accrued liabilities 1,069.5 1,088.6 942.2 1,092.8 1,100.2 1,036.3
Less: liabilities from businesses held for sale - - - - - -
Less: deferred income taxes and other liabilities 82.1 82.1 52.8 89.3 89.7 71.6
Less: goodwill and other intangibles, net 1,354.5 1,361.8 1,332.4 1,328.7 1,335.0 1,335.7
Less: cash and equivalents 42.2 57.4 75.0 91.3 102.7 113.6
Less: short-term investments available for sale - - - - - -
Tangible capital $ 2,262.4 $ 2,212.0 $ 2,237.2
$ 2,249.1 $ 2,392.0 $ 2,146.1 $ 2,282.4 $ 2,160.7 $ 2,193.0
2.3% 2.3% 2.3%
Multiplied by weighted average cost of capital
$ 52.0 $ 50.9 $ 51.5
Capital charge
$ 132.2 $ 158.4 $ 342.0
Economic profit
$ 18,532.8 $ 19,237.6 $ 37,770.4
Revenue
Economic profit margin 0.71% 0.82% 0.91%
(1) Tangible Capital is a quarterly average calculated as total assets allocated to the segment less (total liabilities allocated to the segment, goodwill and intangibles, cash and equivalents
and short term investments available for sale)
(2) The sum of the components may not equal due to rounding
17. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
(in millions)
HEALTHCARE SUPPLY CHAIN SERVICES First Quarter Fiscal 2006 Second Quarter Fiscal 2006 Fiscal 2006
Pharmaceutical July August September Total October November December Total YTD
Economic Profit Margin
$ 225.1 $ 276.0 $ 501.1
Operating earnings
Effective tax rate from continuing operations 36.8% 36.8% 36.8%
$ 142.3 $ 174.4 $ 316.7
Net operating earnings, after-tax (NOPAT)
Total assets $ 10,521.1 $ 10,384.3 $ 11,050.2 $ 10,499.1 $ 10,379.0 $ 10,760.7
Less: assets from discontinued operations 173.1 188.3 191.0 197.3 190.6 178.1
Less: accounts payable 5,506.3 5,692.3 6,238.9 5,626.8 5,867.5 6,167.7
Less: other accrued liabilities 970.8 912.7 890.1 929.7 899.0 847.0
Less: liabilities from businesses held for sale 222.9 222.9 222.9 186.3 186.3 186.3
Less: deferred income taxes and other liabilities 109.1 106.4 44.5 107.6 107.7 43.6
Less: goodwill and other intangibles, net 962.4 958.6 1,168.0 959.5 958.1 1,157.3
Less: cash and equivalents 59.2 66.6 70.3 80.3 88.9 108.2
Less: short-term investments available for sale - - - - - -
Tangible capital $ 2,326.1 $ 2,188.3 $ 2,257.2
$ 2,517.3 $ 2,236.5 $ 2,224.5 $ 2,411.6 $ 2,080.9 $ 2,072.5
2.3% 2.3% 2.3%
Multiplied by weighted average cost of capital
$ 53.5 $ 50.3 $ 51.9
Capital charge
$ 88.8 $ 124.1 $ 264.8
Economic profit
Revenue $ 16,532.8 $ 16,977.2 $ 33,510.0
Economic profit margin 0.54% 0.73% 0.79%
(1) Tangible Capital is a quarterly average calculated as total assets allocated to the segment less (total liabilities allocated to the segment, goodwill and intangibles, cash and equivalents
and short term investments available for sale)
(2) The sum of the components may not equal due to rounding
18. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
(in millions)
HEALTHCARE SUPPLY CHAIN SERVICES First Quarter Fiscal 2007 Second Quarter Fiscal 2007 Fiscal 2007
Medical July August September Total October November December Total YTD
Economic Profit Margin
Operating earnings $ 60.8 $ 78.3 $ 139.2
Effective tax rate from continuing operations 31.0% 31.0% 31.0%
Net operating earnings, after-tax (NOPAT) $ 42.0 $ 54.0 $ 96.0
Total assets $ 2,443.2 $ 2,438.5 $ 2,457.8 $ 2,493.1 $ 2,523.5 $ 2,505.3
Less: assets from discontinued operations - - - - - -
Less: accounts payable 534.8 478.7 510.4 510.6 524.1 544.4
Less: other accrued liabilities 119.3 125.3 96.5 124.5 109.6 67.3
Less: liabilities from businesses held for sale - - - - - -
Less: deferred income taxes and other liabilities 59.5 59.7 55.6 59.8 57.8 50.3
Less: goodwill and other intangibles, net 378.8 377.8 377.7 385.3 384.7 378.3
Less: cash and equivalents 2.9 3.0 4.1 4.2 9.8 7.4
Less: short-term investments available for sale - - - - - -
Tangible capital $ 1,347.9 $ 1,394.0 $ 1,413.5 $ 1,385.1 $ 1,408.7 $ 1,437.5 $ 1,457.6 $ 1,434.6 $ 1,409.9
Multiplied by weighted average cost of capital 2.3% 2.3% 2.3%
Capital charge $ 31.9 $ 33.0 $ 32.4
Economic profit $ 10.1 $ 21.0 $ 63.6
Revenue $ 1,806.1 $ 1,872.5 $ 3,678.6
Economic profit margin 0.56% 1.12% 1.73%
(1) Tangible Capital is a quarterly average calculated as total assets allocated to the segment less (total liabilities allocated to the segment, goodwill and intangibles, cash and equivalents
and short term investments available for sale)
(2) The sum of the components may not equal due to rounding
19. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
(in millions)
HEALTHCARE SUPPLY CHAIN SERVICES First Quarter Fiscal 2006 Second Quarter Fiscal 2006 Fiscal 2006
Medical July August September Total October November December Total YTD
Economic Profit Margin
Operating earnings $ 62.8 $ 69.6 $ 132.5
Effective tax rate from continuing operations 30.1% 30.1% 30.1%
Net operating earnings, after-tax (NOPAT) $ 43.9 $ 48.7 $ 92.6
Total assets $ 2,259.7 $ 2,197.7 $ 2,255.0 $ 2,315.9 $ 2,357.9 $ 2,379.9
Less: assets from discontinued operations - - - - - -
Less: accounts payable 496.2 439.0 534.4 530.4 481.4 498.2
Less: other accrued liabilities 186.0 182.9 143.5 167.9 174.1 138.9
Less: liabilities from businesses held for sale - - - - - -
Less: deferred income taxes and other liabilities 74.1 74.9 69.5 75.6 58.5 52.6
Less: goodwill and other intangibles, net 396.5 397.6 396.8 396.8 415.9 416.2
Less: cash and equivalents 8.4 8.0 8.5 8.4 9.1 10.0
Less: short-term investments available for sale - - - - - -
Tangible capital $ 1,098.5 $ 1,095.3 $ 1,102.3 $ 1,098.7 $ 1,136.8 $ 1,218.9 $ 1,264.0 $ 1,206.6 $ 1,152.6
Multiplied by weighted average cost of capital 2.3% 2.3% 2.3%
Capital charge $ 25.3 $ 27.8 $ 26.5
Economic profit $ 18.6 $ 20.9 $ 66.1
Revenue $ 1,762.6 $ 1,770.2 $ 3,532.8
Economic profit margin 1.06% 1.18% 1.87%
(1) Tangible Capital is a quarterly average calculated as total assets allocated to the segment less (total liabilities allocated to the segment, goodwill and intangibles, cash and equivalents
and short term investments available for sale)
(2) The sum of the components may not equal due to rounding
20. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter
(in millions) 2007 2006
Non-GAAP Operating Margin
$ 512.1
Operating earnings $ 457.1
19.6
Special items 14.3
12.6
Impairment charges and other (2.6)
$ 544.3
Non-GAAP operating earnings $ 468.8
$ 21,784.6
Revenue $ 19,346.9
Non-GAAP operating margin 2.50% 2.42%
21. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter 2007 Year-to-Date 2007
Impairment Impairment
Special Charges and Special Charges and
GAAP Items Other Non-GAAP GAAP Items Other Non-GAAP
(in millions, except per Common Share amounts)
Operating Earnings
Amount $512 $20 $13 $544 $963 $42 $14 $1,019
12 % 16 % 17 % 19 %
Growth Rate
Provision for Income Taxes $164 $7 - $171 $286 $13 $1 $300
Earnings from Continuing Operations
Amount $316 $13 $13 $341 $607 $29 $13 $649
10 % 15 % 17 % 19 %
Growth Rate
Diluted EPS from Continuing Operations
Amount $0.77 $0.03 $0.03 $0.83 $1.47 $0.07 $0.03 $1.57
17 % 20% 23 % 25%
Growth Rate
Second Quarter 2006 Year-to-Date 2006
Impairment Impairment
Special Charges and Special Charges and
GAAP Items Other Non-GAAP GAAP Items Other Non-GAAP
Operating Earnings
Amount $457 $14 ($3) $469 $823 $35 ($1) $857
Growth Rate 13 % 4% 14 % 7%
Provision for Income Taxes $145 $2 ($1) $146 $253 $9 - $262
Earnings from Continuing Operations
Amount $286 $12 ($2) $297 $519 $26 - $544
Growth Rate 11 % 4% 17 % 10 %
Diluted EPS from Continuing Operations
Amount $0.66 $0.03 - $0.69 $1.20 $0.06 - $1.26
The sum of the components may not equal the total due to rounding
22. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2007 2006 2007 2006
1
Return on Equity 34.1% 23.5%
13.8% 12.2%
Non-GAAP Return on Equity
$ 739.3 $ 1,010.0
Net earnings $ 304.0 $ 532.3
12.5 28.7
Special items, net of tax, in continuing operations 12.7 25.5
1.7 3.1
Special items, net of tax, in discontinued operations 4.3 6.0
(425.0) (425.0)
Income tax benefit related to PTS discontinued operations - -
$ 328.5 $ 616.8
Adjusted net earnings $ 321.0 $ 563.8
1,314.0 1,233.6
Annualized 1,284.0 1,127.6
2
Divided by average shareholders' equity $ 8,664.5 $ 8,606.5
$ 8,815.0 $ 8,741.0
1
Non-GAAP return on equity 15.2% 14.3%
14.6% 12.9%
Second Quarter Year-to-Date
(in millions) 2007 2006 2007 2006
1
Return on Invested Capital 13.85% 9.51%
5.70% 5.02%
Non-GAAP Return on Invested Capital
$ 739.3 $ 1,010.0
Net earnings $ 304.0 $ 532.3
12.5 28.7
Special items, net of tax, in continuing operations 12.7 25.5
1.7 3.1
Special items, net of tax, in discontinued operations 4.3 6.0
20.2 43.8
Interest expense and other, net of tax 16.7 31.4
(425.0) (425.0)
Income tax benefit related to PTS discontinued operations - -
$ 348.7 $ 660.6
Adjusted net earnings $ 337.7 $ 595.2
$ 1,394.8 $ 1,321.2
Annualized $ 1,350.8 $ 1,190.4
3
$ 21,349.1 $ 21,245.3
Divided by average total invested capital $ 21,324.7 $ 21,190.2
1
Non-GAAP return on invested capital 6.53% 6.22%
6.33% 5.62%
1
See definitions for explanation of changes in method of calculating these financial measures from prior quarters.
2 The average shareholders' equity shown above is calculated using the average of the prior and current quarters except for year-to-
date which is calculated as the average of the prior years' fourth quarter plus each of the current year quarters.
3 The average total invested capital shown above is calculated using the average of the prior and current quarters except for year-to-
date which is calculated as the average of the prior year fourth quarter plus each of the current year quarters. Total invested capital is
calculated as the sum of the current portion of long-term obligations and other short-term borrowings, long-term obligations, current
portion of long-term obligations and other short-term borrowings in discontinued operations, long-term obligations in discontinued
operations, total shareholders' equity and unrecorded goodwill. Unrecorded goodwill is $9.7 billion for all periods presented. Current
portion of long-term obligations and other short-term borrowings in discontinued operations, and long-term obligations in discontinued
operations were $59.2 million, $46.6 million and $41.3 million at June 30, 2006, September 30, 2006 and December 31, 2006,
respectively, and $81.1 million, $84.7 million and $79.2 million at June 30, 2005, September 30, 2005 and December 31, 2005,
respectively.
23. CARDINAL HEALTH, INC. AND SUBSIDIARIES
GAAP / NON-GAAP RECONCILIATION
Second Quarter Year-to-Date
(in millions) 2007 2006 2007 2006
Effective Tax Rate from Continuing Operations 34.2% 32.0%
33.6% 32.8%
Non-GAAP Effective Tax Rate from Continuing Operations
Earnings before income taxes and discontinued operations $ 479.7 $ 430.5 $ 893.3 $ 772.5
19.6 41.8
Special items 14.3 34.5
Adjusted earnings before income taxes and discontinued operations $ 499.3 $ 444.8 $ 935.1 $ 807.0
$ 164.0 $ 286.0
Provision for income taxes $ 144.7 $ 253.2
Special items tax benefit 7.1 1.6 13.1 9.0
Adjusted provision for income taxes $ 171.1 $ 146.3 $ 299.1 $ 262.2
Non-GAAP effective tax rate from continuing operations 34.3% 32.0%
32.9% 32.5%
Second Quarter
2007 2006
Debt to Total Capital 25% 25%
Net Debt to Capital
Current portion of long-term obligations and other short-term borrowings $ 48.9 $ 374.9
Long-term obligations, less current portion and other short-term borrowings 2,935.8 2,555.5
2,984.7
Debt 2,930.4
Cash and equivalents (1,003.3) (2,115.0)
(467.1)
Short-term investments available for sale (419.0)
Net debt $ 1,514.3 $ 396.4
$ 8,907.8
Total shareholders' equity $ 8,751.0
Capital $ 10,422.1 $ 9,147.4
Net debt to capital 15% 4%
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP diluted EPS from continuing operations and growth rate, non-GAAP return on equity, and non-GAAP effective tax
rate from continuing operations on a forward-looking basis. The Company is unable to provide a quantitative reconciliation of these forward-looking
non-GAAP measures to the most comparable forward-looking GAAP measures because the Company cannot reliably forecast special items and
impairment charges and other, which are difficult to predict and estimate and are primarily dependent on future events.
In addition, the Company's fiscal 2007 outlook and long-term growth rate goal for non-GAAP diluted EPS from continuing operations excludes the
impact of the proceeds from the planned PTS sale. As previously announced, the Company plans to use the net proceeds from the PTS sale to
repurchase shares, which is expected to add materially to fiscal 2008 earnings per share. The Company is unable to reliably forecast the impact of the
proceeds from the planned sale. Please note that the unavailable reconciling items could significantly impact the Company's future earnings.
24. CARDINAL HEALTH, INC. AND SUBSIDIARIES
DEFINITIONS
GAAP
Debt: long-term obligations plus short-term borrowings
Debt to Total Capital: debt divided by (debt plus total shareholders' equity)
Diluted EPS from Continuing Operations: earnings from continuing operations divided by diluted weighted
average shares outstanding
Effective Tax Rate from Continuing Operations: provision for income taxes divided by earnings before
income taxes and discontinued operations
Operating Cash Flow: net cash provided by / (used in) operating activities from continuing operations
Operating Earnings Mix: segment operating earnings divided by total operating earnings for all segments
1
Return on Equity: annualized net earnings divided by average shareholders' equity
Return on Invested Capital: annualized net earnings divided by (average total shareholders’ equity plus debt
2
plus unrecorded goodwill)
Revenue Mix: segment revenue divided by total revenue for all segments
NON-GAAP
Economic Profit: segment net operating earnings, after-tax minus (tangible capital multiplied by weighted
average cost of capital); tangible capital is the quarterly average calculated as total assets allocated to the
segment less (total liabilities allocated to the segment, goodwill and intangibles, cash and equivalents and short
term investments available for sale)
Economic Profit Margin: economic profit divided by revenue
Net Debt to Capital: net debt divided by (net debt plus total shareholders' equity)
Net Debt: debt minus (cash and equivalents and short-term investments available for sale)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided
by diluted weighted average shares outstanding
Non-GAAP Earnings from Continuing Operations: earnings from continuing operations excluding special
items and impairment charges and other, both net of tax
Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from
continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period
non-GAAP earnings from continuing operations
Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for special
items) divided by (earnings before income taxes and discontinued operations adjusted for special items)
Non-GAAP Operating Earnings: operating earnings excluding special items and impairment charges and other
Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP operating earnings minus prior
period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings
Non-GAAP Operating Margin: non-GAAP operating earnings divided by revenue
Non-GAAP Return on Equity: (annualized current period net earnings plus special items minus special items
tax benefit plus $425.0 million income tax benefit related to PTS discontinued operations) divided by average
1
shareholders' equity
Non-GAAP Return on Invested Capital: (annualized net earnings plus special items minus special items tax
benefit plus interest expense and other plus $425.0 million income tax benefit related to PTS discontinued
2
operations) divided by (average total shareholders’ equity plus debt plus unrecorded goodwill)
1
Due to the classification of the Company's PTS segment as discontinued operations, beginning with the fiscal
2007 second quarter, the Company calculates return on equity on both a GAAP and non-GAAP basis with net
earnings in the numerator of the calculation instead of earnings from continuing operations as in prior quarters.
On a non-GAAP basis, the Company excludes the $425.0 million income tax benefit related to PTS discontinued
operations in addition to special items.
2
Due to the classification of the Company's PTS segment as discontinued operations, beginning with the fiscal
2007 second quarter, the Company calculates return on invested capital on both a GAAP and non-GAAP basis
with net earnings in the numerator of the calculation instead of operating earnings as in prior quarters. On a non-
GAAP basis, the Company excludes interest expense and other and the $425.0 million income tax benefit related
to PTS discontinued operations in addition to special items.
###
