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DUBLIN, Ohio, Jan. 22, 2004 - Cardinal Health, Inc. (NYSE: CAH), the leading provider of products and services supporting the health care industry, today announced record second quarter revenue, net earnings and earnings per share, led by strong customer demand for the company’s product and service offerings across the chain of care.

For the quarter ended Dec. 31, 2003, in accordance with generally accepted accounting principles (GAAP), revenue rose to $14.1 billion, earnings from continuing operations reached $381 million and earnings per diluted share from continuing operations improved to $0.87. Year-to-date revenues rose to $27.4 billion, with earnings and earnings per diluted share from continuing operations reaching $711 million and $1.61, respectively. During the first half of fiscal 2004, the company generated $548 million of operating cash flow, an increase of 53 percent over the first half of fiscal 2003.

"Our financial performance for the second quarter was consistent with our expectations and once again reflects strong demand from customers in all segments," said Robert D. Walter, chairman and chief executive officer of Cardinal Health. "As expected, overall earnings growth was below our historic and anticipated future levels as strong performances in medical products, automation and pharmaceutical technologies were offset by short term challenges in pharmaceutical distribution. Looking forward, we expect results will continue to demonstrate the power of Cardinal Health's diverse portfolio of health care products and services."

Cardinal Health made significant progress during the quarter against strategies to build scale and drive competitive advantage in the health care industry, expand product and service offerings, and make investments to deliver new levels of customer value through integrated solutions. Strategic investment spending for research, development and special projects totaled $28 million for the period.

Highlights for the quarter include:

• The strategic acquisition of The Intercare Group, plc., which closed in December, to increase scale within Cardinal Health’s Pharmaceutical Technologies and Services segment. Intercare, a leading European pharmaceutical products and services company, significantly expands Cardinal Health’s global reach, enhances proprietary sterile manufacturing capabilities and broadens participation in the fast growing European generic and injectible product markets.
• Sales momentum in the Medical Products and Services segment from new contracts for distribution and self-manufactured products, which drove record organic growth rates, was well above industry averages.
• Record second-quarter sales for the flagship Pyxis MedStation® products, the result of continued focus in the market on medication safety initiatives, combined with a strong increase in sales of Pyxis SupplyStation® products.
• Strong demand for integrated solutions from health care providers. These solutions include products and services from multiple Cardinal Health lines of business and now represent more than $6 billion in annual sales, growing more than 20 percent year-on-year. More than 180 contracts have been signed representing over 900 hospitals.
• The acquisition of Medicap Pharmacies, Inc., to increase the geographic reach of Cardinal Health’s pharmacy franchise, bringing the total number of franchisees to 1,370 worldwide. System-wide retail sales for franchisees now total more than $2.5 billion. The Medicap acquisition was completed in late December.
• Direct Store Door (DSD) pharmaceutical distribution sales increasing more than 23 percent, reflecting the ramp up of recently won contracts and strong underlying demand for prescription drugs.
• A pharmacy management agreement with Jackson Memorial Hospital that represents one of Cardinal Health’s largest clinical services and consulting contracts to date. Jackson Memorial estimates the agreement will save the hospital $20 million over the five-year contract duration.

Financial Highlights and Segment Results
Special items during the quarter include cash received from a litigation settlement, which was largely offset by merger-related costs and restructuring charges. These items generated income of $3.5 million ($3.3 million after tax) in the second quarter, compared to income of $37.6 million ($22.1 million after tax) in the same period last year, and increased earnings per diluted share in the current quarter and comparable quarter by $0.01 and $0.05, respectively.

The following discussion adjusts certain amounts to exclude special items incurred during the quarter. Please see the attached financial table for a reconciliation of the reported amounts to the amounts excluding these items.

• Earnings per diluted share from continuing operations rose 12 percent to $0.86 versus $0.77 last year. Earnings from continuing operations rose 9 percent to $378 million from $345 million a year ago.
• Operating revenues rose 11 percent to a record $14.1 billion, from $12.7 billion a year ago.
• Operating earnings rose 6 percent to $584 million from $553 million a year ago. Strong growth in the company’s Medical Products and Services, Pharmaceutical Technologies and Services, and Automation and Information Services segments offset expected weakness in the Pharmaceutical Distribution and Provider Services segment’s operating earnings.
• Interest expense and other declined by 38 percent, driven by strong cash flow, lower interest rates and a gain of $9 million from the sale of a non-strategic business.
• Return on equity was 20.5 percent compared to 21.5 percent last year and return on invested capital was 7.90 percent versus 7.96 percent a year ago.
• Operating cash flow of $254 million in the quarter was the result of strong earnings combined with focused asset management.
• The ratio of net debt-to-total capital was 22 percent, and the company ended the quarter with $544 million cash on hand.

Pharmaceutical Distribution and Provider Services experienced strong demand, with Direct Store Door (DSD) drug distribution sales rising to $9.9 billion, a more than 23 percent increase over last year. These gains were dampened by the expected decline in Bulk from Stock sales as vendor buy opportunities versus the prior year continued to be restricted. Overall, the segment delivered a 9 percent revenue increase to $11.4 billion with operating earnings of $271 million. Gross margin pressures were partially offset by ongoing productivity improvements reflecting strong expense leverage. Earnings and working capital leverage enabled this segment to contribute positive cash flow for the quarter. Comparisons for the segment are expected to improve as it passes the strong performance delivered during the first half of fiscal 2003.

Medical Products and Services posted record revenue, which increased 12 percent to more than $1.8 billion. Revenue growth and record second-quarter operating earnings of $160 million were driven by momentum with new and existing distribution contracts and growth of new self-manufactured products, including surgeon gloves, bone-cement delivery systems used to repair fractures, thermal therapy products and procedure-based delivery systems. The impact of product mix and increases in raw material costs – primarily resin and latex -- were offset by expense leverage and productivity improvements to yield 12 percent operating earnings growth. This business continued to show strong return on sales of 8.71 percent.

Pharmaceutical Technologies and Services delivered record operating results with a year-over-year revenue increase of 58 percent to $659 million and earnings growth of 33 percent to $113 million. Growth during the period was driven by strong contributions from nuclear pharmacy services, oral technologies and packaging services. In addition to strong underlying growth in nuclear pharmacy services, operational highlights included the completion of pharmacy consolidation resulting from the January 2003 acquisition of Syncor. Gains in oral drug manufacturing and packaging services were led by ongoing demand for Pfizer’s Detrol LA™, Lilly’s Zyprexa® Zydis®, AstraZeneca’s Crestor®, and Wyeth’s Advil®, all of which are manufactured or packaged by Cardinal Health.

Automation and Information Services revenue grew 14 percent year-over-year to $187 million, the segment’s second largest quarter ever. Revenue growth reflected healthy demand in all product categories. Installation productivity and efficiency continue to improve as return on sales increased 37 basis points to 42.46 percent. Operating earnings increased 15 percent to $80 million, driven by strong product installations and ongoing manufacturing and expense productivity. The backlog of committed contracts ended the quarter at approximately $207 million.

Outlook
Cardinal Health reiterated full fiscal year guidance of mid-teens or better earnings per share growth, before special items, and operating cash flow of approximately $1.3 billion. With improvement in the comparisons for the Pharmaceutical Distribution and Provider Services segment and continued strong performances from other segments, second-half growth rates are expected to be stronger than results for the first half of fiscal 2004.

Conference Call
Cardinal Health has scheduled a conference call for today at 11 a.m. Eastern Standard Time to discuss its second quarter financial performance. To access this discussion via the Internet, go to the Investor Relations page at www.cardinal.com. The company has also established a telephone call-in line at 706-679-0766. An audio replay of the conference call will be available until 11:30 p.m. on Jan. 24, 2004 by dialing 706-645-9291, passcode 4709972. A transcript and replay of the Webcast will be available at the Investor Relations page on www.cardinal.com.

About Cardinal Health
Cardinal Health, Inc. (www.cardinal.com) is the leading provider of products and services supporting the health care industry. Cardinal Health develops, manufactures, packages and markets products for patient care; develops drug-delivery technologies; distributes pharmaceuticals and medical, surgical and laboratory supplies; and offers consulting and other services that improve quality and efficiency in health care. Headquartered in Dublin, Ohio, Cardinal Health employs more than 50,000 people on five continents and produces annual revenues of more than $50 billion. Cardinal Health is ranked No.19 on the current Fortune 500 list and named one of the best U.S. companies by Forbes magazine for 2004.

Except for historical information, all other information in this news release consists of forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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 8-K and Form 10-Q reports (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the costs, difficulties, and uncertainties related to the integration of acquired 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 costs and other effects of governmental regulation and legal and administrative proceedings, and general economic and market conditions. Cardinal Health undertakes no obligation to update or revise any forward-looking statement.