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DUBLIN, Ohio, Nov. 5, 2009 — Cardinal Health today reported fiscal 2010 first-quarter revenue increased 6 percent to $24.8 billion and non-GAAP diluted earnings per share from continuing operations¹ increased 15 percent to $0.54.  

 

The net after-tax dilutive impact from restructuring, impairments and other costs associated with the spinoff of CareFusion Corp. totaled $0.71 per share. These items resulted in a GAAP loss from continuing operations of $62 million for the quarter, or $0.17 per share. Notable one-time items include a $172 million tax charge related to the portion of non-U.S. earnings that will no longer be indefinitely invested offshore due to the company’s reduced international footprint following the spinoff and a $26 million after-tax loss associated with the early retirement of more than $1.1 billion of long-term debt.

 

The quarter was highlighted by 17 percent profit growth from the company’s Medical segment, a lower-than-anticipated segment profit decline of 2 percent from its Pharmaceutical segment and disciplined expense management across the company. First-quarter non-GAAP results also benefited from an expected lower tax rate versus the prior-year period.

 

“We’re off to a solid start to fiscal 2010, with our core businesses performing well and our key initiatives on track to deliver long-term value,” said George Barrett, chairman and chief executive officer of Cardinal Health. “Our first-quarter operating numbers were enhanced by an accelerated revenue recognition item in our Medical segment related to the spinoff and some earlier-than-expected brand price inflation in the Pharmaceutical segment. Based on the data available to us at this stage of the year, we expect that our full-year performance will likely be toward the higher end of our guidance of $1.90 to $2.00 for non-GAAP diluted EPS from continuing operations.”

 

 

 

	Q1 FY10	Q1 FY09	Y/Y
Revenue	$24.8 billion	$23.4 billion	6%
Operating Earnings	$240 million	$287 million	(16)%
Non-GAAP Operating Earnings2	$323 million	$311 million	4%
Earnings/(Loss) from Continuing Operations	($62) million	$172 million	N.M.
Non-GAAP Earnings from Continuing Operations3	$194 million	$168 million	15%
Diluted EPS from Continuing Operations	($0.17)	$0.48	N.M.
Non-GAAP Diluted EPS from Continuing Operations	$0.54	$0.47	15%

 

 

 

 

The Pharmaceutical segment increased revenue by 5 percent to $22.6 billion, primarily driven by increased sales to existing pharmaceutical distribution customers. Sales to bulk customers increased 6 percent to $11.3 billion and sales to non-bulk customers increased 5 percent to $11.2 billion. Segment profit decreased 2 percent to $208 million as a result of the expected impact from fewer significant generic product launches and deflation versus the prior year period, the effect of customer contract repricings within the pharmaceutical distribution business and the decrease in franchise fees from the Medicine Shoppe International franchisee contract transition. The decline in segment profit was partially offset by strong, double-digit profit growth from the Nuclear Pharmacy Services business.

 

“The Pharmaceutical segment continued its progress coming out of fiscal 2009 and performed somewhat ahead of our expectations,” Barrett said. “We are also seeing good early traction with our new generic programs on both the sourcing and customer sides. Our Nuclear Pharmacy Services business continues to perform well in an unusual environment, but we are closely monitoring the supply disruptions of radioisotopes.”

 

 

 

 

Revenue for the Medical segment increased 10 percent to $2.2 billion, primarily from sales growth with existing customers. Additionally, the spinoff triggered immediate revenue recognition from international sales to CareFusion, which contributed approximately $51 million to the quarterly revenue growth. Segment profit grew 17 percent to $115 million, driven by decreased cost of raw materials, the $14 million profit impact from the accelerated international sales to CareFusion, pandemic flu orders and the overall increase in volume for the quarter. Segment profit was partially dampened from investments associated with the Medical Transformation project.

 

“Our Medical segment had a strong quarter with particularly robust performance from our ambulatory and lab supply businesses, and progress is being made in our efforts to transform our medical businesses for long-term growth,” Barrett said. “The segment’s underlying operations are performing well, and the segment is on track for strong profit growth for the full year.”

 

 

        
• Completed the spinoff of CareFusion Corp. through a pro rata distribution to Cardinal Health shareholders of approximately 81 percent of the shares of CareFusion common stock, effectively launching it as an independent, publicly traded company. 
• Awarded a five-year, sole-source laboratory products supply agreement with Novation, one of the nation’s largest group purchasing organizations.
• Purchased approximately $1.1 billion in aggregate principal amount of the company’s long-term debt securities.
• Named to iSixSigma’s 2009 Best Places to Work Top Ten List.
• Hired Mark Blake as executive vice president of strategy and corporate development.

 

 

Cardinal Health will host a conference call and webcast today at 8:30 a.m. EST to discuss first quarter results. To access the call and corresponding slide presentation, go to the Investor page at cardinalhealth.com or dial 617.213.4863, passcode 29086482. Presentation slides, an audio replay and transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 11:30 p.m. EST on Nov. 8 by dialing 617.801.6888, passcode 83452415.

 

 

Cardinal Health will be participating in the following health care investor conferences:

 

At these events, company executives will discuss Cardinal Health’s diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks or a transcript, go to the Investors page at cardinalhealth.com.

 

 

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a Fortune 18 health care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals and ambulatory care sites focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. As one of the largest health care companies in the world, Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 40,000 locations each day. The company is also a leading manufacturer of medical and surgical products, including gloves, surgical apparel and fluid management products. In addition, the company supports the growing diagnostic industry by supplying medical products to clinical laboratories and operating the nation’s largest network of radiopharmacies that dispense products to aid in the early diagnosis and treatment of disease. Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com.

 

 

 

¹ Non-GAAP diluted EPS from continuing operations:  Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.

 

² Non-GAAP operating earnings: Operating earnings excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) spinoff costs not included in items 1 through 3 above.

 

³ Non-GAAP earnings from continuing operations:  Earnings from continuing operations excluding (1) restructuring and employee severance, (2) impairments and loss on sale of assets, (3) litigation (credits)/charges, net and (4) spinoff costs and tax charges not included in items 1 through 3 above, each net of tax.

A reconciliation of the differences between these non-GAAP financial measures and their most directly comparable GAAP financial measures is provided in the attached tables and at cardinalhealth.com.

Cardinal Health uses its Web site as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the investor page at cardinalhealth.com.

Cautions concerning forward-looking statements
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include (but are not limited to) uncertainties and risks regarding the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds realized from future sales of CareFusion stock; competitive pressures in Cardinal Health’s various lines of business; the loss of one or more key customer or supplier relationships or changes to the terms of those relationships; the timing of generic and branded pharmaceutical introductions and the frequency or rate of branded pharmaceutical price appreciation or generic pharmaceutical price deflation; 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 any regulatory authority or any legal or administrative proceedings; the effects of disruptions in the financial markets, including uncertainties related to the availability and/or cost of credit on Cardinal Health’s customers and vendors; the ultimate features of government health care reform initiatives and their enactment and implementation; and conditions in the pharmaceutical market and general economic and market conditions. In addition, Cardinal Health is subject to additional risks and uncertainties 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. This news release reflects management’s views as of Nov. 5, 2009. Except to the extent required by applicable law, Cardinal Health does not undertake an obligation to update or revise any forward-looking statement.

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