Cardinal Health Reports Third-Quarter Results
The quarter was highlighted by a 7 percent increase in Pharmaceutical segment profit and strong operating cash flow of $879 million for the quarter.
GAAP operating earnings declined 4 percent to $366 million, or 7 percent to $385 million on a non-GAAP basis. SG&A expense was higher sequentially and year over year due to performance-based employee compensation that reflects the company's expected fiscal 2010 results.
Third-quarter GAAP earnings from continuing operations were $225 million or $0.62 per share. GAAP results include a positive $0.01 per share net after-tax contribution, primarily from the gain on the sale of CareFusion stock and partially offset by the after-tax impact from impairments and loss on the sale of assets.
"We are pleased with our third-quarter performance and our continued momentum for the year," said George Barrett, chairman and CEO of Cardinal Health. "We had strong performance from our Pharmaceutical segment, which was better than we anticipated. As expected, our Medical segment declined versus the same period last year, but grew sequentially from the prior quarter. We were particularly encouraged by the year-over-year growth in our gross margin rate, and another strong quarter of operating cash flow and working capital improvements."
THIRD-QUARTER SEGMENT RESULTS
Revenue for the Pharmaceutical segment increased to $22.2 billion. Sales to non-bulk customers increased 0.5 percent to $11.3 billion and sales to bulk customers increased 0.5 percent to $10.9 billion. Segment profit increased 7 percent to $307 million primarily driven by solid performance from branded manufacturer agreements, positive margin contribution from the company's generic programs and disciplined expense management. The increase in segment profit was partially offset by previously disclosed contract repricings and the Medicine Shoppe International transition. The company continues to actively manage supply disruptions of medical isotopes for its nuclear pharmacy business. These shortages are now expected to continue through at least the first quarter of next fiscal year.
In addition, the company completed the sale of its SpecialtyScripts business during the third quarter and recently entered into a definitive agreement to sell its Martindale generic injectible manufacturing business, which it expects to close before the end of the fiscal year.
Revenue for the Medical segment increased 7 percent to $2.1 billion, primarily from sales growth with existing domestic customers and strong revenue growth from the Canadian business. As expected, segment profit declined 16 percent year over year to $108 million, primarily due to an unusual year-over-year comparison in the cost of goods sold, the aforementioned impact of performance-based employee compensation and increased investment spend associated with the Medical Business Transformation. The decline in segment profit was partially offset by the positive profit impact from revenue growth within the lab and ambulatory businesses and preferred products. Segment profit increased sequentially from the second quarter as anticipated and is expected to return to year-over-year growth for the fourth quarter.
FISCAL Q4 AND FISCAL 2011 OUTLOOK
"With the first nine months of the fiscal year behind us, we are trending slightly better than our previous expectations, and we now anticipate non-GAAP diluted EPS from continuing operations for fiscal 2010 will be in the range of $2.15 to $2.20," Barrett said.
"Although we don't typically provide annual guidance at the end of the third quarter, this has been a year of transitions for Cardinal Health, and we wanted to provide an early look at fiscal 2011. Based on the progress we've made year-to-date, our preliminary view of fiscal 2011 non-GAAP diluted EPS from continuing operations is in the range of $2.35 to $2.45. We expect to provide more specifics for fiscal 2011 when we report fourth-quarter and full-year results."
Cardinal Health will host a conference call and webcast today at 8:30 a.m. EDT to discuss third-quarter results. To access the call and corresponding slide presentation, go to the Investors page at cardinalhealth.com/investors or dial 617.213.4850, passcode 26885216. Presentation slides and an audio replay 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. on May 6 by dialing 617.801.6888, passcode 70784421.
Cardinal Health will be participating in the following New York-based 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, go to the Investors page at cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $96 billion 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. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 60,000 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. Ranked #17 on the Fortune 500, 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) Other Spinoff Costs (as defined at the end of the attached tables) included within distribution, selling, general and administrative expenses.
(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, (4) Other Spinoff Costs, and (5) gain on sale of CareFusion stock, 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 Investors 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 effect of the CareFusion spinoff on Cardinal Health; the performance of CareFusion and the proceeds realized from future sales of CareFusion stock; uncertainties due to government health care reform including the recently enacted federal health care reform legislation; 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; disruptions in the supply of medical isotopes for the nuclear pharmacy business; 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; 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 April 29, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Q3 FY10 SUMMARY
SOURCE Cardinal Health, Inc.
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