Press Releases

For the second quarter ended Dec. 31, consolidated revenue increased 13 percent to $21.8 billion and earnings from continuing operations rose 10 percent to $316 million, or $0.77 per share.  On a non-GAAP basis, earnings from continuing operations increased 15 percent to $341 million¹, or 20 percent to $0.83² on a diluted per-share basis.

 

The company also announced an agreement to acquire SpecialtyScripts Pharmacy to broaden its specialty pharmaceutical service offerings for pharmaceutical manufacturers.  Terms were not disclosed.

 

“We performed well during the quarter with solid, top-line growth in each business segment, while maintaining the discipline in our operations to also deliver double-digit operating earnings growth in all four segments,” said R. Kerry Clark, president and chief executive officer of Cardinal Health.  “We feel very good about the momentum we have established through the first half of the year.”

	Q2 FY07	Q2 FY06	Y/Y
Revenue	$21.8 billion	$19.3 billion	13%
Operating Earnings	$512 million	$457 million	12%
Non-GAAP Operating Earnings3	$544 million	$469 million	16%
Earnings from Continuing Operations	$316 million	$286 million	10%
Non-GAAP Earnings from Continuing Operations	$341 million	$297 million	15%
Diluted EPS from Continuing Operations	$0.77	$0.66	17%
Non-GAAP Diluted EPS from Continuing Operations	$0.83	$0.69	20%

 

(Segment results include equity compensation previously held at the corporate level.  Due to declining equity compensation levels, this had a favorable effect on segment earnings growth.  Results for the Pharmaceutical Technologies and Services segment are included in discontinued operations for all periods presented).

 

    - Revenue for the Healthcare Supply Chain Services-Pharmaceutical segment grew 13 percent to $19.2 billion, with direct-store-door (DSD) pharmaceutical sales growing 14 percent to $10.2 billion and bulk customer sales growing 22 percent to $8.7 billion.  Strong generic sales combined with expense controls and synergies from the acquisition of the F. Dohmen Company to drive a 19-percent increase in operating earnings to $328 million.  This growth was partially offset by lower pricing in the renewal of several large customer agreements. 

 

    - Revenue for the Healthcare Supply Chain Services-Medical segment increased 6 percent to nearly $1.9 billion and operating earnings grew 12 percent to $78 million.  The primary growth drivers for the segment included strong sales of laboratory and private brand products, and continued momentum with surgery center customers and within the segment’s Canadian operations. Selling, general and administrative (SG&A) expenses declined as a percent of sales primarily due to disciplined expense control, reduced fuel costs and productivity gains from facility and back-office consolidations.

 

    - Revenue for the Clinical Technologies and Services segment increased 10 percent to $662 million, with strong demand for both the Alaris and Pyxis product lines increasing committed contracts above the first quarter.  Operating earnings grew 16 percent from the prior year to $92 million, while the segment continued to make investments in new products and customer service initiatives.  An upgrade to the flagship Pyxis MedStation was released during the quarter. In addition, the company will demonstrate a fully integrated bedside medication verification product in late February that integrates clinical data flow across its Alaris, Pyxis and Care Fusion product lines and will enhance the company’s medication management and patient safety offerings.

 

    - Revenue for the Medical Products Manufacturing segment increased 15 percent to $455 million and operating earnings grew 21 percent to $51 million.  Balanced results across the segment contributed to the strong quarter, including revenue and earnings growth in infection prevention products, medical specialties and from Canadian operations.  Ongoing facility restructuring and operational excellence initiatives continued to deliver benefits during the quarter through improved manufacturing efficiency.

 

    - Repurchase of $300 million of Cardinal Health shares during the quarter and more than $900 million to date in the fiscal year.

    - Announcement of plans to divest the Pharmaceutical Technologies and Services (PTS) segment to focus resources on its four remaining segments serving health-care provider customers, such as hospitals and pharmacies.  (A $425-million tax asset associated with the planned PTS divestiture has been recorded in discontinued operations and will be offset by the related tax expense on any gain over net book value in the quarter that the transaction closes.)

    - Signing the agreement to acquire SpecialtyScripts Pharmacy.  With this acquisition, Cardinal Health intends to develop services for pharmaceutical manufacturers that complement and leverage the company’s existing portfolio of nuclear pharmacies, third-party logistics offerings and distribution services for blood and plasma products.  The acquisition is expected to close in the third quarter.

    - Completing the first full quarter with integrated sales teams focused on hospital networks in the U.S. and Canada, representing Cardinal Health’s entire portfolio of products, services and integrated solutions.

 

Cardinal Health reiterated its fiscal 2007 guidance range of $3.25 to $3.40 for non-GAAP diluted EPS from continuing operations, which excludes the impact of proceeds from the planned sale of its PTS business.

 

Cardinal Health will host a conference call and webcast at 11 a.m. Eastern Standard Time (EST) to discuss the results. To access the call and corresponding slide presentation, go to the Investor page at www.cardinalhealth.com.  The conference call may also be accessed by calling 617-213-8067, conference passcode 22400322.  An audio replay will be available until 1 p.m. EST on Feb. 1 at 617-801-6888, passcode 51497520.  A transcript and audio replay will also be available at www.cardinalhealth.com.

 

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is an $81 billion, global company serving the health-care industry with a broad portfolio of products and services.  Through its diverse offerings, Cardinal Health delivers health-care solutions that help customers reduce their costs, improve safety and productivity, and deliver better care to patients.  The company manufactures, packages and distributes pharmaceuticals and medical supplies, offers a range of clinical services and develops automation products that improve the management and delivery of supplies and medication for hospitals, physician offices and pharmacies.  Ranked No. 19 on the Fortune 500, Cardinal Health employs more than 55,000 people on six continents.  More information about the company may be found at www.cardinalhealth.com.

¹Non-GAAP earnings from continuing operations:  Earnings from continuing operations excluding special items and impairment charges and other, both net of tax.

 

²Non-GAAP diluted EPS from continuing operations:  Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.

³Non-GAAP operating earnings:  Operating earnings excluding special items and impairment charges and other.

 

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 www.cardinalhealth.com.

 

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, 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 business; 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 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.