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Press Releases
- Consolidated revenue grew 9 percent to nearly $100 billion
- Healthcare Supply Chain Services fourth-quarter segment profit increased 8 percent to $341 million
- Cardinal Health fiscal 2010 non-GAAP earnings per share estimates increased to $1.90 to $2.00, adjusted for the spinoff of CareFusion Corp.
- CareFusion fiscal 2010 adjusted earnings per share expected to be between $1.10 and $1.20 as a standalone company
- CareFusion spinoff on track for completion on Aug. 31.
DUBLIN, Ohio, Aug. 18, 2009 — Cardinal Health today reported fiscal 2009 diluted earnings per share (EPS) from continuing operations of $3.16, or $3.48 on a non-GAAP basis1, which was in line with the company’s expectations and includes a $0.03 dilutive impact from the classification of the company’s UK-based Martindale injectable manufacturing business as discontinued operations.
The company reported fourth-quarter diluted EPS from continuing operations of $0.74, or $0.86 on a non-GAAP basis, which includes a $0.01 dilutive impact from the Martindale classification as discontinued operations. The quarter was highlighted by the Healthcare Supply Chain Services (HSCS) segment, which reported an 8 percent increase in segment profit, driven by strong growth in the Pharmaceutical Supply Chain and Nuclear Pharmacy Services businesses, and a return to growth in its surgical and procedural kitting operations. The growth in the final quarter contributed to a slight increase of 0.4 percent in HSCS segment profit for the full fiscal year.
Fourth-quarter and full-year segment profit for the Clinical and Medical Products segment declined on a year-over-year basis within company expectations, due to the deferral in hospital capital spending and the impact from a shipping hold on its Alaris® System infusion product during the second half of fiscal 2009. Sequentially from the third quarter, revenue and segment profit increased. In addition, the Alaris® System shipping hold was lifted in July. The spinoff of CareFusion Corp., the company that will become public from the spinoff of Cardinal Health’s Clinical and Medical Products businesses, remains on track to be completed after the close of business on Aug. 31.
“Fiscal 2009 saw accelerated investments to improve our ability to serve customers, as well as disciplined cost-containment measures, all of which will continue through an important transition year in fiscal 2010,” said R. Kerry Clark, chairman and chief executive officer of Cardinal Health. “With the improvement in the core businesses within the Healthcare Supply Chain Services segment and the resumption of customer installations for the Alaris® System, both Cardinal Health and CareFusion have solid foundations and initiatives in place to position themselves for long-term success.”
Consolidated Q4 and FY09 results
The company reported fourth-quarter revenue growth of 10 percent to $25.2 billion and a 15 percent decline in earnings from continuing operations to $268 million, driven by previously disclosed factors impacting the Clinical and Medical Products business with a partial offset from solid profit growth from the Healthcare Supply Chain Services segment. Special items and impairments and other costs associated with the planned spinoff decreased after-tax earnings by $44 million or $0.12 per share. Excluding these items, fourth-quarter non-GAAP earnings from continuing operations2 declined 9 percent to $311 million.
For full fiscal 2009, consolidated revenue grew 9 percent to $99.5 billion and earnings from continuing operations declined 12 percent to $1.1 billion. The net after-tax dilutive impact from special items and impairments and the impact of other costs associated with the planned spinoff totaled $114 million or $0.32 per share. Excluding these items, non-GAAP earnings from continuing operations declined 8 percent to $1.3 billion. In addition, the company finished the year with strong consolidated operating cash flow of approximately $1.6 billion, through disciplined management of working capital.
Q4 and FY09 summary
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Q4 FY09
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Q4 FY08
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Y/Y
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FY09
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Y/Y
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Revenue
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$25.2 billion
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$22.9 billion
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10%
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$99.5 billion
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9%
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Operating Earnings
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$436 million
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$527 million
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(17%)
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$1.9 billion
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(10%)
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Non-GAAP Operating Earnings3
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$509 million
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$560 million
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(9%)
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$2.1 billion
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(4%)
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Earnings from Continuing Operations
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$268 million
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$316 million
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(15%)
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$1.1 billion
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(12%)
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Non-GAAP Earnings from Continuing Operations
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$311 million
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$342 million
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(9%)
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$1.3 billion
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(8%)
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Diluted EPS from Continuing Operations
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$0.74
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$0.88
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(16%)
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$3.16
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(11%)
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Non-GAAP Diluted EPS from Continuing Operations
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$0.86
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$0.96
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(10%)
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$3.48
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(7%)
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Fiscal 2009 segment results and fiscal 2010 outlook
Healthcare Supply Chain Services
The Healthcare Supply Chain Services segment increased fourth-quarter revenue 11 percent to $24.3 billion, driven by strong growth in the pharmaceutical supply chain business across all customer categories. Sales to bulk pharmaceutical customers4 increased 16 percent to $11 billion and sales to non-bulk pharmaceutical customers5 increased 9 percent to $11.1 billion. Segment profit for the quarter increased 8 percent to $341 million, driven by the profit contribution from revenue gains, growth in generics, strong performance under the company’s fee-for-service arrangements with branded manufacturers, strength in nuclear pharmacy and disciplined expense management.
For the full year, segment revenue increased 10 percent to $95.7 billion, driven by solid sales across the segment. Full-year revenue from bulk pharmaceutical customers increased 17 percent to $43.7 billion and annual sales to non-bulk pharmaceutical customers increased 4 percent to $43.6 billion. Annual segment profit was slightly positive from the previous year at $1.3 billion with profit contribution from revenue gains, solid generics performance and medical supply chain growth being offset by pharmaceutical contract repricings, the impact from anti-diversion activities and bad-debt expense.
The company is in the midst of driving several important initiatives designed to optimize customer mix and improve margins. These include actions to enhance the overall experience across all customer categories, improve its generic pharmaceutical and medical product sourcing programs and enhance internal processes related to pricing. This is complemented by lean operating model initiatives, including a disciplined focus on inventory levels across all lines of business. Importantly, the medical and surgical supply chain businesses have initiated a transformation program, which is designed to implement new systems and processes to improve customer ordering and service.
“The Healthcare Supply Chain Services segment had a strong finish to a solid year,” said George Barrett, incoming chairman and chief executive officer of Cardinal Health. “While we are pleased with the improvement in the supply chain segment, our work continues as we take the necessary strategic actions to drive long-term growth.”
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Healthcare Supply Chain Services
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Q4 FY09
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Q4 FY08
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Y/Y
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FY09
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Y/Y
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Revenue
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$24.3 billion
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$21.8 billion
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11%
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$95.7 billion
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10%
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Segment Profit
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$341 million
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$316 million
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8%
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$1.3 billion
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0%
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Fiscal 2010 outlook for 'New' Cardinal Health
Excluding the businesses that will be spun off as CareFusion, Cardinal Health’s adjusted fiscal 2009 revenue was $96 billion and adjusted diluted EPS from continuing operations for the full year was $2.12 or $2.26 on a non-GAAP basis6.
“As we look forward to fiscal 2010 for ‘new’ Cardinal Health, we expect low single-digit revenue growth and non-GAAP diluted earnings per share from continuing operations in the range of $1.90 to $2.00, which is a slight increase from the implied range of $1.87 to $1.91 provided at our Investor Day on June 2,” Barrett said. “The progress we made in fiscal 2009 reinforces our belief that the company’s core businesses are strong and the investments we are making in fiscal 2010 will create a more positive and sustainable longer-term growth trajectory.”
The company expects its Medical segment to contribute strong segment profit growth in fiscal 2010, which will be offset by an expected decline in Pharmaceutical segment profit, resulting from business investments, unfavorable year-over-year comparison from generic launches and customer contract repricings.
Additional fourth-quarter and recent highlights from Cardinal Health:
- Renewed a distribution agreement with CVS Caremark to supply pharmaceuticals to its national network of retail pharmacies through mid-2013
- Increased the regular quarterly dividend by 25 percent to $0.175 per share, with the impact significantly increasing its expected payout ratio post-spin.
- Record-breaking attendance at the company’s Retail Business Conference, which included launches of new tools to help independent pharmacies deliver cost-effective, personalized care to more patients.
- Announced three new members of the board of directors: George S. Barrett as chairman and chief executive officer of Cardinal Health, effective Sept. 1; Bruce L. Downey, former chairman and chief executive officer of Barr Pharmaceuticals, effective Sept. 1; and Glenn A. Britt, chairman, president and chief executive officer of Time Warner Cable, effective Oct. 1.
- Hired Patricia Morrison as Chief Information Officer to enhance the company’s enterprise-wide information technology infrastructure to support Cardinal Health’s strategic business needs.
Clinical and Medical Products
Fourth-quarter revenue for the Clinical and Medical Products segment declined 12 percent to $1.1 billion, due to the continued deferral in hospital capital spending, the Alaris® System shipping hold and the negative impact of foreign exchange rates. Segment profit declined 32 percent in the fourth quarter to $157 million, driven by the decline in revenue and the negative impact of foreign exchange rates. The quarterly profit decline was partially offset by aggressive spending reductions and sales of ChloraPrep® from the Enturia acquisition.
Clinical and Medical Products revenue saw a slight decrease of 0.4 percent for the full year to $4.6 billion, with increases in the first half of the year being offset by the revenue decline in the second half. Segment profit was also affected by the second-half factors that impacted segment revenue and finished the year down 9 percent to $670 million. The Enturia acquisition continued to exceed expectations for the quarter and full year.
“There is no doubt that the second half of fiscal 2009 was a challenging economic environment, but we assessed and addressed the market conditions correctly,” said David Schlotterbeck, chief executive officer of CareFusion. “In the fourth quarter, we saw a sequential improvement in customer orders from the third quarter and continued strong performance from the infection prevention businesses with top- and bottom-line growth. In addition, resuming customer installations of our Alaris® System infusion line in July, following 510(k) clearance from the Food and Drug Administration, was an important milestone under our enhanced quality system.”
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Clinical and Medical Products
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Q4 FY09
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Q4 FY08
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Y/Y
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FY09
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Y/Y
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Revenue
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$1.1 billion
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$1.3 billion
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(12%)
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$4.6 billion
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0%
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Segment Profit
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$157 million
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$229 million
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(32%)
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$670 million
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(9%)
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Fiscal 2010 outlook for CareFusion
For the fiscal year ending June 30, 2010, CareFusion expects mid single-digit revenue growth compared to fiscal 2009 pro forma revenue of $3.7 billion. Adjusted diluted earnings per share7 for fiscal 2010 are expected to be between $1.10 and $1.20, compared to fiscal 2009 pro forma adjusted diluted earnings per share of $1.54, or $1.32 on an unadjusted basis. The pro forma financials reflect CareFusion results as if the separation and related transactions had already occurred. 8
The expected year-over-year decline in adjusted diluted earnings per share is primarily driven by an incremental $100 million to $110 million in spending CareFusion will incur due to several factors including higher compensation expense, R&D spending and costs to stand up infrastructure as a new public company. In addition the company expects a significant increase in the tax rate from fiscal 2009 to 2010, due primarily to a one-time tax benefit received in 2009.
The guidance for fiscal 2010 is based on an assumed diluted weighted average outstanding share count of 228 million and reflects a previously announced distribution ratio of 0.5 shares of CareFusion common stock for each common share of Cardinal Health held as of 5 p.m. EDT on Aug. 25.
Additional fourth-quarter and recent highlights for CareFusion:
- Form 10 registration statement declared effective by the Securities and Exchange Commission and a private letter ruling received from the Internal Revenue Service. The spinoff is on track to be completed after the close of business on Aug. 31.
- Launched the CareFusion brand, establishing the company as an industry leader in helping hospitals measurably improve patient care and safety.
- Announced the nine members that will comprise the CareFusion board of directors.
- Awarded a contract with the Centers for Disease Control to supply more than 4,500 ventilators to the National Stockpile Program
- Signed a five-year, exclusive agreement for Pyxis® brand medication dispensing equipment with HCA.
- Pyxis® products named #1 in customer service from MD Buyline’s April through June quarterly report, reflecting a multi-year commitment to investing in improved customer service.
- MedMined™ services received #1 ranking for infection surveillance technology providers by KLAS.
Conference call
Cardinal Health and CareFusion will host a conference call today at 8:30 a.m. EDT to discuss the fiscal 2009 results and outlook for fiscal 2010. The conference call will be divided into two separate sessions. During the first session, Cardinal Health Chief Financial Officer Jeff Henderson will briefly review consolidated Cardinal Health financial results for the fourth quarter and fiscal 2009, including the Clinical and Medical Products businesses that are part of the planned spinoff of CareFusion. Following the consolidated discussion, Barrett will discuss a business update on ‘new’ Cardinal Health, and Henderson will provide adjusted financials reflecting the removal of the CareFusion businesses, followed by a discussion of fiscal 2010 expectations and assumptions. These prepared comments will be followed by a question and answer session focused on ‘new’ Cardinal Health and consolidated Cardinal Health results. At approximately 9:15 a.m. EDT, the call will transition to Schlotterbeck for a business update on CareFusion. Ed Borkowski, chief financial officer for CareFusion, will follow with a discussion of historical pro forma financials and expectations for fiscal 2010. CareFusion management then will address questions specific to CareFusion.
To access the call and corresponding slide presentation, visit the investor page at cardinalhealth.com or dial 617-213-4858, passcode 66270788. Participants are advised to pre-register at the investor page at cardinalhealth.com or to dial into the call at least 10 minutes prior to the start time. Pre-registrants are issued a pin number that provides faster access to the live call. Presentation slides, an audio replay and a transcript will be archived on the Web site after the conclusion of the meeting. The audio replay will also be available until 5 p.m. EDT on Aug. 25 by dialing 617-801-6888, passcode 65367949.
Upcoming Cardinal Health events
Cardinal Health will be participating in the following health care investor conferences:
- 2009 Thomas Weisel Partners Healthcare Conference in Boston on Sept. 10.
- Morgan Stanley Global Healthcare Unplugged Conference in New York on Sept. 15.
- 2009 INVESTOhio Equity Conference in Columbus, Ohio on Sept. 15.
- UBS Global Life Sciences Conference in New York on Sept. 23.
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.
About ‘New’ Cardinal Health
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.
About CareFusion Corp.
CareFusion Corp., a wholly owned subsidiary of Cardinal Health, is expected to become a public company with the planned spinoff of the clinical and medical products businesses of Cardinal Health. The global company serves the health care industry with products and services that help hospitals measurably improve the safety and quality of health care. CareFusion develops market-leading technologies including Alaris® IV pumps, Pyxis® automated dispensing and patient identification systems, AVEA and Pulmonetic Systems™ ventilation and respiratory products, ChloraPrep® for infection prevention and MedMined™ services for infection surveillance, neurological monitoring and diagnostic products, V. Mueller® surgical instruments and an extensive line of products that support interventional medicine.
CareFusion employs more than 15,000 people across its global operations. The company has been authorized to have its shares of common stock listed on the New York Stock Exchange under the ticker symbol “CFN.” More information may be found at carefusion.com.
About the planned CareFusion spinoff
Cardinal Health’s board has approved the spinoff of CareFusion Corp. through a pro rata distribution of at least 80.1 percent of the shares of CareFusion common stock to Cardinal Health shareholders, with Cardinal Health retaining the remaining shares. The distribution of shares of CareFusion common stock will be made after the close of trading on Aug. 31 to Cardinal Health's shareholders of record as of 5 p.m. EDT on Aug. 25, the record date for the spinoff. Cardinal Health will distribute 0.5 share of CareFusion common stock for each common share of Cardinal Health outstanding as of the record date. Shareholders will receive cash in lieu of fractional shares of CareFusion common stock. No action is required by Cardinal Health shareholders as of the record date to receive their shares of the common stock of CareFusion Corp. in the spinoff.
