DUBLIN, Ohio, May 1 /PRNewswire-FirstCall/ -- Cardinal Health, a global provider of products and services that improve the safety and productivity of health care, today reported a revenue increase of 5 percent for its third quarter to nearly $23 billion, with GAAP earnings per share (EPS) reaching $1.02 from a $0.01 loss in the prior-year period.
Special items related to acquisition integration, litigation and restructuring, and impairment charges and other items had a $0.06 dilutive impact on GAAP earnings for the quarter, bringing non-GAAP EPS to $1.08(1), an increase of 13 percent from the prior-year period.
Chairman and Chief Executive Officer R. Kerry Clark said, "Our consolidated business and three of our four operating segments are performing to our expectations. We saw a healthy revenue increase in our clinical and medical products sector, with excellent leverage to the profit line. And our supply chain medical segment continued the turnaround we began earlier this year with a strong quarter of profitable growth.
"Within our supply chain pharmaceutical segment, we are managing the same issues we outlined last quarter, including the re-pricing of large retail accounts and the impact of our controlled substance anti-diversion efforts. However, we have renewed all of our major contracts through fiscal 2009 and, with respect to our anti-diversion efforts, we are putting in place new systems that we believe will return us to a strong position in managing this important industry issue."
Healthcare Supply Chain Services Sector
The Healthcare Supply Chain Services - Pharmaceutical segment reported a 3 percent increase in revenue to $19.9 billion. Sales to bulk customers increased 8 percent to $9.1 billion, while sales to non-bulk customers were even with the prior year at $10.8 billion. Revenue growth was dampened by several factors, including customer disruption as the company enhances anti-diversion controls and strengthens its offerings, and by slower overall market growth. Segment profit declined 21 percent to $300 million, primarily from the continued impact of re-pricing several large contracts and the impact of anti-diversion initiatives.
Revenue for the Healthcare Supply Chain Services - Medical segment grew 8 percent to $2.1 billion, with increased sales penetration and growth of existing hospital, lab and ambulatory customers. As expected, the segment returned to positive profit growth during the quarter, with profit increasing 5 percent to $93 million, driven by increased sales volume. Segment profit growth was dampened by a previously disclosed change in corporate cost allocation and by continued softness in the surgical kitting business.
Clinical and Medical Products Sector
"Our Clinical and Medical products sector continued to deliver strong year-over-year growth, reflecting our leadership positions in medication dispensing, infusion, respiratory and infection prevention products," Clark said. "We will continue to invest in these businesses to strengthen our offerings for the future."
The Medical Products and Technologies segment grew revenue by 48 percent to $679 million, driven by the acquisition of VIASYS Healthcare and strong growth within the core infection prevention and medical specialty businesses. Segment profit grew 72 percent to $80 million on the VIASYS addition, strong organic growth and the benefit of foreign exchange. The VIASYS integration remains on schedule to deliver $85 million to $100 million in synergies by fiscal 2010.
Revenue for the Clinical Technologies and Services segment increased by 11 percent to $747 million, driven by continued growth in customer installations for medication and supply dispensing products and infusion pumps. Segment profit increased by 29 percent to $127 million from a favorable product mix and improved operating leverage from expense management initiatives. Segment profit for the quarter was partially offset by a $6.5 million reserve for a recall of integrated circuits and connectors on certain Alaris(R) System modules. The company believes it is fully reserved for remediation efforts on all Alaris product recalls and expects to complete them by the end of the calendar year.
Outlook
The company reaffirmed its non-GAAP EPS range of $3.75 to $3.85 for fiscal 2008. Clark stated, "As the remainder of the year unfolds, we expect full-year, non-GAAP EPS to be about in the middle of the range, excluding the potential dilutive impact of the Enturia acquisition of 1 to 2 cents."
Conference Call
Cardinal Health will host a conference call and webcast at 8:30 a.m. EDT 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 617-213-4853, passcode 66621966. An audio replay will be available until 11:30 p.m. EDT on May 3 at 617-801-6888, passcode 39214175. A transcript and audio replay will also be available at www.cardinalhealth.com .
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is an $87 billion, global company serving the health care industry with products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety, productivity and profitability, and deliver better care to patients. With a focus on making supply chains more efficient, reducing hospital-acquired infections and breaking the cycle of harmful medication errors, Cardinal Health develops market leading technologies, including Alaris(R) IV pumps, Pyxis(R) automated dispensing systems, MedMined(TM) infection surveillance services and the CareFusion(TM) patient identification system. The company also manufactures medical and surgical products and is one of the largest distributors of pharmaceuticals and medical supplies worldwide. Ranked No. 19 on the Fortune 500, Cardinal Health employs more than 40,000 people on five continents. More information about the company may be found at www.cardinalhealth.com .
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 http://www.cardinalhealth.com .
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. 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 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; uncertainties relating to 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; future actions of regulatory bodies or government authorities relating to Cardinal Health's manufacturing or sale of products and other costs or claims that could arise from its manufacturing, compounding or repackaging operations or from its other services; the costs, difficulties and uncertainties related to the integration of acquired businesses; and conditions in the pharmaceutical market and general economic and market conditions. This news release reflects management's views as of May 1, 2008. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
Refer to the GAAP / Non-GAAP Reconciliation for definitions and calculations supporting the non-GAAP balances.
Forward-Looking Non-GAAP Financial Measures
The Company presents non-GAAP earnings from continuing operations, non- GAAP return on equity, and non-GAAP effective tax rate from continuing operations (and presentations derived from these financial measures) on a forward-looking basis. The most directly comparable forward-looking GAAP measures are earnings from continuing operations, return on equity and effective tax rate from continuing operations. The Company is unable to provide a quantitative reconciliation of these forward-looking non-GAAP measures to the most comparable forward-looking GAAP measures because the Company cannot reliably forecast special items and impairment charges and other, which are difficult to predict and estimate and are primarily dependent on future events. Please note that the unavailable reconciling items could significantly impact the Company's future financial results.
GAAP
Debt: long-term obligations plus short-term borrowings Debt to Total Capital: debt divided by (debt plus total shareholders' equity)
Diluted EPS from Continuing Operations: earnings / (loss) from continuing operations divided by diluted weighted average shares outstanding
Effective Tax Rate from Continuing Operations: provision for income taxes divided by earnings / (loss) before income taxes and discontinued operations
Operating Cash Flow: net cash provided by / (used in) operating activities from continuing operations
Segment Profit: segment revenue minus (segment cost of products sold and segment selling, general and administrative expenses)
Segment Profit Margin: segment profit divided by segment revenue
Segment Profit Mix: segment profit divided by total segment profit for all segments
Return on Equity: annualized net earnings divided by average shareholders' equity
Return on Invested Capital: annualized net earnings divided by (average total shareholders' equity plus debt plus unrecorded goodwill)
Revenue Mix: segment revenue divided by total segment revenue for all segments
NON-GAAP
Net Debt to Capital: net debt divided by (net debt plus total shareholders' equity)
Net Debt: debt minus (cash and equivalents and short-term investments available for sale)
Non-GAAP Diluted EPS from Continuing Operations: non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding
Non-GAAP Diluted EPS from Continuing Operations Growth Rate: (current period non-GAAP diluted EPS from continuing operations minus prior period non- GAAP diluted EPS from continuing operations) divided by prior period non-GAAP diluted EPS from continuing operations
Non-GAAP Earnings from Continuing Operations: earnings / (loss) from continuing operations excluding special items and impairment charges and other, both net of tax
Non-GAAP Earnings from Continuing Operations Growth Rate: (current period non-GAAP earnings from continuing operations minus prior period non-GAAP earnings from continuing operations) divided by prior period non- GAAP earnings from continuing operations
Non-GAAP Effective Tax Rate from Continuing Operations: (provision for income taxes adjusted for special items) divided by (earnings / (loss) before income taxes and discontinued operations adjusted for special items)
Non-GAAP Operating Earnings: operating earnings / (loss) excluding special items and impairment charges and other
Non-GAAP Operating Earnings Growth Rate: (current period non-GAAP operating earnings minus prior period non-GAAP operating earnings) divided by prior period non-GAAP operating earnings
Non-GAAP Operating Margin: non-GAAP operating earnings divided by revenue
Non-GAAP Return on Equity: (annualized current period net earnings plus special items minus special items tax benefit) divided by average shareholders' equity (1)
Non-GAAP Return on Invested Capital: (annualized net earnings plus special items minus special items tax benefit plus interest expense and other) divided by (average total shareholders' equity plus debt plus unrecorded goodwill) (1)
SOURCE Cardinal Health, Inc.
