CareFusion Corporation Net Profit Falls, Plans to Cut 700 Jobs

SAN DIEGO, Aug. 10 /PRNewswire-FirstCall/ -- CareFusion Corp. (NYSE: CFN), a leading, global medical device company, today reported results from continuing operations for the three months and fiscal year ended June 30, 2010 and announced a company-wide restructuring expected to generate more than $100 million in annual savings when fully implemented.

"The results we reported today reflect solid performances across our business segments in our first year as a public company. We overachieved against our original fiscal 2010 expectations with incremental positive contributions from both our Infusion and Respiratory businesses," said David Schlotterbeck, chairman and CEO of CareFusion. "During fiscal 2010, we evaluated our cost structure and the strategic fit of certain businesses and are now taking the necessary steps to right size our company. Our goal is to improve our competitive position, accelerate our previously announced efforts to improve our operating margins and enhance our focus on the core opportunities we have for growth."

"Our guidance for fiscal 2011 is consistent with the long-term goals for top- and bottom-line growth we have previously provided. We are expecting revenue growth of mid single digits on a reported basis over fiscal 2010 results, and adjusted diluted earnings per share of $1.58 to $1.68, an 11 to 18 percent increase. Our fiscal 2011 growth projections include overcoming the Infusion and Respiratory benefits in 2010, as well as the impact in the change in currency from 2010 to 2011, all of which total approximately $210 million. Taking into account these items, our underlying core revenue growth rate is 10 to 12 percent for next year."

Restructuring

CareFusion announced today that it initiated a company-wide restructuring that is expected to reduce the company's global workforce by approximately 700 positions. The reductions are designed to eliminate layers of management and reduce the size of the company's supporting infrastructure.

In connection with the restructuring, CareFusion estimates it will generate pre-tax cost savings in fiscal 2011 of $85 million to $95 million and for that amount to increase by an additional $25 million in fiscal 2012. In addition, the company estimates incurring total pre-tax, nonrecurring expenses of approximately $40 million to $50 million in fiscal 2011 related to this restructuring, which includes employee separation and other costs.

Fourth Quarter Results

CareFusion's reported results compare to the three month and fiscal year periods ended June 30, 2009.

Revenue in the fourth quarter increased 19 percent to $1 billion on both a reported and constant currency basis, driven primarily by increased sales in the company's Infusion, Respiratory and Medical Technologies and Services businesses. Operating income increased to $135 million from $85 million. Excluding nonrecurring items, adjusted operating income for the fourth quarter increased 44 percent to $147 million.

Operating expenses, including selling, general and administrative (SG&A), research and development (R&D) and restructuring and acquisition integration charges in the fourth quarter totaled $362 million, or 35 percent of total revenue. Excluding nonrecurring items, adjusted operating expenses in the fourth quarter totaled $338 million, or 33 percent of total revenue. Adjusted SG&A expenses were $294 million and R&D investments totaled $44 million.

The company reported income from continuing operations in the fourth quarter of $52 million, or $0.23 per diluted share. Adjusted net income was $85 million, or $0.38 per diluted share, and the adjusted tax rate was 33.2 percent for the fourth quarter.

Fiscal 2010 Results

For fiscal 2010, revenue increased 9 percent to $3.9 billion on both a reported and constant currency basis, driven primarily by increased sales in the company's Infusion, Respiratory and Medical Technologies and Services businesses, which were partially offset by a decrease in the company's Dispensing business. Operating income increased $28 million to $472 million. Excluding nonrecurring items, adjusted operating income for fiscal 2010 increased to $542 million from $516 million.

Operating expenses, including SG&A, R&D and restructuring and acquisition integration charges in fiscal 2010 totaled $1.4 billion, or 36 percent of total revenue. Excluding nonrecurring items, adjusted operating expenses for fiscal 2010 totaled $1.3 billion, or 34 percent of total revenue. Adjusted SG&A expenses were $1.2 billion, and R&D investments totaled $159 million.

The company reported income from continuing operations for fiscal 2010 of $171 million, or $0.77 per diluted share. Adjusted net income increased $1 million to $317 million, or $1.42 per diluted share, and the adjusted tax rate was 29.5 percent for fiscal 2010.

Summary of Segment Results

The company reports results in two segments: Critical Care Technologies (CCT) and Medical Technologies and Services (MTS). The CCT segment includes the company's Dispensing, Infusion and Respiratory businesses and the MTS segment includes the company's Infection Prevention and Medical Specialties businesses. Segment results for the fourth quarter and fiscal year periods ended June 30, 2010 are as follows:

Adjusted operating expenses, adjusted SG&A expenses, adjusted operating income, adjusted net income, adjusted diluted earnings per share and adjusted segment profit are non-GAAP financial measures and exclude restructuring and acquisition integration charges, nonrecurring spinoff related costs, nonrecurring gain on the sale of assets, nonrecurring tax items and discontinued operations. Adjusted net income also excludes nonrecurring costs related to the bridge loan entered into in connection with the spinoff. A reconciliation of GAAP to non-GAAP financial measures is included later in this news release.

Fiscal 2011 Outlook

For the fiscal year ending June 30, 2011, CareFusion expects revenues to grow on a percentage basis by mid single digits compared to fiscal 2010 revenue of $3.9 billion, and in line with the company's long term guidance. On a constant currency basis, revenue is expected to grow mid-to-high single digits. Adjusted diluted earnings per share for fiscal 2011 are expected to be in the range of $1.58 to $1.68, an increase of 11 to 18 percent.

The guidance is based on an assumed diluted weighted average outstanding share count of approximately 225 million.

Conference Call

CareFusion will host a conference call today at 2 p.m. PDT to discuss earnings results for the fourth quarter and fiscal 2010.

To access the call and corresponding slide presentation, visit the Investor Relations page at www.carefusion.com. Log on at least 15 minutes before the call begins to register and download or install any necessary audio software.

Investors and other interested parties may also access the call by dialing (800) 901-5218 within the U.S. or (617) 786-4511 from outside the U.S., and use the access code 21376159. A replay of the conference call will be available from 5 p.m. Pacific time (8 p.m. Eastern time) on Aug. 10 through 8:59 p.m. Pacific time (11:59 p.m. Eastern time) on Aug. 17 and can be accessed by dialing (888) 286-8010 in the U.S. or (617) 801-6888 Internationally and using the access code 64121701.

About CareFusion Corporation

CareFusion (NYSE: CFN) is a global corporation serving the health care industry with products and services that help hospitals measurably improve patient care. The company develops market-leading technologies including Alaris® IV pumps, Pyxis® automated dispensing and patient identification systems, AirLife, AVEA® and LTV® series of ventilators and respiratory products, ChloraPrep® skin prep products, MedMined services for infection surveillance, V. Mueller® and Snowden-Pencer® surgical instruments and NeuroCare diagnostic products. CareFusion employs more than 15,000 people across its global operations. More information may be found at www.carefusion.com.

Use of Non-GAAP Financial Measures by CareFusion Corporation

This CareFusion news release presents the non-GAAP financial measures "adjusted operating expenses", "adjusted SG&A expenses", "adjusted operating income", "adjusted net income", "adjusted diluted earnings per share" and "adjusted segment profit". The most directly comparable measure for these non-GAAP financial measures are operating expenses, SG&A expenses, operating income, net income, diluted earnings per share and segment profit. The company has included below unaudited adjusted financial information for the quarters and fiscal years ended June 30, 2010 and 2009, which present the company's results of operations after excluding restructuring and acquisition integration charges, nonrecurring spinoff related costs, nonrecurring gain on the sale of assets, nonrecurring tax items and discontinued operations.

In addition, CareFusion presents the non-GAAP financial measure "adjusted diluted earnings per share" on a forward-looking basis. The most directly comparable forward-looking GAAP measure for the company is diluted earnings per share. CareFusion is unable to provide a quantitative reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable forward-looking GAAP measure, because the company cannot reliably forecast restructuring and acquisition integration costs, and other nonrecurring costs. Please note that the unavailable reconciling items could significantly impact CareFusion's future financial results. A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding CareFusion's financial condition and results of operations is included as Exhibit 99.3 to CareFusion's report on Form 8-K filed with the Securities and Exchange Commission on Aug. 10, 2010.

Cautions Concerning Forward-looking Statements

The CareFusion news release and the information contained herein contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. The matters discussed in 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 CareFusion'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: we may be unable to effectively enhance our existing products or introduce and market new products or may fail to keep pace with advances in technology; we are subject to complex and costly regulation; cost containment efforts of our customers, purchasing groups, third-party payers and governmental organizations could adversely affect our sales and profitability; current economic conditions have and may continue to adversely affect our results of operations and financial condition; we may be unable to realize any benefit from our cost reduction and restructuring efforts and our profitability may be hurt or our business otherwise might be adversely affected; we may be unable to protect our intellectual property rights or may infringe on the intellectual property rights of others; defects or failures associated with our products and/or our quality system could lead to the filing of adverse event reports, recalls or safety alerts and negative publicity and could subject us to regulatory actions; and we are currently operating under an amended consent decree with the FDA and our failure to comply with the requirements of the amended consent decree may have an adverse effect on our business. The CareFusion news release and the information contained herein reflect management's views as of Aug. 10, 2010. Except to the limited extent required by applicable law, CareFusion undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.