DUBLIN, Ohio, Oct. 27 /PRNewswire-FirstCall/ -- Cardinal Health, the leading provider of products and services supporting the health-care industry, today announced first-quarter results, with revenue growth of 11 percent to $21.4 billion and earnings growth of 26 percent led by a strong quarter for its Healthcare Supply Chain Services-Pharmaceutical segment.
For the first quarter ended Sept. 30, earnings from continuing operations reached $300 million, resulting in a 33-percent increase in diluted earnings per share (EPS) from continuing operations to $0.73.
“We executed well in our Healthcare Supply Chain Services-Pharmaceutical segment, which drove strong revenue and earnings growth for the company during the quarter,” said R. Kerry Clark, president and chief executive officer of Cardinal Health. “Our other segments contributed more than 40 percent of total operating earnings, reflecting the diversity of our health-care products and services, and highlighting a key differentiator Cardinal Health brings to both customers and shareholders. In particular, our Medical Products Manufacturing segment had an excellent quarter, its first as a standalone segment for Cardinal Health.”
Non-GAAP earnings from continuing operations(1) increased 27 percent to $320 million and non-GAAP diluted EPS from continuing operations(2) rose 32 percent to $0.78. A $16.7 million tax reserve adjustment added $0.04 to EPS in the period. Cardinal Health also reserved $13.5 million, or $0.02 per share, for a previously disclosed recall of its Alaris SE products.
Q1 FY07 Summary Q1 FY07 Q1 FY06 Y/Y Revenue $21.4 billion $19.2 billion 11% Operating Earnings $464 million $377 million 23% Non-GAAP Operating Earnings(3) $492 million $400 million 23% Earnings from Continuing Operations $300 million $238 million 26% Non-GAAP Earnings from Continuing Operations $320 million $253 million 27% Diluted EPS from Continuing Operations $0.73 $0.55 33% Non-GAAP Diluted EPS from Continuing Operations $0.78 $0.59 32% First quarter segment results: - Revenue for the Healthcare Supply Chain Services-Pharmaceutical segment grew 12 percent to $18.5 billion, with direct-store-door (DSD) pharmaceutical sales growing 14 percent to $10.1 billion and bulk customer sales growing 19 percent to $8.1 billion. A strong generic sales mix, combined with expense controls during the quarter drove a 24-percent increase in operating earnings to $301 million, partially offset by continued sell-margin pressure. Operating earnings in the first quarter of last year were affected by a $32-million charge related to vendor credits in prior periods. - Revenue for the Healthcare Supply Chain Services-Medical segment increased 2 percent to $1.8 billion due to moderate sales growth to hospitals and ambulatory care centers. Sales of laboratory supplies and from Canadian operations continued to grow at a faster rate than the overall segment. Operating earnings declined 10 percent to $74 million as the segment continued to transition to new customer service centers and a new sales model, and address competitive pricing within its Presource(R) surgical kitting business. - Revenue for the Clinical Technologies and Services segment increased 3 percent to $594 million, below company expectations due to the delayed introduction of two new products and the recall of its Alaris SE pump. Of the delayed products, the Alaris PCU version 1.5 has now been released, and the Pyxis MedStation 3500 is in the final stages of limited release. Operating earnings declined 14 percent from the prior year to $68 million due to these factors and planned investments in product development and quality and service improvements. - Revenue for the Pharmaceutical Technologies and Services segment increased 10 percent to $451 million and operating earnings increased 13 percent to $22 million. Strong earnings growth in the segment’s softgel and Zydis(R) fast-dissolve pharmaceutical manufacturing operations and in its pharmaceutical packaging businesses were partially offset by declines in sterile manufacturing. SG&A expenses as a percent of sales declined due to expense controls and ongoing operational excellence initiatives. - Revenue for the Medical Products Manufacturing segment increased 11 percent to $424 million and operating earnings grew 15 percent to $61 million. Balanced results across the segment contributed to the strong quarter, including competitive wins in respiratory products, new contracts for Convertors(R) infection prevention products, contributions from recently acquired Denver Biomedical and overall volume growth. Operating margins improved from the prior-year period because of recently completed facility restructurings, further progress in sourcing and SG&A expense control. Additional first-quarter and recent highlights include: - Repurchase of $495 million of Cardinal Health stock as part of a two-year, $2 billion share repurchase program announced in August. - Acquiring MedMined, Inc., a medical analytics firm that will extend Cardinal Health’s patient-safety and clinical offerings. MedMined serves 185 hospitals in the U.S. with technology and services that identify and prevent hospital-acquired infections. The acquisition closed on July 18. - An agreement to acquire Care Fusion, Inc., an industry leader in wireless, barcode-enabled patient identification systems used by hospitals in 20 states. Care Fusion was recently awarded a contract to implement its hand-held devices at the Veteran Health Administration’s 171 medical centers and 500 outpatient clinics. - Signing a seven-year contract with Triad, a HealthTrust Purchasing Group member, for Alaris hardware, software and disposable products. The deal, which is one of the largest Alaris contracts ever awarded, will provide infusion technology to protect patients from medication errors at 52 facilities nationwide. - Beginning commercial production at its new, sterile manufacturing facility in Raleigh, N.C. Cardinal Health began manufacturing Panhematin(R), a biologic therapy used to treat a rare genetic disorder, for Ovation Pharmaceuticals, Inc. Outlook
For fiscal 2007, Cardinal Health reiterated that it expects non-GAAP diluted EPS from continuing operations to be $3.50 to $3.70.
Conference Call
Cardinal Health will host a conference call and webcast at 11 a.m. Eastern Daylight Time (EDT) to discuss its 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 617-597-5313, conference passcode 71416649. An audio replay is expected to be available until 11 p.m. on Nov. 3 at 617-801-6888, passcode 85650472. A transcript and audio replay will also be available at www.cardinalhealth.com.
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. 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.
(1) Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding special items and impairment charges and other, both net of tax.
(2) Non-GAAP diluted EPS from continuing operations: Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.
(3) Non-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 http://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; difficulties in opening new facilities or fully utilizing existing capacity; the costs, difficulties and uncertainties related the integration of acquired businesses; 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.
CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) First Quarter Fiscal (in millions, except per Common Share amounts) 2007 2006 % Change Revenue $21,356.7 $19,237.2 11 % Cost of products sold 20,057.8 18,043.0 11 % Gross margin 1,298.9 1,194.2 9 % Selling, general and administrative expenses 807.3 793.7 2 % Impairment charges and other 3.6 2.5 N.M. Special items: Restructuring charges 13.4 8.5 N.M. Merger charges 2.5 7.0 N.M. Other 8.4 5.8 N.M. Operating earnings 463.7 376.7 23 % Interest expense and other 47.7 31.0 54 % Earnings before income taxes and discontinued operations 416.0 345.7 20 % Provision for income taxes 115.7 108.2 7 % Earnings from continuing operations 300.3 237.5 26 % Loss from discontinued operations (net of tax $13.5 and $2.2 for the first quarter of fiscal 2007 and 2006, respectively) (29.6) (9.2) N.M. Net earnings $270.7 $228.3 19 % Basic Earnings per Common Share: Continuing operations $0.74 $0.56 32 % Discontinued operations (0.07) (0.02) N.M. Net basic earnings per Common Share $0.67 $0.54 24 % Diluted Earnings per Common Share: Continuing operations $0.73 $0.55 33 % Discontinued operations (0.07) (0.02) N.M. Net diluted earnings per Common Share $0.66 $0.53 25 % Weighted Average Number of Shares Outstanding: Basic 404.5 426.3 Diluted 413.0 431.4 CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, June 30, (in millions) 2006 2006 Assets Cash and equivalents $1,609.6 $1,320.9 Short-term investments available for sale 456.5 498.4 Trade receivables, net 3,986.6 4,111.6 Current portion of net investment in sales-type leases 309.3 290.1 Inventories 7,585.3 7,714.2 Prepaid expenses and other 710.5 628.9 Assets held for sale and discontinued operations 63.4 212.6 Total current assets 14,721.2 14,776.7 Property and equipment, net 2,574.1 2,584.0 Net investment in sales-type leases, less current portion 756.3 754.7 Goodwill and other intangibles, net 5,054.5 4,992.4 Other assets 325.1 266.3 Total assets $23,431.2 $23,374.1 Liabilities and Shareholders’ Equity Current portion of long-term obligations and other short-term borrowings $315.3 $229.2 Accounts payable 8,878.3 9,009.3 Other accrued liabilities 2,373.8 2,053.9 Liabilities from businesses held for sale and discontinued operations 10.9 80.4 Total current liabilities 11,578.3 11,372.8 Long-term obligations, less current portion and other short-term borrowings 2,627.4 2,599.7 Deferred income taxes and other liabilities 804.4 910.9 Total shareholders’ equity 8,421.1 8,490.7 Total liabilities and shareholders’ equity $23,431.2 $23,374.1 CARDINAL HEALTH, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) First Quarter Fiscal (in millions) 2007 2006 Cash Flows From Operating Activities: Net earnings $270.7 $228.3 Loss from discontinued operations 29.6 9.2 Earnings from continuing operations 300.3 237.5 Adjustments to reconcile earnings from continuing operations to net cash provided by operating activities: Depreciation and amortization 104.2 101.0 Asset impairments 3.6 1.8 Equity compensation 45.0 81.8 Provision for bad debts 5.1 9.2 Change in operating assets and liabilities, net of effects from acquisitions: (Increase) / decrease in trade receivables 121.0 (265.5) Decrease in inventories 117.8 10.7 Increase in net investment in sales-type leases (20.9) (38.8) Increase / (decrease) in accounts payable (131.1) 468.1 Other accrued liabilities and operating items, net 177.1 122.6 Net cash provided by operating activities - continuing operations 722.1 728.4 Net cash used in operating activities - discontinued operations (3.8) (3.8) Net cash provided by operating activities 718.3 724.6 Cash Flows From Investing Activities: Acquisition of subsidiaries, net of divestitures and cash acquired (44.4) 3.3 Proceeds from sale of property and equipment 3.8 0.5 Additions to property and equipment (85.3) (75.5) Sale / (purchase) of investment securities available for sale, net 41.9 (100.0) Net cash used in investing activities - continuing operations (84.0) (171.7) Net cash provided by / (used in) investing activities - discontinued operations 0.1 (0.5) Net cash used in investing activities (83.9) (172.2) Cash Flows From Financing Activities: Net change in commercial paper and short-term borrowings 101.4 3.0 Reduction of long-term obligations (29.5) (3.7) Proceeds from long-term obligations, net of issuance costs 11.2 5.9 Proceeds from issuance of Common Shares 57.3 34.8 Tax benefits from exercises of stock options 14.0 9.4 Dividends on Common Shares (37.0) (25.5) Purchase of treasury shares (445.3) - Net cash provided by / (used in) financing activities - continuing operations (327.9) 23.9 Net cash used in financing activities - discontinued operations (17.8) - Net cash provided by / (used in) financing activities (345.7) 23.9 Net increase in cash and equivalents 288.7 576.3 Cash and equivalents at beginning of period 1,320.9 1,400.0 Cash and equivalents at end of period $1,609.6 $1,976.3 CARDINAL HEALTH, INC. AND SUBSIDIARIES BUSINESS ANALYSIS HEALTHCARE SUPPLY CHAIN SERVICES Pharmaceutical First Quarter Fiscal (in millions) 2007 2006 Revenue Amount $18,505 $16,509 Growth Rate 12 % 9 % Mix 85 % 84 % Operating Earnings Amount $301 $243 Growth Rate 24 % 18 % Mix 57 % 51 % Operating Margin 1.63 % 1.47 % Medical First Quarter Fiscal (in millions) 2007 2006 Revenue Amount $1,806 $1,763 Growth Rate 2 % 6 % Mix 8 % 9 % Operating Earnings Amount $74 $82 Growth Rate (10)% 3 % Mix 14 % 17 % Operating Margin 4.10 % 4.65 % CARDINAL HEALTH, INC. AND SUBSIDIARIES BUSINESS ANALYSIS PHARMACEUTICAL AND MEDICAL PRODUCTS Clinical Technologies and Services First Quarter Fiscal (in millions) 2007 2006 Revenue Amount $594 $576 Growth Rate 3 % 10 % Mix 3 % 3 % Operating Earnings Amount $68 $78 Growth Rate (14)% 88 % Mix 13 % 17 % Operating Margin 11.37 % 13.57 % Pharmaceutical Technologies and Services First Quarter Fiscal (in millions) 2007 2006 Revenue Amount $451 $411 Growth Rate 10 % 5 % Mix 2 % 2 % Operating Earnings Amount $22 $20 Growth Rate 13 % (54)% Mix 4 % 4 % Operating Margin 4.93 % 4.78 % Medical Products Manufacturing First Quarter Fiscal (in millions) 2007 2006 Revenue Amount $424 $383 Growth Rate 11 % 8 % Mix 2 % 2 % Operating Earnings Amount $61 $53 Growth Rate 15 % 78 % Mix 12 % 11 % Operating Margin 14.36 % 13.80 % CARDINAL HEALTH, INC. AND SUBSIDIARIES BUSINESS ANALYSIS TOTAL COMPANY Non-GAAP First Quarter First Quarter Fiscal Fiscal (in millions) 2007 2006 2007 2006 Revenue Amount $21,357 $19,237 Growth Rate 11 % 9 % Operating Earnings Amount $464 $377 $492 $400 Growth Rate 23 % 4 % 23 % 2 % Earnings from Continuing Operations Amount $300 $238 $320 $253 Growth Rate 26 % 6 % 27 % 4 % See the GAAP / Non-GAAP Reconciliation for definitions and calculations supporting the non-GAAP balances. CARDINAL HEALTH, INC. AND SUBSIDIARIES ASSET MANAGEMENT ANALYSIS First Quarter Fiscal (in millions) 2007 2006 Receivable Days 17.8 16.2 Days Inventory on Hand 30 33 Debt to Total Capital 26 % 23 % Net Debt to Capital 9 % 5 % Return on Equity 14.5% 10.9% Non-GAAP Return on Equity 15.3% 11.5% Return on Invested Capital 6.35% 4.92% Non-GAAP Return on Invested Capital 6.69% 5.17% Effective Tax Rate from Continuing Operations 27.8% 31.3% Non-GAAP Effective Tax Rate from Continuing Operations 27.8% 31.6% See the GAAP / Non-GAAP Reconciliation for definitions and calculations supporting the non-GAAP balances. CARDINAL HEALTH, INC. AND SUBSIDIARIES SCHEDULE OF NOTABLE ITEMS (in millions, except per Common First Quarter Fiscal Share amounts) 2007 2006 Special Items Restructuring charges $(13.4) $(8.5) Merger charges (2.5) (7.0) Other (8.4) (5.8) Total special items (24.3) (21.3) Tax benefit 6.6 7.8 Special items, net of tax $(17.7) $(13.5) Decrease to diluted EPS from continuing operations $(0.04) $(0.03) Impairment Charges and Other Impairment charges and other $(3.6) $(2.5) Tax benefit 1.1 0.8 Net impairment charges and other, net of tax $(2.5) $(1.7) Decrease to diluted EPS from continuing operations $(0.01) $(0.01) Non-Recurring and Other Items Total non-recurring $- $- Vendor credit adjustment - (31.8) Total non-recurring and other items - (31.8) Tax benefit of non-recurring and other items - 10.3 Total non-recurring and other items, net of tax $- $(21.5) Decrease to diluted EPS from continuing operations $- $(0.05) Weighted Average Number of Diluted Shares Outstanding 413.0 431.4 CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION First Quarter Fiscal 2007 Impairment Charges Special and Non- (in millions) GAAP Items Other GAAP Operating Earnings Amount $464 $24 $4 $492 Growth Rate 23 % 23 % Provision for Income Taxes $116 $6 $2 $124 Earnings from Continuing Operations Amount $309 $18 $2 $320 Growth Rate 26 % 27 % Diluted EPS from Continuing Operations Amount $0.73 $0.04 $0.01 $0.78 Growth Rate 33 % 32% First Quarter Fiscal 2006 Impairment Charges Special and Non- GAAP Items Other GAAP Operating Earnings Amount $377 $21 $3 $400 Growth Rate 4 % 2 % Provision for Income Taxes $108 $8 $1 $117 Earnings from Continuing Operations Amount $238 $13 $2 $253 Growth Rate 6 % 4 % Diluted EPS from Continuing Operations Amount $0.55 $0.03 $0.01 $0.59 The sum of the components may not equal the total due to rounding CARDINAL HEALTH, INC. AND SUBSIDIARIES GAAP / NON-GAAP RECONCILIATION First Quarter Fiscal (in millions) 2007 2006 Return on Equity 14.5% 10.9% Non-GAAP Return on Equity Earnings from continuing operations $300.3 $237.5 Special items, net of tax 17.7 13.5 Earnings from continuing operations, excluding special items $318.0 $251.0 Annualized 1,272.0 1,004.0 Divided by average shareholders’ equity(1) $8,302.9 $8,732.0 Non-GAAP return on equity 15.3% 11.5% First Quarter Fiscal (in millions) 2007 2006 Return on Invested Capital 6.35% 4.92% Non-GAAP Return on Invested Capital Operating earnings $463.7 $376.7 Special items 24.3 21.3 Operating earnings, excluding special items $488.0 $398.0 Non-GAAP effective tax rate from continuing operations 27.8% 31.6% Operating earnings, excluding special items multiplied by (1 minus the non-GAAP effective tax rate from continuing operations) $352.4 $272.2 Annualized $1,409.6 $
