Cardinal Health, Inc. Reports First-Quarter Results

DUBLIN, Ohio, Oct. 28 /PRNewswire-FirstCall/ --

Cardinal Health today reported fiscal 2011 first-quarter revenue of $24.4 billion and non-GAAP diluted earnings per share (EPS) from continuing operations of $0.64, up 19 percent versus last year, driven by 42 percent segment profit growth within its Pharmaceutical Segment.

“Our first quarter was an excellent start to the year,” said George Barrett, chairman and chief executive officer of Cardinal Health. “These results reflect the progress we have made in our Pharmaceutical Segment, specifically in the work we have been doing to improve margins across that segment by strengthening our generics programs and expanding our retail independent pharmacy customer base. Our Medical Segment declined as we had expected, largely as a result of unique events in the prior-year period and commodity price increases. Although medical procedures remained somewhat soft during the period, we continue to make great progress in our program to position our medical businesses to serve the needs of these evolving markets.”

Q1 FY11 SUMMARY

First-quarter GAAP earnings from continuing operations were $294 million or $0.84 per share. GAAP results include a positive $0.21 per share net, after-tax contribution from the gain on the sale of CareFusion stock. As previously announced, Cardinal Health, during the quarter, sold the remaining 30.5 million shares of common stock of CareFusion Corp. that it had retained from the spinoff. The aggregate proceeds from this sale were $705.9 million in cash. The transaction resulted in approximately $75 million in GAAP earnings with no associated income tax expense. GAAP results for the prior-year period were negatively impacted by certain items relating to the CareFusion spinoff.

SEGMENT RESULTS

Pharmaceutical Segment

Revenue for the Pharmaceutical Segment declined 1 percent to $22.3 billion as a result of reduced sales to existing bulk customers, previously disclosed contract terminations of two large-revenue customers and the effect on revenue mix from the conversion of certain brand pharmaceuticals to generics. Increased sales to retail independent pharmacies and other direct-store-door customers partially offset the revenue decline. Generic sales were up 19 percent, with sales under our SOURCE(SM) Generics program up 34 percent. Segment profit increased 42 percent to $296 million primarily driven by strong generic performance, including the impact of new generic launches, and solid performance under branded manufacturer agreements, including the impact of branded pharmaceutical inflation. A change in estimated reserves related to distribution service agreement fees receivable from certain manufacturers also contributed $9 million to segment profit for the quarter.

Medical Segment

Revenue for the Medical Segment decreased 3 percent to $2.2 billion. As previously disclosed, the prior period was positively impacted by the immediate revenue recognition of $51 million for international sales to CareFusion as a result of the spinoff. The unusually strong and early flu season in fiscal 2010 also contributed to the negative year-over-year comparison. As expected, segment profit declined for the quarter, down 28 percent to $83 million, driven by the combined prior-year impact of the CareFusion revenue recognition benefit and the unusual flu season, as well as the impact of commodity price increases on the current period’s cost of products sold.

FISCAL 2011 OUTLOOK

“Given the strong start to the year for our Pharmaceutical Segment and the progress we project on various company-wide initiatives, we have become more confident in achieving the higher end of our non-GAAP diluted EPS guidance range of $2.38 to $2.48,” Barrett said.

ADDITIONAL FIRST-QUARTER AND RECENT HIGHLIGHTS

• Early completion of a $500 million share repurchase program, of which $250 million of shares were repurchased during the first quarter.
• Named Meghan FitzGerald to the newly created position of president, Cardinal Health Specialty Solutions for the Pharmaceutical Segment and promoted Lisa Ashby to president, Category Management for the Medical Segment.
• Completed Healthcare Solutions Holding acquisition on July 15.

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. EDT to discuss first-quarter results and its future outlook. To access the call and corresponding slide presentation, go to the Investor page at cardinalhealth.com/investors or dial 617-213-4848 passcode 23771725. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will also be available until Nov. 1 by dialing 617-801-6888, passcode 65259301.

UPCOMING EVENTS

• Annual Meeting of Cardinal Health Shareholders on Nov. 3 at Cardinal Health Headquarters in Dublin, Ohio.
• 2010 Credit Suisse Healthcare Conference on Nov. 10 at the Arizona Biltmore in Phoenix.
• Lazard Healthcare Conference on Nov. 16 at the St. Regis Hotel in New York.
• Cardinal Health Investor and Analyst Day on Dec. 7 at the Hudson Theatre in New York.

At these events, Cardinal Health executives will discuss the company’s diverse products and services, company performance and strategies for continued growth. To access more details and live webcasts of these events, including remarks, go to the Investors page at cardinalhealth.com.

About Cardinal Health

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $99 billionhealth care services company that improves the cost-effectiveness of health care. As the business behind health care, Cardinal Health helps pharmacies, hospitals, ambulatory surgery centers and physician offices focus on patient care while reducing costs, improving efficiency and quality, and increasing profitability. Cardinal Health is an essential link in the health care supply chain, providing pharmaceuticals and medical products to more than 60,000 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. Ranked #17 on the Fortune 500, Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com.

(1) Non-GAAP earnings from continuing operations: Earnings from continuing operations excluding (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, (5) Other Spinoff Costs (as defined at the end of the attached tables), and (6) gain on sale of CareFusion stock, each 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 (1) restructuring and employee severance, (2) acquisition related costs, (3) impairments and loss on sale of assets, (4) litigation (credits)/charges, net, and (5) Other Spinoff Costs included within distribution, selling, general and administrative expenses.

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 cardinalhealth.com.

Cardinal Health uses its website as a channel of distribution for material company information. Important information, including news releases, analyst presentations and financial information regarding Cardinal Health is routinely posted and accessible on the Investors page at cardinalhealth.com.

Cautions Concerning Forward-Looking Statements

This news release contains forward-looking statements, which are not based on historical facts, addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. These statements may be identified by words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “will,” “should,” “could,” “would,” “project,” “continue,” and similar expressions, and include statements reflecting future results or guidance, statements of outlook and tax accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. These risks and uncertainties include (but are not limited to) uncertainties related to demand for Cardinal Health’s products and services; uncertainties and risks regarding CareFusion’s remaining obligations to Cardinal Health; uncertainties due to government health care reform including the recently enacted federal health care reform legislation; 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; the 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; uncertainties regarding the ability to successfully integrate and grow acquired businesses; and the effects of disruptions in the financial markets, including uncertainties related to the availability and/or cost of credit on Cardinal Health’s customers and vendors. In addition, Cardinal Health is subject to additional risks and uncertainties 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. This news release reflects management’s views as of Oct. 28, 2010. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.