Cardinal Health, Inc. Reports Higher Revenue, Lower Earnings

DUBLIN, Ohio, Feb. 3, 2011 /PRNewswire/ -- Cardinal Health today reported a 2 percent increase in fiscal 2011 second-quarter revenue to $25.4 billion and a 21 percent increase in non-GAAP diluted earnings per share (EPS) from continuing operations to $0.69. On a GAAP basis, EPS from continuing operations declined 5 percent to $0.61, reflecting prior-year gains from the sale of CareFusion stock and a litigation benefit, as well as acquisition-related costs in the current quarter.

"We continued the momentum from our first quarter to close out the first half of our fiscal year in a position of strength," said George Barrett, chairman and chief executive officer of Cardinal Health. "Our organization continues to execute well on our priorities. The Pharmaceutical segment had an excellent quarter with double-digit profit growth over the prior year. Our Medical segment faced commodity pressures and a light flu season compared to the prior year, resulting in flat year-over-year profit contribution for the quarter, but the segment achieved favorable sequential performance versus the first quarter.

"Our second quarter included the completion of two, strategic acquisitions which, along with our recent move in specialty, will provide immediate contribution to our earnings and will better position the company for future growth. We completed the acquisition of Kinray, which dramatically increases our presence in the independent pharmacy community by adding approximately 2,000 pharmacy customers, and we closed our acquisition of Yong Yu in China. Yong Yu provides us with an outstanding platform in one of the most important and rapidly growing health care markets in the world.

"Based on our strong performance in the first half of fiscal 2011 and the anticipated contributions from our recent acquisitions, we are increasing our full-year guidance range for non-GAAP diluted EPS from continuing operations to $2.54 to $2.60."

Q2 FY11 SUMMARY

Non-GAAP diluted EPS from continuing operations benefited from a lower-than-usual tax rate and fewer shares outstanding. Second-quarter GAAP earnings from continuing operations were $215 million or $0.61 per share. GAAP results include a net, after-tax dilutive impact of $0.08 per share, primarily from acquisition-related costs in the quarter. Prior year GAAP results also included the gain on the sale of CareFusion stock and the benefit from a previously disclosed insurance recovery related to resolved litigation.

SEGMENT RESULTS

Pharmaceutical Segment

Revenue for the Pharmaceutical segment increased 2 percent to $23.2 billion primarily driven by a 6 percent increase in sales to non-bulk customers. Segment profit increased 11 percent to $289 million reflecting the contribution from stronger generic sales and sourcing initiatives, including the impact of generic launches. Sales under the SOURCE(SM) Generics program increased 31 percent. The segment also benefited from excellent performance within the Specialty Solutions business.

Medical Segment

Revenue for the Medical segment declined 1 percent to $2.2 billion, primarily driven by previously disclosed fiscal 2010 customer losses and a strong flu season in the prior-year period. Segment profit was $102 million, even with the prior year, resulting from cost reductions that offset the negative impact of commodity price increases on the cost of products sold and lower sales of flu-related products compared to the prior-year period. Segment results were also dampened by sluggish in-patient procedural volumes.

ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS

• Early renewal of a distribution agreement with Walgreens to supply pharmaceuticals to its national network of retail pharmacies.
• Signed agreements with Highmark Blue Cross Blue Shield, AmeriHealth and CareFirst Blue Cross Blue Shield for P4 Pathways programs.
• Approval of a new, three-year $750 million authorization to repurchase Cardinal Health common shares.
• Issuance of $500 million in 4.625 percent notes due in 2020.

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. EST to discuss second-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 857-350-1669 passcode 24786608. 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 March 3 by dialing 617-801-6888, passcode 67121871.

UPCOMING WEBCAST EVENTS

• UBS 21st Annual Global Healthcare Services Conference on Feb. 7 at 11:30 a.m. EST at the Grand Hyatt in New York.
• Citi 2011 Global Health Care Conference on March 1 at 8:30 a.m. EST at the New York Hilton.
• Barclays Capital 2011 Global Healthcare Conference on March 16 at 9 a.m. EDT at the Loews Hotel in Miami.

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 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 expense 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 relating to Cardinal Health's ability to retain customers and employees of acquired businesses, including Kinray and Yong Yu, to successfully integrate the acquired businesses into Cardinal Health's operations, and to achieve the expected benefits from the acquired businesses; 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 effects of any investigation by any regulatory authority, including with respect to compliance with the Foreign Corrupt Practices Act. 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 Feb. 3, 2011. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.