SAN DIEGO, Aug. 7, 2014 /PRNewswire/ -- CareFusion Corp. (NYSE: CFN), a leading, global medical technology company, today reported results for the quarter and fiscal year ended June 30, 2014, provided guidance for fiscal 2015, its longer-term outlook through fiscal 2017 and announced a new $750 million share repurchase authorization.
“With every business growing in the fourth quarter, we had a very strong finish to the fiscal year and created good momentum for fiscal 2015,” said Kieran Gallahue, chairman and CEO. “Our solid organic revenue growth demonstrates the value our products bring to health care facilities and patients, even in times of increasing financial pressures for U.S. hospitals.
“Procedural Solutions provided strong results across all businesses in the fourth quarter and for the year, with the Vital Signs acquisition performing well. Medical Systems had a very robust quarter, led by record growth from Infusion and another quarter of record committed contracts from Dispensing.”
The company also announced its board of directors has approved a two-year, $750 million share repurchase program. The new program will be initiated when the company’s current $750 million repurchase authorization is completed. During fiscal 2014, the company purchased 14.6 million shares for approximately $577 million.
Fourth Quarter Results
The company reported revenue for the fourth quarter of fiscal 2014 of $1.12 billion, compared to $903 million in the fourth quarter of fiscal 2013, an increase of 24 percent on both a reported and constant currency basis. These results were driven by strong double-digit gains from both segments.
Operating income was $194 million, an increase of 14 percent compared to $170 million in the prior year period. Excluding nonrecurring items, adjusted operating income rose 20 percent to $227 million. For the quarter, adjusted operating income was 20.2 percent of revenue.
Operating expenses totaled $355 million, an increase of 20 percent over the prior year period, driven by acquisition integration costs and above average incentive compensation on large sales and contracting volumes. Excluding nonrecurring items, adjusted operating expenses increased 17 percent to $325 million.
Income from continuing operations increased 27 percent to $140 million, or $0.67 per diluted share. Adjusted income from continuing operations grew 36 percent from the prior year period to $164 million, or 44 percent to $0.79 per diluted share. The adjusted effective tax rate for the quarter was 20.1 percent.
Medical Systems
Fourth quarter revenue for the Medical Systems segment was $712 million, a 20 percent increase on both a reported and constant currency basis from the prior year period. The segment had a record quarter from its Infusion business, with top-line growth of 40 percent over prior year. The Dispensing and Respiratory businesses also had strong revenue growth of 7 percent and 6 percent, respectively.
Segment profit for the quarter increased 18 percent over the prior year period to $146 million, and adjusted segment profit grew 16 percent to $158 million, led by Infusion’s record quarter and increased installations from Dispensing.
Procedural Solutions
The Procedural Solutions segment grew fourth quarter revenue to $410 million, a 32 percent increase from the prior year period. The increase was primarily driven from contributions from the Vital Signs and Sendal acquisitions, as well as continued growth from its clinically differentiated products in specialty disposables, PleurX® drainage products and the ChloraPrep® and MaxPlus® brands within its Infection Prevention business line.
Segment profit increased 4 percent from the prior year period to $48 million, and adjusted segment profit increased 30 percent to $69 million from organic growth across all product lines and strong performance from the Vital Signs and Sendal acquisitions.
Fiscal Year 2014 Results
Revenue for fiscal 2014 was $3.84 billion, an 8 percent increase on both a reported and constant currency basis. Operating income was up slightly to $621 million, from $619 million in fiscal 2013. Excluding nonrecurring items, adjusted operating income rose 1 percent to $746 million. Operating income as a percent of revenue finished fiscal 2014 at 16.2 percent, or 19.4 percent on an adjusted basis.
Income from continuing operations increased 7 percent to $417 million, or $1.96 per diluted share, for fiscal 2014. Adjusted income from continuing operations increased 6 percent from the prior year to $503 million, or 11 percent on a per diluted share basis to $2.36.
Operating expenses for fiscal 2014 totaled $1.29 billion on a reported basis and $1.18 billion on an adjusted basis. The increase in operating expenses for the year was primarily a result of the acquisitions of Vital Signs, a manufacturer of single-patient-use consumables for respiratory and anesthesia and Sendal, an infusion specialty disposable manufacturer in Spain, and increased incentive compensation.
Medical Systems segment revenue for fiscal 2014 increased 3 percent to $2.39 billion, led by Infusion and strong Dispensing installations during the fourth quarter. Segment profit declined 8 percent from the prior year to $433 million, a decrease of 6 percent to $490 million on an adjusted basis, driven by longer than expected installation cycles in the Dispensing business during the first half of the year and product revenue mix negatively affecting segment margins.
Within the Procedural Solutions segment, revenue increased 19 percent from the prior year to $1.45 billion. The increase was driven by growth across all business lines and its clinically differentiated products and contributions from the Vital Signs acquisition. Segment profit declined 1 percent to $188 million from the prior year and increased 17 percent to $256 million on an adjusted basis.
Recent Highlights
Additional fourth quarter and recent highlights included:
- Continued momentum of the Pyxis® ES platform, with 195 live sites (25 outside the U.S.) and comprising more than half of Dispensing committed contracts for fiscal 2014.
- Alaris® Syringe module and Alaris® PCA module being named Category Leaders by KLAS, an independent research company.
- The introduction of three new products in our Infection Prevention business line, including ChloraPrep® 1mL applicator, ChloraShield® IV dressing and MaxZero needleless connector.
- Completion of a $1 billion bond offering to refinance existing debt and for general corporate purposes.
- Electing Supratim Bose, executive vice president and president, Asia-Pacific, Middle East and Africa for Boston Scientific Corporation to the company’s board of directors.
- The commercial launch of a new micro-laparoscopic line of surgical instruments, eliminating the need to close the incision site with sutures in some procedures and resulting in a virtually scar-less procedure.
- The CareFusion Foundation announcing $500,000 in grants to U.S. hospitals for programs that develop and share best practices in improving medication safety and efficiency.
Outlook for Fiscal 2015 through Fiscal 2017
For the fiscal year ending June 30, 2015, CareFusion expects revenue to grow 5 to 7 percent on a constant currency basis compared to fiscal 2014 revenue of $3.84 billion. Adjusted diluted earnings per share from continuing operations are expected to be in the range of $2.60 to $2.75. The guidance is based on an assumed diluted weighted average outstanding share count of approximately 202 to 204 million, which includes the impact of expected share repurchases during fiscal 2015.
CareFusion also provided its three-year outlook through fiscal 2017, with expectations for mid-single-digit revenue growth, adjusted operating margins greater than 23 percent and a compound annual growth rate for adjusted diluted earnings per share from continuing operations of 10 percent to 12 percent. The company also expects to invest at least 50 percent of its free cash flow through tuck-in acquisitions and share repurchases over this period.
Conference Call
CareFusion will host a conference call today at 2 p.m. PDT (5 p.m. EDT) to discuss the results for the quarter and year, ended June 30, 2014, as well as provide guidance for future periods. To access the call, visit the Investors 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 800.706.7741 within the U.S. or 617.614.3471 from outside the U.S. and using the access code 76419223. A replay of the conference call will be available from 6 p.m. PDT (9 p.m. EDT) on Aug. 7 through 11:59 p.m. PDT on Aug. 14 and can be accessed by dialing 888.286.8010 in the U.S. or 617.801.6888 from outside the U.S. and using the access code 38023772.
About CareFusion Corporation
CareFusion (NYSE: CFN) is a global corporation serving the health care industry with products and services that help hospitals measurably improve the safety and quality of care. The company develops industry-leading technologies including Alaris® infusion pumps and IV sets, MaxPlus® and MaxZero IV connectors and sets, Pyxis® automated dispensing and patient identification systems, AVEA®, LTV® series and AirLife® ventilation and respiratory products, ChloraPrep® products, MedMined® services for data mining surveillance, V. Mueller® surgical instruments, and an extensive line of products that support interventional medicine. CareFusion employs approximately 16,000 people across its global operations. More information may be found at www.carefusion.com.
Use of Non-GAAP Financial Measures
This CareFusion news release and the information contained herein present non-GAAP financial measures that exclude certain amounts, as follows: “adjusted segment profit,” which excludes amortization of acquired intangibles, as well as nonrecurring restructuring and acquisition integration charges; “adjusted operating expenses,” “adjusted operating income” and “adjusted operating margin,” which exclude the impact of the reserve for the expected government settlement and amortization of acquired intangibles, as well as nonrecurring restructuring and acquisition integration charges; and “adjusted income from continuing operations,” “adjusted diluted earnings per share from continuing operations” and “adjusted effective tax rate,” which exclude the impact of the reserve for the expected government settlement and amortization of acquired intangibles, as well as nonrecurring restructuring and acquisition integration charges and nonrecurring tax items. In addition, commencing with the quarter ended December 31, 2013, the company began excluding from its adjusted results inventory valuation step-up charges from acquisitions. The most directly comparable GAAP financial measures for these non-GAAP financial measures are segment profit, operating expenses, operating income, operating margin, income from continuing operations, diluted earnings per share from continuing operations and effective tax rate. The company has included below unaudited adjusted financial information for the quarters and year ended June 30, 2014 and 2013, which includes a reconciliation of GAAP to non-GAAP financial measures.
The company’s management uses these non-GAAP financial measures to evaluate the company’s performance and provides them to investors as a supplement to the company’s reported results, as they believe this information provides additional insight into the company’s operating performance by disregarding certain nonrecurring items. These non-GAAP financial measures should not be considered in isolation, as a substitute for, or as superior to, financial measures calculated in accordance with GAAP, and the company’s financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. While the types of items and charges excluded from the company’s non-GAAP financial measures may occur in the future, the company’s management believes that they are not reflective of the day-to-day offering of its products and services and relate more to strategic, multi-year corporate actions, without predictable trends, or discrete and unusual or infrequent transactions that are not indicative of future operations or business trends.
Cautions Concerning Forward-looking Statements
The CareFusion news release and the information contained herein present forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. CareFusion intends forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “anticipates,” “plans,” or similar expressions to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, which could cause the company’s actual results to differ materially from those projected, anticipated or implied by the forward-looking statements. 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; challenging economic conditions have and may continue to adversely affect our business, 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, product recalls or safety alerts with associated 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.
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