Cardinal Health Reports Fiscal 2013 Second-Quarter Results - Operating earnings increase 13 percent to $506 million, or 11 percent to $525 million on a non-GAAP basis(1)

- Diluted earnings per share from continuing operations increase 16 percent to $0.88, or 15 percent to $0.93 on a non-GAAP basis

- Fiscal 2013 non-GAAP earnings per share guidance tightened to $3.42 to $3.50, representing top half of prior range

DUBLIN, Ohio, Feb. 5, 2013 /PRNewswire/ -- Cardinal Health today reported fiscal year 2013 second-quarter revenue of $25.2 billion and a 15 percent increase in non-GAAP diluted earnings per share (EPS) from continuing operations to $0.93.

In addition, the company tightened its fiscal 2013 outlook for non-GAAP diluted EPS from continuing operations to $3.42 to $3.50, which represents the top half of the prior guidance range.

"We've now completed a strong first half to our fiscal 2013 with a good second-quarter performance. While continued brand-to-generic conversions and the previously announced movement of the Express Scripts contract drove a revenue decline in the Pharmaceutical segment, excellent performance from our generic programs and new customer wins fueled profit gains," said George Barrett, chairman and chief executive officer of Cardinal Health. "And, despite continued procedural softness in the industry, our Medical segment reported double-digit growth this quarter. With our performance in the first six months of fiscal 2013, we are now guiding to the top half of our prior non-GAAP EPS range."

Q2 FY13 SUMMARY


Q2 FY13

Q2 FY12

Y/Y

Revenue

$25.2 billion

$27.1 billion

(7%)





 

Operating Earnings

 

$506 million

 

$449 million

 

13%

Non-GAAP Operating Earnings

 

$525 million

 

$475 million

 

11%





Earnings from Continuing Operations

 

$303 million

 

$264 million

 

15%

Non-GAAP Earnings from Continuing Operations

 

$317 million

 

$281 million

 

13%





Diluted EPS from Continuing Operations

 

$0.88

 

$0.76

 

16%

Non-GAAP Diluted EPS from Continuing Operations

 

$0.93

 

$0.81

 

15%

SEGMENT RESULTS

Pharmaceutical segment

Revenue for the Pharmaceutical segment decreased 8 percent to $22.7 billion due to the previously announced non-renewal of the Express Scripts contract as well as expected conversions from branded pharmaceuticals to lower-priced generics. The decline was partially offset by revenues from new pharmaceutical distribution customers. Segment profit increased 12 percent to $441 million, largely from overall strong performance from generics programs and benefits of customer and product mix within pharmaceutical distribution, partially offset by the impact of continued market softness in our nuclear business.


Q2 FY13

Q2 FY12

Y/Y

Revenue

$22.7 billion

$24.7 billion

(8%)

Segment Profit

$441 million

$394 million

12%

Medical segment

Revenue for the Medical segment increased 3 percent to $2.5 billion, reflecting the benefits of last year's acquisition of FutureMed and one additional sales day year-on-year. Excluding these drivers, year-on-year revenue growth was flat, reflecting continued softness in key U.S. markets, particularly as it relates to procedural volume. Segment profit increased 11 percent to $94 million driven by the favorable impact of commodities, acquisitions and preferred product mix. The increase was partially offset by customer mix and continued volume softness.

The overall profit impact of our Medical Business Transformation for the quarter was slightly negative, including year-over-year incremental depreciation and program expenses, realized benefits, and a $5 million favorable out-of-period adjustment as part of continued cleanup from the conversion to the new platform.


Q2 FY13

Q2 FY12

Y/Y

Revenue

$2.5 billion

$2.4 billion

3%

Segment Profit

$94 million

$85 million

11%

ADDITIONAL SECOND-QUARTER AND RECENT HIGHLIGHTS

  • Retained the No. 1 slot in the Gartner Fourth Annual Healthcare Supply Chain Top 25 ranking
  • Established Cardinal Health Specialty Solutions pathways program with Blue Cross Blue Shield of Louisiana and expanded Cardinal Health Specialty Solutions pathways program with Aetna to include oncologists in Michigan
  • Launched Cardinal Health Specialty Solutions VitalPath™ Integrated Dispensing Solution, VitalSource™ GPO Regimen Analyzer, and PathWare™ Decision Transaction Solutions to help improve physician practice efficiencies
  • Named one of 40 of the 2013 Best Companies for Leaders by Chief Executive magazine
  • Named one of the 2012 Working Mother 100 Best Companies by Working Mother magazine

CONFERENCE CALL

Cardinal Health will host a webcast and conference call today at 8:30 a.m. Eastern to discuss second-quarter results. To access the call and corresponding slide presentation, go to the Investors page at cardinalhealth.com. The call also can be accessed by dialing 224.357.2209, using conference ID 81032416.

There is no pre-registration for the call; however, participants are advised to dial into the call at least 10 minutes prior to the start time. Presentation slides and an audio replay will be archived on the website after the conclusion of the meeting. The audio replay will be available until March 5 by dialing 855.859.2056 or 404.537.3406, using conference ID 81032416.

UPCOMING EVENTS

  • Leerink Swann Global Healthcare Conference on Feb. 13 at 10:30 a.m. Eastern in New York
  • Cowen and Co. 33rd Annual Health Care Conference on March 5 at 8:40 a.m. Eastern in Boston
  • Barclays Global Healthcare Conference on March 13 at 9:30 a.m. Eastern in Miami

At these events, Cardinal Health 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, go to the Investors page at cardinalhealth.com. 

About Cardinal Health

Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is a $108 billion health 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, enhancing efficiency and improving quality. 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 #21 on the Fortune 500, Cardinal Health employs more than 30,000 people worldwide. More information about the company may be found at cardinalhealth.com and @CardinalHealth on Twitter.

1 See the attached tables for definitions of the non-GAAP financial measures presented in this news release and reconciliations of the differences between the non-GAAP financial measures and their most directly comparable GAAP financial measures.

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," "likely," 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 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, including our relationships with CVS Caremark Corporation and Walgreen Co.; the timing of generic and branded pharmaceutical introductions and the frequency or rate of pharmaceutical price appreciation or deflation; uncertainties due to government health care reform including federal health care reform legislation; changes in the distribution patterns or reimbursement rates for health care products and services; the effects of any investigation or action by any regulatory authority; changes in the cost of commodities such as oil-based resins, cotton, latex and diesel fuel; and uncertainties concerning Cardinal Health's ability to achieve the expected benefits of its Medical segment's business transformation project. 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 and exhibits to those reports. This news release reflects management's views as of Feb. 5, 2013. Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.

 

Schedule 1

Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)


Second Quarter



(in millions, except per Common Share amounts)

2013


2012


% Change

Revenue

$

25,232



$

27,078



(7)

%

Cost of products sold

24,008



25,964



(8)

%

Gross margin

1,224



1,114



10

%







Operating expenses:






Distribution, selling, general and administrative expenses

699



640



9

%

Restructuring and employee severance

1



2



N.M.

Acquisition-related costs

25



22



N.M.

Impairments and loss on disposal of assets

5



1



N.M.

Litigation (recoveries)/charges, net

(12)





N.M.

Operating earnings

506



449



13

%







Other income, net

(4)





N.M.

Interest expense, net

27



23



18

%

Earnings before income taxes and discontinued operations

483



426



14

%







Provision for income taxes

180



162



11

%

Earnings from continuing operations

303



264



15

%







Loss from discontinued operations, net of tax



(2)



N.M.

Net earnings

$

303



$

262



16

%







Basic earnings/(loss) per Common Share:






Continuing operations

$

0.89



$

0.77



16

%

Discontinued operations



(0.01)



N.M.

Net basic earnings per Common Share

$

0.89



$

0.76



17

%







Diluted earnings/(loss) per Common Share:






Continuing operations

$

0.88



$

0.76



16

%

Discontinued operations



(0.01)



N.M.

Net diluted earnings per Common Share

$

0.88



$

0.75



17

%







Weighted-average number of Common Shares outstanding:






Basic

340



345




Diluted

343



349




 


Schedule 2

Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)


Year-to-Date



(in millions, except per Common Share amounts)

2013


2012


% Change

Revenue

$

51,121



$

53,870



(5)

%

Cost of products sold

48,739



51,672



(6)

%

Gross margin

2,382



2,198



8

%







Operating expenses:






Distribution, selling, general and administrative expenses

1,388



1,283



8

%

Restructuring and employee severance

6



5



N.M.

Acquisition-related costs

53



49



N.M.

Impairments and loss on disposal of assets

6



2



N.M.

Litigation (recoveries)/charges, net

(34)



(3)



N.M.

Operating earnings

963



862



12

%







Other (income)/expense, net

(12)



5



N.M.

Interest expense, net

53



46



14

%

Earnings before income taxes and discontinued operations

922



811



14

%







Provision for income taxes

347



310



12

%

Earnings from continuing operations

575



501



15

%







Loss from discontinued operations, net of tax



(2)



N.M.

Net earnings

$

575



$

499



15

%







Basic earnings/(loss) per Common Share:






Continuing operations

$

1.69



$

1.45



17

%

Discontinued operations



(0.01)



N.M.

Net basic earnings per Common Share

$

1.69



$

1.44



17

%







Diluted earnings/(loss) per Common Share:






Continuing operations

$

1.67



$

1.44



16

%

Discontinued operations



(0.01)



N.M.

Net diluted earnings per Common Share

$

1.67



$

1.43



17

%







Weighted-average number of Common Shares outstanding:






Basic

340



345




Diluted

344



349




 

Schedule 3

Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

(in millions)

December 31,
2012


June 30,
2012


(Unaudited)



Assets




Current assets:




Cash and equivalents

$

2,255



$

2,274


Trade receivables, net

6,158



6,355


Inventories

8,452



7,864


Prepaid expenses and other

996



1,017


Total current assets

17,861



17,510






Property and equipment, net

1,475



1,551


Goodwill and other intangibles, net

4,428



4,392


Other assets

878



807


Total assets

$

24,642



$

24,260






Liabilities and Shareholders' Equity




Current liabilities:




Accounts payable

$

11,796



$

11,726


Current portion of long-term obligations and other short-term borrowings

474



476


Other accrued liabilities

1,932



1,972


Total current liabilities

14,202



14,174






Long-term obligations, less current portion

2,423



2,418


Deferred income taxes and other liabilities

1,475



1,424


Total shareholders' equity

6,542



6,244


Total liabilities and shareholders' equity

$

24,642



$

24,260


 

Schedule 4

Cardinal Health, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)


Second Quarter


Year-to-Date

(in millions)

2013


2012


2013


2012

Cash flows from operating activities:








Net earnings

$

303



$

262



$

575



$

499


Loss from discontinued operations, net of tax



2





2


Earnings from continuing operations

303



264



575



501










Adjustments to reconcile earnings from continuing operations to net cash provided by/(used in) operating activities:








Depreciation and amortization

88



78



176



156


Impairments and loss on disposal of assets

5



1



6



2


Share-based compensation

22



22



46



42


Provision for bad debts

8



1



9



2


Change in operating assets and liabilities, net of effects from acquisitions:








Decrease in trade receivables

299



236



228



167


Increase in inventories

(329)



(1,392)



(536)



(1,553)


Increase/(decrease) in accounts payable

(433)



708



31



1,118


Other accrued liabilities and operating items, net

(93)



(32)



(97)



(45)


Net cash provided by/(used in) operating activities

(130)



(114)



438



390










Cash flows from investing activities:








Acquisition of subsidiaries, net of cash acquired

(26)





(126)



(7)


Additions to property and equipment

(36)



(57)



(62)



(101)


Proceeds from maturities of held-to-maturity securities

48



25



71



35


Purchase of held-to-maturity securities and other investments



(11)





(11)


Net cash used in investing activities

(14)



(43)



(117)



(84)










Cash flows from financing activities:








Net change in short-term borrowings

27



9



17



4


Reduction of long-term obligations

(2)



(1)



(6)



(1)


Proceeds from issuance of Common Shares

25



14



26



11


Tax disbursements from share-based compensation

(10)



(4)



(12)




Dividends on Common Shares

(81)



(74)



(165)



(152)


Purchase of treasury shares





(200)



(300)


Net cash used in financing activities

(41)



(56)



(340)



(438)










Net decrease in cash and equivalents

(185)



(213)



(19)



(132)


Cash and equivalents at beginning of period

2,440



2,011



2,274



1,930


Cash and equivalents at end of period

$

2,255



$

1,798



$

2,255



$

1,798