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Cardinal Health Reports First Quarter Results
11/05/2007
  • Revenue increases 5 percent to $22 billion
  • Operating earnings up 9 percent to $490 million
  • Diluted earnings per share from continuing operations rise 15 percent to $0.82 per share
  • Non-GAAP diluted EPS from continuing operations increases 15 percent to $0.86 per share
  • Full year EPS guidance reaffirmed, outlook revised for Healthcare Supply Chain Services-Pharmaceutical segment
 
DUBLIN, Ohio, Nov. 5, 2007 — Cardinal Health, a global provider of products and services that improve the safety and productivity of health care, today reported a 15 percent increase in earnings per share during its first quarter, led by strong profit growth in its clinical and medical products businesses and ongoing programs to repurchase shares and streamline operations.
 
For the quarter ended Sept. 30, revenue increased 5 percent to $22 billion, operating earnings increased 9 percent to $490 million and earnings per share from continuing operations rose 15 percent to $0.82, or $0.861 on a non-GAAP basis.
 
“Our first quarter results were solid and led by very strong performance in our Clinical and Medical Products sector, which now accounts for 30 percent of segment profits,” said R. Kerry Clark, chief executive officer of Cardinal Health.
 
Cardinal Health also reaffirmed its annual earnings-per-share guidance, while lowering the profit outlook for its Healthcare Supply Chain Services-Pharmaceutical segment.  The company continues to expect a strong second half of the fiscal year, led by continued growth in clinical and medical products and a significant increase in generic product introductions. 

 “We are disappointed with the performance in our Healthcare Supply Chain Services-Pharmaceutical segment, but have a positive outlook for the second half of the fiscal year for the company,” Clark said.  “Our Clinical and Medical Products sector will be a key growth driver, and we also expect to benefit from new generic pharmaceutical launches and improvements in operational performance.”

Cardinal Health separately announced that Mark W. Parrish, who led the Healthcare Supply Chain Services sector, is leaving the company.  Chief Financial Officer Jeffrey W. Henderson will assume the additional role of interim CEO of Healthcare Supply Chain Services until a permanent successor is named. 
 
Q1 FY08 Summary
 

 
Q1 FY08
Q1 FY07
Y/Y
Revenue
$22 billion
$21 billion
5%
 
 
 
 
 
Operating Earnings
 
$490 million
 
$451 million
 
9%
Non-GAAP Operating Earnings2
 
$512 million
 
$475 million
 
8%
 
 
 
 
Earnings from Continuing Operations
 
$303 million
 
$291 million
 
4%
Non-GAAP Earnings from Continuing Operations3
 
$318 million
 
$309 million
 
3%
 
 
 
 
Diluted EPS from Continuing Operations
 
$0.82
 
$0.71
 
15%
Non-GAAP Diluted EPS from Continuing Operations
 
$0.86
 
$0.75
 
15%

 
 
First quarter segment results:
 
Healthcare Supply Chain Services Sector
 
 
·     Revenue for the Healthcare Supply Chain Services-Pharmaceutical segment grew 4 percent during the quarter to $19.2 billion, with sales to non-bulk customers declining 2 percent to $10.3 billion and sales to bulk customers increasing 11 percent to $8.9 billion.  Segment profit increased 6 percent to $305 million, benefiting from the $14 million adjustment of a vendor related reserve, and partially dampened by sales mix, generic market conditions, nuclear pharmacy pricing pressure and a moderation in the sale of prescription drugs.
 
·     Revenue for the Healthcare Supply Chain Services-Medical segment increased 6 percent to $1.9 billion, with improving demand in new and existing hospital, laboratory and ambulatory customers.  Segment profit declined 10 percent to $58 million due primarily to a previously disclosed change in corporate cost allocation that reduced profit by 9 percentage points.  The company continues to expect a return to profitable growth in the segment later this fiscal year and made progress against that goal during the quarter with continued improvements in customer service operations and strength in its hospital supply business. 
 
 
Clinical and Medical Products Sector
 
 
·     Revenue for the Clinical Technologies and Services segment increased 9 percent to $649 million from continued strong demand for Alaris® and Pyxis® products. Segment profit increased 91 percent to $98 million with good sales momentum from the fourth quarter in dispensing products and a favorable mix of product revenue.  The segment also benefited from a favorable comparison to the prior-year period where a $13.5 million charge was taken for the recall of Alaris SE products.
 
·     Revenue for the Medical Products and Technologies segment increased 47 percent to $623 million, led by strong sales of new products and the addition of VIASYS Healthcare, acquired by Cardinal Health in June.  Segment profit grew 24 percent to $57 million and benefited from the integration of VIASYS, which remains ahead of the company’s schedule.
 
 
 
Additional first quarter and recent highlights include:
·     Repurchasing approximately $600 million of Cardinal Health shares during the quarter and announcing an additional two-year, $2 billion repurchase authorization in August.
·     Introducing several new products, including Esteem Micro surgical gloves made from a proprietary, latex-free material; new Presource® surgical kits for cosmetic procedures and to help prevent central line infections; the LTV 1150 ventilator for home use; and CareFusion™ Transfusion Verification with Rapid Infusion for use in hospital emergency rooms.
·     Signing an exclusive marketing agreement with Sentry Data Systems to offer eligible hospitals and health care facilities technology services that help cost-efficiently extend care to the uninsured and underinsured under the federal 340B Drug Pricing program.
·     Launching the $1 million, Cardinal Health Patient Safety Challenge Grant program to support initiatives to improve safety in U.S. hospitals.  More than 700 hospitals responded to the challenge and are competing for 30 to 40 grants.
·     Breaking ground on a $50 million expansion of the company’s headquarters in Ohio to consolidate its Healthcare Supply Chain Services businesses.
 
 
Outlook
Cardinal Health reiterated its fiscal 2008 guidance range of $3.95 to $4.15 for non-GAAP diluted EPS from continuing operations.  In addition, the company revised the outlook for its Healthcare Supply Chain Services-Pharmaceutical segment, which is now expected to grow profit during the year below its long term goal of 7 to 10 percent growth.  Cardinal Health previously said profit growth for this segment was expected to be in line with the long term range.
 
 
Conference Call
Cardinal Health will host a conference call and webcast at 8:30 a.m. EST to discuss the 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 617-213-4857, passcode 21392080.  An audio replay will be available until 11:30 p.m. EST on Nov. 7 at 617-801-6888, passcode 50524989.  A transcript and audio replay will also be available at www.cardinalhealth.com.

  
About Cardinal Health
Headquartered in Dublin, Ohio, Cardinal Health, Inc. (NYSE: CAH) is an $87 billion, global company serving the health care industry with products and services that help hospitals, physician offices and pharmacies reduce costs, improve safety, productivity and profitability, and deliver better care to patients.  With a focus on making supply chains more efficient, reducing hospital-acquired infections and breaking the cycle of harmful medication errors, Cardinal Health develops market leading technologies, including Alaris® IV pumps, Pyxis® automated dispensing systems, MedMined™ infection surveillance services and the CareFusion™ patient identification system.  The company also manufactures medical and surgical products and is one of the largest distributors of pharmaceuticals and medical supplies worldwide.  Ranked No. 19 on the Fortune 500 and No. 1 in its sector on Fortune's ranking of Most Admired firms, Cardinal Health employs more than 40,000 people on five continents.  More information about the company may be found at www.cardinalhealth.com.
 
###
 
1Non-GAAP diluted EPS from continuing operations:  Non-GAAP earnings from continuing operations divided by diluted weighted average shares outstanding.
 
2Non-GAAP operating earnings:  Operating earnings excluding special items and impairment charges and other.
 
3Non-GAAP earnings from continuing operations:  Earnings from continuing operations excluding special items and impairment charges and other, both net of tax.
 
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 www.cardinalhealth.com.
 
This news release contains forward-looking statements addressing expectations, prospects, estimates and other matters thatare dependent upon future events or developments.  These matters 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; uncertainties relating to timing of generic 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 and administrative proceedings; successful integration of Cardinal Health and VIASYS Healthcare and the ability to achieve synergies from the acquisition; and general economic and market conditions.  This news release reflects management’s views as of Nov. 5, 2007.  Except to the extent required by applicable law, Cardinal Health undertakes no obligation to update or revise any forward-looking statement.
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