Cardinal Health, Inc. (Cardinal Health) has reported revenue of $24.8 billion for the first quarter of fiscal 2010, up 6%, compared with the revenue of $23.4 billion in the year-ago quarter. It has also reported loss from continuing operations of $62 million, or $0.17 loss per diluted share, for the first quarter of fiscal 2010, compared with earnings from continuing operations of $172 million, or $0.48 per diluted share, in the year-ago quarter.
The net after-tax dilutive impact from restructuring, impairments and other costs associated with the spinoff of CareFusion Corp. totaled $0.71 per share. These items resulted in a GAAP loss from continuing operations of $62 million for the quarter, or $0.17 per share. Notable one-time items include a $172 million tax charge related to the portion of non-US earnings that will no longer be indefinitely invested offshore due to the company’s reduced international footprint following the spinoff and a $26 million after-tax loss associated with the early retirement of more than $1.1 billion of long-term debt.
The quarter was highlighted by 17% profit growth from the company’s medical segment, a lower-than-anticipated segment profit decline of 2 percent from its Pharmaceutical segment and disciplined expense management across the company. First-quarter non-GAAP results also benefited from an expected lower tax rate versus the prior-year period.
“We’re off to a solid start to fiscal 2010, with our core businesses performing well and our key initiatives on track to deliver long-term value,” said George Barrett, chairman and chief executive officer of Cardinal Health. “Our first-quarter operating numbers were enhanced by an accelerated revenue recognition item in our Medical segment related to the spinoff and some earlier-than-expected brand price inflation in the Pharmaceutical segment. Based on the data available to us at this stage of the year, we expect that our full-year performance will likely be toward the higher end of our guidance of $1.90 to $2.00 for non-GAAP diluted EPS from continuing operations.”
First-Quarter Segment Results
The Pharmaceutical segment increased revenue by 5 percent to $22.6 billion, primarily driven by increased sales to existing pharmaceutical distribution customers. Sales to bulk customers increased 6 percent to $11.3 billion and sales to non-bulk customers increased 5 percent to $11.2 billion. Segment profit decreased 2 percent to $208 million as a result of the expected impact from fewer significant generic product launches and deflation versus the prior year period, the effect of customer contract repricings within the pharmaceutical distribution business and the decrease in franchise fees from the Medicine Shoppe International franchisee contract transition. The decline in segment profit was partially offset by strong, double-digit profit growth from the Nuclear Pharmacy Services business.
“The Pharmaceutical segment continued its progress coming out of fiscal 2009 and performed somewhat ahead of our expectations,” Barrett said. “We are also seeing good early traction with our new generic programs on both the sourcing and customer sides. Our Nuclear Pharmacy Services business continues to perform well in an unusual environment, but we are closely monitoring the supply disruptions of radioisotopes.”
Revenue for the Medical segment increased 10 percent to $2.2 billion, primarily from sales growth with existing customers. Additionally, the spinoff triggered immediate revenue recognition from international sales to CareFusion, which contributed approximately $51 million to the quarterly revenue growth. Segment profit grew 17 percent to $115 million, driven by decreased cost of raw materials, the $14 million profit impact from the accelerated international sales to CareFusion, pandemic flu orders and the overall increase in volume for the quarter. Segment profit was partially dampened from investments associated with the Medical Transformation project.
“Our Medical segment had a strong quarter with particularly robust performance from our ambulatory and lab supply businesses, and progress is being made in our efforts to transform our medical businesses for long-term growth,” Barrett said. “The segment’s underlying operations are performing well, and the segment is on track for strong profit growth for the full year.”
Additional first quarter and recent highlights
Completed the spinoff of CareFusion Corp. through a pro rata distribution to Cardinal Health shareholders of approximately 81 percent of the shares of CareFusion common stock, effectively launching it as an independent, publicly traded company.
Awarded a five-year, sole-source laboratory products supply agreement with Novation, one of the nation’s largest group purchasing organizations.
Purchased approximately $1.1 billion in aggregate principal amount of the company’s long-term debt securities.
Hired Mark Blake as executive vice president of strategy and corporate development.