01—Abstract
Summary
Summary of the 10-K filed August 20, 2013. Cited figures are marked; the original filing is the authoritative source.
Cardinal Health Inc. reported a challenging fiscal year 2013, marked by a significant 6% revenue decline to $101.1 billiona, largely attributed to the expiration of its pharmaceutical distribution contract with Express Scripts and ongoing brand-to-generic pharmaceutical conversions.
Despite this revenue decrease, the company saw an 8% increase in gross margin to $4.9 billionb, driven by strong performance in its pharmaceutical segment's generic programs. However, operating earnings were substantially impacted, falling 44% to $1.0 billion, primarily due to an $829 million non-cash goodwill impairment charge related to its Nuclear Pharmacy Services division. The company also completed a major acquisition of AssuraMed for $2.07 billion, which is expected to expand its reach in serving homecare providers and patients.
A significant event impacting the upcoming fiscal year is the non-renewal of the pharmaceutical distribution contract with Walgreens, which represented approximately 20% of fiscal 2013 revenue. Management anticipates an adverse impact from this contract expiration but is implementing cost reduction measures to mitigate it. The company expects a positive net after-tax benefit to cash flow from operating activities exceeding $500 millionc in fiscal 2014 as a result of the expected working capital changes following the Walgreens contract expiration.
02—Key points
Key Highlights
- Revenue for fiscal year 2013 decreased by 6% to $101.1 billion, primarily due to contract expirations (Express Scripts) and brand-to-generic pharmaceutical conversions.
- Gross margin increased by 8% to $4.9 billion, driven by strong performance in generic pharmaceutical programs and acquisitions.
- Operating earnings significantly decreased by 44% to $1.0 billion due to an $829 million non-cash goodwill impairment charge in the Nuclear Pharmacy Services division.
- The company acquired AssuraMed for $2.07 billion, strengthening its presence in the homecare market.
- The key pharmaceutical distribution contract with Walgreens will not be renewed upon its expiration at the end of August 2013, impacting future revenue.
- Cardinal Health expects the expiration of the Walgreens contract to result in a net after-tax benefit to cash flow from operating activities exceeding $500 million in fiscal 2014 due to working capital changes.
- The company's effective tax rate for fiscal 2013 was significantly impacted by the non-deductible goodwill impairment charge.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2013, Cardinal Health Inc kept $0.00.
- Revenue$101.09B100.0%
- Cost of revenue−$96.17B95.1%
- Gross profit$4.92B4.9%
- Operating costs−$3.92B3.9%
- Operating income$996.0M1.0%
- Interest, other & tax−$662.0M0.7%
- Net income$334.0M0.3%
Where FY2013 revenue went
$101.09B- Cost of revenue: $96.17B, 95% of revenue
- Net income: $334.0M, 0.3% of revenue
- SG&A: $2.88B, 2.8% of revenue
- Other operating costs: $1.05B, 1.0% of revenue
- Interest, other & tax: $662.0M, 0.7% of revenue
Kept 0.3% as net incomeNet income $334.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2013filed August 20, 2013Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $101.09B$107.55B | −6.0% |
| Cost of Revenue | $96.17B$103.01B | −6.6% |
| Gross Profit | $4.92B$4.54B | +8.4% |
| SG&A Expenses | $2.88B$2.68B | +7.4% |
| Operating Income | $996.00M$1.79B | −44.4% |
| Interest Expense | $123.00M$95.00M | +29.5% |
| Net Income | $334.00M$1.07B | −68.8% |
| EPS (Basic) | $0.98$3.10 | −68.4% |
| EPS (Diluted) | $0.97$3.06 | −68.3% |
| Shares Outstanding (Basic) | 341.00M345.00M | −1.2% |
| Shares Outstanding (Diluted) | 344.00M349.00M | −1.4% |
05—Questions
Frequently Asked Questions
What was the main reason for the revenue decline in fiscal year 2013?
The primary reasons for the revenue decline were the expiration of the pharmaceutical distribution contract with Express Scripts and the ongoing impact of brand-to-generic pharmaceutical conversions, which generally result in lower selling prices for generic drugs.
What is the impact of the non-renewal of the Walgreens contract?
The non-renewal of the Walgreens contract, which represented about 20% of fiscal 2013 revenue, is expected to have an adverse impact on future results of operations. However, the company anticipates a positive net after-tax benefit to cash flow from operating activities in fiscal 2014 due to expected changes in working capital.
What caused the significant drop in operating earnings?
The substantial decrease in operating earnings was primarily due to an $829 million non-cash goodwill impairment charge related to the Nuclear Pharmacy Services division. This impairment reflects significant softness in the low-energy diagnostics market, including sustained volume declines and price erosion.
What significant acquisition did Cardinal Health complete in fiscal 2013?
Cardinal Health completed the acquisition of AssuraMed, Inc. for $2.07 billion. AssuraMed is a provider of medical supplies to homecare providers and patients, and this acquisition is expected to expand Cardinal Health's reach in serving this patient base.
06—Continue