10-QPeriod: Q1 FY2009

CARDINAL HEALTH INC Quarterly Report for Q1 Ended Sep 30, 2008

Filed November 7, 2008For Securities:CAH

Summary

Cardinal Health Inc. (CAH) reported its third-quarter results for the period ending September 30, 2008. The company experienced a revenue increase of 11% year-over-year, reaching $24.3 billion, driven by pharmaceutical price appreciation, increased volumes, and acquisitions. However, operating earnings saw a decline of 13% to $426 million, impacted by higher SG&A expenses and increased restructuring charges, despite a slight increase in gross margin. Net earnings for the quarter were $249 million, resulting in diluted earnings per share of $0.69, a decrease from the prior year. The company's cash flow from operations was negative, primarily due to changes in working capital, including increases in inventories and trade receivables. A significant development announced during the quarter was the planned spin-off of most of its clinical and medical products businesses, expected by mid-2009. This strategic move aims to streamline operations and align resources.

Financial Highlights

29 data points
Beta

Revenue

$23.44B

3.8% Gross Margin

Net Income

$249.10M

1.1% Net Margin

EPS (Diluted)

$0.48

Cash & Equivalents

$387.40M

Free Cash Flow

-$212.60M

Financial Statements
Beta
Revenue$23.44B
Cost of Revenue$22.54B
Gross Profit$901.20M
SG&A Expenses$590.30M
Operating Income$286.60M
Interest Expense$29.30M
Net Income$249.10M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)356.70M
Shares Outstanding (Diluted)361.10M

Key Highlights

  • 1Revenue grew 11% year-over-year to $24.3 billion, driven by pharmaceutical price appreciation and volume increases.
  • 2Operating earnings declined 13% to $426 million, impacted by higher SG&A expenses and significant restructuring charges.
  • 3Net earnings decreased to $249 million, with diluted EPS at $0.69.
  • 4Cash flow from operations was negative at $(353) million, largely due to increased working capital, particularly in inventories and receivables.
  • 5The company announced plans to spin off most of its clinical and medical products businesses, expected by mid-2009.
  • 6Restructuring charges significantly increased to $49.7 million, compared to $14.8 million in the prior year, related to segment reorganization and facility consolidations.
  • 7The company is facing ongoing IRS audits with proposed tax adjustments totaling $178.9 million for fiscal years 2001-2005 and an additional $598.1 million for fiscal years 2003-2005, which the company intends to contest.

Frequently Asked Questions

Cardinal Health reported an 11% increase in revenue to $24.3 billion, but operating earnings declined by 13% to $426 million due to higher operating expenses and restructuring charges. Net earnings were $249 million, with diluted EPS of $0.69.

The decline in operating earnings was primarily driven by a 6% increase in Selling, General & Administrative (SG&A) expenses ($52 million) and a significant rise in restructuring charges ($35 million), which were partially offset by a modest increase in gross margin ($22 million).

The most significant announcement was the planned spin-off of most of its clinical and medical products businesses, expected to be completed by mid-2009. The company also underwent a restructuring of its operating segments to reduce costs and align resources.

Key risks include disruptions in the financial markets impacting credit availability and cost, the financial soundness of customers and vendors, the potential inability to complete the planned spin-off, and the significant proposed tax adjustments from IRS audits, which the company is contesting.