10-QPeriod: Q3 FY2009

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2009

Filed May 7, 2009For Securities:CAH

Summary

Cardinal Health, Inc. reported its third-quarter fiscal year 2009 results, showing a 9% increase in revenue to $24.9 billion, driven by pharmaceutical price appreciation and volume growth. However, operating earnings saw a decline of 14% for the quarter and 8% for the nine-month period, primarily due to lower gross margins, increased special items like restructuring charges, and higher interest expenses. The company is actively preparing for the planned spin-off of its clinical and medical products businesses into a new entity, CareFusion Corporation, targeting a summer 2009 completion. This separation, while intended to unlock value, also contributes to increased restructuring costs and introduces strategic uncertainties. Key financial figures indicate healthy revenue growth but highlight pressure on profitability, underscoring the impact of economic conditions and ongoing restructuring efforts.

Financial Highlights

30 data points
Beta

Revenue

$24.09B

4.1% Gross Margin

Net Income

$312.90M

1.3% Net Margin

EPS (Diluted)

$0.60

Cash & Equivalents

$971.80M

Free Cash Flow

$556.60M

Financial Statements
Beta
Revenue$24.09B
Cost of Revenue$23.10B
Gross Profit$986.90M
SG&A Expenses$573.00M
Operating Income$380.90M
Interest Expense$30.30M
Net Income$312.90M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)358.10M
Shares Outstanding (Diluted)360.90M

Key Highlights

  • 1Revenue increased by 9% year-over-year to $24.9 billion for the third quarter and $74.4 billion for the nine months ended March 31, 2009.
  • 2Operating earnings decreased by 14% to $496 million for the quarter and 8% to $1.46 billion for the nine months, impacted by lower gross margin and higher special items.
  • 3The company announced plans to spin off its clinical and medical products businesses into a new entity, CareFusion Corporation, targeting completion in summer 2009.
  • 4Restructuring charges, including those related to the spin-off and headcount reductions, significantly increased to $48.1 million for the quarter and $112.1 million for the nine months.
  • 5Net earnings decreased by 12% to $312.9 million ($0.87 per diluted share) for the quarter and 11% to $878.4 million ($2.43 per diluted share) for the nine months.
  • 6Cash and equivalents increased to $1.366 billion as of March 31, 2009, from $1.291 billion at the end of the prior fiscal year.
  • 7The company continues to manage significant litigation and regulatory matters, including an amended FDA Consent Decree and DEA investigations.

Frequently Asked Questions

The primary drivers of the revenue increase were pharmaceutical price appreciation and increased volume from existing customers. New customer additions and acquisitions also contributed positively to revenue growth.

The decrease in operating earnings was mainly due to a lower gross margin, higher special items such as restructuring charges and litigation costs, and an increase in interest expense and other costs. The company also experienced negative impacts from customer discounts and foreign exchange.

Cardinal Health announced its intention to separate its clinical and medical products businesses into a new, independent publicly traded company called CareFusion Corporation. This is being pursued through a pro rata distribution of at least 80% of CareFusion's stock to Cardinal Health shareholders. The company aims to complete this spin-off in the summer of 2009, subject to various conditions, including board approval and tax rulings.

As of March 31, 2009, Cardinal Health had $1.366 billion in cash and equivalents. The company had $3.3 billion in long-term obligations (less current portion). While liquidity appears stable, the company noted increased short-term borrowings and active management of its credit facilities.