10-QPeriod: Q1 FY2010

CARDINAL HEALTH INC Quarterly Report for Q1 Ended Sep 30, 2009

Filed November 9, 2009For Securities:CAH

Summary

Cardinal Health, Inc. (CAH) reported its financial results for the quarter ended September 30, 2009, marking a period of significant strategic transition with the spin-off of CareFusion Corporation. Revenue for the quarter saw a modest increase of 6% year-over-year, reaching $24.8 billion. However, operating earnings declined by 16% to $240 million, impacted by increased restructuring costs related to the CareFusion spin-off and a significant impairment charge of $23 million for SpecialtyScripts. The company experienced a net loss of $38.2 million for the quarter, a sharp contrast to the prior year's net earnings of $249.1 million. This downturn was heavily influenced by a $172 million tax charge related to the anticipated repatriation of foreign earnings and a $40 million loss on the extinguishment of debt. Despite these challenges, operational cash flow remained positive at $406 million, driven by working capital management. The balance sheet reflects a substantial decrease in assets and liabilities, largely due to the reclassification of CareFusion as discontinued operations. Investors should note the strategic shift following the CareFusion spin-off, which has reshaped the company's operational and financial profile. While revenue growth is positive, profitability is under pressure from one-time charges and ongoing restructuring. The company's liquidity remains adequate, supported by cash reserves and credit facilities. Management is focused on cost control initiatives and navigating the complex healthcare regulatory environment.

Financial Highlights

47 data points
Beta

Revenue

$24.78B

3.7% Gross Margin

Net Income

-$38.20M

-0.2% Net Margin

EPS (Diluted)

$-0.17

Total Assets

$20.43B

Cash & Equivalents

$1.58B

Free Cash Flow

$369.00M

Financial Statements
Beta
Revenue$24.78B
Cost of Revenue$23.87B
Gross Profit$908.80M
SG&A Expenses$586.10M
Operating Income$239.90M
Interest Expense$33.90M
Net Income-$38.20M
EPS (Basic)$-0.17
EPS (Diluted)$-0.17
Shares Outstanding (Basic)359.10M
Shares Outstanding (Diluted)359.10M

Key Highlights

  • 1Revenue increased by 6% to $24.8 billion in the quarter ended September 30, 2009.
  • 2Net earnings turned into a loss of $38.2 million from a profit of $249.1 million in the prior year's quarter.
  • 3Operating earnings decreased by 16% to $239.9 million, impacted by increased restructuring and impairment charges.
  • 4A significant $172 million tax charge related to foreign earnings repatriation negatively affected net income.
  • 5The company completed the spin-off of approximately 81% of CareFusion Corporation on August 31, 2009.
  • 6Net cash provided by operating activities was $406 million, indicating positive cash generation.
  • 7Long-term obligations decreased significantly from $3.3 billion to $2.1 billion due to debt repayment.

Frequently Asked Questions

The spin-off of CareFusion, completed on August 31, 2009, resulted in CareFusion's assets and operations being presented as 'discontinued operations' and 'held for sale'. This significantly reduced the company's overall asset base and altered its revenue and earnings profile. While it marked a strategic shift, the spin-off also incurred restructuring costs and a substantial tax charge related to foreign earnings repatriation.

The net loss of $38.2 million was primarily driven by a $172 million tax charge related to the anticipated repatriation of certain foreign earnings, a $39.9 million loss on the extinguishment of debt, and increased restructuring and employee severance costs of $59.7 million. These significant one-time or unusual items overshadowed the revenue growth.

Cardinal Health actively managed its debt during the quarter. The company completed a debt tender offer, repurchasing over $1.1 billion of its debt securities. This led to a reduction in long-term obligations from $3.3 billion at June 30, 2009, to $2.1 billion at September 30, 2009. This action, however, resulted in a pre-tax loss of approximately $40 million due to early extinguishment costs.

While revenue shows positive momentum, the company is navigating a period of significant change and facing profitability challenges due to restructuring costs and tax-related impacts. Management is focused on cost control and operational efficiency. Investors should monitor the integration of the post-spin-off business structure and the ongoing competitive and regulatory landscape within the healthcare industry.