10-QPeriod: Q3 FY2010

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2010

Filed May 6, 2010For Securities:CAH

Summary

Cardinal Health, Inc. reported solid revenue growth for the nine months ending March 31, 2010, with total revenue reaching $74.0 billion, a 3% increase year-over-year. This growth was primarily driven by the Pharmaceutical segment, which saw an increase in pharmaceutical price appreciation and volume. While revenue showed an upward trend, operating earnings experienced a slight decline of 1% to $973 million for the same period. This decrease was mainly attributed to higher distribution, selling, general, and administrative (SG&A) expenses, as well as increased restructuring and impairment charges. The company successfully navigated the complexities of the CareFusion spin-off, which significantly impacted year-over-year comparisons. The spin-off resulted in a substantial increase in cash and cash equivalents to $2.6 billion, bolstered by proceeds from the sale of CareFusion stock and strong operating cash flows. Despite ongoing litigation and tax matters, Cardinal Health maintained compliance with its financial covenants, indicating a stable liquidity position.

Financial Highlights

47 data points
Beta

Revenue

$24.34B

4.1% Gross Margin

Net Income

$222.40M

0.9% Net Margin

EPS (Diluted)

$0.62

Total Assets

$21.27B

Cash & Equivalents

$2.64B

Free Cash Flow

$817.40M

Financial Statements
Beta
Revenue$24.34B
Cost of Revenue$23.33B
Gross Profit$1.01B
SG&A Expenses$628.60M
Operating Income$366.30M
Interest Expense$27.70M
Net Income$222.40M
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)358.70M
Shares Outstanding (Diluted)361.80M

Key Highlights

  • 1Revenue increased by 3% to $74.0 billion for the nine months ended March 31, 2010.
  • 2Operating earnings decreased slightly by 1% to $973 million for the nine months ended March 31, 2010, impacted by increased SG&A and restructuring costs.
  • 3Net earnings for the nine months ended March 31, 2010 were $418.7 million, a significant decrease from $878.4 million in the prior year, largely due to the spin-off of CareFusion and a related tax charge.
  • 4The company generated strong operating cash flow of $1.8 billion for the nine months ended March 31, 2010.
  • 5Cash and cash equivalents increased substantially to $2.6 billion as of March 31, 2010, up from $1.2 billion at June 30, 2009.
  • 6The company realized gains from the sale of CareFusion common stock, totaling $43.3 million for the nine months ended March 31, 2010.
  • 7The Pharmaceutical segment remains the largest revenue contributor, with Medical segment revenue also showing growth.

Frequently Asked Questions

Revenue growth was primarily driven by the Pharmaceutical segment, which benefited from pharmaceutical price appreciation and increased volume from existing customers, along with contributions from new customers. The Medical segment also contributed positively with increased volume and new products.

The decrease in operating earnings was mainly due to higher distribution, selling, general, and administrative (SG&A) expenses, which rose by 4% year-over-year for the nine-month period. Additionally, increased restructuring and employee severance costs, along with impairment charges, also negatively impacted operating earnings.

The spin-off of CareFusion significantly impacted the financial results. It led to a large decrease in net earnings due to discontinued operations no longer contributing positively and a substantial tax charge related to the repatriation of foreign earnings. However, it also provided proceeds from the sale of CareFusion stock and improved the company's cash position.

Cardinal Health's liquidity remains strong. As of March 31, 2010, the company had $2.6 billion in cash and cash equivalents. It also has access to a $1.5 billion revolving credit facility and a committed receivables sales facility, with no outstanding borrowings under these facilities at the time.