10-QPeriod: Q2 FY2011

CARDINAL HEALTH INC Quarterly Report for Q2 Ended Dec 31, 2010

Filed February 8, 2011For Securities:CAH

Summary

Cardinal Health, Inc. (CAH) reported its financial results for the quarter ended December 31, 2010. The company experienced revenue growth, driven primarily by its Pharmaceutical segment, which saw increased profit due to new generic launches and improved sourcing programs. However, the Medical segment faced headwinds, with flat profit for the quarter and a decline year-to-date, attributed to rising commodity costs and a strong prior-year flu season. Significant strategic initiatives were undertaken during the period, including substantial acquisitions in the pharmaceutical distribution space in both the US (Kinray) and China (Yong Yu), along with the acquisition of P4 Healthcare to bolster specialty pharmaceutical services. These acquisitions are expected to contribute positively to earnings in the latter half of fiscal 2011. The company also continued to divest its remaining stake in CareFusion, generating a gain and strengthening its balance sheet.

Financial Highlights

49 data points
Beta

Revenue

$25.37B

3.9% Gross Margin

Net Income

$215.00M

0.8% Net Margin

EPS (Diluted)

$0.61

Total Assets

$22.85B

Cash & Equivalents

$1.35B

Free Cash Flow

$82.40M

Financial Statements
Beta
Revenue$25.37B
Cost of Revenue$24.38B
Gross Profit$994.00M
SG&A Expenses$607.00M
Operating Income$343.90M
Interest Expense$21.90M
Net Income$215.00M
EPS (Basic)$0.62
EPS (Diluted)$0.61
Shares Outstanding (Basic)347.60M
Shares Outstanding (Diluted)350.70M

Key Highlights

  • 1Revenue increased by 2% to $25.4 billion for the quarter and was flat at $49.8 billion for the six-month period, compared to the prior year.
  • 2Pharmaceutical segment profit grew significantly (11% for the quarter, 25% year-to-date), driven by generic launches and sourcing programs.
  • 3The company completed three significant acquisitions during the period: Kinray for $1.3 billion, Yong Yu for $470 million, and P4 Healthcare for $506 million.
  • 4Cash and equivalents decreased to $1.3 billion from $2.8 billion due to $2.3 billion used for acquisitions, partially offset by the sale of remaining CareFusion investment and debt issuance.
  • 5Medical segment profit was flat for the quarter but down 15% year-to-date, impacted by rising commodity costs and prior-year flu season strength.
  • 6The company disposed of its remaining investment in CareFusion, recognizing a $74.8 million gain for the six-month period.
  • 7Diluted earnings per share from continuing operations were $0.61 for the quarter and $1.45 for the six-month period.

Frequently Asked Questions

Revenue growth was primarily driven by the Pharmaceutical segment, which saw a 2% increase in revenue for the quarter. This was bolstered by sales to existing customers and contributions from recent acquisitions, offsetting some customer losses.

Cardinal Health completed three significant acquisitions: Kinray, Yong Yu, and P4 Healthcare. These acquisitions collectively are expected to be slightly accretive to earnings in the second half of fiscal 2011, expanding the company's reach in pharmaceutical distribution and specialty services.

The company's cash and equivalents decreased significantly from $2.8 billion to $1.3 billion. This reduction was primarily due to substantial cash used for acquisitions, although partially offset by proceeds from the sale of the remaining CareFusion investment and the issuance of long-term debt.

The Medical segment faced headwinds, with flat profit for the quarter and a 15% decrease year-to-date. This was attributed to increased costs for raw materials like oil and latex, and a strong flu season in the prior year impacting demand comparisons.