10-QPeriod: Q3 FY2011

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2011

Filed May 6, 2011For Securities:CAH

Summary

Cardinal Health, Inc. (CAH) reported solid revenue growth for the third quarter of fiscal year 2011, with consolidated revenue increasing by 7% year-over-year to $26.1 billion. This growth was primarily driven by the Pharmaceutical segment, which saw a 7% increase in revenue, bolstered by recent acquisitions and strong generic program performance. The Medical segment also experienced revenue growth of 5%. Net earnings from continuing operations showed a significant increase of 11% to $249.5 million, or $0.71 per diluted share, reflecting improved profitability and operational execution. The company has been active in strategic acquisitions, including Kinray, Yong Yu, and P4 Healthcare, which contributed to revenue and segment profit growth in the Pharmaceutical segment. Despite increased costs in the Medical segment due to rising commodity prices, overall operating earnings saw a healthy increase of 22%. The company also continues to return capital to shareholders through dividends, with a recent increase in the quarterly dividend approved.

Financial Highlights

49 data points
Beta

Revenue

$26.07B

4.5% Gross Margin

Net Income

$246.00M

0.9% Net Margin

EPS (Diluted)

$0.70

Total Assets

$23.20B

Cash & Equivalents

$1.96B

Free Cash Flow

$854.20M

Financial Statements
Beta
Revenue$26.07B
Cost of Revenue$24.91B
Gross Profit$1.16B
SG&A Expenses$670.00M
Operating Income$447.30M
Interest Expense$25.10M
Net Income$246.00M
EPS (Basic)$0.71
EPS (Diluted)$0.70
Shares Outstanding (Basic)348.50M
Shares Outstanding (Diluted)352.90M

Key Highlights

  • 1Consolidated revenue grew 7% to $26.1 billion for the quarter, driven by the Pharmaceutical segment's 7% growth and Medical segment's 5% growth.
  • 2Net earnings from continuing operations increased by 11% to $249.5 million, with diluted EPS of $0.71.
  • 3Significant acquisitions, including Kinray, Yong Yu, and P4 Healthcare, were completed and are contributing to revenue and profit growth, primarily in the Pharmaceutical segment.
  • 4Pharmaceutical segment profit saw a strong 25% increase due to acquisitions, generic programs, and branded margin growth.
  • 5Medical segment profit experienced a slight decrease of 1% due to rising commodity prices, partially offset by increased volume.
  • 6The company declared a quarterly dividend of $0.195 per share and subsequently announced a 10% increase to $0.215 per share.
  • 7Cash and equivalents decreased to $2.0 billion from $2.8 billion, primarily due to $2.3 billion used for acquisitions.

Frequently Asked Questions

Revenue growth was primarily driven by the Pharmaceutical segment, which benefited from recent acquisitions (Kinray, Yong Yu, P4 Healthcare), strong performance in generic programs, and increased sales to existing customers. The Medical segment also contributed with increased volume from existing customers.

The acquisitions of Kinray, Yong Yu, and P4 Healthcare significantly contributed to revenue growth, particularly in the Pharmaceutical segment. These acquisitions added $1.2 billion to revenue in the three months ended March 31, 2011, and positively impacted segment profit.

Cardinal Health expects low single-digit growth in the primary markets for its Pharmaceutical segment and flat demand in the primary markets for its Medical segment for the remainder of fiscal 2011. Branded pharmaceutical inflation is expected to be consistent or slightly higher than historical trends, while generic deflation has been lower than historical trends.

As of March 31, 2011, Cardinal Health had $2.0 billion in cash and equivalents. The decrease from the prior period was mainly due to $2.3 billion spent on acquisitions, partially offset by cash generated from operations and the sale of its remaining investment in CareFusion. The company believes it has adequate resources for its current needs, but may require supplemental funding for future large acquisitions.