10-QPeriod: Q3 FY2012

CARDINAL HEALTH INC Quarterly Report for Q3 Ended Mar 31, 2012

Filed May 8, 2012For Securities:CAH

Summary

Cardinal Health Inc. reported strong performance for the third quarter and first nine months of fiscal year 2012, with total revenue increasing by 3% and 6% respectively compared to the prior year periods. This growth was driven by increased sales from existing customers and the impact of recent acquisitions. The company saw a significant improvement in operating earnings, up 18% and 20% for the respective periods, boosted by strong generic pharmaceutical programs and a favorable adjustment to contingent consideration related to the P4 Healthcare acquisition. Net earnings from continuing operations also showed positive trends, increasing by 33% for the quarter and 10% for the nine-month period. The company's balance sheet strengthened with an increase in cash and equivalents to $2.4 billion, supported by robust operating cash flow. Management expressed confidence in the company's liquidity to fund operations, capital expenditures, and shareholder returns, including dividends and share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$26.92B

4.5% Gross Margin

Net Income

$333.00M

1.2% Net Margin

EPS (Diluted)

$0.95

Total Assets

$24.64B

Cash & Equivalents

$2.41B

Free Cash Flow

$836.00M

Financial Statements
Beta
Revenue$26.92B
Cost of Revenue$25.71B
Gross Profit$1.21B
SG&A Expenses$683.00M
Operating Income$527.00M
Interest Expense$24.00M
Net Income$333.00M
EPS (Basic)$0.96
EPS (Diluted)$0.95
Shares Outstanding (Basic)345.00M
Shares Outstanding (Diluted)349.00M

Key Highlights

  • 1Revenue increased to $26.9 billion for the three months ended March 31, 2012, up 3% year-over-year, and $80.8 billion for the nine months ended March 31, 2012, up 6% year-over-year.
  • 2Operating earnings showed significant growth, reaching $526.6 million for the three months (up 18%) and $1.39 billion for the nine months (up 20%).
  • 3Net earnings from continuing operations were $332.5 million for the quarter (up 33%) and $833.9 million for the nine months (up 10%).
  • 4Cash and equivalents increased to $2.4 billion as of March 31, 2012, from $1.9 billion as of June 30, 2011.
  • 5The company declared and paid dividends, with the board approving an increase in the quarterly dividend to $0.2375 per share.
  • 6During the quarter, the company recorded a $55 million income related to the adjustment of contingent consideration for the P4 Healthcare acquisition.
  • 7The Pharmaceutical segment demonstrated strong performance, with revenue up 3% quarterly and 6% year-to-date, and segment profit increasing by 9% and 18% respectively.

Frequently Asked Questions

Revenue growth was primarily driven by increased sales from existing customers and the positive impact of acquisitions completed in recent periods. The Pharmaceutical segment, in particular, benefited from strong performance in its generic pharmaceutical programs.

The P4 Healthcare acquisition contributed to revenue growth, particularly in the nine-month period. A significant event in this quarter was a $55 million favorable adjustment to the contingent consideration liability related to this acquisition, which positively impacted earnings. However, the company also noted a loss of revenue from a significant customer of the legacy P4 Healthcare business.

Cardinal Health maintained a strong liquidity position, with cash and equivalents increasing to $2.4 billion. This was supported by robust operating cash flow of $1.3 billion for the nine months. The company also has access to a $1.5 billion revolving credit facility and a $950 million receivables sales facility, with no outstanding borrowings under these facilities at quarter-end. The company continues to return capital to shareholders through dividends and share repurchases.

The company is involved in ongoing audits with the IRS, which have proposed significant additional taxes related to transfer pricing and intellectual property. While Cardinal Health disagrees with these proposals and is contesting them, they represent a potential future liability. The company has accounted for unrecognized tax benefits related to these matters. CareFusion may be liable for a portion of these taxes under a tax matters agreement.