Summary
Cardinal Health Inc. (CAH) reported its fiscal third quarter results ending March 31, 2013. The company experienced a notable 9% decrease in revenue for the quarter and a 6% decrease for the nine-month period, primarily driven by the expiration of a significant pharmaceutical distribution contract with Express Scripts and ongoing brand-to-generic pharmaceutical conversions. Despite the revenue decline, gross margin saw a healthy increase of 7% for the quarter and 8% for the nine months, attributed to strong performance in the company's generic pharmaceutical programs. Financially, the company completed a significant acquisition of AssuraMed for $2.07 billion, funded by new debt issuance and existing cash. This acquisition is expected to expand their reach in serving patients at home and contribute positively to future earnings, excluding amortization of related intangibles. Cardinal Health also announced the non-renewal of its contract with Walgreens, a major customer, which is expected to have a net after-tax benefit to cash flow in fiscal 2014. Conversely, the renewal of contracts with CVS Caremark provides a stable revenue stream. The company maintained a strong liquidity position with a substantial cash balance and access to credit facilities.
Financial Highlights
47 data points| Revenue | $24.55B |
| Cost of Revenue | $23.26B |
| Gross Profit | $1.29B |
| SG&A Expenses | $712.00M |
| Operating Income | $475.00M |
| Interest Expense | $34.00M |
| Net Income | $345.00M |
| EPS (Basic) | $1.01 |
| EPS (Diluted) | $1.00 |
| Shares Outstanding (Basic) | 341.00M |
| Shares Outstanding (Diluted) | 345.00M |
Key Highlights
- 1Revenue decreased by 9% year-over-year for the third quarter to $24.6 billion, largely due to contract expirations and generic conversions.
- 2Gross margin increased by 7% for the quarter to $1.3 billion, driven by strong performance in generic pharmaceutical programs.
- 3Acquisition of AssuraMed for $2.07 billion completed in March 2013, expanding presence in home-based medical supplies.
- 4Pharmaceutical distribution contract with Walgreens (21% of FY2012 revenue) not renewed, expiring August 2013.
- 5Pharmaceutical distribution contract with CVS Caremark (22% of FY2012 revenue) renewed.
- 6Operating earnings decreased by 10% in the quarter due to a prior-year gain on contingent consideration, but increased 4% for the nine-month period.
- 7Cash and equivalents remained stable at $2.3 billion, supported by operating cash flow and new debt issuance, despite significant acquisition spending.