Summary
Cardinal Health Inc.'s (CAH) third-quarter fiscal year 2014 results show a notable revenue decline primarily due to the expiration of the Walgreens distribution contract. Despite this significant headwind, the company demonstrated resilience with flat gross margins for the quarter and a slight increase for the nine-month period, bolstered by acquisitions and strong generic program performance. Operating earnings saw an increase, demonstrating effective cost management and strategic execution in the face of revenue challenges. While the company is navigating the impact of the lost Walgreens contract, it is actively positioning for future growth through strategic initiatives like the CVS joint venture for generic sourcing and the announced acquisition of Access Closure. The balance sheet remains strong, with a significant increase in cash and equivalents, providing flexibility for continued capital deployment through dividends and share repurchases, signaling management's confidence in the company's ongoing operational performance and strategic direction.
Financial Highlights
47 data points| Revenue | $21.43B |
| Cost of Revenue | $20.13B |
| Gross Profit | $1.30B |
| SG&A Expenses | $736.00M |
| Operating Income | $508.00M |
| Interest Expense | $34.00M |
| Net Income | $315.00M |
| EPS (Basic) | $0.92 |
| EPS (Diluted) | $0.91 |
| Shares Outstanding (Basic) | 342.00M |
| Shares Outstanding (Diluted) | 347.00M |
Key Highlights
- 1Revenue decreased by 13% for the three months and 10% for the nine months ended March 31, 2014, largely attributed to the expiration of the pharmaceutical distribution contract with Walgreens.
- 2Gross margin remained flat for the three-month period and increased by 6% for the nine-month period, benefiting from acquisitions and strong generic program performance, which offset the impact of the Walgreens contract loss.
- 3Operating earnings increased by 7% and 4% for the three and nine-month periods, respectively, driven by improved Medical segment performance and management of expenses, despite the revenue decline.
- 4The company announced an agreement to form Red Oak Sourcing, LLC, a 50/50 joint venture with CVS Caremark Corporation for generic pharmaceutical sourcing, expected to be operational in July 2014.
- 5Cardinal Health announced an agreement to acquire Access Closure, Inc. for $320 million, aiming to expand its portfolio of physician preference items.
- 6Cash and equivalents significantly increased to $3.0 billion at March 31, 2014, from $1.9 billion at June 30, 2013, primarily due to strong operating cash flow and a decrease in net working capital.
- 7The company continued its capital return program, paying dividends of $0.3025 per share and repurchasing $389 million of common stock during the nine-month period.