Cardinal Health, Inc. (CAH) reported Thursday a loss for the first quarter of fiscal 2010, compared to prior year's profit, reflecting higher charges mainly related to its spinoff of CareFusion Corp. (CFN). On an adjusted basis, the Dublin, Ohio-based healthcare products and services company's earnings grew 15% from last year on higher segmental revenues. Cardinal Health's spun off unit, CareFusion, also reported a decline in first-quarter profit, while adjusted earnings grew 71%. Further, Cardinal Health said it now sees higher end of fiscal 2010 adjusted earnings forecast range, while CareFusion lifted its full-year earnings forecast.
Cardinal Health's first-quarter net loss was $38.2 million or $0.11 per share, compared to net earnings of $249.1 million or $0.69 per share last year.
The latest quarter results included earnings from discontinued operations of $23.6 million or $0.06 per share, lower than prior year's earnings of $76.9 million or $0.21 per share. The discontinued operations reflected the recent spun off of CareFusion through a pro rata distribution to Cardinal Health shareholders of approximately 81% of the shares of CareFusion common stock, effectively launching it as an independent, publicly traded company.
On a continuing operations basis, loss for the quarter was $61.8 million or $0.17 per share, compared to income of $172.2 million or $0.48 per share in the same quarter last year.
The company pointed out that the net impact from costs associated with the spinoff of CareFusion totaled $0.71 per share, comprising restructuring and employee severance costs of $42.3 million or $0.12 per share, impairments and loss on sale of assets of $15.5 million or $0.04 per share, and other spin-off costs of $198.2 million or $0.55 per share.
Excluding items, non-GAAP earnings from continuing operations rose to $194 million or $0.54 per share from $168 million or $0.47 per share in the year-ago quarter.
On average, 14 analysts polled by Thomson Reuters expected the company to report earnings of $0.43 per share. Analysts' estimates typically exclude special items.
Provision for income taxes for the quarter was $236.8 million, sharply higher than prior year's provision of $82.6 million.
Earnings for the quarter, before income taxes and discontinued operations, declined to $175.0 million from $254.8 million a year ago.
Quarterly revenues grew 6% to $24.78 billion from $23.44 billion in the same quarter last year. Thirteen analysts had a consensus revenue estimate of $24.04 billion for the quarter.
Gross margin for the quarter edged up 1% to $908.8 million from last year's $901.2 million, while operating earnings fell 16% to $240 million from $287 million a year ago. Non-GAAP operating earnings rose 4% to $323 million from $311 million last year.
Segment-wise, revenues from Pharmaceutical Segment increased 5% to $22.56 billion from prior year's $21.40 billion, primarily driven by higher sales to existing pharmaceutical distribution customers. Sales to bulk customers rose 6% to $11.3 billion and sales to non-bulk customers increased 5% to $11.2 billion. Meanwhile, the segment profit dropped 2% to $208 million, hurt mainly by expected impact from fewer significant generic product launches and deflation.
George Barrett, chairman and chief executive officer of Cardinal Health, said, "The Pharmaceutical segment continued its progress coming out of fiscal 2009 and performed somewhat ahead of our expectations. We are also seeing good early traction with our new generic programs on both the sourcing and customer sides. Our Nuclear Pharmacy Services business continues to perform well in an unusual environment, but we are closely monitoring the supply disruptions of radioisotopes."
In its Medical Segment, quarterly revenues rose 10% to $2.24 billion from $2.04 billion a year ago, and segment profit climbed 17% to $115 million. The company noted that the segment had a strong quarter with particularly robust performance from its ambulatory and lab supply businesses.
According to the company, its "first-quarter operating numbers were enhanced by an accelerated revenue recognition item in our Medical segment related to the spinoff and some earlier-than-expected brand price inflation in the Pharmaceutical segment."
In a separate statement, CareFusion, a medical device company created on September 1 through the spinoff of Cardinal Health's clinical and medical products businesses, reported first-quarter net income of $81 million or $0.37 per share, compared to $113 million or $0.51 per share last year. Income from continuing operations was $55 million or $0.25 per share, higher than $30 million or $0.14 per share a year ago.
Adjusted net income for CareFusion increased 71% to $87 million or $0.39 per share from to $51 million or $0.23 per share last year. Analysts expected earnings of $0.26 per share for the quarter.
CareFusion's revenue increased 1% to $923 million from $915 million last year, mainly driven by higher sales of ventilators, infusion pumps and perioperative dispensing systems. Analysts' consensus estimate was $946.33 million for the quarter. The revenue growth was 4% on a constant currency basis. Revenue for the Critical Care Technologies segment, totaled $617 million, flat with last year, while revenue for the Medical Technologies and Services segment increased 3% to $306 million.
In the previous quarter, Cardinal Health reported a decline in profit to $272.2 million or $0.75 per share from $318.0 million or $0.88 per share reported in the corresponding quarter a year ago. Revenue for the quarter grew 10% to $25.20 billion from $22.89 billion in the previous year.
Among Cardinal Health's rivals, McKesson Corp. (MCK) said its profit for the second quarter declined to $301 million or $1.11 per share, from $327 million or $1.17 per share, hurt by higher interest and income tax expenses. Revenues increased 2% to $27.13 billion from $26.57 billion in the prior-year quarter.
Another peer, AmerisourceBergen Corp. (ABC) posted higher fourth-quarter profit of $130.15 million or $0.44 per share, compared to $114.91 million or $0.36 per share in the year-earlier period, helped by strong generic sales, lower expenses and an increased contribution from fee-for-service agreements. Total revenue rose 9.1% to $18.72 billion from $17.16 billion in the previous year.
Owens & Minor Inc. (OMI) posted third-quarter net income of $34.69 million or $0.83 per share, higher than $25.28 million or $0.61 per share reported a year ago, reflecting year-on-year improvement in revenues. Quarterly revenue increased 13.9% to $2.04 billion from $1.79 billion last year.
Looking ahead, Cardinal Health said it currently expects that its full-year 2010 non-GAAP earnings per share from continuing operations will likely be toward the higher end of its previous guidance of $1.90 to $2.00. Analysts expect the company to earn $1.95 per share for the year, with estimates ranging between $1.89 and $2.00 per share.
Barrett said, "We're off to a solid start to fiscal 2010, with our core businesses performing well and our key initiatives on track to deliver long-term value."
Meanwhile, Cardinal Health's spun off unit, CareFusion, raised its adjusted earnings per share outlook for fiscal 2010 to be in the range of $1.35 to $1.45, higher than previous forecast of $1.10 to $1.20 per share.
CAH, which have been trading between $24.87 and $41.37 in the past 52 weeks, closed Wednesday's trading session at $29.13, up 47 cents or 1.64%, on a volume of 4.8 million shares.
CFN settled at $22.55 on Wednesday, up $0.53, on a volume of 271 thousand shares.
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