Cardinal Health has reported solid revenue growth for its fiscal 2009 third quarter financial results and an expected decline in full-year earnings to the lower end of its previous guidance, primarily due to a previously disclosed deferral in hospital capital spending.
For the quarter, which ended March 31, revenue rose 9 percent to $24.9 billion, driven by sales growth from the healthcare supply chain services segment. Healthcare supply chain services segment profit increased 2 percent to $384 million due to the total segment sales growth, strong performance in nuclear pharmacy services and disciplined management of operating expenses. Segment profit growth was partially offset by the impact of customer mix and higher bad debt expense.
Non-GAAP earnings from continuing operations declined 10 percent to $350 million, and non-GAAP diluted earnings per share from continuing operations decreased 10 percent from $390 million in the prior year to $350 million. Including the $36 million after tax impact of special items, impairments and other costs associated with the planned spinoff of CareFusion, GAAP earnings from continuing operations dropped to $314 million, compared with $366 million in the same period last year, the company said.
The Dublin, Ohio-based Cardinal said that the year-over-year earnings decline was primarily driven by a deferral in hospital capital spending affecting its clinical and medical products segment.
Revenue for clinical and medical products decreased 6 percent to $1.1 billion, driven by sales declines from the previously disclosed deferral in hospital capital spending, the ship-hold on certain Alaris products and the impact of foreign exchange rates. The decline in segment revenue was partially offset by revenue growth in the infection prevention businesses, primarily from the Enturia acquisition. Segment profit declined 22 percent to $148 million, driven by the revenue decline, a reserve associated with remediation efforts for IV pumps, the ship-hold on certain Alaris products and the impact of foreign exchange rates.
"We knew we were going to have a difficult quarter in our clinical and medical products segment, but we remain in a strong, long-term competitive position and made progress during the quarter against some of our short-term challenges, which gives us confidence as we move towards completing the planned spinoff," said R. Kerry Clark, Cardinal chairman and CEO.
"Even with the additional impact from the infusion remediation reserve and the ship-hold, we are maintaining our full-year non-GAAP EPS outlook within, but at the low end of, our guidance range of $3.50 to $3.60 per share," Clark said.
The company said its guidance does not reflect any incremental costs it will incur associated with the planned spinoff and separation of the two companies. Cardinal also said expects a "significant portion of these costs" to be classified as special items in accordance with current company practices.