CareFusion Reports Second Quarter Results
-- Revenue increased 5 percent to $1 billion, or 2 percent on a constant currency basis
-- GAAP diluted earnings per share (EPS) from continuing operations of $0.33, or $0.39 on an adjusted basis
-- Company raises 2010 adjusted EPS guidance to upper end of range, now $1.40 to $1.45
SAN DIEGO, Feb. 9 /PRNewswire-FirstCall/ -- CareFusion Corp. (NYSE: CFN), a leading, global medical device company, today reported results from continuing operations for the three and six months ended Dec. 31, 2009.
"We continued to execute well during our second quarter and performed ahead of our expectations," said David Schlotterbeck, chairman and CEO of CareFusion. "Hospital capital spending made modest improvements during the quarter and we continued to win key customer contracts. We also benefited in our respiratory business from government and hospital flu preparedness planning.
"As I look ahead to the second half of the fiscal year, we will make progress on our long-term plans for growth, stepping up our investments in R&D and sales and marketing to grow our key franchises and extend into important market adjacencies."
CareFusion's reported results compare to the three and six month periods ended Dec. 31, 2008.
Revenue in the second quarter increased 5 percent to $1 billion, or 2 percent on a constant currency basis, driven primarily by increased sales in the company's Respiratory business and in its Medical Technologies and Services segment. Sequentially from the first quarter ended Sept. 30, 2009, revenue increased $96 million or 11 percent. Compared to a strong prior year period when the slowdown in hospital capital spending had not yet had an impact on the company's financial results, operating income declined to $127 million from $172 million. Income from continuing operations was $73 million, or $0.33 per diluted share.
Excluding nonrecurring items, adjusted operating income for the second quarter declined to $149 million from $177 million and adjusted net income decreased $22 million to $88 million, or $0.39 on an adjusted basis per diluted share.
Operating expenses, including selling, general and administrative (SG&A), research and development (R&D), and restructuring and acquisition integration charges in the second quarter totaled $351 million or 34 percent of total revenue. Excluding $22 million of nonrecurring items, adjusted operating expenses in the second quarter totaled $329 million, or 32 percent of total revenue. Adjusted SG&A expenses were $292 million, and R&D investments totaled $37 million.
Critical Care Technologies
Second quarter revenue for the Critical Care Technologies segment, which includes the company's Dispensing, Infusion and Respiratory businesses, increased 1 percent to $682 million, driven by a strong performance in the company's Respiratory business. On a constant currency basis, revenue decreased by 1 percent. Segment profit decreased to $111 million from $146 million. Adjusted segment profit decreased to $126 million from $148 million driven by the impact of the slowdown in hospital capital spending and higher allocated costs from standing up as a public company, which were only partially offset by strong results in the company's Respiratory business.
Medical Technologies and Services
Second quarter revenue for the Medical Technologies and Services segment, which includes the company's Infection Prevention and Medical Specialties businesses, increased 15 percent to $337 million, or 8 percent on a constant currency basis, driven by increased sales from the International Surgical Products and Interventional Specialties businesses. Segment profit decreased to $16 million from $26 million. Adjusted segment profit decreased to $23 million from $29 million, primarily driven by higher allocated costs from standing up as a public company.
Six-Month Results
For the first six months of fiscal 2010, revenue increased 3 percent to $1.9 billion. Operating income declined to $244 million from $262 million. Income from continuing operations was $128 million, or $0.58 per diluted share.
Excluding nonrecurring items, adjusted operating income for the first six months of fiscal 2010 decreased to $283 million from $297 million and adjusted net income increased $13 million to $174 million, or $0.79 on an adjusted basis per diluted share.
Operating expenses, including SG&A, R&D, and restructuring and acquisition integration charges in the first six months of fiscal 2010 totaled $685 million or 35 percent of total revenue. Excluding $39 million of nonrecurring items, adjusted operating expenses in the first six months of fiscal 2010 totaled $646 million, or 33 percent of total revenue. Adjusted SG&A expenses were $573 million, and R&D investments totaled $73 million.
Segment results for the six months ended Dec. 31, 2009 and 2008 are as follows:
Critical Care Technologies 1H FY10 1H FY09 Y/Y
-------------------------- ------- ------- ---
Revenue $1,299 million $1,293 million 0%
------- -------------- -------------- ---
Segment Profit $212 million $221 million (4)%
-------------- ------------ ------------ ---
Medical Technologies &
Services 1H FY10 1H FY09 Y/Y
---------------------- ------- ------- ---
Revenue $643 million $591 million 9%
------- ------------ ------------ ---
Segment Profit $32 million $41 million (22)%
-------------- ----------- ----------- ----
Adjusted operating expenses, adjusted SG&A expenses, adjusted operating income, adjusted net income, adjusted diluted earnings per share and adjusted segment profit are non-GAAP financial measures and exclude restructuring and acquisition integration charges, nonrecurring spinoff related costs, nonrecurring tax items, and discontinued operations. Adjusted net income also excludes nonrecurring costs related to the bridge loan entered into in connection with the spinoff. A reconciliation of GAAP to non-GAAP financial measures is included later in this news release.
Additional Second Quarter and Recent Highlights
Additional second quarter and recent company highlights include:
- Introducing under limited release new minimally invasive interventional products to treat spinal compression fractures. With planned general availability in April, CareFusion will offer a complete line of products for both kyphoplasty and vertebroplasty procedures;
- Signing a 10-year, sole-source agreement to upgrade Tenet Healthcare's entire network of 50 member hospitals with the Alaris® system infusion pumps;
- FDA lifting an injunction on manufacture and sale of the CareFusion Alaris® SE pump;
- The New England Journal of Medicine publishing a study showing the superiority of CareFusion ChloraPrep® compared to povidone-iodine for surgical skin preparation;
- Announcing six new Pyxis® medication management products at the 44th American Society of Health-System Pharmacists (ASHP) Midyear Clinical Meeting and Exhibition; and
- Launching the CareFusion Knowledge Portal, a Web-based application providing hospitals with on-demand information to improve efficiency and medication safety, while reducing costs.
Fiscal 2010 Outlook
CareFusion increased its revenue guidance range to a range of $3.95 billion to $4.05 billion, up from the previous guidance range of $3.85 billion to $4.0 billion. In addition, the company narrowed its previously provided adjusted diluted EPS outlook for fiscal 2010 to a range of $1.40 to $1.45, the upper end of its previously provided guidance range of $1.35 to $1.45. The guidance for fiscal 2010 is based on an assumed diluted weighted average outstanding share count of approximately 223 million.
Conference Call
CareFusion will host a conference call today at 2 p.m. PST to discuss earnings results for the second quarter.
The number to call from within the United States is (888) 396-2384 or + 1 (617) 847-8711 Internationally, using the pass code 54684988. A replay of the conference call will be available from 5 p.m. PST on Feb. 9 through 8:59 p.m. PST on Feb. 16 and can be accessed by dialing (888) 286-8010 in the United States or +1 (617) 801-6888 Internationally and using the pass code 36977014.
The Conference Call will also be webcast live through the Investor Relations section, under Calendar of Events, on CareFusion's website at www.carefusion.com.
Log on at least 15 minutes before the call begins to register and download or install any necessary audio software.
About CareFusion Corporation
CareFusion (NYSE: CFN) is a global corporation serving the health care industry with products and services that help hospitals measurably improve the safety and quality of care. The company develops market-leading technologies including Alaris® IV pumps, Pyxis® automated dispensing and patient identification systems, AVEA® and Pulmonetic Systems ventilation and respiratory products, ChloraPrep® products, MedMined™ services for infection surveillance, NeuroCare neurological monitoring and diagnostic products, V. Mueller® surgical instruments, and an extensive line of products that support interventional medicine. CareFusion employs more than 15,000 people across its global operations. More information may be found at www.carefusion.com.
Use of Non-GAAP Financial Measures by CareFusion Corporation
This CareFusion news release presents the non-GAAP financial measures "adjusted operating expenses", "adjusted SG&A expenses", "adjusted operating income", "adjusted net income", "adjusted diluted earnings per share" and "adjusted segment profit". The most directly comparable measure for these non-GAAP financial measures are operating earnings, operating expenses, SG&A expenses, operating income, net income, diluted earnings per share and segment profit. The company has included below unaudited adjusted financial information for the quarters and six months ended December 31, 2009 and 2008, which present the company's results of operations after excluding restructuring and acquisition integration charges, nonrecurring spinoff related costs, nonrecurring tax items, and discontinued operations.
In addition, CareFusion presents the non-GAAP financial measure "adjusted diluted earnings per share" on a forward-looking basis. The most directly comparable forward-looking GAAP measure for the company is diluted earnings per share. CareFusion is unable to provide a quantitative reconciliation of this forward-looking non-GAAP financial measure to the most directly comparable forward-looking GAAP measure, because the company cannot reliably forecast restructuring and acquisition integration costs, and other nonrecurring costs. Please note that the unavailable reconciling items could significantly impact CareFusion's future financial results. A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding CareFusion's financial condition and results of operations is included as Exhibit 99.3 to CareFusion's report on Form 8-K filed with the Securities and Exchange Commission on February 9, 2010.
Cautions concerning forward-looking statements
The CareFusion news release and the information contained herein contains forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. The matters discussed in these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these uncertainties are described in CareFusion's Form 10-K, Form 10-Q and Form 8-K reports (including all amendments to those reports) and exhibits to those reports, and include (but are not limited to) the following: we may be unable to effectively enhance our existing products or introduce and market new products or may fail to keep pace with advances in technology; we are subject to complex and costly regulation; cost containment efforts of our customers, purchasing groups, third-party payers and governmental organizations could adversely affect our sales and profitability; declining economic conditions could adversely affect our results of operations and financial condition; we may be unable to protect our intellectual property rights or may infringe on the intellectual property rights of others; defects or failures associated with our products and/or our quality system could lead to the filing of adverse event reports, recalls or safety alerts and negative publicity and could subject us to regulatory actions; we are currently operating under a consent decree with the FDA and our failure to comply with the requirements of the consent decree may have an adverse effect on our business; and we may face significant uncertainty in the industry due to government healthcare reform. The CareFusion news release and the information contained herein reflect management's views as of February 9, 2010. Except to the limited extent required by applicable law, CareFusion undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CAREFUSION CORPORATION
CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(UNAUDITED)
Quarter Ended Six Months Ended
December 31, December 31,
(in millions, ------------- -----------------
except per share amounts) 2009 2008 2009 2008
------------------------------------------------------------------------
Revenue $1,019 $969 $1,942 $1,884
Cost of Products Sold 541 495 1,013 973
--- --- ----- ---
Gross Margin 478 474 929 911
Selling, General and
Administrative Expenses 305 256 602 536
Research and Development
Expenses 37 41 73 78
Restructuring and
Acquisition Integration
Charges 9 5 10 35
--- --- --- ---
Operating Income 127 172 244 262
Interest Expense and Other,
Net 24 23 66 55
--- --- --- ---
Income Before Income Taxes 103 149 178 207
Provision for Income Taxes 30 42 50 70
--- --- --- ---
Income from Continuing
Operations 73 107 128 137
Income (Loss) from
Discontinued Operations,
Net of Tax (3) 81 23 164
--- --- --- ---
Net Income $70 $188 $151 $301
=== ==== ==== ====
Per Share Amounts:(1)
Basic Earnings (Loss) per
Common Share:
Continuing Operations $0.33 $0.48 $0.58 $0.62
Discontinued Operations $(0.01) $0.37 $0.11 $0.74
Basic Earnings per Common
Share $0.32 $0.85 $0.69 $1.36
Diluted Earnings (Loss) per
Common Share:
Continuing Operations $0.33 $0.48 $0.58 $0.62
Discontinued Operations $(0.01) $0.37 $0.11 $0.74
Diluted Earnings per Common
Share $0.32 $0.85 $0.68 $1.36
Weighted-Average Number of
Common Shares Outstanding:
Basic 220.8 220.5 220.7 220.5
Diluted 222.2 220.5 221.7 220.5
(1) Earnings per share calculations are performed separately for each
component presented. Therefore, the sum of the per share components
from the table may not equal the per share amounts presented.
CAREFUSION CORPORATION
ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Quarter Ended December 31, 2009
-------------------------------
Discon-
tinued Non-
(in millions, Opera- recurring Adjusted
except per common share amounts) GAAP tions(1) Items(2) (3)
------------------------------------------------------------------------
Revenue $1,019 $- $- $1,019
Cost of Products Sold 541 - - 541
--- --- --- ---
Gross Margin 478 - - 478
Selling, General and Administrative
Expenses 305 - (13) 292
Research and Development Expenses 37 - - 37
Restructuring and Acquisition
Integration Charges 9 - (9) -
--- --- --- ---
Operating Income 127 - 22 149
Interest Expense and Other, Net 24 - - 24
--- --- --- ---
Income Before Income Taxes 103 - 22 125
Provision for Income Taxes 30 - 7 37
--- --- --- ---
Income from Continuing Operations 73 - 15 88
Loss from Discontinued
Operations, Net of Tax (3) 3 - -
--- --- --- ---
Net Income $70 $3 $15 $88
=== === === ===
Per Share Amounts:(4)
Basic Earnings per Common Share $0.32 $0.01 $0.07 $0.40
Diluted Earnings per Common Share $0.32 $0.01 $0.07 $0.39
Weighted-Average Number of Common
Shares Outstanding:
Basic 220.8 220.8 220.8 220.8
Diluted 222.2 222.2 222.2 222.2
Effective Tax Rate 29.4% n/a 31.8% 30.2%
(1) Reflects impact of the divestiture of the Company's audiology
business.
(2) Reflects nonrecurring charges related to the spinoff ($13 million),
nonrecurring restructuring and acquisition integration charges and
nonrecurring tax items.
(3) Adjusted financial information reflects GAAP results adjusted on a
non-GAAP basis to exclude nonrecurring items noted.
(4) Earnings per share calculations are performed separately for each
adjustment presented. Therefore, the sum of the per share
adjustments from the table above may not equal the adjusted per share
totals presented.
CAREFUSION CORPORATION
ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Six Months Ended December 31, 2009
----------------------------------
Discon-
tinued Non-
(in millions, except Opera- recurring Adjusted
per common share amounts) GAAP tions(1) Items(2) (3)
-------------------------------------------------------------------------
Revenue $1,942 $- $- $1,942
Cost of Products Sold 1,013 - - 1,013
----- --- --- -----
Gross Margin 929 - - 929
Selling, General and
Administrative Expenses 602 - (29) 573
Research and Development Expenses 73 - - 73
Restructuring and Acquisition
Integration Charges 10 - (10) -
--- --- --- ---
Operating Income 244 - 39 283
Interest Expense and Other, Net 66 - (22) 44
--- --- --- ---
Income Before Income Taxes 178 - 61 239
Provision for Income Taxes 50 - 15 65
--- --- --- ---
Income from Continuing Operations 128 - 46 174
Income from Discontinued
Operations, Net of Tax 23 (23) - -
--- --- --- ---
Net Income $151 $(23) $46 $174
==== ==== === ====
Per Share Amounts:(4)
Basic Earnings per Common Share $0.69 $(0.11) $0.21 $0.79
Diluted Earnings per Common Share $0.68 $(0.11) $0.21 $0.79
Weighted-Average Number of Common
Shares Outstanding:
Basic 220.7 220.7 220.7 220.7
Diluted 221.7 221.7 221.7 221.7
Effective Tax Rate 28.3% n/a 24.6% 27.2%
(1) Reflects impact of (a) removing certain businesses that manufacture
and sell surgical and exam gloves, surgical drapes and apparel and
fluid management products in the U.S. market that were previously
part of the Clinical and Medical Products segment of Cardinal Health
and were retained by Cardinal Health upon the spinoff, and (b) the
divestiture of the Company's audiology business.
(2) Reflects nonrecurring charges related to the spinoff ($29 million),
nonrecurring charges related to the bridge loan entered into in
connection with the spinoff ($22 million), nonrecurring restructuring
and acquisition integration charges and nonrecurring tax items.
(3) Adjusted financial information reflects GAAP results adjusted on a
non-GAAP basis to exclude nonrecurring items noted.
(4) Earnings per share calculations are performed separately for each
adjustment presented. Therefore, the sum of the per share
adjustments from the table above may not equal the adjusted per share
totals presented.
CAREFUSION CORPORATION
ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Quarter Ended December 31, 2008
-------------------------------
Discon-
tinued Non-
(in millions, except per Opera- recurring Adjusted
common share amounts) GAAP tions(1) Items (2)
--------------------------------------------------------------------------
Revenue $969 $- $- $969
Cost of Products Sold 495 - - 495
--- --- --- ---
Gross Margin 474 - - 474
Selling, General and Administrative
Expenses 256 - - 256
Research and Development Expenses 41 - - 41
Restructuring and Acquisition
Integration Charges 5 - (5) -
--- --- --- ---
Operating Income 172 - 5 177
Interest Expense and Other, Net 23 - - 23
--- --- --- ---
Income Before Income Taxes 149 - 5 154
Provision for Income Taxes 42 - 2 44
--- --- --- ---
Income from Continuing Operations 107 - 3 110
Income from Discontinued
Operations, Net of Tax 81 (81) - -
--- --- --- ---
Net Income $188 $(81) $3 $110
==== ==== === ====
Per Share Amounts:(3)
Basic Earnings per Common Share $0.85 $(0.37) $0.01 $0.50
Diluted Earnings per Common Share $0.85 $(0.37) $0.01 $0.50
Weighted-Average Number of Common
Shares Outstanding: (4)
Basic 220.5 220.5 220.5 220.5
Diluted 220.5 220.5 220.5 220.5
Effective Tax Rate 28.2% n/a 37.2% 28.6%
(1) Reflects impact of (a) removing certain businesses that manufacture
and sell surgical and exam gloves, surgical drapes and apparel and
fluid management products in the U.S. market that were previously
part of the Clinical and Medical Products segment of Cardinal Health
and were retained by Cardinal Health upon the spinoff, and (b) the
divestiture of the Company's audiology business.
(2) Adjusted financial information reflects GAAP results adjusted on a
non-GAAP basis to exclude nonrecurring items related to restructuring
charges and acquisition integration charges and nonrecurring tax
items.
(3) Earnings per share calculations are performed separately for each
adjustment presented. Therefore, the sum of the per share
adjustments from the table above may not equal the adjusted per share
totals presented.
(4) Reflects shares outstanding after the August 31, 2009 distribution of
our common stock based on a ratio of 0.5 shares of our common stock
for each common share of Cardinal Health.
CAREFUSION CORPORATION
ADJUSTED FINANCIAL INFORMATION
(UNAUDITED)
Six Months Ended December 31, 2008
----------------------------------
Discon-
tinued Non-
(in millions, except per Opera- recurring Adjusted
common share amounts) GAAP tions(1) Items (2)
--------------------------------------------------------------------------
Revenue $1,884 $- $- $1,884
Cost of Products Sold 973 - - 973
--- --- --- ---
Gross Margin 911 - - 911
Selling, General and
Administrative Expenses 536 - - 536
Research and Development Expenses 78 - - 78
Restructuring and Acquisition
Integration Charges 35 - (35) -
--- --- --- ---
Operating Income 262 - 35 297
Interest Expense and Other, Net 55 - - 55
--- --- --- ---
Income Before Income Taxes 207 - 35 242
Provision for Income Taxes 70 - 11 81
--- --- --- ---
Income from Continuing Operations 137 - 24 161
Income from Discontinued
Operations, Net of Tax 164 (164) - -
--- ---- --- ---
Net Income $301 $(164) $24 $161
==== ===== === ====
Per Share Amounts: (3)
Basic Earnings per Common Share $1.36 $(0.74) $0.11 $0.73
Diluted Earnings per Common
Share $1.36 $(0.74) $0.11 $0.73
Weighted-Average Number of Common
Shares Outstanding: (4)
Basic 220.5 220.5 220.5 220.5
Diluted 220.5 220.5 220.5 220.5
Effective Tax Rate 33.8% n/a 31.4% 33.5%
(1) Reflects impact of (a) removing certain businesses that manufacture
and sell surgical and exam gloves, surgical drapes and apparel and
fluid management products in the U.S. market that were previously part
of the Clinical and Medical Products segment of Cardinal Health and
were retained by Cardinal Health upon the spinoff, and (b) the
divestiture of the Company's audiology business.
(2) Adjusted financial information reflects GAAP results adjusted on a
non-GAAP basis to exclude nonrecurring items related to restructuring
charges and acquisition integration charges and nonrecurring tax
items.
(3) Earnings per share calculations are performed separately for each
adjustment presented. Therefore, the sum of the per share
adjustments from the table above may not equal the adjusted per share
totals presented.
(4) Reflects shares outstanding after the August 31, 2009 distribution of
our common stock based on a ratio of 0.5 shares of our common stock
for each common share of Cardinal Health.
SOURCE CareFusion Corporation
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