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CareFusion Reports First Quarter Fiscal 2014 Results



             CareFusion Reports First Quarter Fiscal 2014 Results

- Revenue of $830 million consistent with company expectations

- Diluted earnings per share (EPS) from continuing operations totaled $0.36 on
a GAAP basis and remained even with prior year at $0.44 per adjusted share

- Repurchased 3.3 million shares during the quarter, bringing the company's
total investments in share repurchases to $621 million since February 2012

PR Newswire

SAN DIEGO, Nov. 7, 2013

SAN DIEGO, Nov. 7, 2013 /PRNewswire/ -- CareFusion Corp. (NYSE: CFN), a
leading, global medical technology company, today reported financial results
for its first quarter of fiscal 2014, ended Sept. 30. 

"Our team executed well and delivered solid first quarter results, putting us
on the right track for the full fiscal year," said Kieran T. Gallahue,
chairman and CEO. "I'm pleased with the way our Procedural Solutions team
continues to perform across the board, and, with good visibility into our
capital business, we continue to anticipate a strong second half of the year
in Medical Systems.

"During the quarter, we continued to make strategic progress, closing our
Sendal acquisition in Spain as part of our strategy to globalize the company
and ramping up our R&D investments in the Procedural Solutions segment as we
prepare to launch several new products over the next 18 months."

First Quarter Results

CareFusion reported first quarter fiscal 2014 revenue of $830 million,
compared to $837 million in the first quarter of fiscal year 2013, a 1 percent
decrease on both a reported and constant currency basis.

Operating income was $116 million compared to $143 million in the prior year
period. Excluding nonrecurring items, adjusted operating income decreased 11
percent to $142 million, with revenue mix and the medical device excise tax
negatively affecting the company's operating margins during the quarter. 

Operating expenses totaled $307 million. Excluding nonrecurring items,
adjusted operating expenses were $281 million, an increase of 2 percent over
the prior year period, primarily driven by the medical device excise tax.  

The company reported income from continuing operations of $78 million, or
$0.36 per diluted share. Adjusted income from continuing operations decreased
3 percent from the prior year period to $96 million, or $0.44 per diluted
share.

During the quarter, CareFusion settled a previously disclosed tax matter with
the IRS, which resulted in an adjusted effective tax rate of 21.4 percent and
contributed approximately $0.04 per diluted share to the company's first
quarter results.

Medical Systems

First quarter revenue for the Medical Systems segment was $524 million, a 5
percent decrease from the prior year period on a reported and constant
currency basis. Strong performance in the Infusion Systems business line was
offset by declines in the Respiratory Technologies and Dispensing Technologies
business lines.  

Segment profit for the quarter fell to $74 million from $102 million in the
prior year period, a 27 percent decrease driven by expected lower volumes in
the Dispensing Technologies business line resulting from a product line
transition. Adjusted segment profit declined 20 percent to $90 million.

Procedural Solutions

Strong performance across the Procedural Solutions segment led to first
quarter revenue of $306 million, a 7 percent increase from the prior year
period on a reported and constant currency basis. Segment growth was led by
double-digit revenue increases in both the Medical Specialties and Specialty
Disposables business lines.  

Segment profit totaled $42 million, driven by gross margin improvements that
were partially offset by increased investments in R&D. On an adjusted basis,
segment profit grew 8 percent to $52 million.

Recent Highlights

Additional first quarter and recent highlights included:

  o Completing the acquisition of Sendal, an infusion specialty disposable
    manufacturer in Spain that primarily serves the western European market,
    further expanding the company's Infection Prevention business line
    globally.
  o Investing $121 million to repurchase 3.3 million shares during the quarter
    under a two-year, $750 million share repurchase program. Since the company
    initiated its first share buyback program in February 2012, CareFusion has
    invested $621 million to repurchase 18.6 million shares.
  o Receiving 510(k) clearance from the Food and Drug Administration for a
    needleless IV connector that features neutral reflux at disconnect and
    only requires a three-second alcohol swab to disinfect.  This product
    launch, expected in December 2013, will be the first of several new
    products anticipated across the Procedural Solutions segment during the
    next 18 months.
  o Introducing a new "Rent-a-Rowa®" leasing and service program that makes it
    easier for European retail pharmacies to adopt the Rowa Smart® System for
    automated management of pharmaceutical inventory.
  o Deploying additional functionality for the Pyxis® ES platform, a
    combination of hardware and software that helps improve medication safety
    by simplifying and standardizing the medication management process.
  o Launching a new online catalog that simplifies the ordering of surgical
    products either individually or as full, procedure-specific trays.
  o Introducing the new Alaris VP pump, a large volume infusion pump with
    technology to accurately measure variable pressure in the infusion line,
    in several key markets outside of the United States.

Fiscal 2014 Outlook

For the fiscal year ending June 30, 2014, CareFusion continues to expect
organic revenue to grow 1 to 4 percent on a constant currency basis compared
to fiscal 2013 revenue of $3.55 billion. Adjusted diluted earnings per share
from continuing operations are expected to be in the range of $2.30 to $2.40.

The guidance is based on an assumed diluted weighted average outstanding share
count of approximately 215 million, which includes the impact of expected
share repurchases during fiscal 2014.

Conference Call

CareFusion will host a webcast and conference call today at 2 p.m. PST (5 p.m.
EST) to discuss the financial and operational results for the first quarter.

To access the call, visit the Investors page at www.carefusion.com. Log on at
least 15 minutes before the call begins to register and download or install
any necessary audio software.

Investors and other interested parties may also access the call by dialing
866.318.8616 within the U.S. or 617.399.5135 from outside the U.S. and using
the access code 68326717. A replay of the conference call will be available
from 6 p.m. PST (9 p.m. EST) on Nov. 7 through 11:59 p.m. PST on Nov. 14 and
can be accessed by dialing 888.286.8010 in the U.S. or 617.801.6888 from
outside the U.S. and using the access code 72445345.

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 industry-leading technologies
including Alaris^® infusion pumps, Pyxis^® automated dispensing and patient
identification systems, AVEA^®, AirLife^® and LTV^® series ventilation and
respiratory products, ChloraPrep^® products, MedMined^® services for data
mining surveillance, V. Mueller^® surgical instruments, and an extensive line
of products that support interventional medicine. CareFusion employs
approximately 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 and the information contained herein present
non-GAAP financial measures that exclude certain amounts, as follows:
"adjusted segment profit," "adjusted operating expenses," "adjusted operating
income," and "adjusted operating margin," which exclude amortization of
acquired intangibles, as well as nonrecurring restructuring and acquisition
integration charges; and "adjusted income from continuing operations,"
"adjusted diluted earnings per share from continuing operations" and "adjusted
effective tax rate," which exclude amortization of acquired intangibles, as
well as nonrecurring restructuring and acquisition integration charges and
nonrecurring tax items. The most directly comparable GAAP financial measures
for these non-GAAP financial measures are segment profit, operating expenses,
operating income, operating margin, income from continuing operations, diluted
earnings per share from continuing operations and effective tax rate. The
company has included below unaudited adjusted financial information for the
quarters ended September 30, 2013 and 2012, which includes a reconciliation of
GAAP to non-GAAP financial measures.

The company's management uses these non-GAAP financial measures to evaluate
the company's performance and provides them to investors as a supplement to
the company's reported results, as they believe this information provides
additional insight into the company's operating performance by disregarding
certain nonrecurring items. These non-GAAP financial measures should not be
considered in isolation, as a substitute for, or as superior to, financial
measures calculated in accordance with GAAP, and the company's financial
results calculated in accordance with GAAP and reconciliations to those
financial statements should be carefully evaluated. The non-GAAP financial
measures used by the company may be calculated differently from, and therefore
may not be comparable to, similarly titled measures used by other companies.
While the types of items and charges excluded from the company's non-GAAP
financial measures may occur in the future, the company's management believes
that they are not reflective of the day-to-day offering of its products and
services and relate more to strategic, multi-year corporate actions, without
predictable trends, or discrete and unusual or infrequent transactions that
are not indicative of future operations or business trends.

Cautions Concerning Forward-looking Statements

The CareFusion news release and the information contained herein present
forward-looking statements addressing expectations, prospects, estimates and
other matters that are dependent upon future events or developments.
CareFusion intends forward-looking terminology such as "believes," "expects,"
"may," "will," "should," "anticipates," "plans," or similar expressions to
identify forward-looking statements. Such statements are subject to certain
risks and uncertainties, which could cause the company's actual results to
differ materially from those projected, anticipated or implied by the
forward-looking statements. 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; current economic conditions have and may continue to
adversely affect our results of operations and financial condition; we may be
unable to realize any benefit from our cost reduction and restructuring
efforts and our profitability may be hurt or our business otherwise might be
adversely affected; 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; and we are currently
operating under an amended consent decree with the FDA and our failure to
comply with the requirements of the amended consent decree may have an adverse
effect on our business. The CareFusion news release and the information
contained herein reflect management's views as of November 7, 2013. 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
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
                                                       Quarters Ended
                                                       September 30,
(in millions, except per share amounts)                2013      2012
Revenue                                                $ 830     $ 837
Cost of Products Sold                                  407       401
Gross Profit                                           423       436
Selling, General and Administrative Expenses           248       244
Research and Development Expenses                      48        47
Restructuring and Acquisition Integration Charges      11        2
Operating Income                                       116       143
Interest Expense and Other, Net                        20        19
Income Before Income Tax                               96        124
Provision for Income Tax                               18        37
Income from Continuing Operations                      78        87
Loss from Discontinued Operations, Net of Tax          —         (3)
Net Income                                             $ 78      $ 84
Per Share Amounts:^1
Basic Earnings (Loss) per Common Share:
Continuing Operations                                  $ 0.36    $ 0.39
Discontinued Operations                                $ —       $ (0.01)
Basic Earnings per Common Share                        $ 0.36    $ 0.38
Diluted Earnings (Loss) per Common Share:
Continuing Operations                                  $ 0.36    $ 0.39
Discontinued Operations                                $ —       $ (0.01)
Diluted Earnings per Common Share                      $ 0.36    $ 0.37
Weighted-Average Number of Common Shares Outstanding:
Basic                                                  214.0     221.9
Diluted                                                217.4     224.4
Adjusted Financial Measures:^2
Operating Expenses                                     $ 281     $ 276
Operating Income                                       $ 142     $ 160
Operating Margin^3                                     17.1   %  19.1     %
Income from Continuing Operations                      $ 96      $ 99
Diluted EPS from Continuing Operations                 $ 0.44    $ 0.44
Effective Tax Rate                                     21.4   %  30.2     %

____________
^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.
^2 Adjusted financial measures are non-GAAP measures that exclude amortization
of acquired intangibles, as well as certain nonrecurring items, as discussed
above under Use of Non-GAAP Financial Measures. These measures are reconciled
to comparable GAAP measures in the Reconciliation of Non-GAAP Financial
Measures included in the pages that follow.
^3 Operating margin reflects operating income divided by revenue.  The
Reconciliation of Non-GAAP Financial Measures included in the pages that
follow present operating income on a GAAP and an adjusted basis, from which
operating margin is derived.

 

CAREFUSION CORPORATION
SEGMENT AND SELECT BUSINESS LINE REVENUES
(UNAUDITED)
                               Quarters Ended  Percent
                               September 30,
(in millions)                  2013    2012     Change
Medical Systems
Dispensing Technologies        $ 211   $ 244   (14)  %
Infusion Systems               219     203     8     %
Respiratory Technologies       88      97      (9)   %
Other                          6       7       (14)  %
   Total Medical Systems       $ 524   $ 551   (5)   %
Procedural Solutions
Infection Prevention           $ 149   $ 144   3     %
Medical Specialties            89      80      11    %
Specialty Disposables          68      62      10    %
   Total Procedural Solutions  $ 306   $ 286   7     %
Total CareFusion               $ 830   $ 837   (1)   %

CAREFUSION CORPORATION
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Adjusted
Financial
Data:
               Segment Profit
(in millions,                                 Operating              Income from   Diluted EPS
except per     Medical  Procedural  SG&A                  Operating  Continuing    from
share          Systems  Solutions   Expenses  Expenses^3  Income     Operations^4  Continuing
amounts)                                                                           Operations^5
Quarter Ended
September 30,
2013
GAAP           $  74    $   42      $  248    $   307     $  116     $    78       $   0.36
Restructuring
and            7        4           —         (11)        11         8             0.04
Acquisition
Integration^1
Amortization
of acquired    9        6           (15)      (15)        15         10            0.04
intangibles^2
Adjusted       $  90    $   52      $  233    $   281     $  142     $    96       $   0.44
Quarter Ended
September 30,
2012
GAAP           $  102   $   41      $  244    $   293     $  143     $    87       $   0.39
Restructuring
and            1        1           —         (2)         2          2             0.01
Acquisition
Integration^1
Amortization
of acquired    9        6           (15)      (15)        15         10            0.04
intangibles^2
Adjusted       $  112   $   48      $  229    $   276     $  160     $    99       $   0.44

____________
^1 Restructuring and acquisition integration charges primarily relate to
nonrecurring expenses associated with rationalizing headcount and aligning
operations.
^2 Amortization of acquired intangibles relate to the non-cash expenses
associated with amortization of identifiable intangible assets of acquired
businesses.
^3 Operating expenses consist of selling, general and administrative, research
and development, and restructuring and acquisition integration expenses.
^4 Income from continuing operations is presented net of tax effect.
Additional information about nonrecurring tax items related to nonrecurring
expenses and the impact on the effective tax rate is included in the
Reconciliation of the Adjusted Effective Tax Rate on the following page.
^5 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
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(UNAUDITED)
Adjusted
Effective Tax
Rate:
                              Nonrecurring      Amortization of     Adjusted ^
(in millions)    GAAP         Items ^1          Acquired            2
                                                Intangibles
Quarter Ended
September 30,
2013
Income Before    $  96        $    11           $     15            $  122
Income Tax
Provision for    $  18        $    3            $     5             $  26
Income Tax
Effective Tax    18.5    %    31.3       %      34.2         %      21.4    %
Rate^3
Quarter Ended
September 30,
2012
Income Before    $  124       $    2            $     15            $  141
Income Tax
Provision for    $  37        $    —            $     5             $  42
Income Tax
Effective Tax    29.8    %    70.2       %      32.7         %      30.2    %
Rate^3
Adjusted EPS Outlook for Fiscal Year Ending June 30, 2014:
GAAP Diluted Earnings per Common Share from Continuing Operations   $2.04 -
                                                                    $2.14
Estimated charges for nonrecurring items related to restructuring
and acquisition integration, net of tax (mid-point of an estimated  $0.05
range of $0.04 to $0.06 per diluted share)
Estimated acquisition-related intangible amortization, net of tax   $0.21
Adjusted Diluted Earnings per Common Share from Continuing          $2.30 -
Operations                                                          $2.40

____________
^1 Reflects nonrecurring charges primarily related to nonrecurring
restructuring and acquisition integration charges, and nonrecurring income tax
items.
^2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP
basis to exclude nonrecurring items and amortization of acquired intangibles
noted above.
^3 Effective tax rate calculations are performed based on whole dollar
amounts, and therefore may not equal the calculations based on amounts rounded
in millions presented in the table above.

 

CAREFUSION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in millions, except per share data)              September 30, 2013  June 30,
                                                                      2013
ASSETS
Current Assets:
Cash and Cash Equivalents                         $     1,773         $ 1,798
Trade Receivables, Net                            402                 429
Current Portion of Net Investment in Sales-Type   340                 351
Leases
Inventories, Net                                  404                 384
Prepaid Expenses                                  34                  30
Other Current Assets                              215                 141
 
                                                  3,168               3,133
   Total Current Assets
Property and Equipment, Net                       406                 409
Net Investment in Sales-Type Leases, Less         973                 1,001
Current Portion
Goodwill                                          3,083               3,081
Intangible Assets, Net                            776                 793
Other Assets                                      86                  136
 
                                                  $     8,492         $ 8,553
   Total Assets
LIABILITIES AND EQUITY
Current Liabilities:
Current Portion of Long-Term Obligations and      $     452           $ 2
Other Short-Term Borrowings
Accounts Payable                                  123                 147
Deferred Revenue                                  58                  51
Accrued Compensation and Benefits                 114                 150
Other Accrued Liabilities                         226                 242
   Total Current Liabilities                      973                 592
Long-Term Obligations, Less Current Portion       999                 1,444
Deferred Income Taxes                             645                 638
Other Liabilities                                 473                 493
 
                                                  3,090               3,167
   Total Liabilities
Commitments and Contingencies
Stockholders' Equity:
Preferred Stock (50.0 Authorized Shares; $.01     —                   —
Par Value) Issued – None
Common Stock (1,200.0 Authorized Shares; $.01
Par Value) Issued – 231.3 and 229.4 shares at     2                   2
September 30, 2013 and June 30, 2013,
respectively
Treasury Stock, at cost, 18.8 and 15.5 shares at
September 30, 2013 and June 30, 2013,             (626)               (505)
respectively
Additional Paid-In Capital                        4,924               4,886
Retained Earnings                                 1,126               1,048
Accumulated Other Comprehensive Loss              (24)                (45)
Total Stockholders' Equity                        5,402               5,386
 
                                                  $     8,492         $ 8,553
   Total Liabilities and Stockholders' Equity

 

CAREFUSION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                                                            Quarters Ended

                                                            September 30,
(in millions)                                               2013      2012
Cash and Cash Equivalents at July 1, Attributable to        $ 1,798   $ 1,648
Continuing Operations
Cash and Cash Equivalents at July 1, Attributable to        $ —       $ (1)
Discontinued Operations
Cash Flows from Operating Activities:
Net Income                                                  78        84
Loss from Discontinued Operations                           —         (3)
Income from Continuing Operations                           78        87
Adjustments to Reconcile Income from Continuing Operations
to Net Cash Provided by Operating Activities:
Depreciation and Amortization                               46        45
Other Non-Cash Items                                        36        34
Change in Operating Assets and Liabilities:
   Trade Receivables                                        25        32
   Inventories                                              (23)      (22)
   Net Investment in Sales-Type Leases                      39        (10)
   Accounts Payable                                         (23)      7
   Other Accrued Liabilities and Operating Items, Net       (104)     (95)
Net Cash Provided by Operating Activities – Continuing      74        78
Operations
Net Cash Provided by Operating Activities – Discontinued    —         1
Operations
Net Cash Provided by Operating Activities                   74        79
Cash Flows from Investing Activities:
Additions to Property and Equipment                         (18)      (18)
Other Investing Activities                                  —         (2)
Net Cash Used in Investing Activities – Continuing          (18)      (20)
Operations
Net Cash Used in Investing Activities                       (18)      (20)
Cash Flows from Financing Activities:
Repayment of Long-Term Obligations                          (1)       (250)
Share Repurchase Programs                                   (114)     —
Proceeds from Stock Option Exercises                        34        7
Other Financing Activities                                  (10)      (16)
Net Cash Used in Financing Activities – Continuing          (91)      (259)
Operations
Net Cash Used in Financing Activities                       (91)      (259)
Effect of Exchange Rate Changes on Cash                     10        14
Net Decrease in Cash and Cash Equivalents – Continuing      (25)      (187)
Operations
Net Increase in Cash and Cash Equivalents – Discontinued    —         1
Operations
Net Decrease in Cash and Cash Equivalents                   (25)      (186)
Cash and Cash Equivalents at September 30, Attributable to  $ 1,773   $ 1,461
Continuing Operations
Cash and Cash Equivalents at September 30, Attributable to  $ —       $ —
Discontinued Operations
Non-Cash Investing and Financing Activities:
Asset Acquired by Entering into Capital Lease               $ 4       $ —

 

SOURCE CareFusion Corp.

Website: http://www.carefusion.com
Contact: Media: Kristen Cardillo, (858) 617-2317,
kristen.cardillo@carefusion.com, Investors: Jim Mazzola, (858) 617-1203,
jim.mazzola@carefusion.com
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