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CareFusion Reports First Quarter Fiscal 2014 Results

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 ResultsCareFusion 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 SystemsFirst 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 SolutionsStrong 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 HighlightsAdditional first quarter and recent highlights included:

  • 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.
  • 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.
  • 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.
  • 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.
  • 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.
  • Launching a new online catalog that simplifies the ordering of surgical products either individually or as full, procedure-specific trays.
  • 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 OutlookFor 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 CallCareFusion 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 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

    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 StatementsThe 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.

    September 30,(in millions, except per share amounts)20132012Revenue$


    837Cost of Products Sold407401Gross Profit423436Selling, General and Administrative Expenses248244Research and Development Expenses4847Restructuring and Acquisition Integration Charges112Operating Income116143Interest Expense and Other, Net2019Income Before Income Tax96124Provision for Income Tax1837Income from Continuing Operations7887Loss from Discontinued Operations, Net of Tax—(3)Net Income$


    84Per Share Amounts:1Basic Earnings (Loss) per Common Share:Continuing Operations$


    0.39Discontinued Operations$


    (0.01)Basic Earnings per Common Share$


    0.38Diluted Earnings (Loss) per Common Share:Continuing Operations$


    0.39Discontinued Operations$


    (0.01)Diluted Earnings per Common Share$


    0.37Weighted-Average Number of Common Shares Outstanding:Basic214.0221.9Diluted217.4224.4Adjusted Financial Measures:2Operating Expenses$


    276Operating Income$


    160Operating Margin317.1


    %Income from Continuing Operations$


    99Diluted EPS from Continuing Operations$


    0.44Effective Tax Rate21.4


    %____________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 CORPORATIONSEGMENT AND SELECT BUSINESS LINE REVENUES(UNAUDITED)Quarters Ended
    September 30,Percent(in millions)20132012 ChangeMedical SystemsDispensing Technologies$



    %Infusion Systems2192038

    %Respiratory Technologies8897(9)


    %Total Medical Systems$



    %Procedural SolutionsInfection Prevention$



    %Medical Specialties898011

    %Specialty Disposables686210

    %Total Procedural Solutions$



    %Total CareFusion$



    %CAREFUSION CORPORATIONRECONCILIATION OF NON-GAAP FINANCIAL MEASURES(UNAUDITED)Adjusted Financial Data:Segment Profit(in millions, except per share amounts)Medical SystemsProcedural SolutionsSG&A ExpensesOperatingExpenses3Operating IncomeIncome from Continuing Operations4Diluted EPS from Continuing Operations5Quarter Ended September 30, 2013GAAP$







    0.36Restructuring and Acquisition Integration174—(11)1180.04Amortization of acquired intangibles296(15)(15)15100.04Adjusted$







    0.44Quarter Ended September 30, 2012GAAP$







    0.39Restructuring and Acquisition Integration111—(2)220.01Amortization of acquired intangibles296(15)(15)15100.04Adjusted$







    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 CORPORATIONRECONCILIATION OF NON-GAAP FINANCIAL MEASURES(UNAUDITED)Adjusted Effective Tax Rate:(in millions)GAAPNonrecurring Items 1Amortization of Acquired IntangiblesAdjusted 2Quarter Ended September 30, 2013Income Before Income Tax$




    122Provision for Income Tax$




    26Effective Tax Rate318.5




    %Quarter Ended September 30, 2012Income Before Income Tax$




    141Provision for Income Tax$




    42Effective Tax Rate329.8




    %Adjusted EPS Outlook for Fiscal Year Ending June 30, 2014:GAAP Diluted Earnings per Common Share from Continuing Operations$2.04 - $2.14Estimated charges for nonrecurring items related to restructuring and acquisition integration, net of tax (mid-point of an estimated range of $0.04 to $0.06 per diluted share)$0.05Estimated acquisition-related intangible amortization, net of tax$0.21Adjusted Diluted Earnings per Common Share from Continuing Operations$2.30 - $2.40____________1 Reflects nonrecurring charges primarily related to nonrecurring restructuring and acquisition integration charges, and nonrecurring income tax items.2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items and amortization of acquired intangibles noted above.3 Effective tax rate calculations are performed based on whole dollar amounts, and therefore may not equal the calculations based on amounts rounded in millions presented in the table above. CAREFUSION CORPORATIONCONDENSED CONSOLIDATED BALANCE SHEETS(UNAUDITED)(in millions, except per share data)September 30, 2013June 30,
    2013ASSETSCurrent Assets:Cash and Cash Equivalents$


    1,798Trade Receivables, Net402429Current Portion of Net Investment in Sales-Type Leases340351Inventories, Net404384Prepaid Expenses3430Other Current Assets215141 Total Current Assets3,1683,133Property and Equipment, Net406409Net Investment in Sales-Type Leases, Less Current Portion9731,001Goodwill3,0833,081Intangible Assets, Net776793Other Assets86136 Total Assets$


    8,553LIABILITIES AND EQUITYCurrent Liabilities:Current Portion of Long-Term Obligations and Other Short-Term Borrowings$


    2Accounts Payable123147Deferred Revenue5851Accrued Compensation and Benefits114150Other Accrued Liabilities226242Total Current Liabilities973592Long-Term Obligations, Less Current Portion9991,444Deferred Income Taxes645638Other Liabilities473493 Total Liabilities3,0903,167Commitments and ContingenciesStockholders' Equity:Preferred Stock (50.0 Authorized Shares; $.01 Par Value) Issued – None——Common Stock (1,200.0 Authorized Shares; $.01 Par Value) Issued – 231.3 and 229.4 shares at September 30, 2013 and June 30, 2013, respectively22Treasury Stock, at cost, 18.8 and 15.5 shares at September 30, 2013 and June 30, 2013, respectively(626)(505)Additional Paid-In Capital4,9244,886Retained Earnings1,1261,048Accumulated Other Comprehensive Loss(24)(45)Total Stockholders' Equity5,4025,386 Total Liabilities and Stockholders' Equity$


    8,553 CAREFUSION CORPORATIONCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)Quarters EndedSeptember 30,(in millions)20132012Cash and Cash Equivalents at July 1, Attributable to Continuing Operations$


    1,648Cash and Cash Equivalents at July 1, Attributable to Discontinued Operations$


    (1)Cash Flows from Operating Activities:Net Income7884Loss from Discontinued Operations—(3)Income from Continuing Operations7887Adjustments to Reconcile Income from Continuing Operations to Net Cash Provided by Operating Activities:Depreciation and Amortization4645Other Non-Cash Items3634Change in Operating Assets and Liabilities:Trade Receivables2532Inventories(23)(22)Net Investment in Sales-Type Leases39(10)Accounts Payable(23)7Other Accrued Liabilities and Operating Items, Net(104)(95)Net Cash Provided by Operating Activities – Continuing Operations7478Net Cash Provided by Operating Activities – Discontinued Operations—1Net Cash Provided by Operating Activities7479Cash Flows from Investing Activities:Additions to Property and Equipment(18)(18)Other Investing Activities—(2)Net Cash Used in Investing Activities – Continuing Operations(18)(20)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 Exercises347Other Financing Activities(10)(16)Net Cash Used in Financing Activities – Continuing Operations(91)(259)Net Cash Used in Financing Activities(91)(259)Effect of Exchange Rate Changes on Cash1014Net Decrease in Cash and Cash Equivalents – Continuing Operations(25)(187)Net Increase in Cash and Cash Equivalents – Discontinued Operations—1Net Decrease in Cash and Cash Equivalents(25)(186)Cash and Cash Equivalents at September 30, Attributable to Continuing Operations$


    1,461Cash and Cash Equivalents at September 30, Attributable to Discontinued Operations$


    —Non-Cash Investing and Financing Activities:Asset Acquired by Entering into Capital Lease$



    SOURCE CareFusion Corp.
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